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IPO Analysis
D-LINK (INDIA) Ltd. FULLY PRICED
OPINION
Issue Opens March 14,2001
Instrument Equity
Pub Iss Size (No) 15.23 lakhs equity share
Issue Closes March 19,2001
Floor Price (Rs) Rs 300
Min. Application ( Retail) 50 Nos. in multiples of 50 thereof.

Book Building/Fixed Port 90/10 Fixed Portion
Industry Computer Hardware
Industry P/E (Hist.) 8.0
Listing BSE, NSE & Bangalore
Main Promoter Mr K.R Naik
Commercial Productiion Optic fibre facilites & expansion
Offer P/E (2000A) 9.8
Lead Managers Tata Finance,Triumph International

POST-ISSUE SHARE HOLDING (%)
Overseas Promters 38.70
Indian Promoters 28.90
Employees 0.30
ESOP Trust 2.10
Public 25.00
Others 5.00
TOTAL 100.00

KEY RATIOS (%)
1998 1999 2000
RONW 43.29 31.04 5.45
OPM 2.50 9.30 7.60
NPM 1.90 7.70 10.20

SALES BREAK-UP FOR 1999-00 (%)
Products
Networking products 54.69
Inter networking products 28.06
Structured cabling products 7.40
Cisco range of products 9.85
TOTAL 100.00

FINANCIALS                (Rs Mn)
9803(A) 9903(A) 0003(A)
Sales 172.50 416.29 816.76
Expenditure 168.14 377.54 754.93
Operating profit 4.36 38.75 754.93
Other income 6.06 3.28 37.06
Interest 4.81 3.79 3.14
Depreciation 2.39 3.07 5.19
Tax 0.00 3.20 22.20
Profit after tax 3.20 31.96 83.47
Equity capital 25.00 30.60 41.30
EPS (Rs.) 1.30 10.40 20.21

At the floor price of Rs 300, the price earnings ratio works out to 9.8 times annualized FY 01 earnings. The valuation may seem cheap but it is in line with other peer group companies ( Mro-Tek Ltd – P/E = 7.7). Considering the current negative sentiments prevailing in international markets over technology stocks, the company may not see price appreciation in short term.

We feel that the stock is fully priced at the current floor price of Rs 300. However, the company appears to be a good long-term bet considering its dominant market share & brand equity, good management and above average financial performance in the last three years. Investors can enter the stock at Rs 270 levels for long-term investment.
ISSUE HIGHLIGHTS
The proceeds of the issue will be used to set up additional production facilities, setting up fibre optic products manufacturing facilities, setting up of software division and installing additional structured cabling equipment.

The proceeds of the issue would be used for financing its Rs 550 Mn project.

Post-issue, the holding of the overseas promoters and Indian promoters would come down to 39% and 29% respectively.

D-Link is one of the leader in networking products in India. As per the Voice & Data magazine, the company has been ranked as second largest vendor behind Cisco in India.

The company has commenced it software operation from February 2000. It is mainly engaged in the development of embedded systems protocol programming and other networking applications.

The company’s portfolio includes 150 products, which reduces the risk of product dependence. It has a direct presence in almost 85% of the entire range of products.

The sales of the company stood at Rs 816.76 Mn in FY 2000 as against Rs 416.29 Mn in FY 1999 while the net profits was Rs 83.47 Mn in FY 2000 as compared to Rs 31.9 Mn in FY 1999.

The operating margins and net profit margins was 7.6% and 10.2% respectively in the FY 2000. The reason for OPM being low compared to NPM is a higher other income at Rs 37.06 Mn.
Ketan Thacker


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