Research

RESEARCH:: COMPANY:: ALLIED DIGITAL SERVICES LTD.

(MID CAP)

04th June’ 2010

Long Term Buy Allied Digital Services Ltd (ADSL) is a leading IT Infrastructure management and Technical Support
Services outsourcing Company. It enables global, large and medium enterprises and service providers
CMP Rs 218 to reduce their total cost of ownership using a combination of onsite and remote services. It primarily
Target price Rs 320 acts as a support-partner for IT infrastructure products like desktops, laptops, servers, network software,
Projected PE 10-12 routers etc.
Investment period 6-12 months

Key Highlights
Stock Info (TTM Basis)
Ø En Pointe Global Services (EPGS) has announced that it will introduce new 2010 Intel Core vPro
Sector ITES processor family into its wide-ranging customer solutions.
Market cap Rs. 1013.2cr
Face value Rs. 5
Ø Company is foreseeing opportunity from UID project in terms of management services and network
Book value Rs. 140.07
integrations.
EPS Rs. 22.35
Sales Growth 16.1%
52 week H/L 84.85/27.25 Ø Company made a joint venture with Tes Amm of Singapore (one of the world's top three players in e-
Avg. Daily Vol (2wk) 38,000 waste management and e-recycling). Worldwide presence of Tes Amm will be a key growth driver for
Chairman Nitin Shah the company.
Incorporation 2006
Listed At BSE/NSE
Equity capital Rs. 23.21 cr
Future Outlook
FII’s/MF’s 24.63/8.74
At Current market price of Rs218, the stock is available at a P/E of 6.89x of its FY11E earnings,
and 5.43x of its FY12E earnings. We recommend a BUY with target price of Rs 320, given that
company’s future shows potential.
(Consolidated Basis)
Why to Invest in Allied Digital
Particulars (In Rs Crore) FY10 FY11E* FY12E*
Ltd ………….…….….Page7
Total Revenue 704.37 880.46 1056.56
Expenditure 561.86 677.7 799.03
CONTENTS PBIDT 142.51 202.76 257.53
Key Highlights & Future
Interest 5.33 5.57 6.21
Outlook………………………….Page1
Company Profile……………Page2 Depreciation 8.61 11.27 12.3
Financials of the PBT 128.57 185.92 239.02
Company……………………….Page6 Tax 20.78 39.04 52.58
PAT
60. 107.79 146.88 186.43

Fairwealth Research Desk:- EPS 23.19 31.60 40.11

http://fairwealth.in/Research.aspx
CEPS 25.04 34.03 42.76
Contact Us:-
OPM (%) 20.23 23.03 24.37
Email: - research@fairwealth.in
NPM (%) 15.30 16.68 17.65
Direct Line: - 0124-3024874/840
Source: Company Reports, Fairwealth Research Estimate
*Estimated

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 Allied Digital Services Ltd.
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Buy- Riddhi Siddhi Gluco Biols Ltd

SHAREHOLDING PATTERN COMPANY PROFILE

ADSL is an IT Infrastructure Management and Technical Support
Services Outsourcing Company. It has over two decades of experience in
enterprise
ise IT Infrastructure, management and implementation &
consulting on complex IT Solutions for different business verticals.
Public & Foreign, Company has about 2,265 Committed Professionals from different
.
Others, 28.45 managerial and engineering backgrounds operating across 132 locations
location
8.99 in India and across locations in USA and Australia

ABOUT MANAGEMENT:
Mr. Nitin Shah, aged 55 years, is a Promoter, Chairman and Managing
Director of the Company. He holds a Bachelors Degree in Electrical
Engineering from University of Mumbai and a Post Graduate diploma in
Computer Management from Jamnalal Bajaj Institute of Management
Studies, Mumbai. He is a member of Manufacturer’s Association of
Mutual Information Technology and Traders Association of Information
Funds, Technology. He is also a member in the Business Expert’s Panel in Indian
8.74 Express publication. He has an experience of thirty two (32) years in the
Promoters
Non IT industry. Prior to this,, he had worked with Crompton Greaves Limited
43.44
Promoter and Nelco Limited. He has also worked in CMC Limited for five years as a
Corporate Customer Support Engineer and Hinditron Computers Private Limited for
Holding, two (2) years as a System Engineer.
10.4

