Aftek Ltd - Rs.53.00

Established in 1986, Aftek Ltd. (erstwhile known as Aftek Infosys Ltd.) is a technology-driven company offering Intellectual Property (IP) based products, solutions and services. It specializes in enterprise business management with core competency in communication arena. It has developed and acquired a huge wealth in terms of IP and is reaping rich dividends now. Its flagship software product called ‘Powersafe’ has been well-accepted in the international market. Powersafe is a gold-certified CA smart solution basically used in energy management as it integrates UPS networks with e-business management frameworks like CA Unicenter, HP Openview etc. Its electronic ticketing machines coupled with its ‘Depot Manager’ software fetched excellent response from public and private road transport organization especially in Europe. Its Digital Home Gateway revolutionised the housing industry by catering to security, safety, automation, entertainment, information and communication. It also has user friendly solutions for industry automation like material handling and access management and markets hi-tech products like Wireless gateway black box, VOIP-PSTN gateway device and small applications like prescription writer, panel simulator etc.

Aftek among the few Indian companies to specialise in Automotive Telematics Embedded Technologies, which is a next generation technology and impacts all aspects of the automotive user experience from human-machine interface, navigation, mapping, traffic information, safety and security aids, mobile internet to remote vehicle diagnostics and control. The company already provides these services to BMW – one of the world’s biggest and most prestigious automobile manufacturers. Presently, it is working on development of Consumer Portal for residential, commercial and industrial consumers, which will act as an intelligent meter and besides measuring the electricity consumption, it will proactively manage the load on the grid in terms of lighting, heating, ventilation, air-Conditioning based on the pre-determined policies and real-time conditions like load on power grid, ambient temperature, power price, etc. Also since last one year, it is developing software called SEPA (Search Engine Performance Advertising) which is state-of-the-art, cutting edge search technology for sponsored links. Incidentally, Aftek is the only Indian company being selected as one of the 200 companies world-wide for innovation, technology, financing and entrepreneurial activity by Red Herring - a renowned US-based media company.

Apart from its organic growth, Aftek is betting big inorganic growth too. It has a wholly-owned subsidiary in the USA called Opdex, which focuses on Energy Management space. Arexera Technologies GmbH is also a wholly-owned subsidiary in Switzerland which specializes in ECM (Enterprise Content Management) and offers a suite of products for Unstructured Data Management. Importantly, via Arexera, Aftek holds 33% stake in Seekport which is the third largest search engine after Google and Yahoo in German language apart from being very popular in French, Italian, Spanish and English. It will also be available in Arabic and some Indian languages in the near future. Aftek has a 25% stake in Digihome, which specializes in the Intelligent Home Management market. It also holds nearly 17% in V-Soft, which handles marketing and sales of the company’s professional services in North America. It also has a strategic 15% stake in Elven, a specialized player in ASIC (Application Specific Integrated Circuit) and FPGA (Field Programmable Gate Array) technologies in the VLSI (Very Large Scale Integration) space. These companies use Aftek’s intellectual properties and/or professional services and thus bring significant value to the company.

Financially, Aftek is debt-free and cash rich company. As on 31st Mar.’06, its cash holding was a whopping Rs.330 cr. (including Rs.75 cr. of unutilized FCCB money) whereas its current market cap is around Rs.475 cr. only. Its strategic investment in other companies including Arexera stands at Rs.118 cr. It has massive reserves of Rs.460 cr. against its small equity of Rs.17 cr. leading to a book value of Rs.56. Last fiscal, the company raised around Rs.160 cr. by allotting 3450 FCCB of US $10000 each to fund an acquisition. Of these, 2270 FCCBs have been converted into equity shares at Rs.94 per share whereas the balance 1180 will be converted at the revised conversion price of Rs.75 per share. Interestingly, possibly to increase their stake, the promoters have allotted 37 lakh share warrants to themselves to be converted at Rs.120 per share and they have already paid 10% of the amount. For FY06 ending 31st Mar.’06 (9 months only) it reported sales of Rs.193 cr. with net profit of Rs.67.50 cr. For H1FY07, its topline grew by nearly 30% to Rs.155 cr. and profit increased by 55% to Rs.59.50 cr. Hence for the full year FY07, it may clock a turnover of Rs.325 cr. with net profit of Rs.108 cr., which works out to an EPS of Rs.11 on its fully diluted equity of Rs.19.50 cr. Thus this company is trading extremely cheap and can easily shoot up by 50% in 6-9 months. Buying is strongly recommended at CMP.