Zylog Systems Limited

Zylog Systems Limited is entering Indian primary market with a Public issue of 3,600,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
 

Zylog Systems Limited is a Chennai based IT services and products Company. Established in 1995 and business commencement in 1997, is a 100% EOU registered with STPI (Software Technology Parks of India). By its onsite offshore model, it provides IT services to its clients as per their requirements. Telecom, Banking Financial Service and Retail companies are prime contributors to its top line.? It has products like Z*Connect, Z*Prism, insured Vehicle Accident Recovery Systems (iVARs), Claim Management System, RTGS PayManager, VISTEM and WAP Page.

 
Promoters

 
The company is promoted by Mr. Sudarshan Venkartaman and Mr. Ramanujam Sesharathnam.

 
Financials

 

 

Zylog Systems Ltd. is a consistent profit making company. For the FY ended March 31, 2006, the company clocked a turnover of Rs. 261.20 crores. The restated net profit for the same period was about Rs. 41 crores. For FY 2007, till Oct?2006, company had already clocked a turnover of Rs.209 crores and a net profit of Rs.30 crores. For both the above periods, corresponding Networth was Rs.104 and Rs. 135 crores respectively.

 
Particulars of the Issue

 

 

 

Zylog Systems Ltd. IPO is a fresh issue of 3,600,000 equity shares. After keeping aside 100,000 shares for its employees, the net issue for public is 3,500,000. The net Retail portion is upto 1,050,000 equity shares. Post IPO, the total outstanding equity will rise from 12,846,420 to 16,446,420 equity shares.

 
Basis for Issue price

 
Zylog Systems Ltd. claims that it has established a Global Delivery Model with office in USA, UK and Singapore. This set up has helped them do low cost delivery to clients. Further, it claims that is has ability to scale rapidly. It further banks on its quality delivery and long term client relationship to give it continuous business. For Fiscal 2006, it had an EPS (Earning per Share) of Rs.37.24. For the Seven months of FY 2007, the same stood at Rs.28.58.

 
Objects of the Issue

 

 

 

The primary purpose is expansion of current operations. Out of the total proceeds of the issue, about Rs.67 crores will be utilized for setting up 2 Offshore Delivery centers. A whopping Rs.81 crores will be kept aside for Working Capital requirements. The rest will be used for acquisitions and issue expenses.
Risks
 

Following are the key risks which can impact company?s performance:
a. Zylog Systems Ltd. has 3 Direct Taxes and 2 Indirect Taxes litigations pending against it. The combined claim is about 4.40 crores.
b. Except for working capital requirements, rests of objects of issue have not been appraised by any independent appraiser.
c. Failure to get contracts can result in a huge bench of workforce which would translate in significant spending without any significant return.
d. Heavy dependency on US clients is a typical risk factor found in Indian IT companies.
e. Dollar weakness can impact company.
f. Chinese IT industry is a big potential threat.

The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.

S. No. IPO Name Status 1 Rathi Bars Limited Draft Offer Document with SEBI 2 Zylog Systems Limited Draft Offer Document with SEBI 3 Mundra Port and Special Economic Zones Limited Draft Offer Document with SEBI