Glodyne Technoserve
Serving a golden ace
Focused on IT infrastructure management services, the company will continue to grow at terrific pace
| Buy | Glodyne Technoserve |
| BSE Code | 532672 |
| NSE Code | GLODYNE |
| Bloomberg | GLOT@IN |
| Reuter | PRDY.BO |
| 52-week High/Low | Rs 538 / Rs 110 |
| Current Price | Rs 531 (as on 02nd May 2008) |
With the recent advancements in telecom and technology, the concept of remote delivery of services from a remote/offshore location has picked up. More than 85% of infrastructure components can be managed from such locations. Through managing these components from a remote location, companies can cut down their cost of infrastructure operations and management by 40–60% while also gaining access to expert ‘skill-on-tap’ on a 24x7 basis.
Various service providers from global to offshore vendors to national players offer RIM services today. Indian IT services companies are offering IMS and RIM services as these services can help them to leverage their global presence and go beyond the labour arbitrage and also to use RIM as an entry point for other software services. Lower costs and high skills availability has been the major attraction as far as India is concerned.
Glodyne Technoserve (Glodyne), formerly Paradyne Infotech, provides Remote Infrastructure Management (RIM) services as well as core IT services. RIM is provided through their Technology IMS division and they provide IMS through a NOC and a data center. Glodyne generates 70% of its revenues through their Tech IMS practice and the rest is generated through the application software services businesses.
Superb consolidated results for the period ended March 2008
For the quarter ended March 2008, Glodyne reported 31% growth in operating revenues at Rs 96.73 crore. The operating revenues of corresponding quarter previous year include full year revenues of Links Group International Inc. The share of Technology IMS revenues of the business increased at 71% against 40% in the corresponding quarter previous year whereas software services contributed 29%. The Technology IMS revenues grew 131% at Rs 68.66 crore and software services revenues dipped 36% at Rs 28.07 crore (due to inclusion of 12-months revenues of Links Group in the March 2007 quarter). The revenues growth was aided by the acquisition of Front Office Technologies Inc. done in FY08. The operating margins improved 270bps at 19.3%. The resultant operating profits surged 53% at Rs 18.67 crore.
Other Income for the quarter was minimal. Interest cost for the quarter was up 219% at Rs 89 lakh and depreciation charge was down 19% at Rs 1.69 crore. thus PBT increased 63% to Rs 16.09 crore. Tax for the quarter was up 259% at Rs 2.07 crore with effective tax rate at 12.9% up from 5.9% in the corresponding quarter previous year. After which, PAT surged 51% at Rs 14.01 crore.
The PBIT margins of Technology IMS segment improved 330bps at 19.3% and that of Software services segment improved 150bps at 28.9%.
In FY2008 consolidated sales jumps 83% and PAT spurts 107%
For the year ended March 2008, Glodyne reported 83% growth in operating revenues at Rs 307.35 crore. The share of Technology IMS revenues of the business increased at 66% against 59% in the previous year whereas software services contributed 34%. The Technology IMS revenues grew 103% at Rs 202.53 crore and software services revenues increased 54% at Rs 104.83 crore. The revenues growth was aided by the acquisition of LGI Inc and Front Office Technologies Inc. The operating margins improved 270bps at 18.2%. The resultant operating profits surged 115% at Rs 55.89 crore.
Other Income for the quarter was minimal at Rs 3 lakh, Interest cost for the quarter was up 159% at Rs 2.70 crore and depreciation charge was up 109% at Rs 5.27 crore, the resultant PBT increased 111% at Rs 47.95 crore. Tax for the quarter was up 136% at Rs 6.33 crore with effective tax rate at 13.2% up from 11.8% in the previous year. PAT surged 107% at Rs 41.62 crore.
The PBIT margins of Technology IMS segment improved 580 basis points at 18.5% and that of Software services segment dipped 130 basis points at 27.2%.
Focused on becoming a global Technology IMS company
Annand Sarnaaik, Chairman & Managing Director, said "The last financial year has been an exciting one for Glodyne. The company’s performance surpassed the guidance for the year. We operate in the fast growing Infrastructure Management space, which has huge business potential globally. At Glodyne we are focused on becoming a global Technology IMS company by penetrating high value verticals and geographies both organically and inorganically."
A 44%-52% consolidated sales growth guidance signifies that FY 2009 would also be impressive
The company has given the guidance that for the fiscal 2009, its consolidated revenue on organic basis is expected to be between Rs 442 crore - 468 crore. This means that the sales growth in FY 2009 in terms of percentage would be 44% to 52%.
For June 2008 quarter, the management expects revenue to grow in the range of 64% to 72%
As per the company’s guidance, for the first quarter ended June 2008, consolidated revenue on organic basis is expected to be between Rs 99 crore – 104 crore.
It might be recalled that in June 2007 quarter, the company had registered revenues of Rs 60.31 crore. This means that in June 2008 its revenues is expected to grow in the range of 64% to 72%.
