Date of report Tuesday, July 29, 2008

Company Tanla Solutions Limited - Quick & Dirty Analysis

Analyst Dhananjayan J

Contact dhanan12@yahoo.com, dhananjayan@valuehunt.net

Table of Contents (Please enable the macro attached to this file)

Fact Sheet >>

Quick & Dirty Analysis >>

Disclaimer >>
Tanla Solutions Limited
Tanla Solutions Limited (Tanla) is engaged in the area of software development and related services. Its telecom products include short message service center (SMSC), optimal
routing solution, signaling system 7 (SS7) voice mail server, welcome roamer, high-density media services, multiple mobile station integrated services digital network (MSISDN),
color ring back tone (CRBT), missed call alert, short messaging service (SMS) direct broadcast and prepaid roaming. Automatic vehicle location (AVL) combines both location
determination technologies, such as global positioning system (GPS) navigation and wireless data for the purpose of tracking, monitoring, and exchanging information between
remote vehicles and fixed bases operators, such as fleet managers. Automated meter reading (AMR) is a special case of field service that represents an opportunity that it warrants its
own category.
Website http://www.tanlasolutions.com 450
Special situation Insider buyings by chairman Uday Kumar Reddy.
Pro forma valuation 400
Price ratio LTM 6/08 FY 3/09 E FY 3/10 E
Price to earnings 11.9 10.1 7.5 350
Price to free cash flow 15.6 - -
Price to tangible book value 2.8 2.2 1.7 300
Enterprise value ratio
EV / Sales 3.5 2.7 2.0
250
EV / EBITDA 7.8 6.7 5.1
200
EV / EBIT 8.9 7.6 5.6
EV / EBT 8.6 7.2 5.3
150
EV / Net income 11.5 9.6 7.1
EV / (EBITDA-capex) 11.9 12.7 11.9
100
Debt and interest coverage

2
0
0
7
7

2
0
0
7
1

2
0
0
8
7

2
0
0
8
/

/
Net Debt / EBITDA NA NA NA
EBIT / Interest expense NA NA NA
Yield Ratio
Dividend yield 0.0% 0.0% 0.0%
Earnings yield 8.5% 9.6% 12.5%
Notional FCF1 yield 5.7% 4.6% 4.2%
Operating margins
Sales growth - organic 78.3% 25.0% 25.0%
EBITDA 45.2% 40.0% 40.0%
EBIT 39.4% 35.4% 36.3%
Net income 30.6% 27.8% 28.8%
Depreciation Vs. Capex Capex Capex Capex

The above valuation ratios are computed after assuming acquisition of Openfit OY in the LTM financial numbers published by the company. (Refer QAD sheet)
Conclusion
Good operating margin. Mind blowing topline growth. Luckily the recent market crash gives defensive investor a chance to invest in safe bid like this scrip. Debt free company with
fantastic operating margin. Good for long term investment with short term target price of Rs. 272/- and long term target of Rs. 400/-.
Our Verdict: Interesting stock for long term.
Quick and Dirty Analysis
(amt in lakhs)
FY 3/08 A 3m 6/07 A 3m 6/08 A LTM 6/08
Gross Revenue:
- Overseas 45,938.63 8,944.15 16,639.86 53,634.34
Growth 86.0%
- Domestic- India 36.87 1.00 46.19 82.06
Growth 4519.0%
Total sales 45,975.50 8,945.15 16,686.05 53,716.40
Total growth - YTD 86.5%
Growth by acquisition 8.3%
Organic sales growth 78.3%

Cost of sales 20,121.75 4,376.39 6,841.23 22,586.59

Gross profit 25,853.75 4,568.76 9,844.82 31,129.81
Margin 56.2% 51.1% 59.0% 58.0%

Selling marketing expenses 2,729.14 411.70 1,056.07 3,373.51

Operating & administrative expenses 1,592.51 193.43 746.49 2,145.57
EBITDA 21,532.10 3,963.63 8,042.26 25,610.73
Margin 46.8% 44.3% 48.2% 47.7%

