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VisualSoft: Marching ahead - Views on News from Equitymaster
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  • Oct 30, 2000

    VisualSoft: Marching ahead

    VisualSoft a leading product development company has reported a fantastic growth in profits for the second quarter ended September 2000. The company's profits increased by 138% on year on year basis and 46% compared to the previous quarter.

    (Rs m) 1QFY01 2QFY01 Change
    Sales 267 298 11.9%
    Other Income 11 18 63.8%
    Expenditure 128 146 13.8%
    Operating Profit (EBDIT) 139 153 10.1%
    Operating Profit Margin (%) 51.9% 51.1%  
    Interest - -  
    Depreciation 8 9 4.6%
    Profit before Tax 141 162 14.6%
    Other Adjustments 36 9  
    Tax 2 2 -17.7%
    Profit after Tax/(Loss) 103 151 46.4%
    Net profit margin (%) 38.7% 50.7%  
    No. of Shares (eoy) (m) 6.6 19.7  
    Diluted number of shares (m) 19.7 19.7  
    Diluted Earnings per share* 21.0 30.8  
    P/E (at current price) 52 36  

    VisualSoft has maintained its operating profit margins to 51% due to increasing revenues from product development. The company's product sales accounts for 48% of total revenues. Its product portfolio is extended to developer suites, developer components and web based application products. 'VisualSoft WebProject' contributes 51% of revenues from product sales. The products developed by VisualSoft enjoys a global customer base. The company also has strong marketing network. It has tied up with 15 global software marketing and distribution companies to market its products.

    The company has diversified its revenue mix whereby software services contributes 52% of total sales. In this segment 89% of the revenues comes from the Internet technologies and the balance from client server technologies. It has also de-risked its geographic concentration. North America accounts for 63% of software service revenues followed by 30% from Europe. During the quarter the company has added 9 new clients. Revenues from top 5 clients forms 19% of total sales and there are 3 clients accounting for more than 5% of total sales.

    VisualSoft's foray into higher value chain of software service and product development has accorded a premium valuation to its stock in the past. Currently the company gets a P/E of 36 times its 2QFY01 annualised earnings. In the recent past the company’s valuations have been affected adversely due to concerns about its revenues, as it had to pay Rs 25 m as a final settlement to Danlaw Inc. USA for the services rendered by the later. Also VisualSoft does not own many IPRs since its products are not original innovations but enhancement of existing technologies. However, the strength of the company, de-risked business model and demand for its products in the market will enable it to maintain high growth rate in the future.



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