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Software cos may consider buyback

Kripa Raman

Mumbai, Sept. 17

SOFTWARE stocks in the country have plunged so low since the US World Trade Centre attack that many companies' market capitalisation has now sunk below their cash reserves, making it attractive for them to start buying back their own stock, said analysts .

``Technology stocks are quoting at scrap levels,'' said a software analyst with an equity firm. ``The companies which genuinely feel their valuations are higher than their market price indicates will certainly start buying their own stock.''

``I think that those who have large equity and a lot of cash in the books should do it at these prices, for a lot of the fall is due to overreaction and panic selling since the future appears too uncertain,'' said one analyst. ``It is a call that compani es have to take. Taking a view is not easy. It depends on how optimistic the companies are about their own future and their own business models.''

A company like Global Tele-systems which quoted at Rs 84 per share a day before the New York attacks, already one-third below its levels a couple of months back, today quoted at Rs 49.8 per share. ``This roughly works out to a market cap of around Rs 350 crore whereas its reserves would be over Rs 500 crore,'' said an analyst.

Aptech Ltd at Rs 33.85 per share, today quoted 32 per cent lower than its September 10 quote of Rs 50 on BSE. ``Aptech too has reserves of more than Rs 250 crore, whereas their market cap is down to Rs 102.5 crore.''

Companies like Pentamedia Graphics, Sonata Software, Aztec and Mascot too have favourable market cap-to-reserves ratios, said analysts.

``Many of us are certainly looking at buying back our own shares from the market once we make an internal decision. Our stocks are being hammered too much on the markets. But we'll wait and watch to see if these levels remain. People must not think we ar e buying at low levels, only to sell our own stock later, even though we might only be buying within legal limits,'' said the CEO of a software company whose stock fell over 30 per cent in the last one week.

He said software companies were also waiting to find out whether talk of any changes to the five per cent limit in creeping acquisition actually come about.