During the week the corporate results continued to be good and the performance of IT companies was particularly encouraging. The market prices have however not moved up significantly. Therefore, the price equations are appearing relatively much more attractive than what they were in the recent past. Investors therefore need to retain their long-term perspective and avoid selling in the present market. 

The Nasdaq market has recently been showing an uptrend with the Microsoft case coming to a logical end. As per the verdict of the US Justice department, Microsoft’s monopoly over the Windows operating system will not be allowed to be misused for marketing other products and the two businesses have to be carried on in two different companies. This is actually a good news for the entire IT sector since the opportunities for other IT companies would improve. This should also benefit Indian software companies who are servicing the American IT industry. 

Amongst the IT sector companies who would benefit by this general industry trend and has also announced good results for the quarter ending March 31 is the Mumbai based Rolta India quoted around Rs 400. The company turned in good results for the year 1999 when the turnover reached Rs 183.83 crores (growth over previous year 53%) and the post tax earnings reached Rs 63.97 crores (growth over previous year 38.5%). This represented an EPS of 10.7 at which the current P/E works out to about 37. 

During the quarter ending March 31, 2000, the turnover has jumped by 50 % to Rs 60.67 crores while the profit after tax has jumped by 51% to Rs 21.36 crores. The annualised EPS at this level is around Rs 15.6 making the shares even more attractive at the current prices.

Even though Rolta India has not been a high profile company in the software sector until now, it has an interesting business portfolio. Its specialization has been in the field of CAD/CAM/GIS solutions in which it has nearly 95 % market share in India. Its applications are widely used in the industry for analysis and implementation of engineering system and workflow projects. The company offers total solution packages in this segment along with hardware and therefore has a high profitability ratio. It has extended its capabilities in CAD/CAM into 2-D and 3-D modelling and provides an integrated solution to many requirements in the Civil engineering industry. The specialized nature of this market ensures that the company has created an effective barrier for the competition and holds a good longterm potential.

Another aspect of Rolta’s business is its focus on the Internet. It is an Internet service provider and provides access and server hosting facilities as well. It has entered into business partnerships with IBM for e–business solutions and Microsoft for deployment of some of their proprietory solutions.

The key to the future of the company is its focus to be an "Application Service provider" on the internet platform. This is a new value added service which can be effectively be offerred only by companies who have the twin expertise of software development and the internet access management. Until recently, Rolta was a domestic software services company. Over the last year the company has also developed export markets and is fast emerging as a global software soutions company. At the current prices, the shares can therefore be considered a good investment buy.

Na.Vijayshankar
29^th April 2000