Recent acquisition have enormously strengthened the company’s position; management targets more acquisitions in the IMS space
The acquisitions Glodyne made complement its portfolios and have strengthened its position in the US market.
Glodyne acquired Front Office Technologies Inc a New York based IMS services company. This acquisition has added key new relationships in the Banking and Finance, Media and FMCG domain to the Technology IMS business. The integration process is in progress.
The integration of Links Group International Inc. has been completed successfully and is
now Glodyne Technoserve East Inc.
The management has said that it will continue to make targeted acquisitions in the IMS space, while maintaining and enhancing its operating model.
Glodyne enjoys strategic alliances with various Global technology giants
Glodyne enjoys strategic alliances with various Global technology giants like Sun, IBM, Oracle, Acer and is one of the Level 1 Turnkey Solution providers empanelled by Department of Information Technology, Government of Maharashtra along with few selected major IT companies like IBM, TCS, Wipro, CMC etc.
Glodyne’s service and product offerings are varied and cater to different industry segments like banking and finance, government sector, education, retail, manufacturing, and ISV (Independent Software Vendor). Glodyne’s business is spread into two Strategic Business Units (SBUs). These are Application Software services and Products and Technology IMS. Glodyne’s Application Software Services are focused on Product Development & Application Development, Business Process Management (BPM) and Customer Relationship Management (CRM). Glodyne’s Technology IMS include: IT Consultancy Services, Facilities Management Services, Network Management Services, Remote Management Services, Disaster Recovery Management Services, Maintenance Services, Application Management Services, Database Management Services, Server Management Services, Security Services and Storage Services
Glodyne enjoys a proven experience in the domestic IT arena in Managed Services space, with several illustrious client relationships in the Banking and Financials, Educations and Research, Telecom and ISP, e-governance, Manufacturing, Retails and Independent Software Vendors. Some of these marquee clients in their respective fields are JM Morgan Stanley, SBI, IDBI Bank, Corporation Bank, Punjab & Maharashtra Bank, Reliance Infocomm, Idea Cellular, IOL Broadband, MTNL, Hathway Cable & Datacomm, Hughes Telecom, Indian Navy, HUDCO, IRMRA, TIFR, GPO, MTDC, MAHADA, Mumbai Police, EPF Organization and Directorate General of Shipping, Globus, ONGC Etc. Developing these existing client relationships and taking good referrals from them for further business development can keep volumes ticking for the company in the coming years.
Solid product story
The company’s product basket comprises FinWorQs and HrWorQ, which cater to the Banking Industry and the Human Resource function of an organization, respectively. FinWorQs is a completely centralized, customer centric, fully integrated solution addressing the needs of smaller Banks. With HrWorQ, users can: Streamline HR systems Deploy employee and manager self-service to facilitate increased efficiencies, reduced costs, and a paperless work environment. HrWorQ self-service applications deliver secure, role-based information and transactions across the enterprise. There is a huge market in the Human Resource Information Management (HRIM) field as every organization intends to effectively manage its Human Resources with minimum cost. The company's product 'HrWorQ' caters to the all aspects of Human Resource Information Management, which faces negligible competition in domestic market and thus, there is vast opportunity for the product implementation. In the Software space HRIMS services are being offered on Software as a Service model as there is a huge potential in this area considering the number of organizations that still don't have a HRIMS suite due to many hindrances like upfront investments, operations, scalability, flexibility and domain expertise.
Garnering global presence
Glodyne has presence in the US through its 100% subsidiary Glodyne Technoserve Inc. (formerly Dyne Techservices Inc.) in the heart of Silicon Valley. In March 2007 it acquired 100% stake in Link Group International Inc. based in Virginia, USA through its US subsidiary in all cash deal of US$ 4.75 million. LGI Inc is in the software services segment. In October 2007, Glodyne acquired 100% stake in Front Office Technologies, Inc. of US to strengthen its IMS space. Front Office Technologies, Inc has rich expertise in the Infrastructure Management Services space across verticals. The consideration for the acquisition is USD 3.34 million in an all cash deal. Front Office Technologies acquisition will add key new relationships in the Banking and Finance, Media and FMCG domains in the USA to Glodyne’s Technology IMS business. Front Office Technologies, Inc has a strong client base with clients like American Express Bank, Standard Chartered Bank, Ogilvy and Mather Worldwide, Bartle Bogle Hegarty, Sotheby’s, Alchemy, etc. It has another wholly owned subsidiary Intercon Management Services Pvt. Ltd.
With the Technology IMS space opening up to outsourcing, considering the tremendous benefits for organizations globally, the company is positioned to capitalize on this demand. Processes, practices, ITIL standards and talent have been built and further investments are being made. The Remote IMS would be its focus area and would also be taken to global shores. HrWorQ - a premium product of the Company caters to the Human Resource Management System. Globally, the HR software market is estimated to be around USD 2 billion. Considering the potential of this market, the company has rolled out the HRIMS services on Software as a Service model. The other product of the company - FinWorQs is a Banking Solution, which the company aims to provide the niche market of the small and mid sized banks globally.
