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8/8/2019 Rolta Mata Securities
1/18
Rolta India Ltd.
February.02 , 2009
Mata Securities India Pvt. Ltd. 1
MappingGrowth.. Outperformer
CMP :Rs. 89
Target
:Rs.
175
Rolta is a leading IT services player in three major business segments:
GeospatialServices,
Engineering
Design
and
eConsulting.
It
provides
integrated solutions for mapping, mechanical designing and ERPs for
defense,government,infrastructureandutilitiessector. Ithastiedupwith
globalgiantslikeThales,Stone&WebsterandCAforvarioustechnological
allianceandoffshoringcontracts.
INVESTMENTRATIONALE
MarketData52W(H/L) Rs.300/42
Market.Cap Rs.1376cr
FreeFloat 60%
PE(x) 4.7x
Avg.vol
(3M)
35
lakh
DifferentiatedBusinessModel
Business Leadership: Rolta is a leading solution provider inGIS and
Engineering Designbusiness in domesticmarkets. It has amarket
shareof70%&85%inGISandEDAbusiness,respectively.
Large
Order
Positions:
It
has
a
large
order
book
of
Rs.1,571cr
to
be
executed in next 12months and sufficiently large order pipeline of
Rs.4,000crspreadacrossvarioussegmentsensuringgrowthvisibility.
Vastofferings: Thecompanyhasawiderangeofproductsandservices
forDefenseandInfrastructureverticals. Ithastransformeditselffrom
beingaserviceprovidertointegratedsolutionsprovider.
RobustFinancialPerformance: Ithas registereda toplinegrowthof36%
CAGR during FY200508 on account of robust demand in defense
sectorandinfrastructureoffshoring.
Technological Edge: The company offers high end services in all its
businesssegment. Ithasatechnologicaledgepoweredbyitslargerich
depository
of
IPRs,
highly
skilled
&
experienced
manpower
and
domainexpertise.
Large Clientele: It has a monopolistic market share in GIS and
Infrastructuredesignbusiness. ItseliteclienteleincludeslikesofIndian
Defense, Reliance, British Telecom, ONGC, Saudi Telecom, Dubai
Municipality,CAandothers.
GrowthDrivers
AnalystRahulJain
912222616835
Head Research
RaviGupta
912265208816
StabilityofDefense&SecuritySegment: Increasedbudgetallocationfor
Defense (C4iSTAR) andHomeland Security in the current five year
planwouldensuresustainedgrowthinthedefensevertical.
GrowthinPower&Energysector : Largeinvestmentsannouncedinthe
powerand
energy
sector
(both
public
&
private)
would
create
robust
demandforplantdesignandplanningbusiness.
StrategicAlliances: ThebiggestUSPofthecompanyisitsallianceswith
globalgiants likeThalesandStone&Websterwhichwoulddrive its
growthinthecomingtime.
RecentAcquisitions: Series of acquisitions (WHC& Piocon) in the e
consulting space have strengthened its domain expertise inbusiness
intelligenceandisexpectedtodrivethegrowthmomentum.
8/8/2019 Rolta Mata Securities
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Rolta India Ltd.
February.02 , 2009
Mata Securities India Pvt. Ltd. 2
FINANCIALPROJECTIONS
FY08 FY09P FY10P FY11P
Totalincome(Rs.cr) 1072.2 1481.4 1851.8 2259.4
EBIDTA(Rs.cr) 390.2 501.6 624.1 733.9
PAT(Rs.cr)# 230.6 295.4 376.9 457.4
EBIDTAMargin(%) 36.4% 33.9% 33.7% 32.5%
PATMargin(%) 21.5% 19.9% 20.4% 20.2%
ROCE(%) 15.2% 18.3% 21.5% 22.5%
EPS(Rs.) 14.3 18.3 23.4 28.4
BPS(Rs.) 73.6 71.9 87.1 106.4
DPS(Rs.) 3.0 4.0 4.5 5.0
#PAT:proformaforMTMprovisionsforFCCBs
PRICEVALUATION&OUTLOOK
MataResearchexpectshighgrowth inpast to continueasensuredbyhigh
orderbookandstrongexecutionrecord. ITbudgetintheinfrastructureand
defense(keyverticalsforthecompany)sectorarecompulsiveinnatureand
areinsulatedfromanyeconomicslowdowns.
Furthermore,thecompanysrichIPRsdepository,strongstrategicalliances
andspecializeddomainexpertisewouldhelpittomaintainitshighmargins
andwouldgiveitanedgeoveritspeers. Goingforward,largeorderbook,
IPled products and uniquebusinessmodel infrastructure design& IT
wouldensurestrongearningsvisibility;makingthegrowthprospectsofthe
companyquiteattractive.
Valuation: Thevaluationof the companys stock isdrivenby stabilityof
segments catered, expertise of the company,dominantmarket shares and
client relationships are reflected in the high proportion of the repeat
businessinthetotalincome.
Our target price for the stock is Rs.175,based on the relative valuation
method,discountingFY10EEPSofRs.23.43at7.5x. Currently,itistrading
onaneconomicalPERof4.8xonits12MtrailingEPSofRs.18.21. Thestock
wasspeculativelybeaten in themarketbasedonrumorsofpromoterspledging its
shares,whichwasvehementlyrefuted/deniedbythepromotersonelectronicmedia.
Thestockrecoveredsubstantiallyfromsuchlow,butscareremained.
