IPO: Fatpipe Network India Ltd (Rs.82-85, June07-09)

Fatpipe Networks India Limited

 

Price Band	Rs. 82 to Rs. 85 per equity share
Issue Open Between	June 07 – 09, 2010
Book Running Lead Manager	Keynote Corporate Services Limited
To List	BSE & NSE
Grading	2/5, Brickwork Ratings India Pvt. Ltd.

 

IPO of equity shares of Rs. 10/- each, aggregating up to Rs. 4900 Lacs.

 

Shareholding Pattern

 

Shareholder Category	Pre-Issue
	No. of Equity Shares	%
PROMOTER AND PROMOTER GROUP
Individuals/ Hindu Undivided Family	5,68,176	4.36
Sub Total	5,68,176	4.36
Foreign
Individuals (Non-Resident Individuals/ Foreign Individuals)	42,89,610	32.93
Sub Total	42,89,610	32.93
Total Shareholding of Promoter and Promoter Group (A)	48,57,786	37.29
PUBLIC SHAREHOLDING
Body Corporate	58,18,669	44.67
Individuals:
Individuals - i. Individual shareholders holding nominal share capital up to Rs. 1 Lakh	218308	1.68
ii. Individual shareholders holding nominal share capital in excess of Rs. 1 Lakh	2131701	16.36
Total Public Shareholding (B)	81,68,678	62.71
TOTAL (A)+(B)	1,30,26,464	100.00

 

Executive Summary

 

·        FatPipe Networks India Limited (Fatpipe) was incorporated on December 24, 2002. Fatpipe is the creator, inventor and multiple patent holder of router clustering technology.

 

·        Fatpipe's core, router clustering technology involves patented and patent pending methods that provide highest level of optimization, reliability, security and acceleration of Wide Areas Network (WANs).

 

·        Fatpipe products bond multiple data networks from multiple data carriers including 2G, 3G, 4G and satellite into a single wide area network globally in the process.

 

·        The products of the company enable its clients to obtain low cost, redundant and fast Internet access, allowing such corporations to implement Intranets, e-commerce strategies, highly redundant Virtual Private Networks (VPNs), highly redundant VOIP, site to site failover for business continuity over the Internet or WAN connections that exceed 99.999988% uptime.

 

·        The Company provides global corporations and government offices with technology that increases the security and reliability of Wide Area Networks, corporate extranets, Virtual Private Networks and all last-mile Internet connections, including wireless connectivity.

 

·        The Company manufactures a range of appliances based on its technology for data transmission over multiple lines that provides highly reliable and redundant Internet/Intranet access solution. Such a solution is provided by combining multiple lines upto 2 gigabits per second, (including any combination of DSL, cable modem, wireless, and OC3, TI or DS3 connections) into one "Fatpipe" either with direct point-to-point, MPLs, frame relay or over the Internet, without any cooperation from the Internet Service Provider (ISP).

 

·        Fatpipe sells its products worldwide through network of authorized distributors and resellers in USA, UK, Australia, India, Europe and Brazil. It is proposed to expand its operations to China, Singapore, South Africa, Kenya, Nigeria, Argentina, Belgium, Germany, France, & Eastern Europe. Fatpipe will be setting up a wholly owned subsidiary in the US to expand US operations and to solicit government business.

 

·        The Company's customers include 20 of the world's top law firms, luxury hotels, several Fortune 1000 companies, banks, educational institutions and government entities. The Company has over 1400 customers across the five continents. Some of the high profile customers of the company include Commerz Bank AG, Jacksonville Jaguars, Green Bay Packers, Ford Modelling Agency.

 

·        The private equity investors of Fatpipe include Trans Cosmos, vSpring Capital, Wasatch Ventures and Draper and Associates amongst others.

 

About the Promoters

 

Dr. Ragula Bhaskar, Chairman & Managing Director

 

·        Is the inventor of router-clustering technology that provides highly redundant, reliable and high-speed Internet/WAN access for mission critical applications for business.

 

·        Done his B.S. (Honors), Mining Engineering from Indian School of Mines, Dhanbad, India, M.S. (Dual) Mining Engineering and Operations Research from, Pennsylvania State University, M.S. (Honors), Business Administration (Finance) from Pennsylvania State University and Ph.D., Mining Engineering from Pennsylvania State University.

 

·        Is a recipient of several honors and awards for academic achievements.

 

·        Has authored over 30 books and written over 30 articles including 18 referred articles such as behavior of fine particles, distributed database design, fractals and WAN technology and engineering.

 

·        Has been a Consultant to companies such as Utah Power and Light, Cyprus, and FMC on engineering, cost control and management accounting areas.

 

Ms. Sanchaita Datta, Whole-time Director

 

·        Has done her M.S. Electrical Engineering from Pennsylvania State University and B.S. Electronics Engineering with Honors from M.A., College of Technology, India. She was a Candidate for PhD. Electrical Engineering, the promoters are assisted by the able Board of Directors and other Management team, the University of Utah.

 

·        Looks after the Technology and Engineering division of FNIL.

 

Competitive Strengths

 

The Company believes that its primary competitive strengths include the following:

 

·        Technology innovation that results in market leadership The Company believes in its domain expertise which has resulted in market leadership and 7 patents.  

