The Rs 10.82 crore public issue lead-managed by the little known UTI Securities Exchange Ltd, was reportedly oversubscribed nearly six times. According to the lead managers, the issue fully underwritten by just two groups - UTI Rs 7.82 crore and Enam Rs 3 crore - was almost entirely subscribed by retail investors numbered around 33000.

The company finalised the basis of allotment on December 2, that is within a month from the issue closing date of November 3. Under the small investor category, out of the 30,000-odd applicants who had applied up to 1000 shares, only 14,000-odd got allotment of 100 shares. In other words, nearly two-thirds of the public issue of 21.63 lakh shares were disbursed amongst small investors with a maximum allotment of just 100 shares.

The balance one-third portion went to about 1,500 applicants whose average holding works out to less than 500 shares. Like every other recent IPO, HMITL too has not disclosed the quantity of shares allotted to the largest applicant which could have a bearing on the post-listing price trend. On listing too, like many other IT IPOs, HMITL has recorded very wide fluctuation.

The scrip started its muhurat on its regional exchange at Chennai on December 23 with a bang at Rs 205 and scaled up to Rs 210 before crashing to Rs 150. It somewhat recovered to close at Rs 189.90 on the first day. Though the scrip commanded 300 per cent appreciation on listing over its offer price of Rs 50, the price could not be sustained for more than just one day.

Since listing, it has been seeking new lows almost every day. The scrip is currently placed at around Rs 120 on the Chennai stock exchange.

Besides Chennai, HMITL was proposed to be listed at Hyderabad and Ahmedabad. While it has been traded on the Hyderabad stock exchange since December 28 more or less in tune with the price trend on the neighbouring Chennai exchange, the scrip is completely missing on the Ahmedabad exchange (ASE).

According to a company source, the share is already listed on ASE but, not traded regularly. But, the lead managers to the issue, UTI Securities, could not confirm the ASE listing! This would probably explain how much the lead managers were involved in the issue. Meanwhile, though not proposed to be listed at the "Infotech City", the HMITL scrip finds regular quotes on the Bangalore Stock Exchange, which are a shade lower than the Chennai price.

HMITL is reportedly having integrated operations of software development, education and IT consulting. It claims to have a track record of consistent profits and uninterrupted dividends since its inception in 1991.

The company is said to have already established an infrastructure of over 21000 sq ft for software development and training, capable of accommodating over 200 employees, training facilities. Reportedly, the company's focus is on `NetCentric' computing, specialising in Intranet and Internet based business applications, e-commerce and visual computing which are all set to grow rapidly in the immediate future.

What's more, the promoters and associates claim to hold nearly 57 per cent of the post-issue equity, and employees were to hold 4.32 per cent. Further, HMITL has projected an EPS of over Rs 7 on the post-issue equity of Rs 5 crore for fiscal 2000. And, it claims to have drawn up plans to acquire software and consulting businesses in the US in near future.

Then, why is the scrip currently under selling pressure, that too at a time when prices of all other IT stocks are booming? Here come the promoters' credentials.

The promoters of HMITL, V Ramachandiran - a chartered accountant and GK Muralikrishna - a gold medalist in science with a post-graduate qualification in business management from IIM Ahmedabad, hardly have any spectacular track record to speak about. Both the promoters started their industrial career as finance and marketing manager respectively two decades back with the Chennai-based Coromandel group and both of them eventually became directors of the Coromandel group which has now vanished.

Many investors still remember how this group lured the investors in early eighties with tall promises.

Also, though HMITL was operating since 1991 under a different banner, its bottomline reached the Rs 1 crore mark only in 1999, that is, on the eve of the issue. As a matter of fact, in 1994, its gross income and profit amounted to only Rs 24 lakh and Rs 7 lakh respectively on a capital of Rs 1 crore! In 1995, it extended the year by three months and posted a turnover and profit of Rs 1.56 crore and Rs 79 lakh respectively.

Next year, once again, it extended the year, this time by six months, and reported a turnover of Rs 4.33 crore. But, profit that year crashed to Rs 18 lakh! What's more interesting that year was, the company claimed to have exited from its forex business for a consideration of Rs 5.42 crore! This consideration represented transfer of the company's forex business as a going concern and a restrictive covenant for not engaging in similar business for a period of 14 years.

HMITL's offer document didn't reveal who paid the whopping amount for the company's forex business whose profit-generating capability was anything but attractive. Nevertheless, by accounting the Rs 5.42 crore as revenue profit, the company's reserves shot up by that amount and the management used this `unrealistic' extra-ordinary income to cook up a premium of Rs 40 for the public issue.

Today, while the public's cost of holding stands at Rs 50 a share, the promoters' average cost works out to less than Rs 20. With only 25 per cent out of 57 per cent being locked in, can any one prevent the promoters from pocketing the gain that the current IT boom offers?

For the public shareholders too, if their company, despite having a capital base of Rs 5 crore can't have a corporate office of its own, and were to lease the same from the promoter's wife for a deposit of Rs 15 lakh and a monthly rent of Rs 7200, what great returns can it offer on their investment in the long run?

(Arranged by INVESTAR - The Aarthik News & Research Syndicate) [E-mail feedback to: investar@bol.net.in] .rm90