Recommendation: MataResearch initiates itscoverageonRolta Indiawith
an Outperformer rating on the stockwith a target price ofRs.175 (96%
Upside)with12monthinvestmenthorizon.
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 3
COMPANYPROFILE
LeadingplayerinGIS&EDA
Worldwidebusinesspresence
55%revenuefromdomestic
business
RoltaIndia
is
the
leading
IT
service
provider
and
developer
of
digital
mapbasedGeospatial services (GIS) fordefence, securityandutilities
sector. The company also specializes in providing ITengineering
services (EDA) for infrastructure companies. It also offers series of
customizedsolutionlikeCRM,BusinessIntelligenceandDataMiningas
anintegratedsolutiontoitsclients.
Rolta has established long term strategicbusiness alliancewithmany
globalgiantstoenhanceitscorecompetency. Itderivesabout55%ofits
revenue from domestic markets. Government (Defence), Municipal
Corporations,Oil&Gas,EngineeringandPowerutilitiesareitstargeted
verticals. Thecompanyaddressedinmorethan40countriesworldwide
aidedbyitsinternationalsubsidiaries(10).
MANAGEMENT:Vibrant&Innovative
Largehighskilledtechnical
workforce
Rolta India is Mumbai based midsize IT company promoted by
Technocrat Mr. Kamal Singh. Mr. Singh is a first generation
entrepreneur and has pioneered CAD/CAM/GIS services offerings in
domesticmarket. Over theyears, the companyhas transformedfrom
beingaserviceprovidertoanIntegratedSolutionsProvider.
It has amature and stable team of over 5000 professional. It also
managesRoltaacademywhichtrainsitsmanpowerinhouseandhelpit
todevelopspecializedskillsetandlowersattritionrate.
SHARE
HOLDING
PATTERN
(as
on
Dec
31,
2008)
Promoters,
40.3%
FII's, 35.3%
DFI's, 2.9%
Public, 16.6%Others, 5.0%
FIIincreasingtheirstakeinthe
company.
Totalshareequitycapitalofthecompanyis160.8cr,withafacevalueof
Rs.10pershare. Thepromotersholdsabout40%stakesinthecompany.
FIIshasbeen continuously increasing their stake in the company and
holdabout35.3%(asagainst23%ason31Dec2006). Equitycapitalis
expectedtofurtherdilutepostconversionofFCCBsdueinFY12. Total
equity would expand by 14.18% and outstanding number of shares
wouldincreaseto18.34cr(currently16.08cr).
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 4
BUSINESSANALYSIS
Crossbusinesssynergyexist
Rolta is themarket leader inGIS and EDA segment forwell over a
decade.It
has
garnered
large
market
share
in
the
domestic
market
and
has undisputed leadership in the defense and homeland security
verticals. It has auniquebusinessmodel as it offers niche and high
valueaddedservices inthegeospatialandengineeringdesignspaceto
largeplayersintheOil&Gas,InfrastructureandDefencesectors.
ThethreemajorbusinesslinesGIS,EDAandeConsultinghavelarge
crosssynergyandofferunifiedrelevancetoitstargetedclients. Itslarge
varietyofhigh skilledexpertise inmappinganddesigninggives itan
edgeover itspeers. MataResearchexpectsthegrowthtoberobustin
comingyearsdrivenbygrowthofindividualbusinesssegmentandalso
fromopportunitiesemergedfromcombinedsolutionoffering.
GROWTHSTRATEGY
Focuses on high growth (Infrastructure) and stable (Defense)
verticals.
ContinuedfocusonIndian(toservegrowingdemand)market.
Offercomprehensiveanduniquesolutionsinthecateredsegmentsto
reducecompetition.
Maintainingitsedgebydeveloping/acquiringtechnologies.
Inhousetrainingtooptimizehighdomainexpertise.
Acquiringbusinesses toexpandgeographicallyand tomoveup the
valuechain.
REVENUEMIX
RevenuebyGeography RevenueDistribution(New/Repeat)
60% 59% 55%
14% 18%14%
26% 23% 31%
0%
20%
40%
60%
80%
100%
FY06 FY07 FY08
India Europe/ME/Others North America
33% 30% 33%
67% 70% 67%
0%
20%
40%
60%
80%
100%
FY06 FY07 FY08
New Projects Repeat Orders
LargedomesticmarketexposureGeographicalMix: Roltahaslargedomesticrevenuesbasewhichreduces
its currency risk, inaddition to lesserexposure toglobalslowdown in
terms of business growth. The contribution from N. America has
increased in recentyearsonaccountof coupleofacquisition in theE
Consultingspace. Ithasbeenabletoincreaseitsmarketshareoverseas
despitetoughcompetitionfromglobalgiantslikeESRI&Fugro.
High proportion of repeat order
businessProjectDistribution: About twothird of the revenues accrue from the
repeat orders from the existing clients. Repeat orders are in form of
8/8/2019 Rolta Mata Securities
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 5
projects,maintenance,upgradesandupdates toexisting clients. High
proportionofrepeatbusinessprovidesvisibilityforrevenues,highlights
thelonglastingassociationwiththeclientsandreflectsthehighquality
ofproducts
and
services
the
company
offers.
