Stock Review: Glodyne Technoserve

 

 

Given the opportunities in infrastructure management services and the operating leverage from its acquisitions, Glodyne looks well positioned in the coming quarters

 

   MUMBAI-BASED Glodyne Technoserve, one of the leading IT services company, offers service across two segments — technology infrastructure management services (technology IMS) and application software services. The latter forms a minuscule part of the company's operations.

BUSINESS:

Glodyne's operations spread across pan India and the US. The company offers services mainly in six segments including government/PSU, IT/ITeS, BFSI, manufacturing and retail, media & telecom and education & research. It has adopted an inorganic route to expand its product base and market reach. In FY07, Glodyne bought Virginia-based Links Group International followed by the acquisition of a New York's Front Office Technologies in FY08. In India, Glodyne bought Broadllyne Technologies, a managed application service provider in the education sector, in FY09. The company merged with Compulink Systems, a project management software services provider. In FY10, it acquired US's DecisionOne a pure-play technology IMS company.

GROWTH DRIVERS:

Going forward, Glodyne is expected to benefit from the integration of the acquired businesses. The robust onsite-remote IMS global delivery model of DecisionOne would enhance Glodyne's market reach and product offerings. The company will also be able to make foray into the travel and healthcare space. Moreover, DecisionOne's client base, including Fortune 500 companies, and more than 2,000 highly skilled professionals will strengthen Glodyne's position in the $524 billion global technology IMS market. Glodyne has witnessed improvement in the government and private education space. The Broadllyne buy lends synergies and benefits the company with tremendous technology, domain expertise and key client relationships to address and tap the opportunities in the education sector. With the growing need for outsourcing of infrastructure management services, Glodyne is left with evergrowing opportunities in the market place. Moreover, leveraging on the business synergies and the complementary strengths with the acquired firms, Glodyne is all set to build its business. With the acquisitions, integration and absorptions, Glodyne looks to become a billion dollar company within three years.

FINANCIALS:

Glodyne's topline grew 38% to 213 crore in the June quarter. This was mainly on account of the revenue from the company's IMS arm, which almost doubled to 187 crore for the same period. The balance was formed by the software services segment, which grew by a marginal 3% to 26 crore. Glodyne expects its attrition rate to inch up to 11% from 9% in the June quarter given the fresh recruitment spree in the IT sector.

VALUATION:

At the current market price of 902, the scrip is trading at nearly 24 times its trailing 12 month earnings per share. Glodyne is expected to fare well in the coming quarters given the benefits of the inorganic growth. Investors may stay invested in the stock.

CONCERN:

More than 25% of the revenue of Glodyne is contributed by the US, making it vulnerable to currency exposure. However, with appropriate hedge positions, the company is expected to weather through forex fluctuations.