Despite the fact that Melstar demanded the full amount of Rs 72 as application money, the IPO received tremendous response from retail investors. In fact, Melstar offered shares at a price-earning multiple of 44.17 (based on an annualised EPS of Rs 1.63 for the first quarter of fiscal 2000). However, going by the profitability projections, the offer was very attractive. The projected EPS of Rs 4.93 for fiscal 2000 discounted the offer price by a multiple of only 14.6.

The company now provides outsourcing services to industries like information technology, banking and insurance. Established in 1986, Melstar had been mainly engaged in trading of hardware till fiscal 1998. As the hardware is a low-margin business and software development offers immensepotential for growth, the company had shifted its focus to software development in 1998.

The company reported a net profit of Rs 51.45 lakh on a total income of Rs 32.74 crore for fiscal 1999.

For fiscal 2000, the company is expected to achieve a net profit of Rs 6 crore on a total turnover of Rs 33 crore. Of the Rs 33-crore turnover, Rs 32 crore will be from software and hardware will account for only Rs 1 crore.Melstar has formed a joint venture with The Summit Group of USA and ITC Consulting GmbH of Switzerland. Melstar is holding 45 per cent, Summit Group 45 per cent and ITC Consulting 10 per cent in the US-based joint venture.

The joint venture, named Global System Development Inc (GSD), will provide consulting business on internet, web applications, e-commerce and client/server and mainframe. The joint venture is expected to contribute Rs 25 crore to the total turnover of Rs 33 crore for fiscal 2000. Mesltar is expected to gain substantially from the joint venture by acquiring offshore projects,domain knowledge in the banking sector and expertise in consulting business and e-commerce.

The company has a workforce of over 325 and has five offices abroad. The company has important global partnership with IBM, Microsoft, Oracle, Digital, Lucent Technologies and 3Com. As the largest business partner for IBM, the company offers enterprise-wide solutions to IBM's top customers in India. For Informix, the company has built a dedicated software worksite manned by 120 developers, which is hotlinked direct to Informix's office in California.

The company's clients include Citibank, Standard Chartered, Dresdner Bank, KPMG, Price Waterhouse, Colgate, P&G, Dupont, DHL and Whirlpool. The money raised from the IPO will be used for setting up new software development centres at Melstar House and SEEPZ in Mumbai, investments in Melstar UK and the US subsidiary, upgradation of existing facilities and prepayment term loans to Punjab National Bank.