Thinksoft Global Services Ltd, established in the year 1998, is engaged in the business of financial and insurance software Testing and Documentation.
Currently, 63% of TGSL’s revenues come from onsite activities where margins are less compared with the same work being outsourced. Going forward, the company plans to actively focus on offshore work and is targeting an onsite to offsite mix of 55:45. With demand of more standardized products for SME, the Company has developed specialized service offerings to meet their needs.
Company has a success rate of 90% in getting business through the bidding process and its service delivery has achieved recognition from Deloitte Tech Fast 50 India and Deloitte Tech Fast 500 Asia Pacific in 2006 and 07.
Concerns:
Top 10 clients contribute 93% to the revenues and management is focusing to lower the business concentration.
TGSL has reported sales of Rs921mn with EBITDA margins of 15.5%, and exports contributed over 97% to its revenues. On the post issue equity, TGSL’s FY09 EPS comes at Rs14.41; this translates into a FY09 P/E of 9x at the higher band of issue price of Rs130. Thinksoft has been posting impressive return ratios over the past few years (RoE of ~30%) and has got an experienced management to run the company but the issue is seen as an exit opportunity for an existing investor.
There is sudden growth in turnover between last year 2007-2008 and this year 2008-2009 obviously to pump up the IPO.
Better to avoid.