SegmentalContribution
The companys revenue can be broadly classified into three main
businessstreams:
a)GIS b)EDA c)EICT
SalesMixFY08 OperatingProfitMixFY08
GIS, 49%
EDA, 32%
EICT, 18%
GIS
54%EDA
35%
EICT
11%
a) GeospatialInformationServicesorGIS:
Expertisetoexecutelarge
projects
RoltaisoneoftheleadingproviderofmapbasedGISservicesand
Photogrammetry solutions provider to the defense, security,
utilities and infrastructure sectors. It has executed largeprojects
like
creating
digital
networks
for
telecom,
power,
gas
and
utilities
companies. Ithasuseditshighendtechnologytofacilitatecarrying
out townplanningandcitymodeling. Thecompanyhasahighly
skilledmanpower of 2,236professionalsworking onGISprojects
spread over 25 countries. It is well placed for deployment,
customization, integrationandproviding lifecycle supportacross
theremotestoflocationsinIndia.
Rolta has acquired technology through longstanding strategic
alliances with global leaders in the GIS business (Intergraph,
Thales). These alliances enables it for ready technical pre
qualification tobid for large projects and request for proposals.
These alliances, efficient operational resources and high
technologicalstrength
have
helped
the
company
to
bag
multi
milliondollarprojectsfromacrosstheglobe.
Marketshareofover70%in
GIS
Rolta ismarket leader inGISspace in thedomesticmarketwitha
marketshareofover70% (orderbookpositionofRs.689.2cr tobe
executed in 1215months). Theblendedbilling rate ($20.9 per
hour) in the segment is increasingwith increasing proportion of
high end services. It enjoys highEBIDTAmargins of 40%, as it
providesendtoendintegratedsolutions(GeoSpatialFusion).
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 6
Expertisetoexecutelargeprojects
b) EngineeringDesignandAutomation(EDAorEDS):
Rolta provides Design Automation Services to various sectors
suchas
Power,
Oil
&
Gas
and
Petrochemical
sectors.
It
has
emergedasadominantplayerwithamarketshareofover85%in
India. Ithas strengthofprovidinghighendengineering services
under its concept to completion model. Services include
CAD/CAM/PDAprocessestodesignplants.
ThecompanyhasjoinedhandwithglobalgiantStone&Webster
(S&WL) Inc,USA tomoveup thevalue chain in the engineering
designtechnology. EvenlyheldJVwithS&WLhasgivencompany
access to latters technological experienceof 115years,numerous
patentsandgatewaytonuclearpowersector.
OrderbookofaboveRs.500crIt has executed prestigious projects for its global clients and has
large
orders
worth
Rs.507cr
in
its
kitty.
It
has
large
opportunities
as
many companies (private & government) has announced major
expansion plans in refinery, power, nuclear and telecom sectors.
Typically,plantdesign (engineering) costsapproximately35%of
totalprojectcost. Consideringthelargeproposedinvestments,technical
allianceandleadershipposition,thecompanyisexpectedtomaintainthe
growthmomentuminthesegment.
AlliancewithComputerAssociates
DevelopedexpertiseinERP&
BusinessAnalyticswithrecurrent
acquisitions
c) EnterpriseInformation&CommunicationsTechnology:
Rolta provides esecurity implementation services, rapid
application development and business analytics solutions to its
customersworldwide. The companyhas analliancewith a firm
ComputerAssociates
(CA)
atechnology
leader
in
network
security
domain. The company has evolved from a mere support &
maintenanceenablertofullfledgednetworksecurityservicegroup.
Thecompanyhasstrengtheneditspositioninthesegmentthrough
recurrent acquisitions toboost technical expertise, readybusiness
and larger geographical foothold. Post the acquisition of these
consulting companies (Orion,Broech,WhittmanHart andPiocon
Technology),Thecompanyhasaddedmanytechnicaltoolssuchas
Multipointdataaccess,dataminingandbusinessintelligencetoits
widespectrumofservices/solutionsofferings.
Highbillingrateof$115permanly
hours.
Thesegmentcontribution in total revenuehas increased in recent
years
and
has
reached
18%
(as
against
5%
in
FY05)
at
Rs.193cr
as
on
yearendingJun08. Itisfocusingonhighendconsultingandearns
high billing revenues of $115 per manly hours. Mata Research
expectsgoingforward,thecompanyisexpectedtosustainupbeatgrowth
in the segment due to increased geographical & technical positions,
positive industry dynamics for infrastructure outsourcing and inter
segmentalsynergy.
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 7
COMPANYGROUPSTRUCTURE(Subsidiaries)
STRATEGICALLIANCES&JOINTVENTURE
Roltasbiggestattribute tosuccess itsability topartner (alliances)with
key global players in various domains, thus offering it with ready
market and technology. The company enters a perpetual exclusive
allianceforselectiveservicesandtargetmarkets.
JVwith
global
giant
Stone
&
Webster
Stone & Webster (JV 50:50): The equally held Joint Venture has
executed projects for petroleum & refineries and is providing
engineeringdesign
services
for
global
projects
(infrastructure
offshoring)ofShawGroup.
Stone&Webster isapartofShawgroupwith115+yearexperience in
EngineeringDesignandhasexpertiseinsettingupNuclearpowerplant
projects. TheJVhasempoweredRoltawithcrucialprocesstechnology
knowhowandhasexecutedprojectsforReliance,Essar,IPCLandIOC
inIndia.
