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IPO Analysis
i-Flex Solutions Ltd
OPINION
Issue Opens June 5, 2002
Instrument Equity
Pub Iss Size (No.) 39,61,700
Issue Closes June 11, 2002
Floor Price (Rs) Face Value (Rs) 5 530
Min. Application (Retail) 10 Nos. and in multiples of 10 thereafter.

Book Building/Fixed Port 100% Book Building
Industry Information Technology
Listing BSE and NSE
Main Promoter OrbiTech Ltd
Commercial Production NA
P/E (FY02) 15.3 (on consolidated earnings)
Lead Manager JM Morgan Stanley

Post-ISSUE SHARE HOLDING (%)
Promoters 43.19
ESPS Trust 8.44
Financial Ventures Mauritius Ltd 1.82
Others 35.93
Public 10.62
TOTAL 100.00

KEY RATIOS FY200003 FY200103 FY200203
RONW (%) 37.9 35.0 24.8
Debt Equity 0.0 0.0 0.0

*BALANCE SHEET (Rs Mn)
FY200003 FY200103 FY200203
Equity 83.2 166.4 169.8
Reserves 2079.8 3091.2 4686.2
Debt 0.0 0.0 0.0
Total Assets 2163.1 3257.6 4855.9

*Profit/ Loss (Rs Mn)
FY200003 FY200103 FY200203
Total Income 2062.7 3211.2 4252.7
Expenditure 1189.9 1869.3 2687.4
Operating profit 872.7 1341.9 1565.3
Financial Expenses 0.0 2.3 2.6
Depreciation 122.3 145.2 144.9
Tax 57.6 94.0 150.0
Profit after tax (before EO Items) 692.9 1100.4 1267.6
Profit after tax (after EO Items) 821.8 1140.4 1203.7
Equity capital 83.2 166.4 169.8
EPS (Rs.) 25.0 34.3 36.1
* The Balance Sheet and Profit/ Loss Account are as per Indian GAAP. However, they pertain to unconsolidated accounts of the entity.

The company has good domain expertise and track record and the floor price is attractively priced at 15.3 times FY02 (consolidated) earnings.

However in FY02 the earnings growth came down to 15% as compare to 58% in FY01 and 37% in FY00. Secondly the company will face increased competition in the financial services IT business, post Polaris - OrbiTech merger. And considering that still there is no clear visibility in the IT spending growth, we believe that high risk traders can take a bet and bid at Rs 530 and liquidate their position on listing. The investors on the other hand should stay away from the IPO.
ISSUE HIGHLIGHTS
- Issue is being made through 100% Book Building Process wherein 60% of the issue shall be allocated to QIBs (Qualified Institutional Buyers) on a discretionary basis, 15% to Non-Institutional Investors and 25% would be allocated to Retail Investors on a proportionate basis.

- i-flex Solutions is promoted by OrbiTech, a member of Citigroup which currently holds 47.5% of its equity.

- i-flex solutions limited is a provider of information technology solutions to the financial services industry worldwide through a range of products and customized service offerings.

- i-flex's portfolio comprises the FLEXCUBE product suite for consumer, corporate, investment and internet banking, asset management, and investor servicing; custom application software development and deployment, maintenance and support services (both onsite and offshore) and business and IT consulting.

- i-flex has provided IT solutions and services to more than 340 customers in over 80 countries.
COMPETITORS
Global IT Services Companies: Cap Gemini E&Y, Electronic Data Systems, Computer Sciences Corporation, IBM Global Services and large Indian IT services companies like Wipro, Infosys and TCS.
STRENGTHS
- FLEXCUBE was ranked second, both on the 2001 retail banking systems and the 2001 wholesale banking systems as per the April 2002 issue of International Banking Systems (IBS) UK.

- Among the top 20 software exporters in India as per data released by NASSCOM for last three years.
CONCERNS
- Promoter OrbiTech holds 93.25% in a subsidiary OrbiTech solutions, which currently competes with i-Flex in offering software products and services to the financial services industry. The recent merger of Polaris with OrbiTech Solutions will increase the competition for i-Flex.

- The company`s operations depend on its relations with a limited number of customers including its affiliates. Citigroup entities accounted for 43.8% of revenues in FY02. The top five customers accounted for 42.4% of its revenues.

- Product sales cycle is long and revenues are difficult to predict.

- High Debtors collection period for FY 2002 - 172 days.
Team Moneypore

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