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Ramco: Flying out of losses? - Views on News from Equitymaster
 
 
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  • Apr 5, 2001

    Ramco: Flying out of losses?

    Ramco Systems has signed an exclusive agreement with the Boeing Company, US, to jointly develop and market enterprise maintenance systems for the global aviation industry. The solutions will be known as Enterprise One. Ramco will act as the technology, application and service provider for the solution and will also provide sales support to Boeing.

    The software will provide a seamless enterprise maintenance solution for the aviation industry covering areas like engineering, maintenance, logistics, inventory and purchase. Thus, improving information availability for the companies regarding maintenance. Due to the size and the complexity of aircrafts, information management is very critical. If information needs are met properly these companies will benefit in terms of increased airplane utilisation, lower inventory costs, reduced time in maintenance and overall improvement in business processes. The bottomline being the operating costs for the companies will come down.

    According to the agreement between the two companies Ramco products like RamcoVirtualWorks™ and enterprise asset management products for the aviation industry will be used to complete Enterprise One. Ramco already has a few existing clients in the aviation industry which include Columbia Helicopters, USA and Indian Airlines. These companies have used the enterprise asset management software.

    (Rs m) 2QFY01 3QFY01 Change
    Sales 385 245 -36.4%
    Other Income 27 17 -37.9%
    Expenditure 338 222 -34.3%
    Operating Profit (EBDIT) 47 23 -52.1%
    Operating Profit Margin (%) 12.2% 9%  
    Interest 5 5 -2.6%
    Depreciation 13 13 1.8%
    Profit before Tax 56 21 -62.2%
    Amortization of R&D and product
    development expenses
    (27) (27) 1.1%
    Tax - -  
    Profit after Tax/(Loss) 29 (6) -121.1%
    Net profit margin (%) 7.50% -  
    No. of Shares (eoy) (m) 7.8 7.8  
    Diluted number of shares 7.8 7.8  
    Diluted Earnings per share* 15 -  

    Therefore, Enterprise One seems to be a solution that will be created out of Ramco’s existing products for the aviation industry and Boeings existing solutions in the maintenance area. Ramco will use Boeings systems integration expertise and will also get an access to Boeings existing customer base. The Enterprise Maintenance System is being jointly presented and demonstrated to prospective customers at an exhibition in the US.

    The span of the engagement is expected to be about 15 years, generating revenues in the range of US$ 150 m to US$ 600 m over a five year period. However, Enterprise One has a modular structure and customers can opt for particular modules depending on their requirements. Therefore, the revenues would largely depend on how the modules are accepted by the clients. Ramco has a vast expertise in this area. Ramco is one of the very few companies in India that has developed an enterprisewide management system like Marshal, which is positioned by the company as an ERP for the small and medium scale industries. The product has been re-christened as Ramco e. Applications, and has not only been scaled up to meet the requirements of large organisations but also has been web enabled.

    However, Ramco did not have any spectacular success with its products and therefore, drew flak while when the sentiment reversed towards the technology sector and it declared losses for the 3QFY01. Will Enterprise One change the company’s fortunes? It depends on the success of the products, which will not be visible for sometime to come. But the fact remains that Ramco has stuck to its guns and continues it endeavour to create products that have the capability of handling enteprisewide requirements, a very tough task. Going by its past, Ramco needs to put in a lot more effort.

     

     

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