Proposed public issue of 4,974,836 equity shares of face value Rs 10 at a targeted price of Rs 375 per share
CRISIL has assigned a CRISIL IPO Grade '4/5' (pronounced 'four on five') to the proposed public offer of Persistent Systems Ltd (PSL). This grade indicates that the fundamentals of the issue are above average, in relation to other listed equity securities in India.
The grading reflects the company's strong position in the outsourced product development (OPD) space by virtue of its ability to provide large scale services in specific parts of the software product development life cycle, such as software development, testing and support, and provide end-to-end product development services on a relatively smaller scale. The former is used by global software companies like Microsoft, Agilent, Covad, etc, while the latter is used by small and medium-sized software product companies who do not have the scale to set up captive operations in India. This has given the company a diverse customer base. The grading also reflects the strong corporate governance architecture in the company, in part due to the presence of eminent independent directors on the company's board for the past six years. The grading is tempered by the fact that the margin compression that the company has seen over the last three years is likely to continue in view of currency movements and wage inflation, as well as increased competition from IT Services companies such as Wipro and TCS, as a consequence of a likely slowdown in their traditional revenue streams. The possible withdrawal of tax concessions would also adversely impact the company's return on equity after 2008-09.
About the company
PSL, promoted by first generation entrepreneurs - Dr. Anand Deshpande and his father Mr. S. P. Deshpande, was incorporated in 1990. The company provides offshore software product development services to its customers, majority of whom are independent software vendors (ISVs). It provides services at all stages of the product development life cycle - product conceptualisation, design, development, testing and support. The company has around 190 customers, of which the top 10 customers account for around 47 per cent of its revenues. As of October 5, 2007, PSL employed around 3,700 people.
PSL focuses exclusively on the OPD market. By providing services to mid-sized and small ISVs, the company has been able to get access to the venture capital community. The company continues to use the venture capital community to garner business within the small ISVs space.
The company's offshore development centres are located in Pune, Nagpur, Bangalore, Goa and Hyderabad. The company owns most of its development centres. It currently owns over 5 lakh square feet of office space with a capacity to seat approximately 3,800 people. PSL plans to use its IPO proceeds to construct two new development centres - one in Pune and the other in Nagpur, with a capacity to seat 3,000 and 1,200 employees, respectively at an estimated cost of Rs 1,516 million.
About CRISIL IPO Grading
CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security.
Client Servicing Contact
|Ramya Krishnan Anil
Head, Market Development & Communications
Mobile: +91 98203 42671
Director, CRISIL Research
Tel: +91-22-6691 3502
Head, CRISIL Research
Phone: +91-22-6691 3526
Email : firstname.lastname@example.org
Tel: +91-22-6691 3561
About CRISIL Limited
CRISIL is India's leading Ratings, Research, Risk and Policy Advisory Company.
About CRISIL Research
CRISIL Research is India's largest independent, integrated research house. We leverage our unique, integrated research platform and capabilities spanning the entire economy-industry-company spectrum to deliver superior perspectives and insights to over 600 domestic and global clients, through a range of subscription products and customised solutions.
A CRISIL IPO Grading is a one-time assessment and reflects CRISIL's current opinion on the fundamentals of the graded equity issue in relation to other listed equity securities in India. A CRISIL IPO Grading is neither an audit of the issuer by CRISIL nor is it a credit rating. Every CRISIL IPO Grading is based on the information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the grading is based. A CRISIL IPO Grading is not a recommendation to buy / sell or hold the graded instrument; it does not comment on the issue price, future market price or suitability for a particular investor.
CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of CRISIL IPO Gradings. For information on any IPO grading assigned by CRISIL, please contact 'Client Servicing' at +91-22-66913561, or via e-mail: email@example.com.
For more information on CRISIL IPO Gradings, please visit http://www.crisil.com/ipo-gradings
This Press Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The Press release may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution of its Press Releases for consideration or otherwise through any media including websites, portals etc.