It People (India) is a human capital solutions company. Its main business is online IT recruitment portal, which provides an online job-board service. The IT portal was launched in 2005. The company, erstwhile Balwas e-com India, was acquired by IT People Pvt Ltd on April 2003. The new management is floating a follow-on offer to raise Rs 45.25 crore from the market. Of the total funds, the company intends to utilise Rs 18 crore in marketing. It plans to use the remaining amount for working capital, technology infrastructure and product enhancement and building/leasing of office premises.
It has not identified an alternate source of finance for the project. In other words, the complete project depends on the funds raised from this issue. In addition to this, it had delayed the project implementation from April 2007 to October 2007. The promoter group company, Orient Information Technology listed on the stock exchange is incurring losses. It had delivered a very dismal performance. The promoter?s stake in the company was 46% in September 2003 and subsequently it was diluted to 26.56% in June 2007.
As per the offer document, the company will set up offices in major cities in India but is yet to make definite arrangements for buying/leasing of office premises. Considering the promoter?s poor track record in the information technology business, atleast before becoming public the company should have implemented some part of the project. Inspite of that it delayed the implementation from April 2007 to October 2007. This signals the absence of well chalked out plans for the company.
Financials
IT People has negative reserves, which makes the networth per share less than the face value (Rs 10). Also, in FY2002-03, the company?s total income was Rs 0.31 crore and it incurred a loss of Rs 0.84 crore. But in FY2006-07, its sales jumped to Rs 16.45 crore along with a profit of Rs 3.08 crore. The sales grew at a CAGR of 169.90%. And hence, sustainability of such spurt is a concern. Also, the company has a daunting task of bringing in stability in its profit growth post-spurt. This calls for an immediate attention. However, it has generated a net operating cash flow of Rs 2.18 crore.
Valuation
The company is very small as compared to its peer Info Edge, which has pan-India presence plus a very good brand perception in the market. Besides, the unlisted entity monster.com is also one of the competitors. In addition to this the job portal is targeted only to IT & ITeS industry, and any slump in this industry could affect the business adversely.
Post-issue diluted earning per share for FY2006-07 turns out to be Rs 0.47 (assuming the issue price is Rs 37). Considering the current market price, it quotes a P/E of around 78.69x based on FY2006-07 earnings. The scrip is priced relatively higher considering its size and financials and in comparison with a larger player like Info Edge (68.92x) on a trailing twelve-month basis.