RoltaThales(JV51:49): ThecompanyhasJVwithFrenchdefenceand
aerospace leaderThales. JVwithThaleswouldprovidetechnologyfor
developing state of the art C4ISTAR information system to service
Indian and international civil&militarydefence operations. Rolta is
leadingsolution
provider
to
Indian
defense
sector
and
expects
large
uptickintherevenuecontributionfromthisventure.
AgreementwithCAfordata
security&networkmanagement
CA (ComputerAssociates): Rolta India has entered into a definitive
agreementwithCAtoprovideonsite&offsiteresourcestoservice full
spectrumoflattersdatasecurityandnetworkmanagement.
Integraph: Rolta has established long term strategic business
partnership with Integraph to obtain core technology in high end
mapping andGIS solutions. The company has a perpetual exclusive
Rolta
SaudiArab
(75%)
Rolta
MiddleEast
(UAE100%)
RoltaInternational
(USA100%)
Rolta
Canada
100%
Rolta
Thales
(51%)
Orion
Tech
100%
RoltaUKLtd.
(UK100%)
ROLTA INDIA
RoltaAsia
Pacific
100%
TUSC
(100%) Benelux
Netherlands
100%
Deutchland
(100%)
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 8
partnershipcontractwithIntegraphinIndia.
RECENTACQUISITIONS
Acquiredcompaniesto
strengthenitseConsulting
business.
Ithasastrategytoacquirecompanieshavingasynergywithitslineof
businesstomoveupthevaluechain. Itfocusesontargetswithcutting
edgeIPRs,establishedtrackrecord,anddomainexpertise. Somerecent
acquisitionsbythecompanyare:
OrionTechnology(July07): ItisaCanadabasedcompanyspecializing
in enterprise web GIS solutions. The acquisition helped Rolta to
distinctivelypositionitselfinspatialintegrationandconsulting.
Broech (TUSC) (Jan08): US based company engaged in highend
consulting for ERP applications, FusionMiddlewarebased onOracle
Applications. Acquisition has facilitated Rolta with data mining,
visualization
and
intant
SOA
capabilities.
WhittmanHartConsulting (July08): BygettingholdonWHC,Rolta
haspositioneditselfstrategicallyinthehighendbusinessconsulting.
PioconTechnology(Dec08): ThisUSbasedcompanyaddressescritical
operationalneedsofOil&Gasrefineries. Roltahasgainedasignificant
clientbase,highskilledworkforce,uniquemethodologiesandprofitable
revenuestream.
STRONGORDERBOOKPOSITION
Orderpipeline
of
over
Rs.40billion.
Rolta haswidened its spectrum of offeringby partnering the global
giants (to get access of technology) and acquiring companies in the
overseasmarkets. The companyhasbeen successfullyaddingup its
orderpipelinedespitehighsalesgrowth recorded inpast threeyears.
Its total order pipeline is approx.Rs.40billion tobe executed in next
fouryears.
9811106
13881514
1571
404447
570
292367
150
400
650
900
1150
1400
1650
Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09
Rs.
inCr
Order Book New orders during the Qtr
Currentorderpositionensures
toplinegrowthof40%CAGR
overFY0810
The runrate for fresh order intake has slowed down in last two
quarters. But the total orderbookposition ofRs.1571cr ensures fair
earningvisibilityandagrowthofabout32%CAGRoverFY08FY10.
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 9
PRODUCTSOFFERING
Segment Vertical Product/Service/Solution
Infrastructure Geospatial/GISConsulting
Telecom HomelandSecurity&Communications
Government HighendPhotogrammetry&Imaging
DefenseUtilities C4ISTAR
Geospatial/
GISLandscape
GeospatialFusion
ConceptualEngineering&Design
ProjectManagement&Procurement
ConstructionManagement
Operations&Maintenance
TechnologyServicesConsulting
Engineering&
DesignServices
Oil&Gas
Petrochemical
Refining
ConventionalPower
NuclearPower
RoltaSpecializedServicesforAsBuilt
RoltaeFusion
BusinessIntelligence
EnterpriseApplications ERP
DataSecurity&ServiceManagementEICT
Healthcare&Finance
Communication&
Utilities
Defense&Government
ConsultingServices
EnrichingBillingRates
Movingupthevaluechainand
hencerising
billing
rates
The company has consistently strengthened the competencies of its
professionals and quality of its intellectual property tomove up the
valuechain,toaddresschallengingneedsofcustomers.
Theincreased
focus
on
providing
end
to
end
solutions
and
deployment
ofhighendserviceshasaidedthecompanytoincreaseitsbillingrates.
Theblended averagebilling rates has increased in all threebusiness
segments.
EICTor eConsultingbusinesshas seen significantjump in thebilling
rateonaccountofintroductionoforaclebased,SOA(ServiceOriented
Architecture)andERPservicesbythecompany.
HourlyBillingRate EffortMix
19.9
115.5
19.519.4
24.1 27.522.2
85.484.9
10
30
50
70
90
110
FY 06 FY 07 FY 08
B
illing
R
ate
($
per
hou
r)
GIS EDA EICT
13% 14%21%
87% 86%79%
0%
20%
40%
60%
80%
100%
FY 06 FY 07 FY 08
Onsite Offsite
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 10
Higheronsitedeploymentof
employeestoimprovebillings
Thehighbillingratehasbeenachievedastheeffortmixofthecompany
has been favoring towards onsite deployment of employees. The
employeedeploymentonsitehasincreasedfrom13%inFY06to21%in
FY08.The
onsite
strength
has
increased
after
consolidating
with
its
acquisitionmadebyitsoverseassubsidiaries.
