Geodesic: Buy

The going has been challenging for several mid-tier IT companies, even as the larger ones seem to have latched on to the revival momentum in client spends.

But others such as Geodesic, a mid-sized company that provides software products across devices and operates in a completely different segment compared to other software companies, have recovered significantly and have posted strong revenue and profit growth in this fiscal.

Investors can consider buying the stock with a two-year perspective, in the light of its strong deal pipeline, continuing traction in domestic deals and attractive valuations. At Rs 77, the share trades at just two times its likely FY-12 per share earnings. During the troubled period in late 2008 and much of 2009, the company faced significant pricing erosion and client cut backs on budgets. But from FY-11, the growth trajectory is once again visible. In the first nine months of this fiscal, Geodesic's revenues grew by 35.5 per cent over the previous year to Rs 636.3 crore, while net profits expanded by 41 per cent to Rs 251.9 crore.

The company provides instant messaging platforms, its mainstay, which works across communication providers, and across devices such as mobile phone, desktop, laptop and smart phones. Geodesic also offers TV and radio services for mobile devices. All these are branded under the name ?Mundu'. Voice services too are offered by the company for consumers to make calls at relatively lower rates across over 40 countries. This apart, the company has developed an electronic handheld device which has uses in e-governance, financial inclusion and the like.

Broad-basing offerings

The company has signed deals with America Movil, a large mobile player in Latin America, for deploying products across countries in that geography. It is important to note that the Latin American geography is a fast-growing mobile market where average revenues per user are three-five times the levels prevalent in India and, thus, presents lucrative opportunities .

The company has also tied up with all the large mobile phone manufacturers for deploying its products . It has also recently made available its Mundu Radio on the Android platform, which would enhance its user base. Some of its entertainment applications are made available in Apple's App stores and Nokia's OVI stores, where the number of users have steadily increased. The company has also signed up a contract with Vodafone in India to allow users to update their Facebook accounts.

For most of the products, the company derives a continuous revenue stream in the form of licence fee, revenues linked to usage and product/feature upgrades.

In India, it has tied up with six banks to deliver services as part of their financial inclusion initiative. With heavy volumes expected, thanks to the increased government thrust on this social dimension, Geodesic appears well-placed to benefit.

The company's clients include Axis Bank, HDFC Securities, Edelweiss and Angel Broking to whom it provides specific modules and consoles. This apart, the handheld device is also being used as a part of e-governance initiatives of several states. With the unique identity number set to become an important thrust area for identifying citizens and delivering a host of government-to-citizen services, Geodesic has made a head-start by winning an order for devices to be used for authentication.

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