STRATEGIC ACQUISITIONS

EN POINTE GLOBALSERVICES, LLC (EPGS)

The Company has acquired a controlling stake of 80.5% in EPGS. It is an IT Solution and outsourced managed services provider
to commercial enterprises, government agencies and educational institutions in USA. It offers following services to various
business verticals:

§ Lifecycle services
§ Client Services
§ Managed Security Services
§ Infrastructure Management Services
§ Remote Infrastructure Management Services

With this acquisition, company has been able to make inroads into the highly lucrative IT market of the United States of Amer
America.

DIGICOMP COMPLETE SOLUTIONS LIMITED

The Company has acquired 51.06% Equity Stake in Digicomp Complete Solutions Limited (Digicomp). Digicomp is a leading
player in the businesses of end to end technical support, reverse logistics, customer care, warranty service, help desk services.
This acquisition is a reverse integration to th
the Company's IMS/TBPO business and will help them to enhance its IMS/TBPO
business by leveraging their services.

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Buy- Riddhi Siddhi Gluco Biols Ltd

SEGMENTS
SEGMENTS

SERVICES (56%) SOLUTIONS (44%)

INFRASRTUCTURE REMOTE INTEGRATED NETWORKING & ENTERPRISE

MANAGEMENT MANAGEMENT SOLUTIONS COMMUNICATION COMPUTING
SERVICES SERVICES SOLUTIONS SOLUTIONS

ENTERPRISE NOC: COMPUTERIZED PREMISES E NTERPRISE

COMPUTING TIME & DISTRIBUTION COMPUTING
END USER HELP
ATTENDANCE SYSTEM
STORAGE DESK STORAGE
ACESS CONTROL ENTERPRISE
INFORMATION REMOTE DESKTOP
& ENTRY/EXIT SWITCHNG INFORMATION
SECURITY MANAGEMENT
AUTOMATION SOLUTION SECURITY
SYSTEM
MESSAGING & REMOTE SERVER
WIRELESS MESSAGING &
COLLABORATION MANAGEMENT
CCTV SYSTEM COLLABORATION
WIDE AREA
ENTERPRISE REMOTE NETWORK
FIRE DETECTION NETWORKS ENTERPRISE
MANAGEMENT MANAGEMENT
SYSTEM MANAGEMENT
CONSULTING
CONVERGENCE SOC:
RFID CONVERGENCE
NEED ANALYSIS &
THIN CLIENT 24x7 INFORMATION
VIDEO AUDIT THIN CLIENT
COMPUTING SECURITY
CONFERENCE COMPUTING
SURVEILLANCE REMOTE NETWORK
SYSTEM
TELECOM SERVICES MANAGEMENT TELECOM
SOLUTION KIOSK SOLUTION
24x7 MANAGED NETWORK
CLOUD COMPUTING DETECTION ATM EVALUATION CLOUD
SERVICE SURVEILLANCE & COMPUTING
REMOTE NETWORK AUDIT &
LOGS ANALYSIS INFRASTRUCTURE
MONITORING
SERVICE ANALYSIS
SYSTEM
MANAGED IMPLEMENTATION
MICROSOFT METHODOLOGY
SECURITY SERVICE FOR LAN & WAN

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 Allied Digital Services Ltd.
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Buy- Riddhi Siddhi Gluco Biols Ltd

INFRASTRUCTURE MANAGEMENT SERVICES:

Allied Digital's proven Infrastructure Management Services OPTIMIZES customer's IT Infrastructure and help slash IT costs
across the organization while significantly increasing efficiency, minimizing security risks, data theft and loss of productivity.

