Acropetal Technologies focuses on health, environment

In the two weeks it has been listed on bourses, the stock of Acropetal Technologies has shown high volatility in trade with high volumes. From its peak of Rs 130.6 it had touched on Monday, it fell by over 41% by the end of Thursday’s trade. With two acquisitions under its belt, the company seems to be on course to fulfil its IPO objectives. But investors need to track its performance to know if it can sustain the growth momentum.

The Bangalore-based Acropetal, which provides engineering design services, healthcare and energy analytics solutions, clocked Rs 152 crore in revenue during the nine months to December 2010. Acropetal raised rs 170 crore through the IPO a month ago to expand its overseas presence and to fund its inorganic plans. On Tuesday , it announced the acquisition of two US firms in the healthcare business at a combined cost of $ 9 million (approximately Rs 40.5 crore).

Healthcare and environmental services are the new focus areas for the company. With a five-fold jump in the revenue share, the healthcare segment has reported good traction over the last four quarters. But its environment and energy division is yet to see a major breakthrough. To ensure growth in this segment would be one of the major challenges in the near term given the discretionary nature of these solutions. A relatively longer receivables cycle is another concern, which could impact profitability in the long term. The company takes nearly five months to collect outstanding sales, much longer than the average two-three months for IT companies.

At the IPO issue price of Rs 90, the company commanded a P/E multiple of 12.3 on annualised nine months ended December 2010 earnings based on post-issue equity. At the Thursday’s closing price of Rs 76.6, its P/E works out to be 11.4. The subscribers to the IPO have lost 15% so far. Since the company is yet to report its quarterly financial performance after listing, it will be too early to comment on its growth potential. Its topline will be boosted once it consolidates revenue of the two acquired companies. But its future prospects depend on how fast it expands its new business segments without sacrificing margins.