According to market sources, there has been excessive speculative build-up in this counter mainly because of the scrip being in no-delivery period. The stock is likely to see unwinding of excessive position in the next couple of days as such a sharp rise is unwarranted, considering the fact that the company's scrip just gone ex-bonus, said Bombay-based brokers.

The scrip after going ex-bonus on September 23 on the National Stock Exchange (NSE) and September 28 on the Bombay Stock exchange (BSE) has been on the rise and has shot up from Rs 434 to Rs 516. Leading Edge's scrip was the lone ranger amongthe software stocks to witness a rise amidst the 225-points crash on a single day. The scrip after going ex-bonus has turned very volatile. On Monday, notwithstanding the nervousness, the scrip zoomed to the freeze-level Rs 504 from the previous close of Rs 467, but closed the day at Rs 478 on BSE.

Leading edge announced a 1:1 bonus and as a result, the equity will swell to Rs 6.58 crore from Rs 3.29 crore. The reserves post-bonus would be at Rs 17.7 crore, thereby yielding an EPS of Rs 36.9. Increase in floating stock is also likely to see the scrip dropping in the next few days, said another Bombay-based NSE dealer.

Just prior to going ex-bonus, the scrip zoomed from Rs 657 to Rs 808 with low trading volumes. But after the scrip entered the no-delivery period, trading volumes have shot up from an average daily volumes of 2,000-3,000 shares to around 35,000-40,000 shares a day.

The scrip has also risen after the news report that the company is placing 12 per cent stake with an Indian private equityfund, advised by Indocean Chase Capital Advisors. Although the fund is picking up the stake at a price of around Rs 387 a share, the current market price has zoomed past well the placement price. The fund will be investing in warrants exerciseable over a period of 18-months period to enable Leading Edge Systems funds its expansion plans.

Indocean Chase capital's investment in Leading Edge is expected to aggregate Rs 36 crore on final conversion. There will not be any actual inflow in the company as the funds would be available only after the warrants are exercised to be converted into equity. The funds to be received over a period of time, will be used to fund the existing expansion of the company's software business in India and abroad.

Formed by three IT professional in 1986, Leading Edge Systems is today a Rs 48-crore company and almost 90 per cent of the revenues comes from client-server based services to US companies. The company reported a decent growth in 1997-98. The net profit zoomed from Rs 6.10crore to Rs 10.68 crore for the year ended March 1998. Turnover improved from Rs 33.5 crore to Rs 46.1 crore.