Managed Services:

Company’s Services are specially designed to effectively manage, optimize and secure the customer's distributed IT
infrastructure across the country and across the globe. Its hybrid Managed Services model offers flexible IT solutions to meet the
day to day operational needs of the clients, providing them both onsite and remote support - 24 X 7 X 365. It is the trusted
provider of real-time Infrastructure Management Services, powered by the most advanced Remote Infrastructure Management
Services (RIMS) tools available in the market.

Remote Infrastructure Management Services:

Its state of the art Global Command Center remotely deploys both network and security infrastructure services for enterprises
across the globe.

NETWORK OPERATIONS CENTER (NOC):

Company provides Remote Services through its state of the art Network Operations Centre (NOC) located at Mahape, Navi
Mumbai. It provides value-added professional services to help companies deal comprehensively with multi-vendor technologies
relating to IT management. The company uses an extremely robust Enterprise System Management (ESM) software platform
with technology and services designed for vendor independence and they can inter-operate with any IT systems. It has
developed specialized managed services and solutions to address customized needs for clients like Microsoft and Cisco.

SECURITY OPERATIONS CENTER (SOC):

Through SOC in Mahape, Navi Mumbai: it provides remote monitoring of security solutions deployed at customer’s site. This
includes Firewalls, IDS, Gateway routers & VPN appliances. This service will include remote log analysis of security devices,
monitoring critical alerts and external vulnerability scanning of customer’s network.

INTEGRATED SOLUTIONS:

Allied Digital integrates technologies from across platforms providing safety, security and device control networking
solutions with its dual offerings of:

Intelligent Building Management Solutions:

Allied Digital offers Intelligent Building Management Solutions (IBMS) using open systems and providing a single web based
console for managing the entire building resources from a single location - local or remote. It integrates different crucial
subsystems in a building such as HVAC, lighting, elevators, etc.

Integrated Physical Security Solutions:

Allied Digital provides comprehensive and seamlessly integrated security solutions that bring together Surveillance, Video
Analytics, Access Control Systems, Biometric Solutions, Perimeter Detection Systems, and Intrusion Detection Systems etc.
It also provides Mobile Command and Control Systems that can interpret video and data in real time to create Actionable
Intelligence for a proactive response to avert potential threats.

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Buy- Riddhi Siddhi Gluco Biols Ltd

NETWORKING & COMMUNICATION SOLUTION:

Allied Digital's Networking and Communications solutions enables anytime, anywhere, secure communications throughout the
company and across the world by bringing together core networking and communications functions. It offers scalable solutions
and allows technical staff to manage the network centrally.

ENTERPRISE COMPUTING SOLUTIONS:

Allied Digital helps customers to set up IT infrastructure with solutions designed to reduce complexity and built around scalability.
With server management technology, customers can see what IT assets they have, how they are used and how they perform.

QUARTERLY ANALYSIS
(STANDALONE BASIS)
Particulars (in crores) Mar'10 Mar'09 Var % Y-O-Y Dec'09 Var % Q-O-Q
Net Sales 133.18 101.44 31.29 122.35 8.85
Add: Other Income 1.96 1.97 -0.51 1.64 19.51
Total Income 135.14 103.41 30.68 123.99 8.99
Less: Expenditure 95.87 76.75 24.91 89.01 7.71
PBIDT 39.27 26.66 47.30 34.98 12.26
Less: Interest 0.75 1.03 -27.18 0.73 2.74
PBDT 38.52 25.63 50.29 34.25 12.47
Less: Depreciation 1.94 1.03 88.35 2.02 -3.96
PBT 36.58 24.6 48.70 32.23 13.50
Less: Tax 6.22 2.91 113.75 5.48 13.50
PAT 30.36 21.69 39.97 26.75 13.50
EPS 6.54 11.97 -45.36 6.14 6.51
CEPS 6.95 12.55 -44.61 6.20 12.12
OPM% 29.49 26.28 - 28.59 -
NPM% 22.80 21.38 - 21.86 -

For the quarter ended March 2010, on y-o-y basis, ADSL reported 31.29% rise in revenues at Rs 133.18 crore with operating margins
improving 300bps at 29.49%. Other income was at Rs 1.96 crore, interest cost was down 27% at Rs 0.75 crore on the back of
repayment of some debt and depreciation charge was up 88.35% at Rs 1.94 crore. Tax provision for the quarter was up 113.75% at
Rs 6.22 crore with effective tax rate at 17% up 517bps and the resultant net profit was up 39.97% at Rs 30.36 crore.

