Despite objections from a Morgan Stanley-advised investment fund, Indian software house Pentafour Software and Exports Ltd is pressing ahead with plans to raise $60m through the issuance of American depository receipts (ADRs) and global depository receipts (GDRs). The Pentafour board has, however, passed the resolution to go ahead despite the warning. It plans to acquire software and multimedia firms in the US, Europe and Asia.
Pentafour has been growing rapidly in the past year, building on demand for its expertise in cinematic computer animation and education and training products. In the year ended March 31, the company saw revenue jump 85% to $122.3m and net income climb 72.5% to $27.6m. The firm’s strong performance in fiscal 1999 has generated considerable interest on local bourses, and has prompted it to look overseas to raise capital.
Any new funds will contribute to the company’s planned construction of a $10m CD-ROM plant in Dubai, with an annual production capacity of 12 million CD-ROMs. They will also go towards financing mergers and acquisitions, joint ventures and strategic alliances, both abroad and in India.
Last year, film animation accounted for 55% of revenue and is set to contribute 70% within three years, according to company chairman, V Chandrasekaran. The market potential in entertainment is huge, he said, citing surveys that suggest the world market for animation and special effects will climb to $40bn in three years from about $16bn today.
Pentafour has recently signed a deal to make animation films for Stan Lee – the
creator of comic book characters Spiderman and The Incredible Hulk – and has also completed work on the 3D-animation movie Sindbad – Beyond the Veil of Mists with US-based Improvision Inc. A sequel is already in production.
Pentafour also has an alliance with New Media Venture Partners Inc of the US, for whom it is producing a series of four computer-animated films over the next two years. Each film is expected to contribute between $10m and $15m to Pentafour’s top line.
Education and training is the other booming business for Pentafour, accounting for 41% of revenues last year, up from 25% percent a year earlier. The firm has 77 training centers in India and trained 30,000 people in the last 18 months. It also has an alliance with IBM Corp to offer the company’s e-business courses in eight Indian cities.