3i Infotech - Small Cap Stock To Buy From IT Sector

3i Infotech (3i) started off in 1999 as a back-office service provider for the ICICI Group.

Now, 3i is a software products, technology and transaction services provider, primarily to the BFSI segment. It has a client-base of 1,500 customers spread across the globe, especially in North America, which contributes 50 per cent to its total revenue.

Over the past 5 years, 3i has increased its revenue from Rs 292 crore to Rs 2,305 crore, while its profits jumped from Rs 32 crore to Rs 266 crore. It has been able to grow in both organic and inorganic way. The result is that it now has a high debt-equity ratio of 2.1. To service this, it issued qualified institutional placement (QIP) of Rs 317.8 crore in September.

3i posted a 4.8 per cent QoQ growth (4.1% YoY) in its 2QFY10 top-line, but high interest costs, depreciation and higher operating costs affected the bottom-line. Profits stood at Rs 52.9 crore, down 9.1 per cent QoQ.

Market Cap 1,471.32
* EPS (TTM) 9.35
* P/E 9.34
P/C 7.17
* Book Value 40.63
* Price/Book 2.15
Div(%) 19.61
Div Yield(%) 2.24
Market Lot 1.00
Face Value 10.00
Industry P/E 23.42

Institutional investors have also shown their faith in the company by increasing their shareholding from 24.11 per cent in March, 2009 to 39.14 per cent till September, 2009. The funds’ interest in the company has also gone up from just 17 funds at the end of May, 2009 to 24 at the end of October, 2009.

The strong institutional interest in the recent months has also boosted its stock price, currently trading at a 49.47 per cent higher P/E than its own 3-year median P/E. But there is potential for upside in the stock since it is still off its peak value.

Go back to Small Cap Stock List For 2010