A Bland Menu
Plunging valuations in technology stocks has not deterred companies from going to the bourses. Even those who haven't turned in any performance are gung ho. The latest to flirt with the markets is Balwas e-Comm India. The company was incorporated on January 24, 2000 as Global e-Comm (India) Pvt. Ltd. Four days after incorporation, it was rechristened Balwas e-Comm India Ltd. in order to capitalise on the fancy valuations in the market.
Balwas plans to focus on e-commerce and web solutions including designing, implementation and maintaining portals. It is also entering multimedia solutions
including corporate presentation, electronic products, catalog, architectural visualisation and product visualisation. The company is also getting into medical and legal transcription and call centres. All these business areas are clearly becoming competitive, and Balwas could emerge as a marginal player. In addition, margins in these lines of business are not high. However, the only plus point is that the company has entered into a Memorandum of Understanding with Iridium Technologies (India) Pvt Ltd. for setting up a medical
transcription unit with 60 medical transcriptionists.
Another major drawback of the issue is that the main promoters, the Balwa
family, have no infotech experience.
Their mainline business is hotels. In addition, the Balwas group has entered
into automobile service. Recently, the group set up one of India's largest Maruti authorised service station at Goregaon in Mumbai.
The group also has a joint venture with Feoder Bergman GmbH & Co for sealing technology used in petrochemicals, refineries, fertilisers, power, marine and other sectors. Currently, there are five outstanding litigations against the joint venture involving a sum of Rs 0.24 crore.
The only positive factor from the promoters' side is their higher equity contribution towards the project cost. Of the total project cost of Rs 11.85 crore, the promoters are bring in Rs 7.15 crore, which is around 60 per cent of the total project cost. Post issue, the promoters' holding in the company would stand at 77.96 per cent. However, the company is acquiring premises valued at Rs 3.59 crore from its directors, H A K Balwa and I A K Balwa.
Even its projections are ambitious. It plans to have a total income of Rs 4.98 crore and a net profit of Rs 1.56 crore by March 2001. This translates into an earning per share of Rs 1.95. In the second year of operation, the company hopes to achieve a total income of Rs 8.22 crore and a net profit of Rs 3.01 crore, a Rs 2.83 earning per share. While in the third year, the company hopes to achieve a total income of Rs 10.48 crore and a net profit of Rs 4.53 crore, resulting in an earning per share of Rs 4.25. Considering the group's past performance, the projections do appear inflated. So looking at the waning market sentiment, investors could easily skip this offer.