Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
VisualSoft: Other alternatives - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 18, 2001

    VisualSoft: Other alternatives

    VisualSoft is desperately looking at alternatives for growth. VisualSoft’s steep growth in FY01 hit a speed breaker due to decline in sales of its products. From 4QFY01 onwards the company’s product related sales have shown significant sequential declines. The contribution of the product sales to total revenues has slipped from 52% in 3QFY01 to 5% in 2QFY02. Consequently, the operating margins seem to have followed suit, and have declined from 53% in 3QFY01 to 22% in 2QFY02.

    Particulars 1QFY01 2QFY01 3QFY01 4QFY01 FY01 1QFY02 2QFY02
    Growth in product sales (QoQ) 22.1% 1.9% 45.8% -38.8% 86.1% -57.3% -79.9%
    Products 52.8% 48.2% 51.7% 37.3% 47.3% 19.2% 4.7%
    Services 47.2% 51.8% 48.3% 62.7% 52.7% 80.8% 95.3%
    OPM 51.9% 51.1% 53.3% 39.5% 48.9% 33.9% 22.0%

    VisualSoft is now rethinking its business strategy. The company has earlier stated that its does not plan to focus on the products business in future and is now looking at different possibilities to add pace to its topline. This includes the tapping R&D outsourcing market and a possible entry in the business process outsourcing (BPO).

    Read more about the R&D outsourcing market.

    The segment of the R&D market that VisualSoft plans to address is that of embedded technologies. The markets for embedded systems are in very early stages, and global technology majors are spending significant amounts on R&D to perfect technologies like Bluetooth, ASIC (application specific integrated circuits) and SoCs (Systems on Chips). Companies like Wipro and HCL Technologies have a significant presence in this segment. Therefore, VisualSoft will have to face stiff competition from these software majors. Also, considering the fact that VisualSoft has not executed any significant project in the area getting a share of the market will be an uphill task. However, with the markets for R&D services estimated to be about 15% of the total exports of the Indian software industry in FY01 (US$ 1 bn), there seems to be room for a lot of players.

    Business process outsourcing on the other hand seems to be a more viable option for the company. As companies concentrate on the core activities, IT-intensive business processes are delegated to an external service provider. The service provider owns, administers and manages the processes. Many of the processes that are outsourced are routine in nature like payroll management. These areas are do not require skilled human resource. According to Gartner, the global market for BPO will nearly triple from US$ 106 bn (Rs 5,088 bn) in 1999 to US$ 301 bn (Rs 14,448 bn) in 2004. But the flip side is that barrier to entry in this segment is low.

    Further, VisualSoft plans to consolidate its Indian operations and strengthen its overseas operations by establishing three more business centres in the US. It has also undertaken the task of re-skilling its employees to align their skill sets with the current market environment.

    It will take quite sometime for the company’s strategy to show an impact on its financials. Investors should wait for the company to get a business model in place before considering it as an investment option. All companies are undergoing a tough time and VisualSoft is no exception to the trend. Therefore, is it wise for the company to shift its focus from its products business? This could point to the fact that the company is there just to grab a piece of the rapidly growing markets and is possibly indifferent to creating a fundamentally strong business.

    At the current market price of Rs 192, the stock is trading at a P/E multiple of 15x its FY02 estimated earnings. The stock price has moved up significantly, from Rs 60 in the first week of October. This has been the case with all technology stocks on the anticipation of a recovery in sector. However, the signs of recovery are very faint and a round of bad news could hurt the valuations.



    Equitymaster requests your view! Post a comment on "VisualSoft: Other alternatives". Click here!


    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    HCL Tech: Ends FY17 on Expected Lines (Quarterly Results Update - Detailed)

    Jun 29, 2017

    Volvo partnership caps a good year for HCL Technologies.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    • Track your investment in VISUALSOFT(I) with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks