The Bangalore-based Subex, whose public issue of 8.05 lakh shares at a premium of Rs 65 apiece closed on July 23, opened 90 per cent higher at Rs 142.80 on September 4 on the Bangalore Stock Exchange (BgSE). Since then, it has received a frenzied support that has catapulted the scrip to Rs 281 in just about a fortnight. A similar trend was also seen on Hyderabad (HSE), where Subex is additionally listed.

However, in comparison to Subex, the Mumbai-based Amex did not have it so good. Amex, which offered 12.5 lakh shares at a premium of Rs 45 each to the public, began trading at Pune Stock Exchange on September 7 at a more modest Rs 70 per share. A week later, it also started trading in Hyderabad and Ahmedabad at around Rs 73. However, in the following days, Amex's price line remained subdued and exhibited only sideward movements with moderate volumes.

While the two information technology (IT) stocks put up contrasting shows, the Faridabad-registered Times Bank (TBL) made a decent debut on Delhi Stock Exchange (DSE), NSE, BSE and Calcutta Stock Exchange (CSE) between September 17-21. The scrip recorded an initial gain of 25 per cent to 51 per cent to its offer at par. In doing so, TBL has fared better than UTI Bank and IDBI Bank, which were listed at a discount to their respective offer prices. Perhaps TBL's impressive show is more due to a combination of conservative issue pricing and the present buoyant market conditions.

Promoted by technocrats Subash Menon and Alex Puthenchira in December 1994, Subex took over the business activities of Subex Systems, a partnership firm in which the promoters were the only partners. At present, Subex operates in three major business segments: Test and Measurement Equipment for telecom and datacom applications, Cellular Infrastructure Solutions and Telecom Software. It also boasts of a range of products to its credit in its area of operations.

Between fiscal 1996 and fiscal 1999, Subex recorded a compounded annual sales growth rate (CAGR) of 21 per cent, from Rs 6.67 crore to Rs 11.72 crore. However, its profitability did not quite keep pace, with PBT limping to Rs 1.16 crore from Rs 0.90 crore for a CAGR of just 9 per cent. Even the net profit margin declined from 9.56 per cent to 8.75 per cent during this period. As against this, Subex has projected a net profit of Rs 3.62 crore on a revenue base of Rs 21.78 crore for the current fiscal. Based on historical trend, the projections thus appear too rosy.

On a qualitative plank, Subex has positioned itself as a domain specialist concentrating on telecom-related segments. This domain expertise could act as a double-edged sword. While it would no doubt sharpen the focus of the company, Subex's fortunes would be inextricably inter-linked with those of the parent industry.

Meanwhile, a close look at Subex's basis of allotment reveals that the company's minuscule public offer, which was oversubscribed 5 times, attracted only 8,667 investors, half of whom had to be turned away. As for Subex's shareholding pattern, promoters hold 66 per cent of the small post-issue equity of Rs 3.22 crore. Employees' welfare trust holds another 4 per cent. Out of its offer through prospectus, Subex made a firm allotment of 1.60 lakh shares to Morgan Stanley. Given this shareholding pattern, Subex's immediate price line appears to be squarely in the hands of Morgan Stanley and a few bulk public shareholders.

Amex was originally promoted by one Ashok Ranade in 1991 as Amex Computers and Services Private Ltd. The company, which remained dormant till 1995, was taken over by its present set of promoters, GS Chandrasekhar, Sharad Gupta and Aniket Jathar in August 1995. At that time, the company's paid-up capital was barely Rs 30,000. Post-public issue, Amex's equity stood at Rs 5 crore, of which the promoters held 48.6 per cent. Interestingly, none of Amex's promoters seems to have any IT expertise worth mentioning. Nor does the company have any link with the widely known American Express, popularly called "Amex".

Operationally, from a net profit of Rs 0.24 crore on a turnover of Rs 1.74 crore for the 6-month period ended March 1998, Amex pole-vaulted to a bottomline of Rs 2.23 crore on a revenue base of Rs 8.49 crore in FY 1999. However, with onsite consulting activity constituting about 83 per cent of the total revenue and with Y2K revenue put at 14.5 per cent for FY 1999, value-addition was conspicuous by its absence.

Despite its unimpressive track record, Amex's public offer was oversubscribed 3.4 times, essentially due to the current bullish sentiment for IT stocks. In fact, if the company's basis of allotment is anything to go by, even the otherwise greedy large investors had shown only a lukewarm interest in the issue, with only 180 bulk applicants bidding for the offer. With such a thin speculator spread, the Amex scrip is in for some dull trading. And, if smaller shareholders prefer to exit in frustration, the price line can only come down further.

As regards the third listing of this month, promoted by Bennett Coleman & Co Ltd (BCCL) and its subsidiaries in 1994, Times Bank (TBL) completed four full years of operations in March this year. Though TBL has managed to be in the black during these years, signs of strain are visible. In FY 1999, the interest spread remained well below 2 per cent for the second year in succession. Perennially increasing `other expenditure' as well as provisions for depreciation on investments and NPAs further impaired the bottom line. Of late, the proportion of sub-standard advances to total advances too has seen a dramatic increase. With the ageing of TBL's advances, and with tighter RBI norms for NPA provisioning set to take effect soon, TBL's bottom line is indeed facing a serious challenge on the NPA front.

For the current fiscal, TBL has projected a net profit of Rs 46.13 crore on an income base of Rs 397.57 crore. Though the projections appear reasonable, any higher provision for NPAs and depreciation on investments than the earmarked Rs 12 crore could spoil TBL's party. Even if entirely achieved, TBL's FY2000 net profit would translate into a fully diluted EPS of Rs 3.42. The present market price of Rs 15 discounts the anticipated EPS about 4.4 times.

The basis of allotment from TBL once again highlights the growing divide between small and large investors. While about 1.15 lakh small shareholders owned 1.70 crore shares between them, a few hundred shareholders controlled the bulk of the floating stock. At a time when banking stocks are not very popular, it is diffi cult to perceive any lng-term commitment from both the investor groups. Another factor that may haunt investors is the pathetic post-issue-plight of TimesGroup's previous public venture -- Times Guaranty Ltd. Can TBL have a better capital appreciation? Times Guaranty offers no guaranty!

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