Monday, July 2, 2007

India’s Allied Digital Services IPO in a Crowded Field


Allied Digital Services Limited is a Mumbai based IT infrastructure management and technical support services outsourcing company. It uses a combination of on site and remote services to reduce the cost of ownership of the enterprises and service providers. It delivers strategic, personalized, full service technical support services solutions.

Allied Digital has customer base in India and throughout the globe. There are about 1000 employees at 72 locations across India.

Business profile:

The company’s operations include:

Consultancy: Network design, integration and assessment, management and optimization, test and analysis.

Project Management: Project scope, schedule, integration, allocation, coordination, communication and risk management.

Implementation: Installation, system commissioning, site survey and delivery control, documentation, operations training with round the clock support.

Allied Digital provides services and solutions in networking communications, information security, software, information technology (IT), technical BPO and gateways.

In 2004, a joint venture company, Allied CNT was formed after the merger of Allied Digital India and CNT International Limited, Sri Lanka. Allied CNT is the regional distributor for check point software, eSafe antivirus and content security solutions.

Allied digital provides integrated solutions such as safety and security systems (computerized time and attendance, access control entry and exit automation system, closed circuit television system, ATM surveillance and remote monitoring system, fire detection system etc.), video conferencing systems and radio frequency identification systems.

It also provides turnkey IT solutions such as enterprise computing and management, storage, information security, messaging and collaboration, telecom solutions etc.


The company was incorporated on February 10, 1995 as Allied Digital Services Private Limited under the Companies Act, 1956 and later converted into a public limited company with fresh certificate of incorporation on March 31, 2006.

The management team comprises of Nitin Shah (Chairman and Managing Director), Prakash Shah and Manoj Shah (both executive directors), Bimal Raj (Chief executive officer), Nishith Sheth (Chief operating officer) and Sunil Bhatt (Chief technology officer).

In 1984 they started the office at Fort with just 2 employees. Within 3 years they got their first order from Mafatlal Industries, Mumbai. In 1992 they executed India’s first CAT – 3 for Hindustan Ciba Geigy. In 1996 they were appointed by Dell as the authorized distributors in India. In the same year they were given the maintenance contract of Air India’s travel agent network which continued for five years. In 1997 the company tied up with Microsoft for distribution of the entire product suite. In 2002 they joined hands with Media Gate for their unified messaging solutions on the telecom front. In 2004 the company executed Asia’s largest wireless infrastructure project for Reliance Communications.

Today the company has offices, customer support locations and service centres in many cities and towns in India. Except for the north eastern states of Nagaland, Manipur, Mizoram, Arunachal Pradesh and Tripura it has established presence all over the country.

The company has strategic alliances with IBM, Microsoft, Unisys and Intel to build advanced technology capabilites and deliver comprehensive solutions to the customers.

The company received the following in 2005.

  • National and regional gold awards for storage, integrated solutions and networking by DQ Channels.
  • Best support organization award by CRN magazine.
  • Best system integrator award by DQ week.

The company received the following in 2006.

  • Best services company award and most comprehensive solution provider award by DQ Channels.
  • National and regional gold awards for integrated solutions by CRN magazine.
  • Best system integrator award by Express computer.
  • Deal of the year award by IBM India.

Some of the clients include Reliance Industries, Thermax, Maruti Udyog, Larsen and Toubro (manufacturing), Cable and Wireless, British Telecom, Reliance Communications, Tata Teleservices (telecom), ICICI Bank, Citibank, HDFC Bank, NSE, State bank of India (finance), Tata Power, Hindustan Petroleum, Bharat Petroleum, British Gas (oil & energy), TCS, NIIT (software), Jet airways, STAR TV, Oberoi group of hotels, Accenture (services), Air India, Government of Maharashtra (government departments / undertakings), Shoppers Stop, Pantaloon Retail, McDonalds (retail business).

The company plans to raise about Rs. 86 crores (at Rs. 190, the upper end of the price band). About Rs. 33 crores has been earmarked for starting a Global Service Delivery Centre (GDSC), which is likely to serve as a centralized control and monitoring centre for the company’s operations around the country.

Financial Data:

























Net profit before tax






Net profit after tax






Adjusted Profit






All figures are in rupees crores. PBIDT = Profit before interest, depreciation and tax.

Details of the IPO:

Issue Period: July 02, 2007 to July 05, 2007

Issue Size: 45,22,435 Equity Shares

Issue Type: 100% Book Building

Face Value: Rs. 10/-

Price Range: Rs. 170/- to Rs. 190/-

Market Lot: 35 shares

Minimum Quantity: 35 shares

Retail Investor cap: Rs.100,000

Red Herring Prospectus can be downloaded from here.


The company has developed a good business model with operations all over India, extending to Caribbean, UK and Sri Lanka. The services provided are vast and diversified in the IT sector. The company has very good clientele as we have seen above. The 20+ years experience in this field is definitely an advantage.

However, the software industry does face some challenges. There are plenty of software companies in India, particularly in the southern part of the country. There are some huge players like Infosys, Satyam, Wipro, TCS, Polaris, to mention a few. There is quite a bit of competition in IT infrastructure and services. This could affect the profitability, share of business and possibly revenues. But the locational advantages may compensate for the company since it is Mumabi based.

Allied Digital is smaller in scale and quantum of operations when compared to some other larger players. But at the offer price of Rs. 190, the P/E ratio works out to 14.3 with an EPS of 13.3. This is definitely at a discount to their competitors. So it may be a good idea to invest in the IPO at the upper price band with a long term perspective.