SSI to fund offshore centre via GDR issue - Views on News from Equitymaster

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SSI to fund offshore centre via GDR issue

Feb 24, 2000

SSI Technologies (SSIT), a division of Software Solutions India (SSI) has announced a GDR issue. The funds from the issue are to be used for setting up an offshore development centre (ODC) in Chennai. SSI started off as a software training company with a single centre in Chennai. It offered high-end courses based on platforms such as Java, Corba, Com etc. The company then aggressively expanded its network across the country through franchisees. It ventured into software development only around 18 months back and was successful in bagging a contract from NASDAQ amid competition from 18 companies worldwide.

The contract with NASDAQ was not a one-time contract. It actually envisaged the establishment of IndigoMarkets, a joint venture company to create Internet-based trading and market systems for the global markets.

The offshore development centre that SSI has planned is actually for the software development for this joint venture. Obviously the company also believes that the JV would actually create a strong referral for getting business from the other stock exchanges worldwide.

The catering of the JV via an ODC also makes sense since the revenue the company would get would be at international billing rates while the costs of software development are far lower in India. This would ensure higher contribution too.

Also this marks a foray for SSI into the lucrative e-commerce market. This will also enable to company to enjoy the enhanced valuations that product companies are entitled to on the stock markets.

Market View:
SSI has been rated by most analysts as a ‘hold’ primarily because of the excessive run up in the stock fueled partly the software rally and partly by the NASDAQ deal. Any downward re-rating of the sector itself could hurt the stock’s valuations.

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