CLIENTPROFILE&CONCENTRATION
Lowclientconcentrationrisk
Highproportionof repeatbusiness
The company has been serving large Industrial Corporations and
Government Bodies across the globe. The company has extensive
relationshipsfromitsclientsasreflectedfromhighproportionofrepeat
businessorders(67%)intotalrevenues.
The companysbusiness is characterizedbyprojectbasedCapex and
annuitybased revenuemodel. It services its clients through its own
independent solutions/products aswell as in combinationwith third
partysolutions.
It
has
alow
client
concentration
risk
with
its
Top
5clients
andTop10clientscontributing22.1%and28.6%oftotalrevenuesearned.
21% 20%22%
27% 26%29%
0%
5%
10%
15%
20%
25%
30%
35%
FY 06 FY 07 FY 08
ShareinRevenues
Top 5 Clients Top 10 Clients
Followingarefewofthetopclientsindifferentbusinesssegments:
BUSINESSSEGMENT MAJORBUSINESSCLIENTS
GISAirportAuthorityIndia,BritishTelecom,BSNL,CESC,Civilaviation(Abu
Dhabi),FijiTelecom,GeorgioPower,IndianMinistryofDefense,Mumbai
Police,NationalGrid,ONGC,QatarWater,SaudiTelecom,Verizon.
EDA3M,ABB,AlsthomPower,BASF,Bayer,BHEL,Essar,ExxonMobil,HPCL,
L&T,Petrobras,Reliance,RollsRoyce,SaudiAramco,Shell,Siemens,Tata
Chemicals,Thermax,ToyoEngineering,Webasto,YorkInternational,etc.
ECITAmerican Express,Deloitte, Eurobank, Eximbank, Fujitsu,Hitachi,RBI,
SaudiElectricity, Schneider, SITA, State ofAlabama, Suntrust,TDBank,
TimeWarnerTelecom,UnitedAirlines,Vodafone,WalMartetc.
Source: Company
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INDUSTRYANALYSIS
Rolta India Ltd. largely serves four verticals viz. Defense (including
security),
Government,
Infrastructure
and
Others.
The
increased
spends
intheabovesectorhaswidenedtheIndustrysize.
GeoSpatialInformationServices
Defense sector forms major part (approx 12%) of the companys
revenues. Services in these sectors include digital mapping,
photogrammetry andC4ISTAR (ERP solution formilitary). With the
Government spend in the defense increasing at a brisk pace the
opportunities for service provider have increased significantly. IT
budgetsforms45%oftotalspendbyDefense(reached1trillionmarkin
2008). Roltabeing thepreferredvendor for IndianDefense is likely to
benefitfromincreasedfocusondefenseandhomelandsecurity.
Also,
National
Map
Policy
(2005)
has
opened
opportunities
by
allowing
access to National Topographic Database of the Survey of India to
promoteuseofgeospatialknowledgeand intelligence. Thepolicyhas
envisagedanideatoclassifytheOpenSeriesMap(OSM)toutilizethem
forthedevelopmentactivites(Townplanning&plantdesigning).
EngineeringServicesOutsourcing(ESO):NextLeapofSuccess
Year ESOOpportunity
2007 $4bn
2020 $50bn
Indiasskillinthesoftwareservicesoutsourcingspaceinanestablished
fact,butofflateIndiaisemergingasapotentialoutsourcingdestination
intheengineeringdesignsegment. IngeneralITInfrastructurespends
arecompulsiveinnatureandarelargelyservedonsitebutarecentstudy
conductedby Booz,Allen&Hamilton andNASSCOM has indicated
highpotential
for
Indian
Engineering
Outsourcing.
The
study
highlights the strength of developing countries like Indiawith huge
talent pool, availability of critical resources and that too in a cost
effectivemanner. ThestudyexpectsESOtogrowataCAGRof25%to
reach$50bnin2020from$4bninFY07(Source: BoozAllen&HamiltonandNASSCOM).
INFRASTRUCTUREBOOM
EngineeringDesignAutomationbusinesshashugepotentialasreflected
from huge capacity expansion in the Oil & Gas and Power Sector.
EngineeringDesign forms4 to5%of the totalproject cost. Thehuge
creationofinfrastructureplannedbyGovtineleventhplanwouldform
largedomestic
market
opportunity.
Refiningcapacitytogrowfrom146MMTPA(present)to212MMTPA
by2012.
Powergeneration capacity in India to increase from 115,000MW to
285,000MWby2016.
AdditionalopportunityinNuclearpower(40,000MWplanby2020).
Source: GovernmentofIndia.
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STRATEGICANALYSIS
In
the
current
challenging
environment
it
is
important
to
analyze
a
companyonSWOTbasis. Roltawith integratedbusinessmodel, large
orderbook, preferred vendor status, domain expertise and high end
technology&IPRarecapabletoovercometoughtimes.
4points Strength
LargeorderbookofRs.1567crandanorderpipelineofRs.4000cr.
PreferredVendor statuswith largeGovernment and Infrastructure
companies.
Technical Alliancewith global giants such as Thales and Stone &
Websterstoaddsignificantbiddingstrength.
Consolidation
with
the
acquired
companies
(TUSC,
Broech,
Piocon
&
WHC)hasaddedtodomainexpertise.
