Take Solutions is a Chennai-based IT products company, which caters to companies in the fields of supply chain management (SCM) and life sciences. The company has entered the capital market with an offering of 21 lakh shares.

Plans & investonomics

Of around Rs 151 crore, the company intends to use around Rs 83.5 crore to repay debt used for an earlier acquisition. And the remaining proceeds, it intends use in developing domestic facilities and new products and to repay term loans.

Take Solutions currently offers 16 products in SCM and six in life sciences. In FY07, SCM solutions contributed 48% to the total revenue, while the share of life sciences division was 45%. The rest came from IT services.

It must be noted that post-issue, the promoter group stake will drop from 71.9% to 59.3%. Under life sciences, the company provides data capture and mining solutions related to drug discovery, clinical trial planning and management. In case of SCM, it has a presence across three sections, which includes planning, collaboration and execution. The solutions in this space include mobile data collection, enterprise label management and product returns management.

It has a presence in the US and Asia Pacific regions. The US operations contribute 48%, while the Asia Pacific accounts for 52% of the company?s total revenue. The company is contemplating on an inorganic route to make its presence in the European market.

Take Solutions has shown substantial variation in profitability. In FY07, its operating margin shrunk by 7.7 %, while its net margin contracted by 2.8 %. The company is in a growth phase. Its sales and net profit witnessed a CAGR of 131% and 312% over the past four and three years, respectively. Also the standalone basis, the company?s PAT has seen a surge of more than 100% and the sustainability of which is also a concern.

Valuation

Considering post-IPO equity, on a consolidated basis, Take Solutions demands a P/E of 27.7(x) its FY07 earnings at the higher end of the price band. However, on a standalone basis, the company quotes a not-so-encouraging P/E of 84(x) at the higher end of the price band. Investors must take this fact into account.

Considering the company?s niche area of business of SCM and life sciences, one cannot draw a parallel in terms of peers. However, if one resorts to a crude comparison, we have companies like 3i Infotech, which offers products in the banking and financial services space, and quotes a 12-month P/E of around 17(x). Also Subex Azure, an IT products company, exhibits a P/E of 36(x).

The company recently acquired an SCM solutions provider. Such acquisitions will further strengthen the company?s presence in its core domains.

The company is still in the growth phase in the less-explored areas of IT solutions. And there is still to see growth with stabilisation in its revenue and margins. Investors must be aware of these factors before investing.