Tulip Telecom - Buyback of FCCBs

Tulip Telecom Ltd has informed that in terms of the approval granted by the Board of Directors of the Company on January 19, 2009 to extinguish, restructure, buyback / redemption of FCCBs, the Company, till date, has repurchased the FCCBs aggregating to US$ 30.50 million.

Tulip Telecom, Viceroy Hotels, Visa Steel, Welspun Gujarat

Tulip Telecom, Viceroy Hotels, Visa Steel, Welspun Gujarat

Tulip Telecom

Investors with a two-year horizon can buy the shares of Tulip Telecom, a data connectivity provider in the domestic market, considering its strong business prospects and attractive valuations. At Rs 430, the share trades at a modest valuation of seven times its likely 2008-09 earnings. Tulip has maintained healthy growth rates in its business over the last three years, including in the first half of the current year. Its revenues and profits have grown by 52.2 per cent and 37.1 per cent respectively. Strong technical advantages in its operations and continuing engagements with high-value clients with big technology spends give Tulip an edge in the domestic market.

Tulip offers wireless last-mile connectivity for its Virtual Private Network services. ‘Last mile’ here refers to the connectivity between the company’s point of presence in any city to the client’s premises in that city. The Internet Protocol VPN market is estimated to be Rs 3,343 crore in size by 2013, growing from the current Rs 1,200-crore levels, according to Frost & Sullivan. Tulip is estimated to have a market share of 37.8 per cent in this segment. Further, the domestic enterprise data market is put at Rs 13,393 crore by 2013.

Tulip has over 900 clients across 1,300 cities in India across BFSI, retail, government and telecom segments, and is well-placed to make further inroads into this market. Data-intensive industries such as banks, large corporates and government are also likely to ramp up their investments in branch connectivity, spelling a further opportunity for Tulip. Considering that data connectivity means offering higher bandwidth, the company has also started building its own fibre network. This process is nearing completion in key business districts of top metros across the country. This will enable the company to offer a blend of fibre-based and wireless data connectivity, a larger addressable market.

The company is trying to bring down the low-margin network integration business to 20 per cent from over 40 per cent currently, by taking such deals only as a part of a complete managed services deal. This may help improve the margins for the company. Tulip has been able to secure a host of e-governance deals to enable offering government-to-citizen services, and range between Rs 50 crore and Rs 95 crore. This also allows Tulip to cross-sell its VPN services. Competition from Bharti Airtel, Reliance and Sify in the VPN market and players such as CMC and HCL Infosystems in hardware-intensive deals create pricing pressure for the company.

India Cements, PNB, Tulip Telecom

India Cements, PNB, Tulip Telecom

Tulip Telecom Ltd

Investments with a one-two year horizon can be considered in the stock of Tulip Telecom, a strong player in the domestic data connectivity and network integration space.

At Rs 855, the share trades at 11 times its likely 2008-09 earnings. Though Tulip has strictly no comparable peers, it faces competition in some of its segments of operation from hardware and system integration players. With margins expanding, owing to a healthy revenue mix, the company appears well-poised to tap potential opportunities. Tulip’s revenues over the past three years have grown at a compounded annual rate of 53.5 per cent to Rs 1,239.4 crore while net profits have grown at 137.9 per cent to Rs 187.2 crore.

The company broadly has two sets of operations — network integration and corporate network and data services. The latter includes the fast growing IP VPN (internet protocol virtual private network) service that connects branches of companies, banks and many other data transfer-intensive organisations. This enables secure transmission of data, voice and video for companies, enabling Tulip to add several blue-chip companies across several industries to its client base. Strong technical advantages in its segment of operations, continuing engagements with high-value clientele with big technology spends and bright prospects for new business segments give Tulip an edge in the domestic market.

Key Business Advantages

Wireless last mile connectivity: Tulip offers wireless last-mile connectivity for its VPN services. ‘Last mile’ here refers to the connectivity between the company’s point of presence in any city to the client’s premises in that city.

