Good performance for day one

Intrasoft technologies Limited the owners of the greeting card website 123greetings listed their share on the BSE and NSE yesterday. There was a listing ceremony held at the BSE for the same. The share listed at the BSE at Rs 140 and Rs 150 on the NSE. Within seconds the share had made its low of Rs 123.30 on the BSE and Rs 124 on the NSE respectively. The share recovered as dramatically thereafter and in the next couple of minutes the lows were like an aberration or a ‘glitch’ in technical language.

The share made a high of Rs 167.15 on the BSE and Rs 167.40 on the NSE. Trading volumes were huge and the total traded volume was 389.11 lakhs or 10.5 times the IPO size of 37 lakhs. Delivery volume of 27.25 lakhs was just about 7% of the traded volume but a very significant 73.64% of the IPO size. What is significant from these numbers is that the listing debacle of Shree Ganesh Jewellery which happened on Friday is still very fresh in the minds of people and they would take quite some time to get out of it. Probably it was this listing drama of Friday which saw the share dip momentarily to a low of Rs 123.30 on the BSE and Rs 124 on the NSE respectively. However the fact that prices recovered in less than a couple of minutes also suggest that the fall was only to create a panic if possible so that the share could get hammered and result in money for short sellers. This did not happen simply because the issue which was subscribed just about 19 times ensured that nobody got substantial allotment and therefore did not have a large quantity to sell.

The trading was huge and the delivery as a whole very significant as almost 75% of the shares have changed hands. The management post listing has given top line guidance and also profitability guidance in interviews to television channels. On a fully diluted basis the earnings for FY 2009-2010 which is just gone by would see the company earn a EPs of Rs 6 which would in the following year 2010-11 rise to and EPS of Rs 10, a growth of almost 66%.

Today the share is likely to see some sideways movement and probably trade in a broad range of plus minus 10 Rs from yesterday’s close. It would be interesting to see how the share fares in the coming days as almost all investors would be brand new and it would depend on the person now entering the share at a 10% premium on what his view on the share is.

Up about 7%

Listing ceremony

The share listed at the BSE at Rs 140 and very quickly made the low of the day at Rs 123.30. On the NSE the share listed at Rs 150 and came down to Rs 124 before recovering sharply on both the exchanges.

The high made on BSE was Rs 167.15 and on the NSE was Rs 167.40. The trading volume has been very brisk and in the first two hours of trade the total traded volume is over 2.04 cr shares or 5.5 times the IPO size of 37 lakh shares. The share is holding well and is currently trading at Rs 154-157 and the weighted average of the day is also currently at the same price. The IPO size was a mere 37 lakh shares and therefore there are no major shareholders who could sell the shares post allotment.

It would be interesting to see how the day pans for Intrasoft Technologies. Incidentally the website of the company is 123greetings and the low that the share made on the BSE was Rs 123.30 or effectively the trade name was registered on day one.

Intrasoft Technologies Limited which had launched its IPO between the 23rd and 26th of March is to list on Monday the 12th of April 2010. The issue was for 37 lakh shares and the price band was Rs 137-145. The issue garnered excellent support and was subscribed just about 19 times. The company runs a website for free greeting cards and is popular as 123 greetings.

The company would have a listing ceremony on the BSE on Monday the 12th of April.

Intrasoft Technologies Limited had launched its IPO by offering 37 lakh shares in a price band of Rs 137-145. The issue had opened on Tuesday the 23rd of March and closed yesterday Friday the 26th March. The issue received excellent response from all the three categories of investors and was finally oversubscribed just under 19 times.

The company runs the popular free greetings card site 123greetings.

Intrasoft technologies Limited (Intrasoft) is tapping the capital markets with an IPO which has opened on Tuesday the 23rd of March 2010 and closes on Friday the 26th of March 2010. The company is better known for its product 123 greetings, which is an electronic greeting cards website. The issue has a price band of Rs 137-145 and would raise between Rs 50-54 crs.

Business
In good old days, we all went to a shop, bought a card whether birthday, anniversary or what have you, actually filled up the same and then sent the card by hand delivery, courier or post. All this cost money and time. Now you go to a website, select a card and send it by e-mail to the person, and all this happens free to you the sender. Could this be a business model? Yes, there is no free lunch and the time that we are actually selecting a card, deciding on the matter and mailing it, advertisements pop up which are paid for by the advertiser and that is the business model.

Intrasoft is into this business. They have a library of 20,000 electronic greeting cards, which are rich in diverse multimedia content and are designed to cater to varying geographical and religious celebrations, occasions and other events. The website automatically refreshes itself every 15 minutes and incorporates a simple and user friendly interface which allows users to navigate through the library by occasion, popularity or text, customise them with rich content and music, and send them to any recipient email address at zero cost.

