The company is tapping the public mainly to raise funds for its Rs 2.62-crore software project coming up at the city's software technology park. A part of the issue proceeds will also go towards upgradation of its existing software development facilities.

The MM Softek issue is more than 10 per cent discount to the companyÕs current book value of Rs 11.47. Moreover, given the annualised earnings per share of Rs 3.91, the issue looks reasonably priced. Unlike many other software firms, the company's area of business is concentrated in COM, DCOM, E-Commerce, etc., and not on Y2K projects which otherwise would have severely limited its topline in the coming years.

For the seven-month period ended June 1998, MM Softek earned a net profit of Rs 27.64 lakh, an improvementof 14 per cent over its Rs 24.36-lakh net earned during the 15-month period ended November 1997. Total income, on the other hand, had gone up by 13 per cent to Rs 1.1 crore from Rs 97.49 lakh.

MM Softek is projecting a Rs 6.45-crore total income for the year to November 1999 and Rs 8.07 crore for the year to November 2000. The company expects to earn net profits of Rs 1.82 crore and Rs 2.39 crore during the said periods respectively. In the present scenario in the software sector, a 25 per cent growth in total income and a 31 per cent rise in net look reasonable. On a Rs 5-crore equity base, this would give an EPS of Rs 3.64 and Rs 4.78, respectively.

The new project, appraised by Karnataka Bank, is proposed to start commercial production before next January which considerably cuts down on the gestation period. Of the total Rs 2.62 crore required for the project, apart from the public issue, promoters are contributing Rs 60 lakh and balance amount of Rs 27 lakh is being raised through a ICICI termloan.

Post-issue promoters holding in the company will be 65 per cent, while the banks, MFs and FIs will hold around 5 per cent stake. The issue, being lead managed by Canara Bank's merchant banking division, will open on December 10 and closes on December 16.