 

·        Established business model with an economic cost structure The Company's offshore product development capabilities combined with worldwide sales and support capabilities enable it to provide it's customers with high quality solutions and customer satisfaction.

 

·        Well established client base The Company's customers include 20 of the world's top law firms, luxury hotels, several Fortune 1000 companies, banks, educational institutions and government entities.  The Company has over 1400 customers across the five continents. In addition, it enjoys long-standing relationships with several of its customers.

 

·        Strong leadership team The Company has an experienced management team with a strong track record of achieving and effectively managing growth. Most of the members of the senior management team have an industry experience of more than 20 years. The Company has been successful in retaining talent and mid to senior level employees have been employed for more than 6 years. The company continues to cultivate a business culture identifying and investing in high quality personnel to serve on the management team.

 

Industry

 

·        Business Continuity and Disaster Recovery have become imperatives, from an IT perspective. The explosion in data exchange and the exponential increase in the need for data security is the driving force behind the elevation of business security planning.

·        This growth is expected to continue as an increasing number of organizations prioritize their data security and transmission optimization strategies to match the compounding growth in data exchange.

·        IDC, a leading provider of global IT research and advice, stated in a recent report that the worldwide market for IT was estimated to be $1.48 trillion in 2008.

·        The United States IT market comprised $499 billion and continues to be the single largest market in the world. IDC predicts IT spending in Brazil will decline by 13% in 2009 in US dollars, but will grow by 5% in constant currency terms.

·        Latin America is continuing to show growth in IT spending in 2009 in constant currency terms (Latin American, 5.0%, but declining 10% in US dollars, while IT spending in India will grow at the rate of 5% in 2009 in constant currency.

 

Financials

 

Particulars	31st Dec 2009 (9 months)	31st March
		2009	2008	2007	2006	2005
Total Income	4,591.38	4,229.60	316.21	222.72	119.38	64.47
Net Profit before tax and extraordinary items	805.10	424.61	20.28	31.76	7.05	3.97
Net Profit after extraordinary items	520.09	399.37	16.99	30.58	6.44	3.97
Net Block	2,179.31	2,257.57	31.59	34.43	27.50	27.62
Share capital	1,302.65	1,302.65	1.00	1.00	1.00	1.00
Net worth	3,589.08	3,405.99	107.68	90.70	60.06	50.96
Earning per Share (EPS) (Weighted Average) *	3.99	6.46	169.86	305.81	64.37	39.68
Return on Net worth (%)	14.49	11.73	15.77	33.72	10.71	7.77
Net Asset Value per share (Rs)	27.55	57.50	1073.42	916.66	600.57	509.57

*­Un­annualised

 

Objects of the issue

 

The objects of the Issue are primarily to raise capital for the following business and operational requirements of the Company:

 

·              To expand the product line with enhanced Research and Development activities, specifically for development of new product-lines.

·              To establish 16 new Marketing Offices across the globe including additional offices in the USA.

·              For strategic acquisition of business/ company

·              To meet margin money for Working Capital requirement and

·              To meet the Public Issue Expenses

·              General Corporate Purposes

·              To get the equity shares of the Company listed on the Stock Exchanges

Requirement of Funds

The breakup of the cost of the project is as herein under:

Sr. no.	Particulars	Amount (Rs. in Lakhs)
1	To expand the product line with enhanced Research and Development	676.00
2	To establish marketing offices	1008.00
3	Strategic Acquisitions of business/ company	1500.00
4	To meet working capital requirements	720.00
5	To meet Public Issue Expenses	355.00
6	General Corporate purposes	641.00
	TOTAL	4900.00

 

No part of the issue proceeds will be paid as consideration to Promoter/ Directors/ Key Managerial Personnel, Associate or Group Companies.

 

Means of finance

 

Particulars	Amount (Rs. In lacs)
Public Issue	4900.00
Total	4900.00

 

 

Peer Comparison

 

Name of the Company	Equity share capital (Rs. in Crs.)	Sales as on 31/03/2009 (Rs. In Cr.)	RONW (%)	Book Value (Rs.)	EPS (Rs.)	P/E Multiple based on Price as on 30/04/2010
Cyberteck System and Software Limited	26.47	12.80	14.10	19.10	2.50	7.28
Micro Technologies (India) Ltd.	10.98	230.70	26.60	243.10	56.80	3.36
Mindteck (India) limited	24.76	54.40	3.00	54.10	1.40	20.61
Redington India Limited	78.63	6,066.20	13.60	78.30	10.30	37.14
Smartlink Networks Limited	6.00	156.70	3.90	48.60	2.20	20.41
Softpro Systems Limited	7.28	0.70	11.20	44.50	3.40	81.10
Subex Ltd.	57.98	301.10	49.00	108.50	4.10	15.11
Take Solutions Limited	12.24	59.00	5.10	19.50	1.00	26.90
Tanla Solutions Limited	10.15	172.40	12.00	64.40	7.10	6.30
Trigyn Technologies Limited	25.03	21.10	14.11	29.20	3.90	5.49
Vakrangee Softwares Ltd.	21.40	294.30	19.00	125.60	23.80	6.86
Fatpipe Networks India Limited		42.30	11.73	55.12	6.46	-

 

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