Intrasoft is India’s largest and the world’s second largest visited website in terms of unique visitors. The website attracted over 90 million unique visitors and this is growing at a very rapid rate. The company had a growth of 15% in the month of February 2010 as per comScore Media Metrix, a company which provides internet audience measurement services. In the electronic cards business the competitors are Evite.com and AG interactive. American greetings is yet another competitor but not strictly comparable because it is into other verticals as well.

Revenues are from advertisers and almost 90% of the total revenue derived by this company is from advertisements. Advertisers include major U.S. and Indian based organizations in the entertainment, retail, and information technology and internet space. The growth in revenues would come from customization and maximization of advertisement effectiveness which would result in significant increase in the billing rate. In 2007 the company was funded by Intel Capital.

The company has started 3rd party services for using the portal for online gifting. This at the moment is an insignificant portion of the revenues but has the potential to become a money spinner.
The current content is mostly in English and the new feature 123greetings Studio which is currently under test by a limited number of developers would be able to address this issue. This offering would allow the company to expand into new geographies and new user groups who would contribute to providing local content or new content in different languages. This would help grow the user base significantly.

Yet another feature being built in the software is the facility to send e-invitations for events and occasions. The introduction of this service would attract new user groups and also introduce the invitees who receive such invitations to the website.
Objects of the Issue

The objects of the issue include the following: -

Financials
The company has reported a net income of Rs 2017.86 lakhs for the year ended March 2008 and Rs 2335.15 lakhs for the year ended March 2009. The net revenue for the six months ended September 2009 is Rs 1050.33 lakhs. The net profit after tax for the year ended March 2008 is Rs 442 lakhs while for the year ended March 2009 is Rs 532.82 lakhs. In the six months ended September 2009 the profit is Rs 309.13 lakhs.

The business is highly cyclical and the second half of the year or October to March is typically more active. The reason is simple as almost the major festivals or occasions happen during this period. To illustrate the same Christmas, New Year, Chinese New Year, Diwali, Valentines’s day etc all happen in the second half of the year. Intrasoft has not given half yearly breakup of revenues but it would be safe to assume that around 1/3rd of the revenue comes in the first half and 2/3rd of the revenue comes in the second half of the year. Profit margins in this business are high and the net profit margins have been at 21.9% in March 2008 and at 22.8% in March 2009. They have improved significantly in the first half of the year ending March 2010 to a little over 29.4%.

Comparison
As mentioned earlier there is no competition or comparable company in India in this line or similar line of activity. Internationally there are comparables in the form of Evite.com and AG interactive. One can also look at American greetings and Hallmark. In the case of the last two they are strictly not comparable as they are into different verticals as well.

Valuations
The company cannot be compared on EPS and PE. The advertisement rates vary from the type of visitors and the ability to eliminate pop-ups which has made visitors shun a site. A website can attract higher ad rates simply by its ability to attract premium customers and its growth rate. The change in ad rates over a gradual curve can change from US $ 2.5-3 per 1000 to as much as 17-18$ per 1000. This of course cannot happen in a jiffy over time. Intrasoft is currently earning in the region of $ 4 per 1000.

Based on EPS the company earned Rs 3 on a fully diluted basis for the year ended March 2008, Rs 3.62 for March 2009 and Rs 2.10 for the half year ended September 2009. The growth potential, the marquee clients, the library size of 20,000 cards and the presence of Intel as an investor from 2007 are reasons good enough to bet on this company.

Risks
Any technology company always runs the risk of getting overtaken by new technology. Here such a risk does not remain because the habit of wishing, greeting and gifting cannot die or go away. The challenge is in introducing new products and innovation like the 123greeting studio and the e-invite add-ons which will help in establishing supremacy of the product. The 20000 strong library and additions to it will help in making this website a must see going forward. Complacency alone can kill the product otherwise the size of library ensures a head start and creates an entry barrier in itself.

Conclusion
I believe investment in Intrasoft will be profitable in the medium and long term. This is a company which offers an opportunity to multiply your money in time to come. It is not a story for mere listing gains. Subscribe for substantial gains in the medium and long term.

Sebi disclaimer: – I intend to subscribe to the above issue

Intrasoft Technologies Limited announced the price band for its IPO which opens on Tuesday the 23rd of March and closes on Friday the 26th of March. The issue is for 37 lakh shares and the price band is Rs 137-145. The issue will raise Rs 50.69 at the lower end of the price band and Rs 53.65 crs at the upper end of the price band.

The company is better known as the website 123 greetings.