Highbillingratesensuringhighoperatingmargins.
4points Weakness
Low inhouse technology or over dependence on technological
alliances.
LargeexposuretoGovernmentsectorhasleadtohighdebtordays.
Lowannuityrevenuesintotalsales.
4points Opportunities
LargecapacityexpansionindomesticPowerandEnergysector.
Implementation of Nuclear power project in India holds huge
potential.
Deployment ofGeospatial eFusion (Sensor to shooter) solution in
DefensesectorwouldgivebigthrusttoGISsegment.
3points Threats
Increased competition from local and international players post
announcementofNationalMapPolicy.
Challenges to retain high skilled talent in a highly competitive
environment.
Technological
Obsolesce
as
achieving
and
sustaining
high
growth
dependsonabilitytoadoptemergingtechnologies.
AverageSWOTScore#:4points
#ScoringRangeis15(higherscoreisbetter)
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 13
FINANCIALPERFORMANCE
Rolta India is one of themost consistent performers in the Indian IT
spacewith
adifferentiated
business
model.
The
company
is
capitalizing
onitsmarketleadership,strongorderbookandnicheexpertise.
Mappinghighrevenuegrowth
Roltaisoperatinginthreebusinessverticalsandhasamarketleadership
inGIS (market share 70%) and Engineering designbusiness (market
share 85%). The company revenue grew at a CAGR of 36% during
FY04FY08. Thegrowthmomentumpickedup inrecentyearsasmost
ofitsJVandacquisitionshavestartedbearingthefruits.
ToplinetogrowataCAGRof
28%during
FY08
10.
ThecompanyisservingverticalslikeGovernment,Defense,Utilitiesand
Healthcarewhicharelesssensitivetoeconomicslowdownorslowdown
fears. It has high orderbook pipeline (Rs.40bn) to ensure a growth
visibilityof
28%
CAGR
over
next
three
years.
Thecompanyderiveslargechunkof itsrevenuefromdomesticmarket
(55%)wherethethrustoninfrastructureprojectswouldprovideenough
opportunities. Also, thecompanyhasnot receivedanycancellation in
order from itsmajor clients. Mata Research expects Roltas consulting
businesswouldactasafrontwheelofitsgrowthvehicleincomingyears.
415535
711
1072
1481
1852
2259
0
500
1000
1500
2000
2500
FY05 FY-06 FY-07 FY-08 FY09E FY10E FY11E
Sales(Rs.cr)
Marginstoremainhigh
OperatingMarginstostabilizein
3234%range
The company offers high value added solutions in the GIS and
EngineeringDesignsegment. Theoperatingmarginsinthesesegments
arehighat58%and39%,respectively. But,overallmarginshavebeen
dilutedwithdecrease in the contributionofGIS segment from62% in
FY06to
49%
in
FY08.
Also,
the
margins
in
the
consulting
business
are
lowdue to itshighemployeecostand largeonsiteexpenditure. Mata
Research expects increased utilization level, lower attrition level and
lowerhikeinemployeecostwouldhelpitsustainitsoperatingmargin.
NetProfitmarginwashighinarangeof21%to24%duringFY06FY08.
Going forward, we expect slower cash conversion and dilution in
revenuemixwouldslatedownitsprofitabilityby100150bps.
8/8/2019 Rolta Mata Securities
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 14
24.3%
21.5%20.4% 20.2%
41.1%
32.5%
21.7%19.9%
41.1%
33.7%33.9%36.4%
15%
20%
25%
30%
35%
40%
45%
FY06 FY07 FY08 FY09E FY10E FY11E
PAT Margin EBIDTA Margin
HighDebtorOutstandingDays
The high exposure in the Government vertical has resulted in high
debtoroutstandingdays. Thoughthedebtorcycleislong,thequalityof
receivable is high and secured. It has considerably improved its
receivabledaysfrom316daysinFY05to150daysinFY08. Thiswould
further improveonaccountof increasedproportionof consultingand
onsitebusiness.
Debtordaysimprovingatabrisk
pace.
Debtors Days
251
198
150141 136 127
0
50
100
150
200
250
300
FY06 FY07 FY08 FY09E FY10E FY11E
Adequateliquidityandlowgearingposition
OverallGearinglowat0.59x.
Thecompanyhasacomfortableliquidityasindicatedbyitscurrentratio
of2.78xasonJune30,2008. Ithas lowsolvencyriskasreflected in its
overall gearing of 0.59x as onMarch 31, 2008. The only debt in the
booksareunconvertedzerocouponFCCBsaggregatingRs.600crduefor
repayment in FY12. FCCBs are convertible at Rs.368 per share and
carryanaggregatepremiumof39%incaseonnonconversion.
The company has been following prudent accounting policy and is
providing foryearlypremiumasacontingencymeasure for theyields
onFCCBsasmightpayableat the timeof redemption in caseof their
nonconversion.
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 15
BoomingFirstHalf(H1FY09)
Robustfirsthalfgrowth
Thecompanyhascontinueditsrobustgrowthmomentuminfirsthalfof
currentfiscal
ending
Jun09.
Total
income
grew
by
53%
backed
by
huge
tractionaddedbyEICTsegment. EICToreConsultingbusinessgrewby
about 248% supported by series of acquisition and added business
expertiseintheERPdomain.
