Multimedia major, Pentafour Software, has set aside US$ 100 m for its overseas acquisitions and joint ventures over the next two years. It also plans to raise US$ 60 m from the US markets this year. This was revealed by leading financial dailies.
Pentafour Software and Exports differentiates itself from its software peers on the basis of large exposure to high margin multimedia business in which it has a competitive edge. This is due to its excellent track record and long term relationship with global multimedia companies. It is one of the few global companies that can produce complete content for multimedia-based movies.
The multimedia business (54% of FY99 revenues) is a very capital-intensive business. Over the years, the company has made substantial investments on specialised workstations for multimedia and motion capture equipment.
In a bid to expand its global operations, the company has set aside US$ 100 m for acquisitions and mergers in US and European markets. It is also considering joint ventures with other like-minded companies in these markets. By being closer to the markets, the company will be able to service its clients more efficiently. It will also be able to intensify its marketing efforts and enhance its client base. Moreover, it can use contacts of its local partner/associate to grow in US and European markets.
Pentafour's US$ 60 m American Depository Receipt (ADR) has been cleared by the Finance Ministry. The ADR listing will enable the company to build upon its image in the US market, and it can bank upon the Infosys's successful ADR listing. In addition to mergers and acquisitions, it can use proceeds of the ADR to issue dollar-denominated stock options to its employees.
Pentafour's stock has been trading at a discount to its peers largely due to poor management perception. However, the management has taken several steps (corporate governance, improved disclosures) to correct that perception. The stock has been rerated as a 'BUY' by some analysts.
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