The Hindu Business Line : Ramco Systems: Invest

SHAREHOLDERS of Ramco Systems can consider investing in the rights offer at Rs 210 per share. This offer remains appropriate only for shareholders with a holding period of more than a year.

The attractive pricing, higher margins from its existing client relationships and the possibility of induction of strategic partner/s to widen its marketing reach in the enterprise solutions market, are encouraging elements of this offer.

Since the previous rights offer in December 2003, the company has managed to increase the number of client relationships for its distinctive enterprise solutions platform — Ramco VirtualWorks. This platform which focusses on a high level of automation for clients in different verticals such as aviation, financial services, healthcare and manufacturing, puts it ahead of its peers in the customised enterprise solutions space. The potential for this solutions capability in the overseas and domestic markets is also quite high. But the company is yet to get its marketing act together. The expectation that it will forge multiple relationships with global consulting firms to penetrate the developed markets in the past two years has not happened.

In late 2004, the company had planned to make a preferential offer of equity/warrants to Halycon Resources and Management Consulting, a consulting firm, to further its growth plans. But this was called off later. Though the company has its presence through subsidiaries in the US and Europe, its marketing reach has not been proven yet. Competitive pressures are also rising from leading enterprise solution vendors such as SAP and Oracle.

The slow commercial acceptance of its solutions platform is reflected in its financials. While the have grown in 2004-05 and in the first half of 2005-06, it has remained volatile across quarters.

On top of that, profitability has been its bugbear. It has remained in the red over this period and its accumulated losses have mounted. Through a recent scheme of arrangement, approved by the Madras High Court, the company has set off Rs 200 crore against the share premium account.

Accumulated losses of Rs 110.77 crore and receivables, amounting to Rs 88 crore from its overseas subsidiaries, have been adjusted against share premium. In the last rights offer, the receivable dues from the subsidiaries were highlighted as a critical risk factor.

Facts from the offer: Ramco is making the rights offer to meet its working capital, ongoing R&D and marketing expenses, estimated at Rs 105.5 crore. This is to be funded partly through this rights offer of Rs 64.5 crore.

The issue, which opened on December 19, closes on January 18. Kotak Mahindra Capital is the lead manager to the offer.

More Stories on : Rights Issue | Recommendation | Rights Issue

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page