The Hindu Business Line : Allsec Technologies: Reject

Shareholders of Allsec Technologies (Allsec) can reject the open offer being made by the acquirer, First Carlyle Ventures Mauritius (First Carlyle), to acquire an additional 20 per cent equity in the former at Rs 260 per share.

Since Allsec's fundamentals rest on a good footing, staying invested for now appears prudent. As the offer document states, First Carlyle is merely a financial investor and the management control will continue to reside with Allsec's promoters. Any change in this status, if effected at a later date, will again attract an open offer under the provisions of the Takeover Code.

The stock trades close to the offer price, and at current price levels the price-earnings multiple works out to 14 times its annualised 2006-07 earnings, leaving room for capital appreciation. For the half-year ended September 30, 2006, Allsec recorded an encouraging 38 per cent growth in revenues at Rs 58.5 crore and 45 per cent rise in post-tax earnings at Rs 14.2 crore.

The acquisition of B2K Corporation in January has added another vertical, high-end technical support to its existing line of third-party customer care and support business. It currently offers its customer care services across four verticals: Life-cycle customer management, collections, quality assurance and payroll management. During the course of this year, the company plans to grow its existing customers by adding a wider range of service offerings.

Offer details: The offer by First Carlyle follows a preferential allotment of equity and warrants convertible to equity made by Allsec at Rs 260, the price at which the offer is being made. The preferential allotment was also accompanied by a warrant issue to Allsec's promoters, representing 4.96 per cent of post-conversion fully diluted equity. The promoter's equity holding, post-warrant conversion, will be 30.23 per cent, while First Carlyle will hold 19.66 per cent of fully diluted equity, without taking into account this open offer.

Since the offer announcement, First Carlyle has mopped up some additional equity of 4.93 per cent of the current equity as of September 30 from Euronet (another foreign venture capital investor) in an off-market transaction at Rs 258.80 per share. The offer, which opened on October 23, closes on November 11.

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