This removes the dependence on wired leased lines that is usually resorted to by other players such as Sify. It also enables quicker implementation and deployment of VPN services.

MPLS based backbone: The company has built a multi-protocol label switching (MPLS) technology-based backbone network. This technology is regarded as being easily scalable in architecture and superior to traditional ATM or Frame Relay-based technologies. The MPLS VPN of Tulip is offered in around 1,200 cities across the country giving it an edge over competitors.
Business Drivers

Changing revenue-mix: Tulip has managed to win a large client base in the IP VPN segment, including PSU banks such as Punjab National Bank, ADAG group companies, Bajaj Allianz, France Telecom and Idea Cellular among others. Most of these companies are data-intensive and would require secure VPNs to communicate between branches.

The company’s present focus on PSU banks assumes significance at a time when a number of PSU banks are adopting core banking facilities across the country. Such services will also cater to the CRM and ERP requirements of companies.

Tulip with its presence and execution capabilities appears well-placed to cater to these opportunities. This creates a sustainable revenue stream for the company. The IP VPN business, which has been growing rapidly, accounts for well over 50 per cent of the revenues. It is also a higher margin service compared to network integration, which explains the company’s expanding overall margins over the past few years.

The IP VPN market is estimated to be Rs 3,343 crore in size by 2013, growing from the current Rs 1,200 crore levels, according to a report by Frost & Sullivan. Tulip is estimated to have a market share of 28 per cent in this segment. Further, the domestic enterprise data market is estimated to be Rs 13,393 crore by 2013. Tulip, with its strong existing client relationships, appears well-placed to gain from the opportunity.

Government SWAN deals and budget cues: The company has been able to secure a host of government deals in IT infrastructure and implementation. These include state-wide area network (SWAN) deals of the governments of Haryana, Assam and West Bengal and, more recently, Madhya Pradesh. These are e-governance deals to enable offering of government-to-citizen services, and range between Rs 50 and Rs 95 crore. With both the Union and Railway Budgets setting higher outlays towards IT, order flows from this segment may increase for Tulip. Defence, another sector with increased allocation, also offers opportunities for Tulip to cross-sell its IP VPN capabilities.

Data centres and remote infrastructure management: Tulip also hosts and fully manages data centres on behalf of companies. This is an emerging area as it allows companies to outsource critical IT infrastructure. Tulip offers this service in the form of co-location with the client as well as on a fully managed service basis. This becomes important for small and medium enterprises adopting IT for the first time and wanting to minimise cost. This opens up a wide potential client base for the company.

Though this is a nascent area for Tulip, this model has the potential to create a sustainable revenue stream for the company over a longer period.

The company has also started WiMAX deployments recently and would look to leverage on its backbone network and wireless last mile network. With bidding for spectrum and Wimax services set to take off soon, this is another area that holds potential for Tulip.
Risks

Attempts by fully integrated telecom players such as Bharti Airtel or Reliance Communications to increase their presence in the enterprise VPN space and to possibly offer wireless last mile connectivity may pose competition to Tulip. In hardware-intensive deals, the company faces competition from players such as CMC, HCL Infosystems and Wipro Infotech, creating pricing pressures on deals.

Tulip Telecom

Tulip Telecom

Tulip IT Services

Investments with a one-two year horizon can be considered in the shares of Tulip IT Services (Tulip IT).

At Rs 957, the share trades at 18 times its current earnings and 14 times its estimated FY-09 earnings. Though Tulip IT has strictly no comparable peers, it faces competition in some of its segments of operation from hardware and system integration players. With expanding margins and a healthy revenue mix, the company appears well-poised to tap potential opportunities.

The company broadly operates in two business segments — network integration and corporate network and data services. The latter includes the fast growing IP VPN (internet protocol virtual private network) service that connects branches of companies, banks and many other data transfer-intensive organisations. This service has enabled Tulip IT to count several blue-chip companies in its client base. Strong technical advantages in its segment of operations, continuing engagements with high-value clientele with big technology spends and bright prospects for new business segments give Tulip IT an edge in the domestic market.
Business Advantages

Wireless last mile connectivity: Tulip IT offers wireless last-mile connectivity for its VPN services. ‘Last mile’ here refers to the connectivity between the company’s point of presence in any city to the client’s premises in that city.

