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Friday, September 11, 2009

Valuemart Info Technologies Ltd:Future growth prospects and outlook

1)Scripscan:Valuemart Info Technologies Ltd

Story:Valuemart Info Technologies, (formerly known as GDR Software) was incorporated in October-97 however commenced its business operations exactly a year later in October-98. During the initial years under the earlier management the company focused on providing solutions in the GIS space, and after a gap of just 15 months, during the middle of technology boom in March-2000 the company went public to raise capital to ramp up its infrastructure, resources and overseas offices. In the next four years under the earlier management - the company could good not ramp up clients and started reporting losses, which led to the wiping of net worth. Seeing the huge opportunity in the IT service sector, Mr. Vasudevan (an ex-banker with SBI having 20 years of experience) took over the company from the earlier dispensation and re-named the company as Valuemart Info Technologies in September - 04 to capture and give new focus and thrust to the company's activities. Along with Mr. Vasudevan came a fresh set of investors and a new management team on board to revive and restructure the company.Valuemart intents to position itself as a new generation technology and business solutions provider with a clear mandate to focus on two business lines: (a) to be a leading IT solutions-cum-service provider and (b) in the business processing space - to focus on transaction processing. To attack the global clients - Valuemart has already identified the following business segments like business continuity of software applications through rejuvenation of legacy applications, ensuring data integrity and security, IPR and R&D incubation and finally improving business controls like IT governance, corporate performance and compliance. For the domestic market - Valuemart is targeting the enterprise solutions space to address the mid to large enterprise market. Though the company is unwilling to divulge the names of its clients, Valuemart has already acquired anchor clients in this space. It is expected that Valuemart would derive significant portion of revenues from clients from the banking and insurance sector, hotels & hospitals and from the discrete and process manufacturing industries.Though Valuemart might be a new entrant and is a startup entity - the management is reasonably confident that it can put up strong domain knowledge based functional heads to head the various practice. Our only concern is, can the company scale up over the next 3 - 5 years, since global clients are going for vendor consolidation. Hence not many tier-3 IT services vendors can compete with the large ones - unless these companies offer extremely competitive billing rates, which in turn would affect the margins over the medium term. This can lead to positioning of the company as a price warrior or discount service provider status within the industry. The other main concern that we have is large and mid size clients are looking for IT services vendors - who have serious past track record and a strong balance sheet. Valuemart can mitigate this shortcoming by strategically tie-up with some mid sized US IT vendors like Whitman Hart or Sapient - who can provide access to large clients and also can participate in large offshore deals - by leveraging with the balance sheet size of the partners. Investment into Valuemart - is a HIGH RISK HIGH RETURN investment.Though at 1 re investors hve hardly anything to loose.

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