Most of these have now changed their names from `Investment and Finance' to `Infotech' and are once again active in the secondary market. Some of the late comers who missed the bus have changed their objective from `leasing and hire purchase' to `software development' and have succeeded in raising public money in recent months. One such case is the Mumbai-based Kushal Software Ltd (KSL).

Incorporated as Prarambh Finance and Leasing in 1994, it couldn't net any tangible income from its finance activities in five years despite having an equity base of over Rs 3 crore. The name was changed into the present one in 1999 with the objective of getting into software development in a big way.

Before the recent IPO, the company had an equity of Rs 3.98 crore of which, the promoters along with `friends and associates' held 46.3 per cent and the majority (51.7 per cent) was with the investors who had acquired the same under `private placements' more than a couple of years back. In November 2000, KSL floated an IPO of Rs 5.50 crore at par which has takenthe equity to Rs 10 crore.

Post-public issue, the promoters including their friends and relatives hold only 24.5 per cent of the capital. Though KSL's IPO was claimed to have been fully subscribed, the small investor portion of 27.5 lakh shares was subscribed to an extent of only 6.1 lakh (22 per cent). Just 28 applicants bid for nearly 89 per cent of the total offer of which, 24 per cent was bid by a single applicant alone!

In other words, but for this one mega application, the IPO would have been bombed. KSL finalised the allotment within 13 days after the issue and completed the listing formalities in another 8 days. Though the stock is said to have been listed on the Pune (regional) stock exchange (PSE) and the Inter-connected Stock Exchange of India (ISE) from the first week of December, one hardly hears about the stock.

The company too lacks professionalism. Its office opens at only 11.30 am. The company secretary hardly responds to his call. It was only after making a complaint to the merchant bankers, a director of KSL calls up and tells that the Rs 10 paid-up stock was traded at Rs 62 on PSE and Rs 61.50 on ISE in the month of January. But, he is not able to give the latest quotes. If the IPO offered at par were to be grossly undersubscribed by the retail investors only a couple of months ago, which investor was interested in the stock at five times more the IPO price in January? Of course, KSL has made an impressive dividend projection of 22 per cent, 33 per cent and 44 per cent for the three fiscals starting from 2001.

Nevertheless, the promoters' profile and their abysmal equity stake tell us that one should take the dividend projections with a `bucketful' of salt! Listing delay bares it all. Here is an another instance of a `finance' company turning `infotech' to exploit the market condition.

The Vadodara-based Fortune Infotech Ltd (FIL) was incorporated as Chimanlal Maneklal Fortune Fiscal Ltd only in early 1998. But towards the end of the year, the promoters changed the name into the present one. FIL floated a small IPO of Rs 1.90 crore at par in November 2000 which was lead-managed by Doogar & Associates, which has recently been suspended by Sebi.

FIL's public issue was claimed to have been fully subscribed. But, the company did not reveal the full details of allotment. The abridged "basis of allotment" published by the company claims that there were 1,343 valid applications for 14.05 lakh shares against the net public offer of 14 lakh shares.

Nonetheless, the size of the applications has not been disclosed for reasons best known only to the company and its merchant banker. Interestingly, the company which finalised the basis of allotment within 22 days took another 45 days for listing the shares even on its regional Vadodara stock exchange (VSE). The delay gives enough clue that the issue had faced problems.

Currently, the stock is hardly visible on VSE, while it is available below par on the nearby Ahmedabad stock exchange (ASE). Fundamentally, a lot to be desired of FIL. Whereas the promoters have staked in mostly at par, they have charged twice the value to "friends and relatives"! Further, though the promoters' stake is put at 74 per cent, more than 54 per cent has come from non-promoters! What's more the company has taken office premises mostly from the promoters and group company on rent.

The most interesting of all is, they say, FIL has provided "Internet-based stock trading software" to Fortune Fiscal Ltd, a group company, and has received Rs 15 lakh which has been returned to the same company as "office rent deposit"!

Do we need to say anything more?
(Arranged by Investar - The Aarthik News & Research Group) E-mail feedback to: fernando@bol.net.in (or) feedback@investaronline.com