On Consolidated Basis, company reported revenues of Rs 193 crore, up by 21% y-o-y and 8% q-o-q. Operating Margin stands at
21.3% for the quarter, reflecting growth of 360 bps y-o-y. Its operating margins had increased consistently on quarterly basis i.e. OPM
in Q1 are 18.8%, Q2 20.3%, Q3 20.8%. The margins are improved due to increase in share of services business in the total revenues
which operates at higher operating margins.

Net profit for the quarter stands at Rs 31 crore, up by 41% y-o-y and 14% q-o-q.

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Buy- Riddhi Siddhi Gluco Biols Ltd

FINANCIALS OF THE COMPANY

PAST FIVE YEARS PERFORMANCE (STANDALONE BASIS)
Particulars (In crores) 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05
Net Sales 470.98 391.64 297.04 156.03 88.47 51.68
Stock adjustment 1.6 2.58 3.68 0.22 -0.12 0.02
Other income 4.25 2.19 2.58 0.17 0.52 0.12
Total Income 476.83 396.41 303.3 156.42 88.87 51.82
Less: Expenditure 343.22 297.25 233.97 123.24 71.5 48.43
PBIDT 133.61 99.16 69.33 33.18 17.37 3.39
Less: Interest 3.32 2.6 1.38 1.1 0.8 0.77
PBDT 130.29 96.56 67.95 32.08 16.57 2.62
Less: Depreciation 6.48 0.89 3.29 0.86 0.56 0.32
PBT 123.81 95.67 64.66 31.22 16.01 2.3
Less: Tax 20.05 16.13 21.1 8.29 3.95 0.86
Net Profit 103.76 79.54 43.56 22.93 12.06 1.44
Less: Extraordinary items 0 0 0 0 0 -1.25
Adj. Net Profit 103.76 79.54 43.56 22.93 12.06 2.69
Equity Share capital 23.24 18.11 17.29 12.77 4.74 2.63
EPS 22.32 43.58 25.19 17.96 25.44 5.48
CEPS 23.71 44.07 27.1 18.63 26.62 6.69
Operating Profit Margins % (OPM) 28.37 25.32 23.34 21.27 19.63 6.56
Net Profit margins % (NPM) 22.03 20.31 14.66 14.70 13.63 2.79
Source: Capitaline Database

During FY10, the Net Sales of the company witnessed an increment of 20.25% to Rs 470.98 cr as against Rs 391.64 cr during the
corresponding period last year. Correspondingly, the PBIDT of the company worked out to be Rs 133.61 cr increased 34.7% as
against Rs 99.16 cr over last year, as on standalone basis, share of services business in revenues increased by 7% to 35% in
FY10 from 28% in FY09 which have OPM of 73% where solutions business have OPM of 27%. This results in the increment of
operating profit margin by 305 bps to 28.37% over last year.

However, Net profit after tax registered a growth of 30.45% to Rs103.76 cr as against Rs79.54 cr over the corresponding period last
year. The interest cost of the company witnessed an increment of over 27.7% to Rs 3.32 cr as against Rs 2.6 cr in the previous
year. The effective tax rate for the FY10 stood out at 16.19%.

KEY CONCERNS

General Economic Conditions: General economic slowdown may compel the company’s clients to postpone their decisions to
acquire newer technology and reduce their IT operations cost. In turn, such a scenario may affect the revenue and profitability of the
company.

