CMC up 12% on privatization hopes

MUMBAI: Shares of Indian software firm CMC Ltd were at a limit up 12 per cent

during Thursday noon trade on hopes that the government will spell out plans for

reducing its stake in the firm.

While the rest of the software sector was lackluster, the CMC share stood

out, gaining Rs 36.60 to Rs 341.75. A government committee on disinvestment is

due to meet on Friday to take decisions on some state-run companies.

The government currently holds 83 per cent stake in CMC. The company has

applied to the government to increase its equity to Rs 1.8 billion from the

current Rs 151.5 million, which will reduce the government's stake.

Media reports in the past have speculated that the government might sell some

of its stake to a strategic partner, which is really what the market is hoping

will happen.

Though CMC is in the lucrative software sector, analysts say its image among

the investing community has been hurt because of its government parentage.

"CMC is developing good software, but it's marketing is suffering

because it is a public sector firm," said Nucleus Securities analyst Sagar

Tanna.

"If it gets a foreign partner, it can make the marketing thrust needed

for getting orders from overseas," he said.

SMIFS Securities analyst Jayesh Parekh said, "If the government divests

its stake in favor of a strategic partner, it means extra power in terms of

margins and management depth."

CMC posted a 76.33 per cent jump in net profit for 1999-2000 at Rs 128.90

million compared to Rs 73.10 million in the previous year.

Its shares have been rising from the Rs 244 level on May 29, gaining 40 per

cent till Thursday's high of Rs 341.75.

(C) Reuters Limited 2000.