Vakrangee Software Ltd - Rs 202.00

Incorporated in 1990, Vakrangee Software Ltd (VSL) is a leading provider of complete document and data management solutions encompassing large-scale data capturing & management, scanning, digitization and printing. It has three business segments, viz - document management services, printing management services and IT enabled services catering to various verticals like the central and the state government, banking and financial services industry, telecom, power, retail, aviation and others. Importantly, VSL has the largest scanning and variable data printing capacity in India with 5.6 million pages per day and 2.40 million pages per day respectively. Besides, company is a pioneer in multi-lingual application software and has developed versatile document management software, which can be used in 13 regional languages. After its Voters Identity Card software, Electoral Roll software, Voters Data entry Package, Cyber Saver etc, company is in the advanced stage of developing Human Capital Management software & School ERP software which have tremendous potential in domestic market. Currently, VSL derives 75% of revenue from government business while the balance comes from private sector. Hence its clientele comprises of various election divisions, government & semi-government organizations, public authorities & local bodies, business associates and other private organizations.

Earlier, VSL was mainly into election commission work and database management but now the focus of the company is on e-Governance including document management projects and further to printing management projects. It boast of successfully completing land record digitization project of Ghaziabad development authority, digitization of patent records at Indian patent office, public facilitation office under MCA-21 and various other election projects for the state of Maharashtra, Rajasthan, Chhattisgarh, Gujarat & UP. It has around 25 delivery centers in major cities across India. Apart from being an outsourcing partner to TCS & CMC, company has a tie up with Godrej & Boyce for jointly executing large election related projects at national and state level. In Dec 2006, VSL imported world’s fastest printing system - Kodak Versamark VT3000 which can print customized design from page to page. This machine has not only helped the company to execute all election commission related work in house but also enabled it to get more business from the emerging opportunities like printing documents (including bills) for telecom companies, electricity supply companies, retail groups etc. Recently it has entered into a strategic alliance with Eastman Kodak company to offer mass customization & personalization of customer communication practices in India and has been granted with the Kodak Gold Plus accreditation status. Maintaining records and issue of voter’s identity card for Maharashtra, MP, UP, Gujarat etc is an ongoing process for the company. For TCS, it is doing Registrar of Companies database management at 32 locations. Couple of months ago it bagged a prestigious project from the chief election commission, Maharashtra unit for the Delimitation exercise which consist of redrawing boundries of Lok Sabha and assembly constituencies to maintain equitable distribution of population across constituencies. This project involves preparation of the new electoral roll in multiple copies for more than seven cr electors of the state.

Today, e-Governance is the fastest growing business opportunity as well as a major social responsibility initiative in India. It is further fuelled by the implementation of Right to Information Act (RTI) by govt of India, which makes it mandatory for all govt departments to have all the information in digital form. This includes not only conversion of historical data but also to keep present as well as future information in digital form. In view of the innumerable ministries, departments, offices at center and state level and other authorities, e-Governance has emerged as a huge opportunity for the IT industry in general and for the company in particular. Besides, VSL has started focusing more to cater private sector and intends to take the share from this segment to more than 50% of the total revenue. Hence, with a rich experience and excellent track record it is all set to capitalize the huge opportunity in coming years.

Since last three years, VSL’s topline and bottomline has been growing at an impressive CAGR of 90% and 160% respectively. Moreover, company has been consistently registering an OPM of more than 40% & NPM of 20%. For FY08 its revenue jumped up 90% to Rs 224 cr whereas its PAT more than doubled to Rs 50 cr posting an EPS of Rs 23 on equity of Rs 21.40 cr. Incidentally, despite a substantial fall coupled with bearish sentiment in the stock market, warrant holders (including promoters) still exercised their option and got their 22.50 lakh warrants converted into shares @ Rs 241 per share in March 2008. Further, company is contemplating to come out with right issue in near future. For the latest June’08 quarter as well, VSL reported encouraging result and is expected to end FY09 with total revenue of Rs 300 cr and net profit of Rs 60 cr i.e. EPS of Rs 28. So at a reasonable discounting by 10x times earnings, scrip has the potential to touch Rs 280 (i.e. 40% return) in 12~15 months. Although, promoters hold only 19% and doesn’t enjoy good reputation in the stock market still it’s a good bet as company has bid for high value new private sector orders through its alliance with Eastman Kodak Co. So, as and when opportunity arises investors can buy at sharp declines around 180~190 levels.

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