Fly-by-night cos staging a come back through software boom

New Delhi, Jan 31: Are fly-by-night-operators back in the capital market? A difficult question to answer. But at least the seeds are bein...

New Delhi, Jan 31: Are fly-by-night-operators back in the capital market? A difficult question to answer. But at least the seeds are being sown now. The code: change the name of the company with an infotech tag. The means: let the share prices ride on the infotech boom in the secondary market. The objective: offload promoters8217; holding or tap the public for funds. The players: victims of the collapse of the NBFC sector.

Caution: Stay away. It could be another trap in the making like the one witnessed in 1994 by a large number of small time finance companies. Some of them could be trying to stage a comeback now through a simple shift in focus to software activities, or to begin with, change the name of the company.A host of companies, mainly from the NBFC sector, have changed their names to the hi-flying infotech ones. The available tags are plenty 8212; infosys,

websity, infotech, login, cyberspace, unisys and not to speak of the plain software. The announcement of the change in name is usually followed by asurge in stock prices of such two penny stocks, rising from as low as 50 paise to crossing the Rs 10-mark.

We present below the recent cases of such companies who have changed their names. A caveat here: it is not possible to say if all the cases mentioned below are fly-by-night operators. In many cases information is not available. It is difficult therefore to separate the good and the bad bets. Cyberspace Infosys, formerly Century International Finance, was among the first one to change its name. An NBFC, came out with a public issue of equity shares at par and 16 per cent fully convertible debentures in 1994-95. The company raised Rs 4.08 crore and the equity issue was oversubscribed 12.3 times. After its reincarnation as Cyberspace Infosys, in May 1998, the scrip shot up from a low of Rs 18 to Rs 60 in a few trading sessions. The liquidity in the counter today has improved, with volumes surging from 200-500 shares a day to 8000-10000 shares a day. The current price of the scrip is Rs 52. The financialdetails of the company are not available.

GMS Industries had almost everything under its umbrella of operation from finance to leasing and even a software division. It also aimed at a vegetable dehydration project. In its original avatar, Ganesh Management Services was providing advisory services for public issues. The company changed the name to GMS Industries. A public issue in March 1995 brought in Rs 2 crore. The available financials show that the company had made a net profit of Rs 1.83 crore on an income of Rs 5.21 crore during 1995-96. The company had also accepted fixed deposits. The scrip listed at Rs 16 in June 1995 shot up to Rs 25 in August 1996 and remained below Rs 5 for most part of 1997 and 1998. The lowest price quote was 10 paise. It could not have gone down further. But certainly there was a propellant available. The name was changed to GMS Computers and the scrip surged to Rs 10. The trading volumes are unbelievable today. About 30,000 to 40,000 shares are traded today against about 2000shares a day.

India Education Centre was hardly traded after its listing in July 1996 till May 1998. The name was changed in March 1998 to IEC Software. Why not? After all the company is in the business of computer education. The trick worked. The scrip started trading regularly, with of course huge volumes. The price doubled from Rs 21 to Rs 43 in less than a month. IEC had mobilised Rs 2.96 crore in March 1996 through a public issue of equity shares at par. The latest available data shows that the company made a net profit of Rs 22 lakh on an income of Rs 4.6 crore.

Chicago Futures and Finance saw a future in changing its name to Chicago Software Industries. A new name in the new year. It clicked. The scrip shot up from Rs 1.30 to Rs 8.9. It is now being traded at Rs 7.3. All in less than a month. What more can we ask for a company which was listed in Ocotber, 1995 at Rs 10 and dropped to 10 paise in September 1997. Synergy Credit Corporation had acquired a company called Log-in Systems in 1993-94. Butthose were the days of finance companies. It had charged a premium of Rs 5 for its public issue. The scrip was perhaps listed at Rs 7 in June 1996. Now the scrip is quoted at Rs 22 and trading volumes of 60,000 to 80,000 shares a day compared to 200 shares. The company is now called Synergy Log-in Systems. The latest data on financials show that the company had made a net profit of Rs 1.6 crore on an income of Rs 11.27 crore for the 15-month ending June 30, 1996.

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Proline Software amp; Finance was formerly SRG Financial and Management. The name was changed in August, 1998. The company has witnessed some trading activity only in the last three sessions around a price of Rs 32.

Shalibadhra Finance Limited was listed in June 1996 at Rs 25 and dropped to 75 paise in January, 1997. The company had raised Rs 3.75 crore from the public with an equity issue in February, 1995. In October 1998, the name was changed to Shalibhadra Infotech. Trading has resumed in the last few days.Sony Corp is changing its name to SoniInfosys. An NBFC, it plans to enter the software business and float a Rs 2-crore rights issue at a premium of Rs 10 and a preferential offer of equity shares at higher premium of Rs 20. The scrip has shot up by 120 per cent, from Rs 9 to Rs 22, in just 11 trading sessions. The company has already applied to the Registrar of Companies RoC for the change in name.Prashant Global Finance changed its name to Silicon Valley Infotech in July, 1998. But it has hardly helped the scrip. The last traded price on the Bombay Stock Exchange was Rs 22 in November, 1998. The company had come out with a public issue of Rs 6.9 crore in 1996. The issue at a premium of Rs 20 was oversubscribed 1.55 times.