i-flex falls 5.8% on trading debut

Robin Elsham

MUMBAI: Financial software maker i-flex solutions Ltd. made a topsy-turvy

trading debut on Friday, its share surrendering early gains to close 5.8 per

cent below the initial public offer (IPO) price.

After rising early to trade 5.7 per cent higher than its IPO price of Rs 530,

it sank to close down at Rs 499.45. i-flex, in which Citigroup is the largest

shareholder with a 40 per cent stake, makes banking software products used by

330 institutions in 80 countries.

"The market price reflects the overall decline in the IT sector since

the issue was priced," said Pratish Krishnan, a technology analyst at

Cholamandalam Securities in Bombay. "The prices of most front-line issues

have fallen."

Since subscriptions closed on June 11 for the largest IPO in the Indian IT

sector in two years, the Bombay Stock Exchange's IT sub-index fell as much as

7.9 per cent.

Arun Kejriwal, director at Mumbai-based equities research house KRIS, said i-flex's

share price was under pressure from selling by employees awarded shares before

the IPO and other earlier stake holders.

"It appears the selling was from allottees and original investors who

were unlocking the value of their holdings." i-flex's IPO opened on June 5

as tension between India and Pakistan was peaking and the nuclear-armed

neighbors seemed on the brink of war.

i-flex sold a 10 per cent stake and raised Rs 2.1 billion ($43 million)

through the IPO, which closed on June 11 and was oversubscribed 2.72 times.

"At the time we did the issue, people were airlifting their citizens

from the country. Yet the kind of response we got -- every fund we met has

appreciated our story," company chairman and managing director Rajesh Hukku

said after banging a gong on the floor of the Bombay Stock Exchange to signal

the start of trading.

"It should be possible for people to understand that an Indian company

based on products can come and list in difficult times." i-flex was founded

by former employees of Citigroup and in addition to that the company counts

Japan's Shinsei Bank, UBS Warburg and the Development Bank of Singapore among

its top clients. It has more than 2,000 employees.

Product company



Hukku said listing will give the Bangalore-based company greater visibility.
"We had a strategic plan and we believed now was the time to create the

branding because the product has done very well and there was no sense for

waiting for this time or that time.

"We have been around for 10 years, served customers in 84 countries and

had good financial numbers."

Despite the slowdown in IT spending by banks, i-flex, one of India's top 20

software exporters, reported a 34 per cent jump in revenue to Rs 4.15 billion

($85 million) for the past year to March. Profit rose 15 per cent to Rs

1.27billion. Products accounted for 60 per cent of revenue with the balance

coming from services. Other Indian software companies earn most of their income

from services.

Hukku declined to comment on the company's results for the April-June quarter

or on the outlook going forward except to say: "Nothing is slowing us down

at the moment."

(with reporting by Rosemary Arackaparambil)

(C) Reuters Limited.