Infinite Computer or Birla Shloka

Subscriptions to the initial public offering of Infinite Computer Solutions India and the follow-on issue of Birla Shloka Edutech have begun.

Infinite is a global service provider of infrastructure management, intellectual property leveraged solutions, and IT services. It has fixed its price band at Rs 155-165 per share. The issue will close for subscription on January 13.

Birla Shloka is a Yash Birla Group company. It plans to raise Rs 34.77 crore via this issue, the proceeds of which will be used for capital expenditure, funding proposed M&A activities, and working capital requirements. The price band has been fixed at Rs 45-50 and will close for subscription on January 13.

So, which of the two issues should one subscribe to? SP Tulsian of sptulsian.com says the performance of Infinite Computer has improved over the last 18 months. "It has a sizeable presence in the sector." The shares, he added, are issued at a price-to-earnings of nine times FY10 earnings while its peers are trading in the range of 15-20 times. Tulsian advises a buy and says one can subscribe at the upper band also.

For him, Birla Shloka Edutech is a clear avoid. He says it is presently a trading company and is raising money under the pretext of computer education. "It has participated in a tender in Maharashtra under the Sarva Shiksha Abhiyan. The company has a book value of Rs 10. Earnings per share for FY09 stands at 60 paisa while the same for H1 FY10 is Rs 1.2."

exclusive interview with SP Tulsian on CNBC-TV18

Q: Would you buy Infinite Computer Solutions between Rs 155-165?

A: Yes. It looks good because the company is into the infrastructure management, IP leverage solutions and providing IT support to telecom and media. The best part about the company is that they have shown good growth in their topline and bottomline in the last 18 months. If you see FY09 they have a turnover of about Rs 500 crore with a bottomline of about Rs 45 crore, while in first half they already have achieve a bottomline of about Rs 37 crore that too after providing some extraordinarily of Rs 5 crore. So I think if the same pace of the growth is maintained by the company they should be able to post an EPS (earnings per share) of Rs 18-19 for FY10.

If you see their total issue size of about Rs 180 crore, 50% is for offer for sales, the company will be getting only Rs 90 crore. If you see their three objectives maybe the loan repayment of about Rs 8 crore, acquisitions of about Rs 5 crore, I do not think that company really needs that money. Because if they have their own accrual to the extent of Rs 75-80 crore, which is expected for FY10 with the cash presently held by the company to the extent of Rs 30 crore that means they have an expected accrual of about Rs 100 crore plus or maybe at least Rs 75 crore plus as of March 2010. So why do they need that money. But yes since the offer for sale process has been going on they much have thought of mobilizing an equivalent amount Rs 90-Rs 100 crore.

If you compare it with Tech Mahindra, Infotech Enterprises, Mindtree and all these companies are Rs 1000 crore company and this company should be having a topline of Rs 600-700 crore, so you cannot call it a very small company. Going ahead, things are looking good. There has been the re-rating of the whole sector. All those companies, which I mentioned, are ruling at a P/E multiple of close to 15-20 and this issue is being made at a P/E multiple of 9. I think there is a reasonable scope for the prospective investors left on the table and one can go ahead with the IPO.