{"id":718,"date":"2010-06-03T12:29:12","date_gmt":"2010-06-03T06:59:12","guid":{"rendered":"http:\/\/greenworldinvestor.com\/?p=718"},"modified":"2010-06-03T12:29:12","modified_gmt":"2010-06-03T06:59:12","slug":"indian-ipo-market-fatpipe-networks-review-and-analysis-reveals-it-to-be-a-decent-buy","status":"publish","type":"post","link":"https:\/\/iiec-india.org\/greenworld\/2010\/06\/03\/indian-ipo-market-fatpipe-networks-review-and-analysis-reveals-it-to-be-a-decent-buy\/","title":{"rendered":"Indian IPO Market – Fatpipe Networks Review and Analysis reveals it to be a decent buy"},"content":{"rendered":"

Fatpipe Networks<\/strong> a Chennai based company is planning to come up with ~$11 million IPO on the 7th of June,2010.The DRHP filed with SEBI reveals that it might be an interesting small cap company to buy . Given the flood of low quality junk IPOs hitting the market<\/a> , Fatpipe Networks<\/a> looks good on a high level review and analysis .There are not a lot of\u00a0 genuine Technology companies in India one can buy,because companies like Infosys,Wipro etc fall more into the category of\u00a0 Outsourcing companies like WNS rather than Technology companies like Google. However risks are quite large in investing in any Indian Small Cap as transparency is not a strong point of India’s corporate world.Investing in the Indian markets is hazardous<\/a> for retail investors looking to build a portfolio of large concentrated positions in individual stocks.That said lets look at the pros and cons of Fatpipe Networks from the lens of the 235 red herring prospectus<\/a><\/p>\n

Advantages<\/strong><\/p>\n

The company’s sector of WAN redundancy is unique and a fast growing one<\/strong>.WAN or Wide Area Network is a term used to define a Computer Network spanning multiple geographic points across cities or continents.Most Large Companies today have operations across multiple countries and\u00a0 their computers are linked together through a Wide Area Network (WAN).Ensuring that this network is secure ,reliable and redundant is the value proposition that Fatpipe Network brings to the table.The company has 7 patents registered in the US and its top management are experts in this field.<\/p>\n

Low debt <\/strong> The company has a relatively low debt position of around 89 lakhs ($200,000) compared to equity of 37 crores.This is good as it shows that the company has grown through internal accruals and promoters’ cash infusions.Also no parts of the IPO proceeds is going to repay debt unlike other IPOs\u00a0 like Nitesh Estates<\/a> and Tarapur Transformers<\/a>.<\/p>\n

Good Margins<\/strong> – The company’s 2009 FY numbers reveal a decent Gross Margin of 60% and a Net Margin of 10% which makes sense for a company of this size and the sector it operates in . Expect higher revenue numbers to improve the net margins<\/p>\n

Good Management<\/strong> – The top management of Fatpipe Networks are all techies with a good background in education and innovation.I am biased towards CEO’s having a Phd in Engineering .It has also high quality VC investors in Draper Fisher.<\/p>\n

All IPO Proceeds to be used in company expansion<\/strong> – The whole 49 crores expected to be raised will be used in expanding the company mainly on R&D and Marketing expenses<\/p>\n

Disadvantages<\/strong><\/p>\n

I could not find any glaring disadvantages or red flags. The company has yet to get RBI approval for a foreign loan taken by its US subsidiary.It also has to get the land deed for its premises to be registered.It also has to face currency,legal and potential patent infringement risks.However these risks are par for the course for a small technology company.<\/p>\n

Summary<\/strong><\/p>\n

The valuation of the company cannot be analyzed till the company discloses the price band , however operationally and technology wise the company looks a good albeit a risky bet (due to its small size and sector).However the upside also seems commensurately good to me based on a niche technology sector,solid financials and good management.I would be willing to buy a small position based on a decent valuation.<\/p>\n","protected":false},"excerpt":{"rendered":"

Fatpipe Networks a Chennai based company is planning to come up with ~$11 million IPO on the 7th of June,2010.The DRHP filed with SEBI reveals that [\u2026]<\/span><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","content-type":"","footnotes":""},"categories":[32,61],"tags":[3157],"class_list":["post-718","post","type-post","status-publish","format-standard","hentry","category-ipo-indian-capital-markets","category-technology-sector","tag-ipo-indian-capital-markets"],"_links":{"self":[{"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/posts\/718","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/comments?post=718"}],"version-history":[{"count":0,"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/posts\/718\/revisions"}],"wp:attachment":[{"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/media?parent=718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/categories?post=718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/iiec-india.org\/greenworld\/wp-json\/wp\/v2\/tags?post=718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}