Technically, the scrip has broken through its trendline and the relative strength index has formed a new top in the over-bought zone. The other indicators, too, suggest a decline in the stock price to around Rs 250 levels.

Infotech Enterprises is among the top five GIS companies in the Asia Pacific region. The company is currently engaged in geographical information systems (GIS) conversion, but is trying to move up the value chain in order to increase value addition per employee. Simply put, GIS conversion means converting apaper-based drawing into the desk-top. Typically, the process involves scanning of the original map received from the customer and obtaining the raster images. This raster data after cleaning is rubber-sheeted to the grid and the line work is entered into the foreground, while keeping the raster data in the background and editing at various stages.

The different maps are snapped to each other through edge-matching; the data is then entered using the `double-entry' techniques, developed in-house. The completed data is then packed in the required output format and shipped to the customer. At present, a substantial chunk of around 50-60 per cent of the company's turnover comes from this moderate risk-return business.

The United States of America, Italy, Australia and Germany account for a major portion of this income. Infotech Enterprises Ltd has now forayed into the relatively higher margin photogrammetry segment. This means the company will now move towards aerial photography and satellite imagery from thetraditional land surveying business.

The GIS industry is at present in its infancy, but software experts say it is a fast growing sector worldwide. According to a few estimates, the sector is currently growing at a rate of over 25-30 per cent per annum and this is likely to accelerate soon. Infotech Enterprises, which earns as much as 94 per cent of its income through exports, is very keen to provide end-to-end GIS solutions to its customers by building on the foundation of conversion services.

During 1998-99, the company had some success with basic telephone service providers in India and is now planning to duplicate this experience in the south-east Asian and European markets. The acquisition of US-based Dataview Solutions, a leading supplier of GIS solutions from the desktop to the web, will expand Infotech Enterprises' presence in Europe as well as mark its entry into Internet GIS.

To address the rapidly growing GIS market, Infotech Enterprises has adopted a market strategy of having strategicpartners who have the responsibility of locating the prospects, bidding on contracts, closing a project, defining the process to the company, interfacing with the customers and maintaining customer relations.

Infotech Enterprises sets up the process, meets client specifications, manages the project and guarantees quality. In other words, the company works more or less like an offshore development unit. While this ensures a good work-order and saves on cost, the margins are lower. In order to improve margins, Infotech Enterprise will have to take the drivers' seat in the prospecting and bidding process.

In addition to GIS, Infotech Enterprises also provides computer aided design (CAD) solutions, develops products, offers JAVA programming and undertakes software services like client server applications and enterprise resource planning. In CAD solutions, Infotech Enterprises is leveraging the strong foundation it has laid in computer aided design and drafting.

In 1998-99, the company completed a CADsolution for a German car major and in the current fiscal is planning to reach out to end-users and move up the value chain. In product development, the company has launched a ERP product for the manufacturing industry which caters to the small and medium enterprises. However, with competition hotting up in this segment, margins will continue to be under pressure.

To cash in on the new vista of opportunity thrown open by the Internet, the company has decided to set up a specialised JAVA programming team which will offer a variety of services. In addition, Infotech Enterprises' net services division will enable all its products to be web compatible. This division is expected to substantially increase its contribution to the total turnover in the current fiscal.

Infotech Enterprises has decided to focus on acquisitions as a strategy to grow. It has recently acquired to companies at an estimated cost of Rs 22 crore is slated to be on the lookout for more. To finance these takeovers, the company has decidedto privately place 10 lakh shares with foreign and domestic institutional investors at around Rs 350 per share. Apart from the two acquisitions, the private placement will also fund the expansion of the US operations. The equity will expand by Rs 1-1.5 crore (if one includes the stake to be acquired by US-based ASI), but more important the counter will now attract institutional interest.

However, Infotech Enterprises' aggressive acquisition strategy lined up for the future could strain the cash-flow position. As of FY 1999, reserves stood at Rs 12 crore, which after the private placement should be around Rs 53-55 crore. But with two acquisitions taking up a large chunk of this, the cash-flow position could come under some pressure. As it is, the company has decided to keep the dividend payout at 18 per cent for 1998-99 instead of 30 per cent mentioned in the IPO prospectus of 1997 in order to conserve cash for utilisation in business, including potential acquisitions.