Foreign Currency Fluctuation: Company’s foreign revenue is primarily earned in US Dollars. The exchange rate between Indian
rupee and US dollar has fluctuated significantly in the recent past and the same may continue fluctuating in future. Currency
fluctuation some time may turn out highly unfavorable and may adversely affect the revenue and gross margins.

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Not a Technology Originator: Company’s Enterprise Computing Team gives various technology solutions to customer. These
solutions are usually conceived using building blocks of different range of IT products namely computing, storage, networking,
security and software products. Very often this range of IT products belongs to different OEMs and functioning of final solutions
highly depends on integration of all products.

Pricing Pressure: The Indian IT market (domestic) has been viewed as a highly emerging market compared to other markets,
hence it has become a focused market for several large Indian IT firms & various global IT giants. Though the Company is
comfortably placed because of its rich experience and vast geographical presence in the market place, but highly competitive
scenario can create pricing pressure and may affect its gross margin in the long run.

Human Resources: Services business is a highly Human Resource intensive. An increased demand of IT professionals may result
in increased attrition which may affect business in the short term.

ANALYSIS & REPORT

Why to invest in shares of Allied Digital Services Ltd.?

SECTOR:

Earlier Application Development and Maintenance (ADM) and Business Process Offshoring (BPO) industries have
dominated offshoring business. Now, Infrastructure Management Services (IMS) that manage an enterprise’s core IT
systems (hardware, software, connectivity and people) becomes equally important.

The Infrastructure Management Services (IMS) industry is moving towards a remote delivery model where services are
increasingly delivered by vendors from low-cost locations. This phenomenon is a by-product of three factors – the
continuous effort by enterprises to enhance service and performance levels and reduce costs, advancements in
technologies that have improved infrastructure efficiency and management, and evolution in offshore capabilities. The
addressable market for RIMS is estimated to be worth US$96 billion to US$104 billion. Remarkably, this emerging
segment is comparable to the offshore ADM opportunity of US$77 billion to US$93 billion and offshore BPO opportunity
of US$120 billion to US$150 billion. It is expected that the majority of growth will come from off-shoring midrange
services, which would likely to account for approximately 70 percent of the overall opportunity by 2013. So far, India
accounts for US$3 billion to US$4 billion of the total US$6 billion to US$7 billion worth of services off-shored. RIMS, as
an independent industry, could unleash the next largest wave of opportunity in off-shoring. This provides a considerably
large opportunity for Indian players to grab a larger part of the global market share.

COMPANY:

Ø It has around 2000+ committed professionals operating across 132 direct locations across India. The Company has
laid down quality processes within the organization and is conferred with ISO 9001:2000. In additions, the Company
has adapted to the ITIL best practices aligning its service delivery mechanism to BS 15000 Standards.

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Ø Company has received the prestigious CRN Excellence award as Best Managed Services Provider (2009) and it was
awarded as "Best under a Billion Dollar"by Forbes. Recently, it bagged 4 Awards at the Channel Excellence Awards
function held by Data Quest Channel (DQC) in Bangkok.

Ø It has conducted massive infrastructure expansion with a state of the art Repairs centre in Bangalore rated as the
Best of its kind in India. Digicomp has been rated as the leader in mother board and PCBA repairs and has currently
acquired contracts with several top companies including the Global # 1 and #2 notebook manufacturing companies
and among the top American PC brands in India. Digicomp also conducts large scale IT Asset Recovery
management working with almost every single PC brand in India.

CLIENT PROFILE:

MANUFACTURING
PFIZER, RELIANCE INDUSTRIES, JINDAL, MAHINDRA & MAHINDRA, L&T etc.

TELECOM
CABLE & WIRELESS, TATA TELESEVICES, RELIANCE INFOCOM, BRITISH TELECOM, BSNL.

BANKING/ FINANCE/ INSURANCE

ICICI, HSBC, CITIBANK, HDFC, , SBI, BOI, DENA BANK, IDBI, DCB, NSE-IT.

