Omnitech Infosolutions – Acquisition of Dutch Company has Helped

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Omnitech Infosolutions - Latest Results

(click column header to sort results)
(in Cr.)  
Jun-11  
Dec-10  
FY10-11  
Revenue
96.06
81.27
316.25
Net Profit
15.41
14.45
51.48
EPS
11.05
10.42
37.14
Cash EPS
15.85
14.98
54.81
OPM %
33.46
33.83
33.12
NPM %
16.04
17.78
16.28

Omnitech Infosolutions - Share Price Movement

 
 
 
Weekly H/L
150
138
Monthly H/L
155
132.25
52 Weeks H/L
258.8
121.6
 
( 15 Oct 10 )
( 16 Aug 11 )
Delivery / Var+ELM %
81.34
12.5
 
 
 

Omnitech - Share Price Movement

Source


Q1 results satisfactory

Omnitech Infosolutions has produced satisfactory results for the quarter ended 30.06.11 as compared to the quarter ended 31.03.11. Revenue has increased from Rs.81.27 crore to Rs.96.06 crore. Revenue for the full year 2010-11 was at Rs.316.25 crore. Net profit marginally increased from Rs.14.45 crore to Rs.15.41 crore. Net profit for the whole year 2010-11 was at Rs.51.48 crore. EPS for the year 2010-11 was at Rs.37.14 whereas the annualised EPS for Q1 has increased to Rs.44.20. Cash EPS was at Rs.54.81 for the year 2010-11 whereas the annualised cash EPS for Q1 increased to Rs.63.40. Operating profit margin was flat at 33.46%. Net profit margin marginally declined from 17.78% to 16.04%. The company is operating in IT consulting and software. The shares of Omnitech Infosolutions are traded in the Indian stock markets at Rs.139.30 now (Bombay Stock Exchange 18.11.11). The highest price recorded by the company’s shares in the last one year was at Rs.258.80 (15.10.10) and the lowest price was at Rs.121.60 (16.08.11). In other words, the present share price is close to its lowest price in the last one year. This gives a temptation to the investors to buy the shares of Omnitech Infosolutions at the current market price. Is this temptation justified? Let us analyse.

REVIVE may boost the company’s fortunes

Omnitech Infosolutions is targeting small companies with cloud-based disaster recovery service. The company has christened this service as REVIVE. The service uses pay- per-use billing model. This has done away with the need of maintaining a disaster recovery hardware and software, IT staff and other operational expenses. Omnitech Infosolutions expects a lot of traction coming from emerging enterprises opting for disaster recovery plans. Its revenue will be boosted if REVIVE proves to be a success. Cloud computing is in its nascent stage and is slowly catching up in India. It will take for a few more years for it to be fully established and a part of life among the corporate sector.

Scouting for more acquisitions

Omnitech Infosolutions is scouting for opportunities to acquire IT Services companies in Europe or Asia. The company has earmarked Rs.70 crore for the acquisitions. The company is looking at two criterion for acquisitions. First it is interested in companies operating in cloud technology. Secondly it is also looking at companies with intellectual property rights. Omnitech Infosolutions found a good opportunity to acquire a company in Europe in 2008, but because of the economic recession, it dropped the idea.

Double digit growth

Omnitech Infosolutions is a Mumbai-based IT company in India offering remote infrastructure management solutions and IT systems integration to international and domestic customers. Its strategy is to concentrate on medium and small clients. Due to continued demand from its customers, Omnitech Infosolutions has been able to post a double digit growth even when the IT industry is finding it difficult because of the economic crisis in USA and Europe.

Acquisition of Avensus

Omnitech Infosolutions recently acquired the Dutch company Avensus for $9 million. It will add strength to the company’s foothold in European IT market for infrastructure management and security solutions. The acquisition has provided Omnitech Infosolutions about 100 European customers. This has also given the company opportunity to cross sell its services to other places. Avensus is offering its services to sectors like health care, financial services and government. Avensus reported a turnover of $9 million in the first nine months of the year 2010. It has 45 employees. Omnitech Infosolutions expects to earn a revenue of $40 million from European operations in the next three years. Atul Hemani is the Managing Director of the company. Avensus will merge with Omnitech Infosolutions but it will retain the brand name Avensus. The Chief Executive Officer of Avensus Ed Trautig will continue with the company. Omnitech Infosolutions has 1100 employees globally. Has Omnitech Infosolutions overpaid while acquiring Avensus? It is not. Usually for acquisitions in the IT sector, the common trend is to pay upto 1.3 times the revenue of the company to be acquired. Omnitech Infosolutions has followed this trend. Moreover Omnitech Infosolutions has paid only 50% of the amount while acquiring. It will pay the remaining 50% after three years when Avensus meets the agreed growth target. The only hitch is that Avensus operates with 8% margin as against 30% margin of Omnitech Infosolutions.

Setback and reward

Omnitech Infosolutions was listed in Indian stock markets in August 2007. During the 2008 IT industry crash, the share price of Omnitech Infosolutions plummeted from a peak of Rs.250 to Rs.30. Investors lost heavily in the counter at that time. But investors who had invested in the company’s shares at this low price of Rs.30 were richly rewarded subsequently as the share price of the company rose to reach a height of Rs.275.

Invest at declines

If Omnitech Infosolutions succeeds in its plan regarding acquisitions, it could soon become a Rs.1000 crore company. The shares of Omnitech Infosolutions can be acquired at declines, ideally at around Rs.100-Rs.110, for medium and long term holding for the following reasons:

  • The company has kept its margins and business in tact even when the IT industry is facing challenges
  • The company has planned its growth strategy through acquisitions
  • It enjoys a reasonably good margins

The acquisition of Dutch company could broad base its revenue

Omnitech Infosolutions is an Indian IT Company

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forexpulse 5 years ago from Califorrina

Thanks a bunch for that helpful article!

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