NetSol International, an information technology consultant and software developer, plans a $30 million to $40 million initial public offering of shares in its Network Solutions Pakistan subsidiary, in a move that would make it the first IT company to be listed in Pakistan.
NetSol's president, Najeeb Ghauri, said the company plans to list the subsidiary within four to six months on the Karachi Stock Exchange. It will use the money to complete construction of its $10 million technology campus in Lahore, and to build infrastructure sites in Karachi and other cities across Pakistan.
NetSol, headquartered in the US, was formed in 1995 by four Pakistani brothers with the aim of developing software in Pakistan, where labor costs are cheap, and selling the products overseas. Its clients include Mercedes-Benz Finance Australia, Daimler Chrysler Taiwan and CFS Group UK. Network Solutions Pakistan employs 250 engineers û employed at about an eighth of the salary of their US counterparts û who develop the software NetSol sells abroad.
"We have a huge cost advantage over our competitors," said Ghauri. "Offshore software development is becoming a big thing now. India is doing very well and Pakistan is now in the race."
By passing a portion of those cost reductions on to customers, and ensuring products reach the market in a timely fashion, NetSol hopes to become a dominant competitor in the $400 billion global software market. It's a market that rating agency Standard & Poor's estimates will grow at an annual rate of 9.4% through 2001.
The company also provides consultancy, training and customization services, and owns its own proprietary software that help clients run their financing and leasing operations. S&P expects the market for IT consultancy services to grow 14.7% a year through 2001, from $25.3 billion in 1998. It expects the IT training sector to grow 36% a year over the same period.
"We don't just provide software but advise on its deployment," said Ghauri. "Once you sell a licence to a client you are there for many years, upgrading and training."
NetSol listed its shares on the US Nasdaq in December 1999, moving up from the over-the-counter bulletin board. After rising to a 52-week high of $75 on March 3, the shares have since slumped, trading as low as $20.75 on May 17. Much of the decline came after May 12, when the company said it lost $797,603, or 8 cents a share, in the quarter ended March 31, compared to a loss of $174,000 or 6 cents a share in the year-ago period.
Ghauri said the expanded loss reflects increased investment in technology sites, acquisitions and the establishment of an e-commerce subsidiary based in the UK. The company expects revenue to rise to $7.0 million in the year ending June 30 this year, up 133% from $3.0 million in 1999. Ghauri says he expects the company to be in the black by mid-2001.
So far the company's US listing has garnered it little attention from investment analysts û in part because just 15% of the outstanding shares are available to be traded by the public, making them relatively illiquid. Still, the company expects the listing to help give credibility to its Pakistani offering. Ghauri said the company is being "pursued" by several international and local investment banks eager to underwrite the offering. It hasn't yet chosen a partner.
