Move aimed at pruning Rs 800-crore debt burden

Cranes Software International, the Rs 600-crore publicly held the Bangalore-based software products firm in the engineering and analytics space, is set to raise Rs 100 crore through a fund based in West Asia.

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Cranes on Thursday ended with a market capitalisation of Rs 1,400 crore and on the company’s present share price of a little over Rs 40, it will mean a dilution of around 7 per cent. The promoters of the company led by founder and managing director Asif Khader presently held close to 37 per cent stake in the company, of which 91 per cent has been pledged to raise debt in various stages.

Since 1991, Cranes has been effecting an expansion strategy of acquiring new software products, adding value and expanding the available market for the product. It has over the past six years spent close to Rs 500 crore in acquiring 16 companies/product IPs. Cranes has invested Rs 800 crore accrued from profits in enhancing and expanding the software products it acquired.

The Rs 800 crore in debt includes FCCBs worth Rs 250 crore on which the company has a discounted buyback option. Excluding this, the debt will be around Rs 550 crore of which Rs 400 crore is long-term debt. Cranes Software is understood to be settling the short-term debt of Rs 150 crore from fresh funds infusion within the next four months, resulting in much-needed breathing space for the company, industry sources said.

While Cranes Software is raising around Rs 100 crore at the enterprise level, it is also hoping to raise an additional Rs 300 crore by selling stakes in two of its three subsidiaries. Cranes three subsidiaries — engineering, analytics and technology — account for Rs 150 crore, Rs 125 crore and Rs 225 crore respectively of its revenues. Sources indicated that the engineering and technology divisions have got at least three investment proposals.

Investment banking sources indicated that Cranes is looking at a valuation of at least two times the topline of these divisions from which the company could raise close to Rs 300 crore. However, Khader declined to comment on what he called “forward-looking statements”.

Cranes Software, which counts General Motors, Eli Lilly, Ashok Leyland and Tata Group among its clients, showed sluggish growth of 5.7 per cent to Rs 122 crore for the first quarter of the present fiscal. The bottomline declined 11.6 per cent year-on-year to Rs 28.1 crore owing to margin contraction and higher Interest costs, besides depreciation charges in the June quarter which were up 33.4 per cent over the previous year.

The company, which employs around 1,400 people, added that its number of debt days has increased to 240-250 days in recent months and this, coupled with personnel costs incurred on acquisitions like Cubeware, has impacted the cash flows of the company. Khader said that measures are being taken to spruce up the company’s supply chain and improve collections.

Cranes’ proprietary products business recorded a year-on-year growth of 13.2 per cent for quarter-ended June 30, while the product alliances segment saw revenues crashing 90 per cent because of lower sales of Matlab. Mathworks, which owns the Matlab product, has set up a direct presence in India and this has affected sales in the product alliances segment.

Clarification:

The market capitalisation  of Cranes Software at Rs 40 a share is Rs 500 crore, and not as stated. The dilution, according to sources, will not be more than 10 per cent, as a fund from West Asia is expected to buy into the company, based on future growth.

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