The Offering ( can be change at last moment, subject to demand )

Common stock offered :-  4,400,000 shares common stock par value $0.01

Common stock outstanding after this offering :-  22,826,867 shares of common stock par value $0.01

Offer price range :- $14.00 and $16.00 per share

Valuations

This section contains the final estimate about company's valuations

For details about Business/outlook check Business Overview, For offer/objects of issue check Offer/Objects.

"Virtusa" is a information technology service company and uses an offshore delivery model to provide services like IT consulting, technology implementation and application outsourcing. At March 31, 2007 company had 3576 employees.

Company provides IT services primarily to following industries;

• Communication and technology

• BFSI (Bank, financial services and insurance)

• Media and information

Its clients includes;

• Aetna life insurance company

• BT

• ING North America Insurance company

• International Business Machines corporation

• JPMorgan Chase Bank and many more

Its competitors mainly includes;

• Other offshore IT services providers like HCL technologies, Infosys etc

• In-house IT departments.

Revenue

Company drive its revenue form variety services like IT consulting, technology implementation and application outsourcing. It provide services on both time and material and fixed price basis. Revenue from fixed-price contract accounted for 14% of revenue in FY 2007.

Company works with onsite-to-offshore service mix, in which one team interact directly with the client at clients location (USA ,UK etc) to know its needs, problems, requirements and gives necessary input to offshore team which in turn develop and deliver required solution/service from an offshore location (India etc). 

• In last two years company services mix of onsite Vs offshore stand at nearly 17% on site, rest offshore. 

• Revenue from onsite - offshore resources stand at 40% and 60% in FY 2007 and 47% and 53% in FY 2006.

• Its top ten clients account for its 72% of business in FY 2007

• Repeat business consist nearly 97% of companies revenue and shows the high level of satisfaction among customers.

• BT its largest client accounted for its 23% revenue in FY 2007.

Net revenues attributable to geographic regions based on location the customer

Business/Company Outlook

Off shoring of IT services is expected to continue not only because of cost advantage but mainly due to availability of required skills and quality of services.

Growth of company depends on growth of industries or verticals to which company provides its services and also on management capability to, 

• Find new verticals/industries to serve.

• Attract and retain talent.

• Attracting new customers

• Expanding existing relationships etc

Main concerns about company's future is adverse currency movements and any slowdown in costumer industries.

Financials  ($ in Thousand)

Company's financial year ends on March 31.

Company revenues has shown significant growth, from $24 million in FY 2003 to $124 million in FY2007.Also during this period company turn around and shows a operating profit of nearly $14 million in FY 2007 from a operating loss of $2.4 million in FY 2003.

Company's balance sheet is healthy and will strengthen further if this offering got through.

Cash Vs Market cap

Before this offering company has nearly $44 million of cash in books and if this offering got settle at $14 per share company will get additional cash amounted to nearly $50 million.

That leaves company with nearly $94 million of cash and almost no debt after offering and nearly $319 million of market cap if issue settled at $14 per share.

Valuation/Offer value  

At offer price of $15 per share company shares are available at current PE of nearly 25 (taking operating profit as base) which is reasonable due to following factors;

• Growth which company has shown in past.

• Highly impressive clientele.

• Healthy balance sheet.

We rate this IPO 2+ on scale of "1 to 5" (5 for best)

Negatives

• High dependence on few client.

• Dollar has shown steep decline against other currencies. Due to geographical mix of company's business this decline can hit company hard.

• Competition is rising.

• Due to high number of employees in IT industry the dilution of equity capital due to employ stock options plan is much higher in IT industry than in other industries.

Positives

• Long-term contract with BT signed in March 2007.

• Global presence

• High growth in past

• Global delivery model.

• Healthy balance sheet.

• Cash in book is enough for company to consider a big acquisition.

• Strong balance sheet will also help company to easily pass through any tough times for business that caused by global slow down, adverse currency movements, loss of any big client.

• Funds raised from this offering will be utilize by the company as against other recent offering which just gives exit route to existing owners of the company.

This article reflects personal view of the author about the company and one must read offer prospectus and consult its financial adviser before making any investment decision