Sonata scorched the turf on the bourses right from the word go. The scrip, which was offered to the public at Rs 90, impressively recorded its maiden quote on BSE on January 15 at Rs 170.

Interestingly, the company, which took just 10 days to complete the allotment, got its shares traded on the BSE only 27 days after allotment. Incidentally, Sonata made its market debut a day after the announcement of the encouraging third-quarter results. True to the design, the muharat excitement peaked to Rs 245 at one point, and then steadied down to close the opening day at Rs 225.10 apiece. Sonata's action-packed first day saw 3.70 lakh shares change hands in 1,115 trades for a turnover of Rs 7.74 crore.

On thefollowing trading days too, the upward march of the scrip continued unabated. On January 18, Sonata edged up to Rs 243 and then to Rs 262.40 by the end of the next day.

Significantly, however, the volumes got thinner by the day. While January 18 witnessed 96 trades for 24,800 shares, the following day saw 40 trades for hardly 7,900 shares.

On the Bangalore Stock Exchange (BgSE), the only other exchange where Sonata's shares are listed, its price line pushed behind the Mumbai lead. After opening at Rs 239 on January 16, the scrip moved ahead on BgSE to end January 19 at Rs 289, a clear gain of Rs 26, or 10 per cent, over the BSE closing price. On BgSE though, the volumes have been frugal, probably reflecting the absence of the speculative interest so special to Mumbai.

The glaring pattern of dropping volumes seen on BSE, the `regional exchange' of Sonata, on the first few trading days, is a matter of interest to the discerning analysts. One school views the pattern as, perhaps, an indicator of theexistence of an orchestrated `grey market' for the Sonata scrip, as a build-up to the listing. Once the grey market deals were taken on brokers' books on the opening day, this school explains, the volume at the counter appears to have tapered off.

Of course, the market is sure of one thing that the last has not been heard on the price line of Sonata on BSE. If the grapevine is to be believed, certain operators active in the infotech counters have set an `ambitious target' for the Sonata rally in the not too distant future. The engineered rally, if found true, will surely be yet another test case exposing the drowsiness of BSE's surveillance desk and the bark of Sebi minus-the-bite.

Interestingly, at a time when the FIIs and domestic mutual funds were going overboard over the fortunes of the IT industry, Sonata's public offer of 25.22 lakh shares at a premium of Rs 80 apiece in December did not have any reservation for FIIs/financial institutions/mutual funds, nor for NRIs/OCBs. Perhaps, the idea was toforce the bulk institutional investors to tap the secondary market in case they wanted a piece of the Sonata cake.

Going by Sonata's basis of allotment, the public offer appears to have done reasonably well. It attracted about 10,000 investors for a subscription of 3.96 times the issue size. About 9,450 small investors bid for a total of 30.08 lakh shares, thereby ensuring oversubscription at this stage itself. The bulk category, largely represented by 167 investors, accounted for a collective bidding of 69.92 lakh shares, or about 70 per cent of the total subscription.

Sonata has allotted 60 per cent of the total issue, as against the mandatory 50 per cent, to the smaller investors, and the rest to the bulk category. Consequently, the post-issue stake available with the retail and bulk category of shareholders works out to 15.59 per cent and 9.63 per cent, respectively. Sonata's employees hold 13.59 per cent and its Employees' Welfare Trust holds another 9.45 per cent of the stake. The Ghia-Rahejapromoter combine accounts for 47.54 per cent of the company's post-issue equity. Other private investors hold 4.2 per cent stake in the company whose registered office in Mumbai is bereft of any responsible person to answer even investor queries.

Operationally, Sonata has done reasonably well in its independent existence since October 1994. In fiscal 1998, Sonata's turnover was placed at Rs 84.65 crore and profitability at Rs 5.58 crore. For the first half of the current fiscal, the company posted a turnover of Rs 53.74 crore and a net profit of Rs 4.41 crore. Its performance in the third quarter, made public to coincide with the listing, shows a turnover of Rs 28.88 crore, churning out a net profit of Rs 3.10 crore to take the first nine months' profitability to Rs 7.51 crore. As per its offer document, Sonata had projected a turnover and profitability of Rs 128.37 crore and Rs 8.62 crore for the whole of fiscal 1999. The performance in the fiscal so far clearly spells out that Sonata is certainly oncourse to achieve its projected financials for the whole year.

Nonetheless, one needs to factor in certain crucial peculiarities specific to Sonata before hitching it to the IT bandwagon. Sonata differs very significantly from other companies in the IT industry on many counts. Unlike most software outfits, which are all net foreign exchange earners, Sonata is a net forex spender. This strange phenomenon is due to its import and local sale of products. Though Sonata has made a conscious effort to move away from product sales and towards services in the last three years, the contribution to revenue of the former is quite significant.

Yet another area of intrigue pertains to Sonata's travel bill. Year after year, the company has posted a travelling expense in foreign currency equivalent to more than 50 per cent of its forex earnings from software exports. What's more, the travel bill has consistently exceeded its employee costs right since its inception. However, fiscal 1998 was just too atrocious withSonata expending Rs 8.96 crore on wages and Rs 18.27 crore on foreign travel. In comparison, Infosys Technologies incurred a forex travel bill of just 20 per cent of its employee costs. From a qualitative angle, too, Sonata presents a study in contrast. Unlike most entities in the IT industry, Sonata's promoters are not technocrats to spearhead and direct the company's operations themselves. Consequently, they would be eternally dependent on the core technical team for guiding the company's fortunes. If, for any reason, this core team decides to leave en masse, in an industry where quality manpower is perhaps the only asset of consequence, Sonata would be left with a shell without any substance.

(Arranged by Investar -- The Aarthik News & Research Syndicate)