Silverline is back on track, says chief

Feels restructuring has paid off

MUMBAI: Ravi Subramanian, chairman of Silverline Technologies, feels the market has vindicated the restructuring of his company.

On its relisting on the Bombay Stock Exchange on Thursday, the company’s shares closed at Rs 160.50, more than 12 times its price on the day before the shares were suspended for trading due to the impending restructuring and relisting.

For every 100 shares held in the old company, shareholders were given 10 shares of the new company, and 4 shares of another entity, Silverline Animation Technologies, spun out from the old one, and to be listed separately.

“The value of 100 shares in the company’s earlier avtar would have fetched investors around Rs 1,300. Now, the 10 shares given in lieu of the older 100 shares would fetch approximately Rs 1600,” says Subramanian.

While investors may still view this much-maligned company with a suspicious eye, Subramanian is confident that Silverline is on a comeback path.

Silverline got listed on the BSE in 1992. During the technology boom, it was considered among the big boys of Indian IT, its shares having touched a record high of Rs 1,395 in February 2000.

However, some imprudent moves from Subramanian in 2000 saw the beginning of the fall of Silverline. In his own words, his “overambitious nature”, had him make five all-cash overseas acquisitions worth approximately $150 million. But the technology meltdown of 2000-2001 and the terrorist attack on the World Trade Center in New York thereafter, snowballed on Silverline, with the company having to down its shutters. Incidentally, SeraNova, one of the companies that Silverline took over had an office at World Trade Center. Severance pays for six months to the employees of this company also sounded the death knell on Silverline.

“We were bleeding almost $3-4 million a month at that time, and were left with no option but to shut shop and lay off employees,” says Subramanian. In its heydays, Silverline had approximately 3,200 employees.

For the next three years, this company, though it remained listed on the BSE, did not report annual results. It was a notice from BSE to the promoters, to delist the shares of the company, that got Subramanian on his feet again.

“I had two choices: either to start a new company or revive the old one. If I chose the former, I would be viewed as the founder of a lost enterprise. So I chose the latter route, and here I am, leveraging all that I can to put into this restructured enterprise,” said Sugramanian.

So his second coming, injecting around Rs 150 crore into the refurbished company, looks more like a desire to prove a point.

“In India, if a company fails, its promoter is deemed to be a crook. People fail to take into account unfavourable market forces and destiny contributing to the failure of a company,” he laments. For the record, Silverline also has the dubious distinction of being a part of K-10, the 10 stocks that market scamster Ketan Parekh had played in and artificially pushed up in 2000.

So how did Subramanian clear all his debts? “I sold off my properties in Thane, Hyderabad and Chennai, which fetched me around Rs 70 crore, and I used to retire debts,” says Subramanian. And the fresh capital infusion has been made possible through funding from some US investors, and Montblanc Investment Corp from Canada.

And how does he hope to change investor perception of Silverline? “We turned around last year, reported a profit again this year, and hope to have Rs 500 crore in revenues and Rs 60 crore in profit for the year ending June 2008,” said Subramanian. He indeed needs to deliver on these targets if investors are to get comfortable with his company again. Otherwise, Thursday’s price of Rs 160, at a price to earnings ratio (P/E) of 30, will look more like an aberration. If IT’s bellwether, Infosys, trades at a trailing P/E of 22, then there’s no reason why Silverline should trade at 30.

sanat_vallikappen@dnaindia.net