Business mix shifting towards
consultingbusiness
The business mix has been getting skewed in favour of booming
consultingbusiness,with itscontribution increased to27% in firsthalf
from 18% for FY08. Thebilling rate has improvedwith increasing
contribution of integrated solutionbased offering. The company has
been able to add up Rs.78cr in the order book apart from burning
Rs.708crinfirsthalf.
Theoperatingmarginshasdippeddue todilution in the revenuemix
andincreased
onsite
deployment.
It
has
charged
Rs.84.01cr
on
account
oftranslationlossesonFCCBsduetorupeedepreciation. Thecompany
has also expressed its interest tobuyback some portion of its FCCBs
(tradingatbigdiscount)byitsunutilizedcash&equivalentsofRs.252cr
ason31stDec.,08.
H1FY09 H1FY08 Growth
TotalIncome 708.1 462.7 53.0%
EBIDTA 244.5 176.7 38.3%
Depreciation 79.1 65.1 21.6%
PAT 84.4 114.0 (25.9)%
PAT(w/oexceptionalitem)# 168.1 114.0 47.4%
EBIDTAMargin 34.5% 38.2%
PATMargin 11.9% 24.6%
PATMargin(w/oexcpitem) 23.7% 24.6%
*figuresinRs.crunlessotherwisestated
#MTMlosses(translation)onreinstatementofFCCBliabilities
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 16
STOCKVALUATION&RECOMMENDATIONS
Rolta,with
its
acquisition
and
alliance
strategy,
has
been
widening
the
service offering and geographical reach & opportunities. It has
diversified business model and healthy client relationships. The
company has technological edge in its business domain and enjoys
leadershipstatuswithadominantmarketshare.
MataResearchexpectsfollowingfactorstodrivethegrowthprospectsof
thecompanyincomingquarters:
LiberalisedNationalMapPolicy.
GrowingdemandforGISintownplanningandutilities
management.
LargeopportunitiesinITInfrastructureOutsourcing.
Largecapacity
expansion
in
the
Power
&
Energy
sector.
Swellingdefensebudgets.
Increasedimportanceofhomelandsafety.
HugedemandforData&NetworkSecurity.
HugepotentialdemandinviewofCountrysNuclearPowerplans.
AddedarmorypostacquisitionofcompaniesineConsulting
segment.
Relativefairprice:Rs.175RelativeValuation: Thestock iscurrently tradingatacompellingPE
multipleof4.7xon its12M trailingEPSof18.21. OurTargetPriceof
Rs.175discounts7.5xonitsFY10EEPSofRs.23.43.
DCFtargetprice:Rs.220DCF
Valuation:
Based
on
the
DCF
methodology
the
fair
price
of
the
Stock is Rs.221. The high valuation is due to internally funding of
CAPEX, improving working capital position and strong earning
visibility.
InitiatingCoveragewithan
Outperformerrating.
Conservatively,MataResearchhasconsideredmoderategrowthandstable
marginsincomingquarters. MataResearchinitiatecoverageonRolta
IndiaLtd.withan Outperformerratingwithoneyear targetpriceof
Rs.175,withaninvestmentupsideof100%.
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 17
CONSOLIDATEDNUMBERSOperationalPerformance BalancesheetParticulars FY 05 FY 06 FY 07 FY08 YrEndingMar.31 FY 05 FY 06 FY 07 FY08
(Rs.cr)
Assets
(Rs.
cr)
NetSales 414.6 534.9 711.4 1072.2 FixedAssets 297.0 369.8 459.2 618.7
OtherIncome 2.1 2.8 0.0 0.0 Investments 6.3 0.0 112.4 97.6
TotalIncome 416.7 537.7 711.4 1072.2 NCA/NWC 387.0 273.1 379.7 948.0
CostofSales 262.5 316.8 419.0 682.0 CurrentAssets 489.5 398.9 512.8 1125.1
PBDILT 154.2 220.9 292.4 390.2 CurrentLiabilities 102.5 125.9 133.1 177.1
Depreciation 48.9 74.7 101.9 138.3 TotalCap.Empld 690.3 642.9 951.2 1664.3
PBILT 105.4 146.2 190.5 251.9 Liabilities
Financecharges 11.6 14.7 0.7 0.0 ShareCapital 63.7 63.7 79.9 80.1
Op.ProfitbfrTax 93.8 131.5 189.8 251.9 Reserves 391.8 392.9 861.5 966.5
Extraord.Items 4.2 -0.1 4.5 16.5 Miscexpw/o 0.0 0.0 0.0 0.0
PBT 98.0 131.4 194.3 268.5 NetWorth 455.4 456.6 941.4 1046.6
