Lead-managed by DSP Merrill Lynch, MTL went public in the month of September through the Book Building route with a floor price of Rs 95 for a Rs 5 paid-up share. The book built portion of 45.98 lakh shares was reportedly oversubscribed 1.4 times by 4,428 bidders, of which 4,527 came from the retail segment. Though the bid prices varied between Rs 95 and Rs 335, the `offer price' was finally fixed at the floor level of Rs 95. The fixed price portion of 5.1 lakh shares was oversubscribed by 1.2 by 3,910 small investors. To its credit, MTL allotted the shares in just 16 days and listed the same on its regional stock exchange at Bangalore (BgSE) as well as the NSE in another 20 days, on November 3. The scrip, after opening at Rs 130 on BgSE thereby registering a gain of 37 per cent, closed the first day at Rs 84, losing almost 35 per cent within a day. On the NSE, the scrip opened at Rs 114.90 and closed at Rs 92.05 after touching a low of Rs 90.

On November 6, whereas BgSE failed to register any quote for the scrip, the NSE witnessed a high and low of Rs 95 and Rs 92 respectively with 38,261 shares changing hands. Same day, the scrip got listed on the BSE at Rs 96 and went down to Rs 84 before closing at Rs 94.55. Currently, though having a lack luster trading on BgSE, it is placed at above Rs 100 on both NSE and BSE.

MTL's fiscal 2000 bottomline of Rs 16 crore yields an EPS of Rs 7.84 on the post-issue equity of 2.04 crore shares which discounts the current market price of around Rs 100 about 13 times. As compared to the current discounting of some of the telecom affiliated stocks, MTL's price-earning multiple may look very low.

Does this mean that MTL is available cheap? The company's past record does not give much comfort. Though a `hi-tech' hype has been created around the scrip, the company is actually into the manufacture networking product like modem which is already facing stiff competition. What's more, even at the end of June 2000, MTL derived more than 60 per cent of its sales through "traded goods". Interestingly, in the 14 long years of its existence, MTL could not achieve a bottom line of even Rs 1 crore until fiscal 1998. By substantially stepping up its trading activities from Rs 12.71 crore to Rs 23.25 crore, as compared to the growth of `manufactured sales' from 7.84 crore to Rs 10.57 crore, the company posted a net profit of Rs 1.96 crore in 1999. In fiscal 2000, whereas manufacturing accounted for Rs 37 crore, trading shot up to Rs 66.85 crore, and this helped the company to post a pre-tax profit of Rs 22 crore, of which Rs 6.10 crore was provided for tax.

Though MTL's capital base is more than Rs 10 crore, its current gross block is put at only Rs 7.16 crore. Also, of the proposed Rs 37 crore funds deployment, only Rs 4.61 crore was meant for expansion of manufacturing facilities. As a matter of fact, of the `project cost', the largest component of Rs 15 crore was earmarked for work ing capital and Rs 12.80 crore was to be spent on additional marketing facilities and a new corporate office. Even before going public, MTL had more than 500 shareholders which indicates that the company had placed some shares privately.

Though the public were offered at Rs 95, the promoters and their associates' average cost of holding was just Rs 2.50. Like some of the high-fliers, who artificially boost their share prices through stock splits, MTL too resorted to a stock split early this year.Interestingly, the company's bottomline has shot up after the previous auditors resigned in 1998. With such loose fundamentals, how long will this `tech' stock hold its fort?

New name, old profile
For five years since its inception the company was known as Datanet Corporation Ltd. The company is still in the same business of "technologies of work flow automation systems and computer telephony integration". Yet, the company has now changed its name to Datanet Systems Ltd (DSL). They say that the name was changed to reflect the activities of the company which are part of the information technology industry. But, will a mere change of name enhance the company's prospects?

From its own IT activities, the company never earned any profit in last five years. In 1998, it posted a profit of Rs 49 lakh after accounting for a trading income of Rs 3.36 crore. In 2000 it arrived a profit of Rs 6 lakh after booking a credit of Rs 1 crore from the sale of commercial rights of its wireless division! Rest of the years, it ended up at loss. The accumulated deficit for the three years exceeded Rs 1.5 crore. Last fiscal the company raised its equity capital from Rs 4.6 crore to Rs 9.45 crore through allotments to promoters and their associates in order mainly to pay back loans.

In August this year DSL floated a 3.15 crore public issue at par to augment working capital requirements and also to meet certain capital expenditure. Whereas the small investor portion was barely subscribed by 2788 people, the large investor portion of Rs 1.58 crore was oversubscribed more than 3.5 times by 331 applicants.

Even though DSL completed the allotment within 24 days, it waited another 46 days to list its share for trading. The waiting seems to have aided the scrip in a way, as the listing has taken place when the market was in an upbeat mood. On both the BgSE and the BSE, the DSL scrip is currently priced at 10 per cent premium over the offer price of Rs 10. On the Hyderabad exchange, the scrip is yet to be traced. Perhaps, the current price may give some comfort to the investors of DSL. But, what's the future scope? If the promoters' stake (22.5 per cent) is anything to go by, one can't be too optimistic about DSL. Interestingly, the so called "relatives, friends and associates" hold much more (46 per cent) than the promoters!

(Arranged by Investar - The Aarthik News & Research Group)[E-mail feedback to: fernando@bol.net.in (or) feedback@investaronline.com]