India's Aptech remains on course

Indian computer training and software company Aptech is confident that it will still be able to complete its first overseas share sale on Monday.

A $75 million global depositary receipt (GDR) offering by Aptech of India is still on schedule for pricing on Monday, despite the volatility in the tech sector that has knocked many primary deals off course.

Led by Morgan Stanley Dean Witter, the deal has been structured as a fixed dollar amount, with the number of units to be sold dependent on the price achieved. One unit will equal half a share and there is a 15% greenshoe. Co-leads are Credit Lyonnais and Jardine Fleming, with ABN Amro as co-manager. 

The deal should also be bolstered because the company was recently included in the MSCI indices for the first time. Bankers believe that in a volatile market, investor discrimination will play to the company's strengths. As one puts it: "There is a lot of momentum behind the deal because investors are being very selective at the moment and they like what they see about quality of management, growth potential and use of proceeds."

Analysts also report that although Aptech's domestic share price has mirrored volatility in the tech sector, it has not been as badly hit. "It generally moves in line with the sector, but there is a non-volatile mix to its earnings base, so it doesn't hit quite the same highs and lows," one Bombay-based analyst comments.

Aptech shares are currently trading around Rp850 ($19), after hitting a high of Rp1,370 at the end of February and a low of Rp550 at the end of May. On a price-to-earnings basis, the company is trading around 30 times projected 2000 earnings. That compares with large-cap software companies, such as Infosys, which are trading at 60 times, and small to mid caps, like Software Solutions, which trade at roughly 30 times.

"On an absolute valuation basis of 0.6 times growth, the company is actually trading at a slight premium," the analyst adds. "Its overall growth levels are not as robust as the rest of the tech sector, since the educational side of its activities will never grow as fast as the software side."

However, the company predicts that within the next three years software will contribute an equal portion of the company's revenues to education and training. For the first half of 2000, training accounted for 70% and software 30%, although analysts say that the figure is slightly skewed as education is more cyclical and will pick up more strongly in the second half.

"The actual ratios are probably still about 80:20," one concludes. First listed in India as a training company back in 1995, Aptech moved into the software business in 1998 and has recently seen this side of the business grow by about 135% every six months. By comparison, its nearest direct competitor NIIT is growing by about 49%, albeit off a larger base. 

The company, which has trained more than one million students to use computers, has now set up training centres in 27 countries.

Bankers say that Aptech chose a GDR format for its first international deal because it wanted to access the market quite quickly in anticipation of taking advantage of an acquisition opportunity. Longer term, it is looking to reconcile its accounts to US Generally Accepted Accounting Principles (GAAP) and has appointed Deloitte Touche Tohmatsu as an adviser.   

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