After recording a maiden quote of Rs 25.10 per share on January 19, the scrip soon zoomed to Rs 34.75. After shedding some value, it ended the first day at Rs 28.95. The counter transacted a volume of 40,300 shares in 129 trades on the opening day.

The following trading days saw a roller-coaster ride of both the price line and volume at the SMMS counter. The scrip, after opening at Rs 28.95 on January 21, hit a downward path, declining to Rs 20 by close on January 22 on the back of lower volumes. On the following three trading days, however, a divergent trend was witnessed when the price line continued to move up despite fluctuating volumes. The closing price achieved on January27 was Rs 28.85 a share.

On the Madras Stock Exchange, the only other exchange where the shares of SMMS are listed, trading at the counter began on January 22. While the price line, after opening at Rs 28 apiece, remained steady, the volume recorded on MSE was much lower than that on BgSE.

The last closing price of SMMS on BgSE represents a whopping 188 per cent return to the investors in the public issue within a short period of a little over a month. However, looking at the company's credentials, the SMMS-jig on the stock market has more to do with the euphoria surrounding infotech scrips than any inherent merits of the scrip.

Promoted by brothers M Mahabala Bhat and M Udaya Shankar, who are first generation entrepreneurs, SMMS's public offer was to part-finance a Rs 2.62-crore project for setting up a 100 per cent export-oriented unit (EOU) at Software Technology Park of India, Bangalore, and for upgrading the existing software development facilities. Karnataka Bank Ltd, which had appraised theproject, also extended a term loan of Rs 27 lakh to SMMS. Along with the public issue, SMMS made a Rs 60-lakh reservation for the promoters.

The pre-issue equity of SMMS was Rs 2.65 crore which was held by the promoters. However, on closer scrutiny, it is evident that the core promoters held only 1,031,500 shares, or 38.91 per cent of the pre-issue equity. The company appeared to have privately placed the balance equity of Rs 1.69 crore of the promoters among 2,400 shareholders. As such, the claim of SMMS that the post-issue promoter holding would be 65 per cent on an equity of Rs 5 crore sounds hollow as it is based on the omnibus definition of the term `promoters'. More so, when the reservation made for promoters in the present issue also entailed the participation of the `private-placement-promoters'.

As to its roots, SMMS's beginning was very humble. In 1990, Mahabala Bhat started a computer training institute as a proprietorship firm. In 1992, four others joined him to convert it into a partnershipunder the name MM Computer Centre (MMCC). The company, SMMS, was incorporated in August 1996 to take over MMCC.

In the period between June 1992 and October 1996, the partnership firm could chalk up only a cumulative turnover and profitability of about Rs 81 lakh and Rs 24 lakh, respectively. For the first 15 months of operations ended November 27, 1997, SMMS posted a turnover of Rs 97.49 lakh and a net profit of Rs 24.36 lakh. The company, whose accounting year is December to November, reported an after tax earnings of Rs 27.64 lakh on a turnover of Rs 109.95 lakh for the seven-month period ended June 1998.

Against this background, SMMS, at the time of its public offer, projected for the years ending November 1999 and 2000, a total turnover of Rs 6.45 crore and Rs 8.07 crore and a net profit of Rs 1.82 crore and Rs 2.39 crore respectively. Of this, exports are expected to rake in Rs 4.08 crore and Rs 5.10 crore respectively. If SMMS's past performance is used as a yardstick, the projections lookextremely ambitious. Of course, the equity shareholders from the public issue would not qualify for dividend for the year ended November 1998.

Significantly, though SMMS's public issue managed to attract more than 2,000 small investors, institutional investors like banks, financial institutions and mutual funds, for whom it had reserved 2.5 lakh shares, totally shunned the offer. Coming as it does when the infotech stocks are upstaging their blue chip counterparts in the secondary market, the cold-shouldering of SMMS by the organised investing community talks volumes about the company.

The lower number of `shares-per-trade' at SMMS on BgSE is perhaps a pointer that the ever-gullible retail investors are active at the counter. No doubt, it is an unfortunate indicator. One can only caution them that at least based on available evidence, SMMS seems to lack both the quality and quantity of earnings to justify its current market price of Rs 29 a share.

At a time when the stock market is overly obsessed withinfotech scrips to quickly reap windfall gains, no one wants to be left behind. Valour, and not discretion, is the order of the day. There is but very little room for any sensible and calculated risk. Nonetheless, armed with the past experience of having witnessed many a euphoria ending in disaster, a handful of analysts have been emphasising the importance of discretion on the part of investors in choosing the right type of stock for investment.

Alas, as long as the going is good, nobody has time for such "prophets of doom". So, it is cheers to SMMS in the opening round.