MUMBAI; An initial public offer by India’s fifth largest back-office outsourcing company was subscribed more than 47 times, official data showed, indicating robust investor interest for participation in the booming sector.
An offer for 69.3 million shares by Firstsource Solutions Ltd., formerly ICICI OneSource Ltd., attracted bids for 3.29 billion shares, data on the National Stock Exchange Web site showed on Friday.
“The demand for the IPO is in line with our expectations,” J. Niranjan, head of investment banking at ICICI Securities, one of the managers to the issue, told Reuters.
Most bids came near the upper end of the price band and the final price would be set over the weekend, he said.
Firstsource handles customer service and other back-office functions for Western firms especially in banking, telecommunication, media and health care sectors.
It is part of India’s technology outsourcing industry, which is expected to earn revenues of $31 billion in 2006/07 and grow 30 percent annually.
For the year to March 2006, Firstsource reported a net profit of 246.7 million rupees on revenues of 5.5 billion rupees.
“We believe that robust earnings growth in excess of 40 percent over the next two years is sustainable on the back of increasing annuity business, mergers and acquisitions related upsides and industry growth of 30-35 percent,” brokerage firm Edelweiss Securities said in a recent IPO note.
The brokerage has estimated price to earnings ratio of 30, based on 2006/07 earnings estimate of 890 million rupees and 18 times based on the following year’s earnings estimated at 1.47 billion rupees.
However it has also sounded a note of caution on the high staff turnover of 39 percent.