Company Name: Rolta India Ltd.
Industry: Computers – Software
CMP: Rs. 41.40
PE Ratio: 2.62
Financial Analysis:
* Strong revenue growth in past few years with steady gross and net profit margins. Robust revenue growth in first half of current fiscal but shrinkage in net profit margins. This was mainly due to provision for re-evaluation of the company’s FCCB liability in accordance with accounting standard 11.
* The company has been generating positive operating cash flow for the past five years which is always a good sign, especially in these times of cash crunch. The company has also made significant capital expenditure over the past few years and this would surely translate into higher revenue growth in the near future. The company has a comfortable cash and cash equivalents position of Rs. 241 Crores as on June 2008.
* The company has been expanding its equity base which has led to decline in EPS for its existing shareholders. But being a growth company this is not such a big issue. Rolta has also leveraged itself in the last two years but the debt to equity ratio is very comfortable and not a cause of concern.
* The adjusted cash EPS of the company as on June 2008 was Rs. 26.6 while its book value was Rs. 81.05 per share. So currently the stock is trading at nearly half its book value.
Business Outlook:
* The company has three main business segments namely Geospatial Information (GIS) System and Defense, Enterprise Information and Communication Technology (EICT) and Engineering and Design Services (EDA). The business prospects for GIS and Defense are especially very bright for India, and Rolta stands to benefit from the same being a major player.
* The order book position for Rolta is currently about Rs.15.9 billion, about 7.1 in GIS, about 5 in EDA, and about 3.7 in EICT and the order book is going to be executed over next 15 to 18 months time period. This gives clear revenue visibility to the company at least for the next year and half.
* The order book of the company is about 56% to 57% of from domestic market. The rest is from international. Thus, the company has got a good national presence and with the global economic slump this is a good thing as Asia is still expected to do relatively well.
* Rolta also has got a very good client list which includes companies like Airport Authority of India, Geological Survey of India, BSNL, CESC, ONGC, MTNL, Indian Army, Indian Air Force, BASF, BHEL, HPCL and NTPC just to mention a few.
Important Global and Local News:
* Citigroup reported that it is operating at a profit through February. This sparked off a major rally in Wall Street with all major indices gaining well over 5% for the day.
* Barclays Capital has revised GDP growth expectations for FY 10 from 5.2% to 4.0% for India. This is entirely possible and FY 10 should also be a equally bad year for other economies. However, Mr. Bernanke thinks otherwise for US. Lets see what actually happens.
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