Value Investing and The Indian Equity Markets

Visualsoft Technologies Ltd. made a press release on the 17th of March, 2006 stating that - they are no longer going ahead with the amalgamation of the two other pvt companies with Visualsoft Technologies Ltd. Another relevant info in the same news item was - Mr. Sashi Reddy has resigned as the CEO of the company.

The charting below shows the performance of the stock.

The stock price has taken a serious dent from it's Jan4th levels of 260 rupees and is today almost 50% below that price. Notice the strong volume of 1.75 million on 17th March 2006 because of the news that the amalgamation has been aborted and the resignation of the CEO of the company. On that day, the stock fell from 162 rupees to 138 rupees.

Financially, the specs of the company are enclosed -

Share capital - 19.98 crs
Loans - 0.00 crs
Investments - 0.00 crs
Net current assets - 154.10 crs
FV - 10 rupees per share
Dividend - 2.50 rupees per share
CMP - 138.65 rupees per share (17-Mar)
LY profit - 28.34 crs

Lets make some inferences from this -
1. NCAV for Visualsoft Technologies is a fantastic 77.13 rupees/share (the CMP less than 2x of the NCAV)
2. Cash with the company is 54 crores i.e. 27.02 rupees of cash per share
3. Zero debt company (cash rich - zero debt is a lethal combination !!!)
4. Dividend yield would come to 1.79%.

Now the problem areas -
1. While sales in Q1 and Q2 increased by 14% and 15% respectively over last yr, the Q3 sales actually dropped by a huge 41% over last yr
2. Profits for Q1 fell by 24% over last yr, for Q2 fell by 6% over last yr and for Q3 fell by 41% over last yr
3. Estimated profit for the year is only 19 crores for the company which means a P/E of 14.72. (a P/E of 14 is available with other peers aswell who although donot have this fantastic NCAV that Visualsoft holds, but have more stable earnings)
4. The profits are well below my 10 crs per quarter rule.
5. and ... I have the slightest idea how the stock will behave over the next 3 days.

Mar-17 saw huge volumes on this counter and massive decline. March 20th can be a make or break. Amazingly, this is the same company which was listed in Forbes as one of the Top 200 Small Companies in the world.

Questions for you -
a) Is Visualsoft under / fairly / overpriced at rupees 138.65?
b) Will Visualsoft go further down in price over the next week or so? If yes, how much? If not, why not?
c) Is there some appreciation to be seen in the price of the stock over the next 3 months / 1 year from today?

An additional question - investing in which stock is preferable ... a Visualsoft which has a great NCAV but sparse earnings record or an NIIT Technologies which has no NCAV but a consistent and growing earnings record?