No Clear Focus
Arraycom (India) is coming up with a public issue of 90 lakh equity shares of Rs 65 each. The issue is to finance the operations of its communications, software and materials and components division. It also intends to set up a foreign subsidiary, prepay foreign currency loans besides acquisitions and for augmenting long term working capital requirements.
Arraycom is promoted by Jaisukhlal Parekh, the chairman of the groups flagship company Parekh Platinum. The present operations of the company are divided into three divisions _ materials and components (MCD), communication solutions and automation division (CSD) and software and IT division (SID).
In MCD, Arraycom makes micro electronic materials. This division is pre-dominantly export oriented. In CSD, Arraycom offers a wide range of communication solution packages covering wireless communication, navigational aids, telecom, telemetry and SCADA. The focus is on tailor made solutions as per customer requirement covering hardware and software requirements .
Currently the company is largely dependent on contract manufacturers for its products, it intends to establish a complete assembly line which can support manufacturing of communication and navigational aids products in-house for which the utilisation of issue proceeds is earmarked. The company has been a marketing and service support agent for VSNL for its gateway Internet access services and had simultaneously launched its own P-mel
brand modems. The company plans to shift its focus to higher technology products related to data transmission and networking products.
SID, has been mainly involved in in-house staff support for software development for the company's other divisions. Arraycom claims that the division is now poised to be a commercially independent division focusing on development of global positioning systems, geographical information systems, wide area networks. The division would focus on communications software, LINUX based networking software, embedded software.
To maintain its thrust in the telecom segment, the company plans an in-house facility for design, integration and testing of products. It claims that once the entire set up of design, integration and testing facility is available with Arraycom, it can
significantly penetrate the market which it has not yet fully tapped. To penetrate the global markets, Arraycom has decided to set up a wholly owned subsidiary in US.
The company's exports in the nine months ended December 31, 1999 stood at nearly Rs 30 crore.
The company plans acquisition in the fields of telecom, navigational aids, broadcasting and industrial electronics. The company has already submitted a bid for
acquisition of 51 per cent share holding in Gujarat Communication and Electronics an unlisted Government of Gujarat company based at Gandhinagar. GCEL has
approximately loss of Rs 8 crore for March 1999. Arraycom, says the loss is due to high manpower cost for which a VRS is being implemented.
On the financial front, Arraycom has grown consistently from Rs 14 crore in 1997-98 to Rs 44.76 crore for nine months December 1999. Though its other income too has moved up from Rs 1.55 crore to Rs 6 crore in tandem with sales. The net profit has increased to Rs 7.56 crore from Rs 1.75 crore during the same period.
Its flagship group company, Parekh Platinum has been unable to achieve any of the projections it has made. The reason was partly due to delay in implementation of projects, however, sales shortfall has been huge indicating management's inability to achieve the projections.
Arraycom's post issue equity would stand at Rs 14.5 crore the company is projecting a net profit of Rs 14.8 crore for year 2001 translating into an EPS of Rs 12.8.
However, the issue seems to be lacklustre with the company still in the preliminary stages of entering software while in
telecom its business is still in the lower end of the value chain. Investors can afford to skip the issue and can look forward to buy on listing.