While the past track record is not exciting, the year ahead is expected to be significantly better. Nevertheless, Intrasoft Technologies’ pricing looks stiff.
As internet penetration increases, online companies that deal with services like travel, shopping and so on could see better business volumes going ahead. The same holds true for companies like Intrasoft Technologies, which is in the business of providing electronic greeting cards, development of associated digital content and online marketing. Intrasoft operates www.123greetings.com, one of the most popular greetings websites worldwide. The company intends to raise around Rs 50-53 crore from the capital markets to fund its requirements for branding and promotions (Rs 20 crore), purchasing corporate office in Kolkata (Rs 13 crore), investment in technology infrastructure (Rs 2 crore) and general purpose (balance).
| GROWING AT A STEADY PACE | |||
| in Rs crore | FY08 | FY09 | FY10E |
| Total income | 20.2 | 23.4 | 29.0 |
| EBITDA (%) | 26.5 | 32.5 | 31.0 |
| PAT | 4.4 | 5.3 | 7.4 |
| EPS (Rs) * | 4.0 | 4.8 | 5.1 |
| P/E (x) @ Rs 137 | - | 28.4 | 27.1 |
| P/E (x) @ Rs 145 | - | 30.2 | 28.7 |
| * Based on post-offer equity; E: estimates | |||
The business
Intrasoft follows the user model; it provides its services free of cost to its users and derives revenues from the advertisers. To attract the online traffic, the company offers over 20,000 electronic greeting cards covering over 3,000 seasonal and everyday categories, which help it to attract a large advertiser base. Its website is looked closely by advertisers, both in India and worldwide.
According to comScore Media Metrix, www.123Greetings.com received the largest number of unique visitors in India (around 15 million between November 2008 and October 2009) and in the same period it was accorded as the second largest by the number of unique visitors’ world-wide (around 91 million). The company generates 90 per cent of its revenues from online advertisements and 70 per cent of advertiser revenues come from US; India accounts for the balance. Plans are afoot to venture into Europe and South East Asian regions like Singapore.
Majority of the content is in English. But, as Intrasoft intends to expand its horizon, both in India and other non-English speaking countries, the multi-lingual content is the way to become popular in those regions. One of the vehicles is 123greetings Studio, where developers (by invitation) can build content that could be circulated through the website, thereby increasing its visibility with people who speak different languages and require different content.
Conclusion
In order to increase its footprint, the company firmed up association with popular online networking portals including facebook.com and twitter.com. Going ahead, the company plans to further strengthen distribution partnerships with major internet content and service providers. With two-thirds of the website’s users being female, the company could seek arrangements with female-based platforms, to deliver higher traffic. Besides, its gifts business that has relatively better margins could rise over three-fold from an estimated Rs 3 crore in 2009-10 to Rs 10 crore in 2010-11. Lastly, the company also has cash equivalents worth Rs 16-17 crore.
Although there are no comparables, the stock is available at a PE of 27-29 times its estimated 2009-10 earnings (on post-IPO equity), which doesn’t look cheap. Investors with some appetite for risk and patience may consider it with a long-term perspective.