Allsec Technologies Ltd - 135.00 Rs

Incorporated in 1998, Allsec Technologies Ltd (ATL) is a pure Business Process Outsourcing (BPO) company providing support services for inbound customer care, technology helpdesk, inbound / outbound teleservices (sales, collections, lead generation, market research), third-party quality assurance and HR & payroll processing. It offers response and contact management solutions cutting across all media of delivery i.e. voice, e-mail, web chat and offline processing. Its key focus areas are customer life cycle management, call quality monitoring for other call centres, F&A BPO, collections, technical support, and payroll & benefits administration. ATL derives more than 90% of revenue thru exports mainly to US clients including 'Fortune 50' PC manufacturer, a leading mortgage & debt consolidation lender, a mid-sized ISP, a world-renowned automobile company a Student Loan Consolidator and of course its major client Compu credit. Hence in a very short span of time ATL has emerged as a global corporation, servicing veritable corporate majors across the world on a 24/7/365 basis. Incidentally, ATL has the pride of being the first pure play BPO Company to be listed in the Stock Exchanges in India during 2005.

Currently, ATL is operating with a capacity of 2,300 seats across 3 delivery centers in Chennai and one in Bangalore. In last couple of years company has concentrated on capacity expansion by setting up the 1000-seat facility in Chennai which became fully operational in fiscal 2006 in addition to its original 700 seats. Earlier, it took over B2K Corp - a Bangalore-based knowledge process-outsourcing firm with 600 seats, 51,000 square feet facility located in Whitefield, Bangalore. Maintaining its inorganic growth, few weeks back ATL acquired 100% equity of M/s. Kingdom Builders Inc (KBI) a BPO company based out of Manila, Philippines for 1.50 million US $. The operations in Manila will cater to the needs of existing and proposed customers from the US, Australian and Asian markets. Hence company intends to expand this 150 seats operation to 750 seats by Jan 2008. Further, ATL is in the process of setting up a 200 seat call centre facility at Trichy, which is expected to become fully operational soon. In short, a combination of organic & inorganic growth would lay the foundation for the company to maintain its growth for the years to come.

Importantly to funds its expansion, ATL raised approx 80 cr by private placement to high profile international venture capital fund - First Carlyle Ventures Mauritius @ 260 Rs per share. With the participation in the ownership, Carlyle is committed to help ATL become one of the top, full service BPO companies in the global markets in future. Financially, apart from being debt free, ATL is holding liquid cash to the tune of 110 cr which translates into whopping 70 Rs per share. That means at CMP of 135 company is actually available at a throw away price of 65 Rs per share. And notably out of that 110 cr company has invested around 70 cr in mutual funds, in which it may generate other income of around 8~10 cr. Meanwhile, ATL is planning to merge B2K Corp with itself which is expected to become profitable at the net level in FY08 and will make ATL fundamentally much stronger. However, company is not so aggressive in hedging and hence has been badly hit by the sharp rupee appreciation. But this negative has been fully factored, as the share price has become one third from its recent high of 375 Rs. Despite this it is estimated to post an OPM of 20~22% (against 29% in FY07) and end FY08 with topline of 125 cr and bottomline of 25 cr. This works out to an EPS of 15 Rs on fully diluted equity of 16.25 cr. As ATL may continue to face margin pressure in short term, only long term investors are strongly recommended to buy at current levels with a price target of 210 Rs (50% appreciation) in 12~15 months.