This removes the dependence on wired leased lines that is usually resorted to by players such as Sify. It also enables quicker implementation and deployment of VPN services and becomes especially important in difficult terrains or where last-mile leased line is not available or the incumbent inordinately delays allocation. Most other players in VPN services depend on leased lines for last-mile connectivity.

MPLS based backbone: The company has built a multi-protocol label switching (MPLS) technology based backbone network. This technology is regarded as being easily scalable in architecture and superior to traditional ATM or Frame Relay-based technologies. This MPLS VPN of Tulip IT is offered in around 1,000 cities across the country giving it strong edge over competitors. The company offers inter-city connectivity through optic-fibre network, leased from players such as Gailtel, Railtel and Power Grid Corporation, among others.

Vendor Neutral: In the network integration segment where the company offers implementation and system integration services related to IT and telecom infrastructure, Tulip IT works with multiple vendors with no special preferences. This enables it to retain flexibility to customise services to the specific requirements and preferences of clients.
Business Drivers

IP VPN service well-poised: The IP VPN market is estimated to be Rs 3,343 crore in size by 2013, growing from the current Rs 1,200 crore levels , according to a report from Frost & Sullivan. Tulip IT is estimated to have a market share of 28 per cent in this segment.

Tulip IT has managed to win a large client base in this segment. These include banks such as Punjab National Bank and some PSU banks, ADAG group companies, Bajaj Allianz, France Telecom and Idea Cellular among others. Most of these companies are data intensive and would require secure VPNs to communicate between branches.

The company is especially targeting PSU banks. This becomes important with many PSU banks adopting core banking facilities across the country. Such services will also cater to the CRM and ERP requirements of companies. Tulip IT with its presence and execution capabilities appears well-placed to cater to these opportunities. This creates a sustainable revenue stream for the company. The IP VPN business has been growing rapidly for the company and now contributes over 50 per cent of the revenues. It is also a higher margin service.

Government SWAN deals and budget cues: The company has been able to secure a host of government deals in IT infrastructure and implementation. These include state wide area network (SWAN) deals of the governments of Haryana, Assam and West Bengal. These are e-governance deals to enable offering of government-to-citizen services, each of which is worth over Rs 50 crore. With both the Union and Railway Budgets setting higher outlays towards IT, order flows from this segment may increase for Tulip IT. Defence, another sector with increased allocation, also offers opportunities for Tulip IT to cross-sell its IP VPN capabilities.

Data centres business: Tulip IT also hosts and fully manages data centres on behalf of companies. This is an emerging area as it allows companies to outsource critical IT infrastructure. Tulip IT offers this service in the form of co-location with the client as well as on a fully managed service basis.

This becomes important for small and medium enterprises adopting IT for the first time and wanting to minimise cost. This opens up a wide potential client base for the company. Significantly, many of the domestic IT services companies also view the SME segment as offering a lot of promise.
Risks

Fully integrated telecom players such as Bharti Airtel or Reliance Communications increasing their presence in the enterprise VPN space and possibly trying to offer wireless last mile connectivity may pose competition to Tulip IT. A ramp up in government deals may lead to a smaller deal size as well as lower margins; apart from extending the receivables cycle. In hardware-intensive deals, the company faces competition from players such as CMC, HCL Infosystems, Wipro Infotech and Datacraft.

