RS Software - Rs.88.00

Established in 1991, RS Software India Ltd. (RSS) is a leader in providing quality software services and consulting to global players in the electronic payments space. Its bandwidth of offerings covers all segments from card associations to processors, acquirers & issuers, ISOs, all the way down to the merchants who manage POS terminals at retail outlets. Since inception, the company has acquired extensive understanding of the credit and debit card domains and is engaged in building tools, frameworks and customizable industry components for use in payment systems applications for smart cards, payment gateways and mobile-based technologies. It offers a gamut of services that include Transaction Processing, Dispute Resolution, Risk Mitigation and Data Analytics. In the hi-tech space, the company is creating Biometric offerings for securing financial transactions through fingerprint identification and is working towards developing frameworks that include multi-modal biometrics for solutions in areas that require high degree of security. It also has substantive expertise in Embedded & Hi-tech Systems while its technology bandwidth spans across mainframes, mid-range, client-server, systems software, web technologies and ERP.

Operating out of the Salt Lake Electronics Complex in Kolkata and having offices in UK and USA, RSS is amongst the first companies to receive the ISO 9001: 2000 certification and CMM Level 4 and P-CMM level 3 assessments in the year 2000. It is one of the first companies to bring the IBM Mainframe architecture to India in 1991 and the fiftieth company to receive the BS7799 Certification in 2005. Its clients include high profile global players in the Payment Cards industry, Insurance, Manufacturing and in the Retail/Logistics sector. However its top client, VISA, contributes about 60% of the revenues with 90% of the revenues coming from its top 5 clients. The offshore/onsite mix is around 40/60 while the revenue mix is in the ratio of Maintenance-31%, Development–21%, Testing-30% and Consulting-18%. Apart from the UK and US, the company is working towards expanding its operations to Asia Pacific and Far East countries also. For future growth, the company is expanding aggressively to set up a new infrastructure of 60,000 sq. ft. in Kolkata, which would be completed by FY08. To complement this, it is planning to increase the headcount to 600 employees from 500 currently and further to 850 by FY08.

To fund its expansion and repay some of its high cost borrowing, RSS recently raised approx Rs.16 cr. through a Rights issue at Rs.65 per share. In the last couple of years, the company has financially turned around strongly and has transformed itself from a plain vanilla software service company to a specialist in the niche payment system domain. For H1FY07, while its topline improved by 15% to Rs.53 cr., its bottomline doubled to Rs.4.40 cr. due to better margins and lower depreciation. For the full year FY07, the company is expected to clock total revenue of Rs.115 cr. with PAT of Rs.9 cr., which translates into EPS of Rs.11 on its fully expanded and diluted equity of approx Rs.8.40 cr. For FY08, its EPS can shoot up to Rs.16. Hence investors are strongly recommended to buy at current levels with a price target of Rs.130 in 9-12 months.