ABM Knowledgeware: Indian Equities

ABM Knowledgeware: Indian Equities
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ABM Knowledgeware: Indian Equities
ABM Knowledgeware executes IT projects primarily for state governments.
It primarily executes e-governance projects, which enjoys a virtuous circle when government departments see the results of successful implementation with their peers.  The company is currently operating in Maharashtra but plans to expand to other states.
The company reported consistent growth in revenues and operating profits in the last five years – reporting over 20cr of operating profits on over 90cr of revenues in the last twelve months.  It operated with a net cash balance of just under 15cr as at 31st March, 2012.
The primary risk facing the business is government apathy and/or spending cuts, which curtails projects and reduces revenues.
The business also faces substantial risks in technology obsolescence in meeting client objectives, and acquiring and retaining skilled manpower at reasonable costs.
Other risks include execution difficulties (leading to cost overruns), lack of citizen awareness (leading to lesser future projects), minimal of electricity, telephone and internet access for many citizens, lack of coordination/inefficiencies among various government departments (increasing execution costs), inflationary cost increases, etc.
The company reported about 25cr in “long-term loans and advances”, which appear to be capital work-in-progress.  However, management haven’t provided details on this item, which is somewhat surprising considering that it sticks out like a sore thumb from the balance sheet.
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