RS Software's tieup with Hanover Direct Inc. has boosted sentiments in the counter. The scrip was frozen at the upper-end of the circuit-filter at Rs 195.1 soon after trading commenced on Thursday. Sources say the 40:60 venture will develop software systems as well as net-based programmes and e-commerce. Hitherto engaged in maintenance/development services and Y2K conversion, RS Software is now trying to broaden its horizon. It has forayed into client server technology and now plans to focus on data warehousing and E-Commerce applications. For the latter, the company has tied-up with Software AG of Germany.

The latest tie-up with the US firm will help RS Software vie for a slice of the Internet pie. The company's aggressive stance to ramp up its business and look beyond Y2K will aid topline growth. According to sources, the joint venture should have a turnover of $ 25 million over the next three years. RS Software is also reportedly in talks with some of itsclients in the US for equity participation in the company. While this will not only bring in money for expanding its offshore business, it will also improve the company's perception in the market and boost valuations.

Spin-off may affect Ramco's valuations

Ramco Industries' reported move to hive off its IT business into a separate company will affect its valuations. This is because post-spin off, Ramco will be valued as a commodity stock rather than a software stock. At present, the software business is in losses, but the newly developed ERP tool - Marshal - is expected to rake in mega bucks and help turn the unit around. Moreover, the company's other two divisions - asbestos cement sheet and cotton yarn - are facing tough times. Although the asbestos cement sheet division is still profitable, industrial slowdown has affected demand. So far as shareholders are concerned, the benefits will depend on how the deal is structured; they stand to gain if they are allotted shares of the new company.

Themarket believes that Ramco is scouting for a strategic partner for the hived off software company. This will bring in the much-needed funds to aggressively market the ERP tool which has to compete with international ERP majors like SAP, Baan, PeopleSoft and Oracle both in India and abroad. For developing a brand, a company has to incur some capital expenditure. Hence, a tie-up with a strategic partner could be on the cards. The other option for the hived off company could be to tap the market for funds - as a purely software company (that to, selling products rather than services) it could command good valuations.

A win-win situation for PSI Data Systems

The takeover of Price Waterhouse's India software development and financial services division by PSI Data System will help the latter broad-base its business. At present, the latter is restricted to the banking sector and the acquisition will position PSI as a complete financial service solution provider.

Price Waterhouse' software divisioncaters mainly to the foreign banks -- in India and provides high-end software development as well as services in custodial, electronic securities trading, etc. Apart from the impressive clientle which includes Deutsche Bank and ANZ Grindlays, PSI also stands to gain the entire book order from Price Waterhouse.

However, for the first three years, a royalty of 20 per cent of the revenues will have to be paid to Price Waterhouse in addition to the royalty on the products developed by it. According to sources, even after paying the royalty, PSI should manage to add Rs 1 crore to its revenue in the current fiscal. Besides, the expertise that PSI Data gains from the acquisition can be leveraged with other clients like nationalised banks and non-banking finance companies. With its revenues going up, PSI's valuations should go up in the long-term. In the short-term, the scrip may attract some selling pressure.

Punters prop up Bombay Dyeing

Despite a 13 per cent drop in net profit for fiscal 1999, BombayDyeing is back on the punters' buying list, thanks to the rising prices of polyester and polyester intermediates. Analysts point out the lower net profit of Rs 20 crore (Rs 23 crore in fiscal 1998) was mainly on account of one-time adjustment of Rs 4 crore on account of VRS. The company's bottomline was also hit because of lower sales by 7 per cent at Rs 952 mainly on account of recessionary trend in the market and a higher interest burden.

Reliance Industries has recently hiked the prices of polymer, polyester and intermediates. This indicates an improvement in demand for polyester and intermediates. In fiscal 1999, though Bombay Dyeing's DMT production went up from 1.38 lakh tonnes to 1.55 lakh tonnes, thanks to poor realisations the division's turnover was lower at Rs 325 crore from Rs 379 crore. With prices of petrochemicals hardening globaly, the demand for DMT should look up.

The scrip has also been witnessing an uptrend. The scrip which had been languishing at Rs 35 on May 28 hit the upper band ofthe filter at Rs 38.4 on May 31, the day company announced its results. On June 1, despite a fall in Sensex, the scrip touched the upper limit of eight per cent to Rs 41.45 with a heavy volume of 3.6 lakh shares. However, profit booking in the stock led to marginal drop in the share price to Rs 41 on Wednesday. On Thursday the stock again hit the circuit breaker as it closed at Rs 44.28. Marketmen are targeting a 12-month price of Rs 80 for the stock.

-- Nandita Datta and Sunita Nagpal