Subscribe to Persistent Systems, says SPA Securities

MUMBAI: SPA Securities has advised investors to ‘Subscribe’ to the initial public offering of Persistent Systems.

The company has entered the capital market with an issue size of 5,419,706 shares to be priced between Rs 290-310 per share through 100 per cent book building process. The issue closes Friday.

Persistent Systems provides outsourced development services to its customers. It designs, develops and maintains software systems and solutions, creates new applications and enhance the functionality of its customers existing software products.

“At the upper band of Rs 310, the stock is available at a P/E and P/BV multiple of 11.7x and 2.0x based on its annualised FY10 EPS of Rs 26.5 and post issue BV/share of Rs 153.4. Persistent’s peers are trading at cheaper valuations at P/E and P/BV multiple of 7.1-8.2x and 1.1-1.5x respectively.

However, given Persistent’s niche focus on OPD, presence across software product’s entire value chain, robust fundamentals, ability to earn higher margins and strong relationship with its customers, we recommend investors with long term horizon to ‘Subscribe’ to the issue,” the report said.

The company plans to use the proceeds for establishment of development facilities, capitalise subsidiaries for establishing development facilities and for procuring hardware.