| . | In one of the worst week that the
investors in India have seen in recent days, the Sensex had a free fall
during the first three days of the week before appearing to bottom out
on Thursday. When the week commenced, there were fears in the minds of
the observers that the Nasdaq effect of the previous week would have a
dampening effect on the market. However, for reasons dealt with in detail
in these columns last week, the Nasdaq effect was not expected to last
beyond Monday. In the meantime Nasdaq itself revived while the Sensex continued
to tumble. As a post-facto inference, some have attributed the fall to
the operations of the domestic mutual funds. However, it has been clarified
by most of the fund managers that even though there were notable redemptions
in the month of March, the Mutual funds have gained surplus resources and
are not panic sellers in the market. Infact some of the funds seem to be
sitting on huge cash positions and can enter the market any time.
During the week, Reliance came out with a stupendous profit announcement and was followed by good results from Polaris and Visual Soft. All in all there appears to be no logic for the market to fall except for the suspicion that the Cricket match fixing scandal may spread its tentacles to Mumbai and touch some of the stock brokers. Since such a probability is low, investors may consider the market condition at present as a golden moment to buy top IT scrips. The shares of Infosys and Wipro have already started recovering and others are expected to follow after a time lag. Amongst the top few scrips worth looking at for investment in this bearish phase is the Chennai based DSQ Software quoted around Rs 1100 per share at present. Ever since the first CEO Mr Krishnamurthy left the company to join Hexaware, investors have been watching the progress of this company with some caution. The concern has been whether the change in day to day management would have any long term adverse effect on the company. Even though, the stock prices have not directly demonstrated any concern for this key management change, invstors have been waiting for a confirmation over a longer period. Simultaneously, there also appeared to be payment issues with Indian Bank, which indicated some liquidity pressures. It is a matter of relief that under the control of the promoter Mr Dinesh Dalmia, the company seems to have successfully managed the transformation and is on a growth path. The financial highlights of the company as shown in the accompanying table indicates that the turnover has grown from Rs 41 crores in 1995 to Rs 275 crores for the 15 month period ending June 2000 (220 crores on an annualized basis). The net profit in the same period has grown from Rs 10.37 crores to Rs 49.93 crores. (Rs 39.94 crores on an annualized basis). Performance Highlights of DSQ Software (Rs crores)
During the quarter ending March 31, 2000 the company has achieved a 25 % growth in turnover and 53 % growth in profit after tax over the previous quarter. Considering the current trend, the company may end the current 12 month period with an EPS of around 20. As a part of its business strategy for the coming year, the company has announced that it would restructure its product portfolio with an increased emphasis on E-Commerce related products. The share of E-Commerce products is targeted to reach upto 50 % in the coming years. The company is also developing new ventures that may change the future of the company for the better. One such project is to become a global player as an "Application Service Provider" where the company delivers service through a remote server to users on a "Pay by Use" basis. The services would be focussed on individuals or small companies who can access the services through Internet. In another joint venture with BankAm, the company is setting up a software development center in Chennai which may specialize in the development of financial software. Yet another initiative that the company has taken is in developing Internet portals providing share trading, education, entertainment and value added B2B services for the media industry. Although some of these projects may not be able to immediately contribute to the bottom line of the company in the next year, the valuation of the shares is likely to be significantly pushed up once the import of the new business profile is assimilated by the market. Since the current share prices represents a deep trough from the 52 week high ( Rs 2820), it is expected that when the market starts moving up, the share would provide a handsome gain to those who may invest at the current prices. Na.Vijayashankar April 20, 2000 |
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