Although the IPO investors are very cautious about high premium issues (recall Arraycom's experience which had to return whatever money collected through its IPO due to poor investor response), SIPtech is confident about the success of its IPO.

Says K C Sukumar, managing director of SIPtech, ``We are not a run-of-the-mill software company. We sell concepts and this ensures continuety of business. We offer value-added specialised services to our clients and hence, imparting efficiency in their business operations. The shares are offered at a price-earning multiple of 15 which is attractive.''On pointing out SIPtech's dependance on just four clients for its entire business, Sukumar explains that, ``We are operating in a niche market (product engineering) and our operations are based on emerging technologies like Java and Internet.

At present, we cater to Sun Microsystems Inc of USA, KKL of Switzerland, Firedrop Inc of USA and Arontis AG of Germany. All these clients are major global players and considering their large scale of operations, our association with them will generate enough business for us.'' The company is also believed to have in talks with Siemens AG for a business tieup for providing technological data management to nuclear power plants. If SIPtech is able to strike the alliance, this is expected to generate big business for the company.

According to a merchant banking source, several mutual funds are expected to make bids for SIPtech share. UTI, SBI Mutual Fund, Prudential ICICI, Zurich AMC and Dundee Mutual Fund may subscribe to SIPtech shares offered through bookbuilding, says the merchant banker. Also, some mutual funds and foreign institutional investors based in Singapore, United Kingdom and Hong Kong are also showing interest in the company, says the source. Thanks to this, initial estimates show that the bookbuilding portion may be subscribed to the tune of around 3 times, says the merchant banking source.

Ahead of the IPO, mutual funds like DSP Merrill Lynch Equity Fund, DSP Merrill Lynch Balanced Fund, Prudential ICICI Technology Fund and SBI Mutual Fund have together picked up four lakh equity shares at a price of Rs 275. Global Trust Bank, which is the apprising bank, has also subscribed to 75,000 shares of SIPtech at a price of Rs 300.

Of the project cost of Rs 42.21-crore, SIPtech has earmarked Rs 13 crore for acquisitions. SIPtech is targetting foreign companies for acquisitions/alliances. ``We are in talks with a number of small consulting groups abroad for acquisitions and alliances. We are eyeing companies with extensive domain knowledge so that our operations can be synergised,'' says Sukumar.

The company has also earmarked Rs 2 crore for partnership programmes. Under the partnership programmes, SIPtech will train its employees to gain experience in middleware tool and this will create a knowledge pool, according to Sukumar.

SIPtech, which has a software development facility in Chennai, at present has 150 software employees.

The employee strength will be enhanced to 300 by the end of the current fiscal. In order to retain human talent, the company has created a employee trust and has issued shares (4.2 per cent of the current paid up capital of Rs 4.7 crore) at par to the trust. In future, the company may increase the employee quota to 8 per cent.

SIPtech is implementing export orders worth Rs 25 crore for the current fiscal and will surpass the projected turnover of Rs 25 crore, says Sukumar. For fiscal 2002, the company has export orders worth Rs 42 crore. SIPtech has an operating margin of 40 per cent. For fiscal 2002, net profit is projected at Rs 20.6 crore on turnover of Rs 51.2 crore.

For fiscal 2000, the company had earned a net profit of Rs 4.42 crore on turnover of Rs 10.81 crore. For the first quarter of the current fiscal, SIPtech has reported a net profit of Rs 2.41 crore on total income of Rs 5.84 crore. The company has a networth of Rs 11.87 crore.

SIPtech has associated with Java technology from 1.0 version right through J2EE, J2ME and host of technologies for internet solution. The company's focus is to leverage such knowledge in providing web-based solutions to customers based on Java and connected middleware and rear end tools.

The company is now setting up a Rs 42-crore project which is funded by GTB to the tune of Rs 4.5 crore. Of this, a major portion of Rs 15 crore is going towards setting up an office, Rs 7.5 crore for creating infrastructure for 400 persons, Rs 73 lakh for setting up a development centre at California in USA and Rs 45 lakh for a marketing office in USA. The company may also set up one small development centre in Hyderabad or Chennai.