Via BL

Tulip IT Services

Tulip IT Services

Ashok Leyland, Indoco Remedies, Tulip IT, BHEL

Ashok Leyland, Indoco Remedies, Tulip IT, BHEL

SBI, Tulip IT, Sterlite Tech, Cipla

SBI, Tulip IT, Sterlite Tech, Cipla

Tulip IT Services

Tulip IT Services

Tulip IT Services

Tulip IT Services

Tulip IT Services, Natural Gas

Tulip IT Services, Natural Gas

DLF, Mahindras, Tulip apply for UASL

US firm AT&T in a tie-up with diversified group Mahindras, property developer DLF and IT firm Tulip on 1 October applied for telecom licences on the last date for filing applications, while Hinduja TMT and realty firm Omaxe may submit the necessary documents later in the day.
AT&T said in a statement it has filed applications with the Department of Telecom for a Unified Access Service License (UASL) to start services in all 22 circles of India.
“This is an important step toward participating in India’s upcoming spectrum allocation proceedings,” it said.
AT&T is extending its partnership with Mahindra Telecommunications Pvt Ltd, through its local unit AT&T India, to apply for the UASL, the company said.
AT&T already has licences to provide NLD and ILD services. Tulip also has NLD and ILD licence.
A Hinduja TMT official said the company will be applying for the license after its board took a decision on it. Omaxe officials also said the company would submit its application.
At least 13 companies have submitted more than 230 applications for telecom licences and most of these are for a pan-India UASL. DLF and Omaxe join other real estate firms Indiabulls Real Estate, Unitech and Parsvnath Developers to apply for telecom licence.
Other companies who have applied for licences include Swan and Cheetah Telecom, JSW Steel, HFCL and Ruias-backed BPL Mobile. The companies rushed to apply for a telecom licence when DoT said on September 24 it will not accept applications after October 1.

Tulip IT Services, Garware Offshore, Jubilant Organosys, Punjab National Bank

Tulip IT Services, Garware Offshore, Jubilant Organosys, Punjab National Bank

BUY -Tulip IT, Opto Circuits, Great Offshore, Lakshmi Energy, UBI, Sasken, Venus, Greenply, SELL - ACC

BUY -Tulip IT, Opto Circuits, Great Offshore, Lakshmi Energy, UBI, Sasken, Venus, Greenply, SELL - ACC

Tulip IT Services

Tulip IT Services

Religare - PNB, Shringar Cinema, Tulip IT,

Religare on PNB

We are positive on PNB considering that core operational performance remains
robust and the lower-than-expected profitability in FY07 was largely on account of
one-off items. Further, PNB’s initiative to create provisions towards AS-15 guidelines
ahead of their implementation would safeguard future profitability, while the BPLR
hike in April would protect margins. The robust growth in fee income is also a positive
sign. While the continuous increase in NPAs and the unexpected announcement of an
equity offering are concerns, we expect the bank to maintain its steady growth
trajectory in the coming year.

Recommend Buy with target of Rs 610

The stock currently trades at 1.3x on FY09E ABV. We recommend Buy on the stock

Religare on Shringar Cinemas

At the current level the stock is quoting at 15.9x and 10.1x its FY08 and FY09
expected earnings respectively. The following table depicts the comparative analysis
of various multiplex players.

DCF valuation yields fair value of Rs 75; HoldWe have undertaken a DCF valuation in order to capture the growth momentum of the company.
Our DCF model estimates a fair value of Rs 75/share for Shringar, based
initiated coverage; Hold on a terminal growth rate of 4%, beta of 1.01 and a weighted average cost of capital (WACC) of 15.1%. The stock has appreciated 17% since we initiated coverage on 22 May 2007. We now recommend a Hold with a target price of Rs 75.


Religare on Tulip IT


We have valued the company using a sum-of-the-parts (SOTP) valuation model that
An attractive long-term employs the two-stage discounted cash flow (DCF) and EV/EBIT multiple valuation investment; Buy methods. Taking the average of target prices arrived at using the two methods, we have a March 2008 target of Rs 932 for the stock. At the CMP of Rs 875, the upside is limited to 6%, but we believe the company offers a good opportunity for long-term investment. We recommend a Buy on the stock.

Edelweiss - Tulip IT, Geometric, I-Flex

Tulip IT

Geometric Software

I-Flex Solutions

Anand Rathi - Tulip IT, Triveni Engineering, Spicejet

Anand Rathi - Tulip IT, Triveni Engineering, Spicejet