IPO Update : Accel Frontline

Take a Backseat on this !

Accel Frontline (hereafter called”Accel”) has entered the capital market with a public issue of 56.36 Lac equity shares at a price band of Rs. 75-90. Investment Guru rates this IPO as “Below Average” as it is priced aggressively and recommends investors to stay away from the IPO.

Highlights of the Issue :

Accel is a Information Technology (“IT”) Services provider specialising in consulting, infrastructure, applications, outsourcing and support services.

The company has structured its business by carving out four strategic business units (“SBUs”) namely IT Infrastructure Solutions; IT Infrastructure Management Services; Enterprise Software Solutions; and Business Process Outsourcing Services.

The company mentions end-to-end IT solutions, strong focus on customer service, strong pan India customer service network and stable management setup as its competitive strength.

The IPO proceeds would be used to fund global business expansion plans including development of our overseas marketing and sales infrastructure and to acquire or invest in strategic businesses(Rs. 30 Crore), to increase ESS and BPO capacities (9 Crore) and for working capital requirements(Rs. 20 Crore).

IT Infrastructure segment generates 55% of the Revenue for the company while service segment generates the balance 45%. The company expects to increase share of service revenue.

Financials: Total Income has grown by 25% in FY06 compared to FY05. Net profit has grown by 130% in the same period. However, one should note that the company’s sales has grown by just 10% over last 5 Years. Company has incurred losses in FY04. Hence, consistency is not seen in the financial performance.

Cash flow from operating activities has been negative in three out of the last five years

The weighted average EPS comes to 2.74. The offer comes at a PE multiple of 27-33. Competitors are quoting at a PE of 17-24. So tell me friends, would you like to buy shares of CMC, HCL, 3i Infotech which are established players and are quoting at lower PE or would you like to apply for accel IPO at a higher PE than these companies. The choice is yours !

The weighted average return of Net worth is 7.94 %. Competitors are generating returns in the range of 13-57%.

The pre-issue NAV per share comes to Rs. 15.86.

Issue Opens : 28-Sep-2006
Issue Closes : 05-Oct-2006
Registrar : Karvy


KB said...

Hi Rajesh Nice artice....Can you write something about What is happening in Petroleum sector.


Anonymous said...

hi rajesh,
without reading ur article i have purchased some shares during ipo of accel around 1050 shares, can i hold it or to sell, i purchased for rs.75 and now presently it is around rs.62, please advice.