Paradyne Infotech Ltd
(Rs 208, FY09E – 6x, BUY with revised Target Price Rs 275)
(Initially recommended at Rs. 149 on 11th June 2007)
Company Background
Paradyne Infotech (Paradyne) is one of the few domestic focused IT players with core competency in Application software services and Technology IMS (Infrastructure Management Services).
Paradyne service and Product offerings are varied and cater to different industry segment, such as banking and finance, government sector, education, retail, manufacturing, and ISV. PIL has come a long way to capture the booming Indian IT sector, with a modest beginning as a System Integrator to a provider of varied range of services and offering.
PIL has planned out a well-defined path for growth, which comprises of both the organic and inorganic initiatives to garner the incremental IT spending in both the domestic and global market, and PIL’s acquisitions of LGI is synergetic to leverage the latter global presence and derisk the geographical risk. Going forward, PIL is further looking at inorganic opportunities in US and UK regions, which will provide further fillip to PIL’s growth trajectory.
Recent Developments:
Paradyne Infotech acquires LGI Inc:
Paradyne Infotech has recently acquired LGI Inc. (Links Group International Inc.) based in Virginia, US. The acquisition is all cash deals, with a cash consideration of $ 4.75 mn. Paradyne Infotech signed the purchase agreement to acquire 100% stake in LGI, through its US subsidiary Dyne Techservices. The deal was finance through the both the debt and internal accruals, with debt comprises of major part to the tune of around $4.15 mn
Links Group International:
LGI was established in June 2004 by a few hardened professionals, LGI actively pursued a partnership model to ensure complete servicing of the client’s IT needs.
Links Group International Inc. is a growing IT services company that specializes in delivering highest quality technology solutions to companies across the globe.
Q1FY08 Performance: Impressive Numbers
PIL continues to show strong growth, and for Q1FY08 revenues on a standalone basis grew by 16% QoQ and 82% YoY to Rs 487.5 mn, driven by strong growth in the key verticals. EBITDA margins improved by 220 bps QoQ, and net profit were higher by 25% QoQ and 112% YoY.
On a consolidated basis, numbers were not strictly comparable as PIL has booked entire year financials from LGI (PIL’s recent acquired company) in Q4FY08.
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