Money Tree

The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : July 02, 2007
Issue Closes On : July 05, 2007
Issue Size : 45,22,435 equity shares
Face Value : Rs.10/-
Price Range : Rs. 170 to Rs. 190/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 35
Minimum Order Qty : 35
Listing Stock Exchange : NSE, BSE

Objects Of the Issue :

Starting up of a Global Service Delivery Centre (GSDC)
Upgradation and Expansion of Existing Infrastructure.
Setting up of new Strategic Business Units.
Strategic Acquisition.
Financing working Capital requirements.
To meet Issue Expenses.

Basis for Issue Price :

Face Value : Rs.10/-
Issue Price : 17 Times(Lower Price Band) of the Face Value.
Issue Price : 19 Times(Higher Price Band) of the Face Value.
Issue Price : Rs. 170 to Rs. 190
EPS for the last financial year 2006-07 : Rs 19.07
EPS for the last year 2005-2006 : Rs 12.00
EPS for the financial year 2004-05 : Rs. 1.28
Weighted Average EPS for the years April 2004- March 2007 : Rs 13.74

Industry PE ratio:

Highest : 113.0
Lowest : 3.2
Industry Composite : 23.80

PE ratio of Allied Digital on the higher side of price band comes out to 13.8 times and on the lower side of the price band comes out to 12.4 times on the basis of weighted average EPS for the last three years.

PE ratio of the Peer Group

HCL Infosys : 25.90
Tata Elxsi : 19.10
Wipro Ltd : 27.90
3i Infotech : 46.60
CMC Ltd : 27.10

Business Overview :

The main Business of Allied Digital is providing IT services and IT solutions. The IT services business covers the infrastructure management including test and repair, remote management services and technical BPO. The IT solutions business comprises IT solutions sourced from a broad vendor base. The company is having a strategic tie-up with Echelon Corporation to foray into Intelligent Building Management and Energy Management Solutions.

Financial Information :

Total income of the Company for the year ended 31st March, 2007 : Rs. 15,642 lacs
Total income of the Company for the year ended 31st March, 2006 : Rs. 8,887 lacs
Total income of the Company for the year ended 31st March, 2005 : Rs. 5,181 lacs

Net profit (after tax) for the year ended 31st March, 2007 : Rs.2293 lacs
Net profit (after Tax) for the year ended 31st March, 2006 : Rs.1206 lacs
Net profit (after Tax) for the year ended 31st March, 2005 : Rs. 144 lacs

Comments :

The valuations are very attractive and the issue is made around 12 to 13 times weighted EPS of the last three years, which is much below the average industry PE ratio and that of its peers. The company is in a good space and has recorded a consistent growth in revenues and profits over the past few years. The IT space is expected to continue its growth in the coming years and inspite of a stiff competition there will be growth in the company as well and the same will be reflected in the price of its stock. In the present market scenario the issue seems to be a good one and is worth subscribing.