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Zylog Systems – Review and Recommendation

July 24, 2007

Zylog Systems is promoted by first generation entrepreneurs Sudarshan Venkatraman and Ramanujam Sesharathnam. It is a global services provider with major focus on application development and integration including web application, web services, application integration, business Intelligence, data warehousing and mobile and wireless applications; enterprise infrastructure management and quality assurance & testing.

Zylog is a very small company 1/15th the size of Infosys. The company has business concentrations in the same verticals as Infosys does.

Current Offer:
36,00,000 Equity shares within the price band of Rs 330 to Rs 350 aggregating mere Rs 126 crore.
Fully Diluted Equity Post IPO = 1.65 Crore Equity Shares of Rs 10 each.

Valuations:
At the price band of Rs 330 – Rs 350, FY 2007 EPS (on post-issue equity) of Rs 33.2 is discounted 9.9-10.5 times.

The stock looks reasonably valued and leaves good scope for appreciation. Since the issue is very small, Investors who are lucky and have chances of allotment can blindly subscribe to the IPO. Even the fate of Rs 100,000 application will be decided by lottery. The stock will be easily listed upwards of Rs 525 as the Grey Market Premium is upwards of Rs 150.
Good Luck!!!

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