Less:Tax 8.6 14.7 21.7 38.8 TermLiabilities 234.9 186.3 9.8 617.7
PAT 89.4 116.7 172.6 229.7 TotalCap.Empld 690.3 642.9 951.2 1664.3
KeyRatios CashflowsParticulars FY 05 FY 06 FY 07 FY08 YrEndingMar.31 FY 05 FY 06 FY 07 FY08
ProfitAfterTax 89.4 116.7 172.6 230.6
GrowthinTotalInc. 17% 29% 32% 51% Depreciation 48.9 74.7 101.9 138.3
GrowthinPAT 43% 31% 48% 34% ChangeinWC 96.2 51.0 18.1 6.8
PBDITMargin 37.0% 41.1% 41.1% 36.4% Opg.CashFlow 234.5 140.4 256.5 362.1
PATMargin 21.5% 21.7% 24.3% 21.5% Inc/DecGro.Block 180.1 40.9 158.9 230.0
ROCE 17.2% 19.1% 15.4% 15.2% Inc/DecinCWIP 5.7 26.0 78.1 26.6
RONW 19.6% 16.7% 17.4% 20.7% Inc/DecinInv. 6.3 112.4 14.8 184.0
Gearing(x) 0.4 0.0 0.6 0.6 C.F.Investing 179.4 97.5 222.2 440.6
OverallGearing(x) 0.4 0.0 0.6 0.6 Dividendpaid 22.3 32.0 40.1 49.8
InterestCover(x) 910% 996% 2574% - TaxPayment 3.1 4.5 6.8 8.6
CurrentRatio(x) 3.2 3.9 6.1 2.8 Inc.inT.Liab. 48.6 176.5 607.9 76.1
Inc.inS.Capital 0.0 392.5 11.0 46.2
SalesPerShare* 65.4 67.3 88.8 66.6 C.F.Financing 74.0 179.6 550.1 28.5
EPS(Rs.)* 14.0 14.6 21.5 14.3 Op.CashBalance 50.8 33.1 88.7 639.0
DPS(Rs.)* 3.5 4.0 5.0 3.1 Cl..CashBalance 33.1 88.7 639.0 259.8
*BonusIssue1:1 (Rs.cr)
FinancialProjections
OperationalPerformance BalancesheetParticulars FY 08A FY09P FY10P FY11P YrEndingMar.31 FY 08A FY09P FY10P FY11P
(Rs.cr) Assets (Rs.cr)
NetSales 1072.2 1481.4 1851.8 2259.4 FixedAssets 618.7 1022.2 800.6 824.9
OtherIncome 0.0 0.0 0.0 0.0 Investments 97.6 281.6 331.6 431.6
TotalIncome 1072.2 1481.4 1851.8 2259.4 NCA/NWC 948.0 575.6 769.3 939.3
CostofSales 682.0 979.8 1227.7 1525.5 CurrentAssets 1125.1 899.1 1132.8 1342.8
PBDILT 390.2 501.6 624.1 733.9 CurrentLiabilities 177.1 323.5 363.5 403.5
Depreciation
138.3
176.6
210.7
236.9
Total
Cap.
Empld
1664.3
1879.5
1901.5
2195.9
PBILT 251.9 325.1 413.4 497.0 Liabilities
Financecharges 0.0 0.0 0.0 0.0 ShareCapital 80.1 160.9 160.9 160.9
Op.ProfitbfrTax 251.9 325.1 413.4 497.0 Reserves 966.5 1024.8 1196.7 1441.0
Extraord.Items 16.5 20.5 27.5 38.0 MiscExp.Notw/o 0.0 0.0 200.0 200.0
PBT 268.5 345.5 440.8 535.0 NetWorth 1046.6 1185.7 1157.6 1401.9
Less:Tax 38.8 50.1 63.9 77.6 TermLiabilities 617.7 693.8 743.9 794.1
PAT# 229.7 295.4 376.9 457.4 TotalCap.Empld 1664.3 1879.5 1901.5 2195.9
#PAT:proformaforMTMprovisionsforFCCBs
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Rolta India Ltd.
Mata Securities India Pvt. Ltd. 18
ProjectedRatios ProjectedCashFlowsParticulars FY 08A FY09P FY10P FY11P YrEndingMar.31 FY08A FY09P FY10P FY11P
ProfitAfterTax 230.6 295.4 376.9 457.4
GrowthinToInc. 51% 38% 25% 22% Depreciation 138.3 176.6 210.7 236.9
GrowthinPAT 34% 28% 28% 21% ChangeinWC 6.8 128.0 77.0 92.0
PBDITMargin 36.4% 33.9% 33.7% 32.5% Opg.CashFlow 362.1 344.0 510.6 602.3
PATMargin 21.5% 19.9% 20.4% 20.2% Inc/DecGro.Block 230.0 300.0 250.0 200.0
ROCE 15.2% 18.3% 21.5% 22.5% Inc/(DecinCWIP 26.6 145.0 15.0 0.0
RONW 20.7% 25.2% 29.5% 29.3% Inc/DecinInv. 184.0 50.0 100.0 150.0
Gearing(x) 0.6 0.6 0.6 0.5 C.F.Investing 440.6 205.0 335.0 350.0
OverallGearing 0.6 0.6 0.6 0.5 Dividendpaid 49.8 64.4 72.4 80.4
InterestCover(x) - - - - Dividendtax 8.6 9.0 10.1 11.3
CurrentRatio(x) 2.8 3.1 3.3 3.7 Inc.inT.Liab. 76.1 50.1 50.1 50.1
Inc.inS.Capital 46.2 0.0 0.0 0.0
SalesPerShare 66.6 92.1 115.1 140.4 C.F.Financing 28.5 23.2 32.4 41.6
EPS(Rs.) 14.3 18.4 23.4 28.4 Op.CashBalance 639.0 259.8 325.5 418.6
DPS(Rs.) 3.1 4.0 4.5 5.0 Cl.CashBalance 259.8 325.5 418.6 579.1
(Rs.cr)
MATASECURITIESINDIAPVTLTD
2RahimtoolaHouse,1stFloor,7HomjiStreet,Fort,Mumbai400001
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