Being a specialist player has its advantages as well as disadvantages and at the moment there is more of the latter
The specialist software consultant has been garnering attention on the stock market. Rumours abound that the company that caters largely to the airline industry is up on the block. The rumour has now been confirmed as the promoters have sold their entire stake of 35.61 per cent at Rs 173 per share totaling about Rs 97 crore. Given that the acquisition is being made at a 21 per cent premium over Thursday's closing price, expect the stock to open higher on Friday.
Meanwhile, the airline industry itself has been going through a lot of trouble and the ancillary industries have also suffered. However, over the bad cycle, Kale Consultants had depicted a revenue and net earnings growth of around of 24 and 43 percent respectively over the past five years. Even in the June quarter, the company recorded an operating income of Rs 34 crore for the quarter ended, as compared to Rs 25.62 crore during the corresponding period, a growth of 31%.
The company has been able to maintain its earnings before intereat tax, depreciation and amortisation margins at around 24 percent levels, which is more than most of the generic technology players in the market place. Kale Consultants remains a leader in the in passenger revenue accounting or PRA solutions with industry acclaimed products, largest pool of expertise, widest solution portfolio and biggest customer base. Around 15 out of 20 airlines uses Kale Consultants solutions.
It has three software development centers and four managed process outsourcing unts and employs over 1600 professionals who focus on delivering quality service to over 120 clients across 30 countries. Not surprisingly, analysts expected the company's earnings to stagnate and plateau as the growth in the global airline industry would be restricted.
While there are plans to tap the logistics space, they have not fructified as yet. In this context, the coming in of the new promoter, Spain-based Accelya which is among the leading players in the aviation BPO segment, is good news and should prove helpful for both the companies. Kale's current share price trades at around 11 times its 2010-11 estimated earnings.