Questions over ambitious Rs. 150 m investment move by eChannelling

Monday, 8 August 2011 00:02 - - {{hitsCtrl.values.hits}}

THE decision by eChanneling Plc Board last week to invest Rs. 150 million in subsidiary ECL Soft Ltd., has raised many eyebrows as being ambitious given the parent’s own meager performance and asset base.

At a meeting eChannelling Board had had resolved to invest Rs. 150 million (as ordinary voting shares) in its group company ECL Soft (Private) Limited. The Company said the increase in capitalisation was required since it was expanding rapidly and would need funds for several projects and strategic investments including Leisure; Consultancy and Training; Media and Advertising; Financial Services; Global network of the ECL Group and Business Process Outsourcing.

Whilst the move is subject to shareholder approval, analysts have questioned its viability in addition to the rationale for diversifying into leisure.

The planned investment is almost double the equity of eChanneling which was Rs. 78.5 million as at 31 March, 2011 whilst its assets were Rs. 119 million.

EChannelling’s audited accounts for financial year ended 31 March, 2011 as well as 2011/12 first quarter are still pending whilst as per interim accounts, it had made a profit of Rs. 8.3 million in 2010/11, up from Rs. 1.8 million in the previous year. The bottom line had been boosted by other operating income of Rs. 7.7 million. Revenue was Rs. 61.5 million, up from Rs. 52.1 million. Profit from operating activities was only Rs. 2.3 million, as against a loss of Rs. 5.2 million.

In 2009/10 Annual Report auditors raised the issue of eChannelling’s net assets (Rs. 94.4 million) being less than half of its stated capital (Rs. 187.5 million). In October 2010, the eChannelling Board in a bid to recoup accumulated losses resolved to reduce the stated capital by Rs. 93.7 million.

eChannelling last week closed up 20 cents to Rs. 6.60 with 34.4 million shares traded for Rs. 240 million.