ENERGY/ POWER
TATA POWER RALLIS, BPCL, HPCL, GAIL, RELIANCE POWER, BHEL, IOCL, BRITISH GAS.

ITES/ SOFTWARE DEVELOPMENT/ BPO

TCS, E-FUNDS, WORLD NETWORK SERVICES, QUINNOX, LAWKIM, SYNTEL, L&T ITL, NIIT.

SERVICES
AMWAY, FEDEX, ACCENTURE, JET AIR, HBO, ITC GROUP OF HOTELS, SIEMENS.

GOVERNMENT
AIR INDIA LTD, AIRPORT AUTHORITY OF INDIA, MIDC, DEPARTMENT OF EDUCATION.

RETAIL
SHOPPER STOP, GLOBUS, MCDONALDS, ADLABS, BRITT WORLDWIDE.

Ø Company has a strong client rationale in its portfolio where major contracts are from bigger MNC’s which boosts the
revenue of the company. Recently, it got sizable contracts from Lenovo, IBM, and Fleetwood etc.

Ø The IT Industry is moving towards the utility model with the advancement of technology. This gives rise to huge
opportunities in the form of Infrastructure-as-a-Service (laaS), PC-as-a-Service (PCaaS) and Cloud computing which
has already been launched by the Company.

FUNDAMENTALS:

Ø In present scenario, companies have a pressure to reduce cost and improve efficiency. Therefore, most of the
organizations are shifting towards the option of outsourcing IMS abroad to cost effective geographies like India.
This benefits the company as they are the pioneers in providing RIMS and to leverage on a state of the art,
centralized, Global Services Delivery Centre or Global Command Centre (NOC/SOC).

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Ø Company has a technical expertise in implementing complex solutions which include RFID implementations, Energy
management solutions, Cheque truncation solutions, Videoconferencing solutions etc. It has also taken the lead in
Cloud computing arena this fiscal with the launch of Cloud computing management and security services for
enterprises. These services would help large enterprise and hosting service provider to easily deploy and manage
business critical application on the Cloud with a new level of automation, control, profitability and security.

Ø Allied Digital Services has made a healthy change in its business-mix towards services. It is getting synergies in the
form of facilities, better expertise etc. from acquisition of En Pointe Global Services and Digicomp. Further, it will
help them to add new clients and cross-sell & up-sell their services to their existing clients. Company is also eyeing
for more acquisitions with the motive to expand geographically.

Ø Company is focusing entirely on the remote infrastructure management space to improve the operating profit
margins. They are doing transformation in the existing business model of EPGS in to remote management model,
where the customers are availing traditional infrastructure management services. Further, they are increasing from
current seat capacity of 250 to 650 seats in the NOC/SOC for which they have raised funds of Rs. 231.2 cr via QIP.
This would be operational by June, 2010.

Ø IT companies generally operates on the linear business model where they earn revenues on people-billing basis
which increases the employees cost. Where ADSL has the advantage of the non-linear business which significantly
improves their operating profit margins.

Ø ADSL has a healthy order book of Rs544 crores where Solutions consists of Rs.110 crores to be executed in 90-120
days and Services accounts for Rs.434 crores which is to be executed in the next 12-15 months. This reflects their
earnings in the coming period.

Disclaimer:
This publication has been solely prepared for the information purpose and does not constitute a solicitation to any person to buy or sell
a security. While the information contained therein has been obtained from sources believed reliable investors are advised to satisfy
themselves before making any investments. Fairwealth Securities Pvt Ltd does not bear any responsibility for authentication of the
information contained in the reports and consequently is not liable for any decision taken based on the same. Further Fairwealth
Research report only provides information updates and analysis. All opinions for buying and selling are available to investors when
they are registered clients Of Fairwealth Investment advisory services. As a matter of practice, Fairwealth refrains from publishing any
individual names with its reports. As per SEBI requirements it is stated that, Fairwealth securities Pvt Ltd, and/or individuals thereof
may have positions in securities referred herein and may make purchases or sale while this report is in circulation.

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