Valuation ate attractive
The company has an exceptional track record of consistent high growth. In FY 2009, we expect the company to register consolidated sales and net profit of Rs 450.28 crore and Rs 62.68 crore respectively. On equity of Rs 10.88 crore and face value of Rs 10 per share, EPS works out to Rs 57.6. The share price trades at Rs 531. P/E works out to just 9.2.
| | 0503 (12) | 0603 (12) | 0703 (12) | 0803 (12) | 0903 (12P) |
| Net Sales | 68.55 | 86.83 | 167.8 | 307.35 | 450.28 |
| OPM (%) | 10.1 | 11.8 | 15.5 | 18.2 | 19.3 |
| OP | 6.93 | 10.25 | 26.04 | 55.89 | 87.08 |
| Other Inc. | 0.02 | 0.73 | 0.3 | 0.03 | 0.00 |
| PBIDT | 6.95 | 10.98 | 26.34 | 55.92 | 87.08 |
| Interest | 0.55 | 1.15 | 1.04 | 2.7 | 4.90 |
| PBDT | 6.4 | 9.83 | 25.3 | 53.22 | 82.19 |
| Dep. | 0.39 | 1.09 | 2.52 | 5.27 | 8.45 |
| PBT | 6.01 | 8.74 | 22.78 | 47.95 | 73.74 |
| Tax | 0.88 | 1.28 | 2.69 | 6.33 | 11.06 |
| Net Profit | 5.13 | 7.46 | 20.09 | 41.62 | 62.68 |
| EPS | 4.7 | 6.9 | 18.5 | 38.3 | 57.6 |
| * Annualised on current equity of Rs 10.88 crore. | |||||
| Glodyne Technoserve: Consolidated Results |
| | 0803 (3) | 0703 (3) | Var. (%) | 0803 (12) | 0703 (12) | Var. (%) |
| Net Sales | 96.73 | 73.73 | 31 | 307.35 | 167.8 | 83 |
| OPM (%) | 19.3 | 16.6 | | 18.2 | 15.5 | |
| Operating Profit | 18.67 | 12.21 | 53 | 55.89 | 26.04 | 115 |
| Other Income | 0.00 | 0.01 | | 0.03 | 0.30 | -91 |
| PBIDT | 18.67 | 12.22 | 53 | 55.92 | 26.34 | 112 |
| Interest | 0.89 | 0.28 | 219 | 2.70 | 1.04 | 159 |
| PBDT | 17.78 | 11.94 | 49 | 53.22 | 25.30 | 110 |
| Depreciation | 1.69 | 2.08 | -19 | 5.27 | 2.52 | 109 |
| PBT | 16.09 | 9.86 | 63 | 47.95 | 22.77 | 111 |
| Tax | 2.07 | 0.58 | 259 | 6.33 | 2.69 | 136 |
| Net Profit | 14.01 | 9.28 | 51 | 41.62 | 20.09 | 107 |
| EPS* (Rs) | 51.5 | 34.1 | | 38.3 | 18.5 | |
| * Annualised on current equity of Rs 10.88 crore. | ||||||
| Glodyne Technoserve: Consolidated Segments |
| | 0803 (3) | 0703 (3) | Var. (%) | % of Total | 0803 (12) | 0703 (12) | Var. (%) | % of Total |
| Revenues | | | | | | | | |
| Technology IMS | 68.66 | 29.78 | 131 | 71 | 202.53 | 99.53 | 103 | 66 |
| Software Services | 28.07 | 43.95 | -36 | 29 | 104.83 | 68.27 | 54 | 34 |
| Total | 96.73 | 73.73 | 31 | 100 | 307.35 | 167.80 | 83 | 100 |
| PBIT | | | | | | | | |
| Technology IMS | 13.16 | 4.59 | 186 | 62 | 37.53 | 12.63 | 197 | 57 |
| Software Services | 8.00 | 9.51 | -16 | 38 | 28.50 | 19.43 | 47 | 43 |
| Total | 21.15 | 14.10 | 50 | 100 | 66.03 | 32.06 | 106 | 100 |
| Less: Interest | 0.89 | 0.28 | 219 | | 2.70 | 1.04 | 159 | |
| Less: Unallocable expenses (net) | 4.18 | 3.96 | 5 | | 15.38 | 8.24 | 87 | |
| PBT | 16.09 | 9.86 | 63 | | 47.95 | 22.77 | 111 | |
| PBIT Margins | | | | | | | | |
| Technology IMS | 19.2 | 15.4 | | | 18.5 | 12.7 | | |
| Software Services | 28.5 | 21.6 | | | 27.2 | 28.5 | | |
| Figures in Rs crore | ||||||||
BigGains !!
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