Aggregating Rs 11.61 crore, the issue is aimed at establishing a software technology park near Pune, pre-payment of company's long-term borrowing and for setting up of two overseas subsidiaries.

Although the company is going public, a lot of groundwork remains to be done before its operations take off. The completion of these tasks would directly influence its bottomline. KPIT Systems is yet to obtain the complete possession of the land at Pune technology park where the project would be set up and has not yet placed orders for the equipment required for the project. In addition, it is yet to get RBIpermission to set up its middle east subsidiary.

Despite the software craze that is currently driving the market, the promoters are still playing it safe by having the issue fully underwritten. While the two merchant bankers, Enam Financial and DSP Merrill Lynch, have underwritten to the tune of Rs 8.03 crore and Rs 1.5 crore, respectively, IL&FS and Enam Securities are contributing 1.5 crore and Rs 58.05 lakh, respectively.

The project cost is pegged at Rs 15.40 crore of which Rs 11.61 crore is coming through the IPO route and the balance is being financed by internal accruals. The setting up of the software development facility would cost the company Rs 6.80 crore. The company also plans pre-payment of long-term debts to the tune of Rs 1.20 crore.

According to company estimates, the total cost of setting up the subsidiaries would come to Rs 2.40 crore. One of the two subsidiaries is planned in the US while the other in the middle East.

Post-issue, while the promoters would hold a 50.63 per centstake in KPIT Systems' Rs 5.15 crore equity, the public holding would be at 25 per cent. Being a 100 per cent export oriented unit, 93 per cent of KPIT Systems' Rs 15.59 crore turnover during fiscal 1997-98 came from overseas. 55 per cent of this came from its UK operations.

During fiscal 1998 ended June 30, KPIT Systems earned a net profit of Rs 1.90 crore from a total income of Rs 16 crore. During the current fiscal the company expects to earn a net profit of Rs 4.50 crore, a huge jump of 137 per cent over fiscal 1998 net, from a total income of Rs 27.14 crore.

Currently, the range of services offered by the company include re-engineering, migration, datawarehousing and enterprise resource planning (ERP) consulting.

Since the scrip is scheduled to be listed on the three minor exchanges, Pune, Ahmedabad and Hyderabad, the investors in the IPO are likely to face liquidity problem after the initial allotment.

The issue, which opens on February 18 and closes on February 22, is lead managed by EnamFinancial Consultants.