Depreciation 2,347.11 331.88 1,237.10 3,252.33

EBIT 19,184.99 3,631.75 6,805.16 22,358.40
Margin 41.7% 40.6% 40.8% 41.6%

Other Income - mostly interest income 1,741.75 506.07 200.75 1,436.43

EBT 20,926.74 4,137.82 7,005.91 23,794.83
Margin 45.5% 46.3% 42.0% 44.3%
Tax - actual 4,616.10 812.10 1,365.17 5,169.17
Provision for income tax 4,395.83 768.01 1,197.79 4,825.61
Provision for FBT 19.95 1.58 15.75 34.12
Provision for deferred tax 200.32 42.51 151.63 309.44
Tax rate 22.1% 19.6% 19.5% 21.7%

Tax - 25% asssumption 5,948.71

Net income 16,310.64 3,325.72 5,640.74 17,846.12
Margin 35.5% 37.2% 33.8% 33.2%
O/S 1,000.00 1,000.00 1,000.00 1,000.00
EPS INR 16.31 INR 3.33 INR 5.64 INR 17.85
Adjusted EPS

Price INR 213.50

PE 12.0

Funds through IPO in 2007 42,095.25

Funds unutilized as on June 30, 08 6,039.91

Mar 2007
Cash 12,601.85
Debt -
Mcap
Adj M cap / Enterprise value (EV)
Adj Price
Adj PE
Target PE
Target Price
Capital gain
Mar 2007
Capex 6,259.63

Notional FCF1 before WC investments 14,838.82

Notional FCF1 / share INR 14.84
Price / Notional FCF1 14.39

Share capital
Reserves & surplus
Total shareholders equity
BV / share
Price / BV

EV / Sales
EV / EBITDA
EV / EBIT
EV / EBT
EV / Net income
EV / (EBITDA-capex)

Dividend per share

Dividend yield
Earnings yield
Notional FCF1 yield

Debt bargain
EBIT/interst expenses - assumption
Debt capacity with interest coverage rati
Adj Mcap

Net debt / EBITDA - asssumption

Debt capacity with EBITDA coverage rati
Adj Mcap
Acq of Openbit Pro forma
5th June 08 6/08 E FY 3/09 E FY 3/10 E

5,612.60 59,246.94

82.06

59,329.00 74,161.25 92,701.56

25% 25%

1,213.54 26,824.27 29,664.50 37,080.63

21.6% 45.2% 40.0% 40.0%

168.38 3,420.71 3,420.71 3,420.71

1,045.16 23,403.56 26,243.79 33,659.92
39.4% 35.4% 36.3%

803.00 1,206.91 1,925.60

24,206.56 27,450.71 35,585.52
40.8% 37.0% 38.4%

6,051.64 6,862.68 8,896.38

18,154.92 20,588.03 26,689.14
30.6% 27.8% 28.8%
1,000.00 1,000.00 1,000.00
INR 18.15 INR 20.59 INR 26.69
INR 17.55 INR 19.68 INR 25.24

INR 213.50 INR 213.50 INR 213.50

11.8 10.4 8.0

7,440.00 5,161.85 15,086.41 24,070.00

 213,500.00 213,500.00 213,500.00
208,338.15 198,413.59 189,430.00
INR 208.34 INR 198.41 INR 189.43
11.9 10.1 7.5
15.0 15.0 15.0
INR 272.32 INR 308.82 INR 400.34
27.6% 44.6% 87.5%

9,389.45 14,084.18 21,126.26

12,186.18 9,924.56 8,983.58

INR 12.19 INR 9.92 INR 8.98
17.5 21.5 23.8

1,000.00 1,000.00 1,000.00

75,571.20 96,159.23 122,848.37
76,571.20 97,159.23 123,848.37
INR 76.57 INR 97.16 INR 123.85
2.8 2.2 1.7

3.5 2.7 2.0

7.8 6.7 5.1
8.9 7.6 5.6
8.6 7.2 5.3
11.5 9.6 7.1
11.9 12.7 11.9

INR - INR - INR -

0.0% 0.0% 0.0%
8.5% 9.6% 12.5%
5.7% 4.6% 4.2%

4.00 4.00 4.00

93,614.23 104,975.17 134,639.67
208,338.15 198,413.59 189,430.00

2.00 2.00 2.00

53,648.53 59,329.00 74,161.25
208,338.15 198,413.59 189,430.00
Disclaimer

Reports prepared by the Value Hunt Research & Analytics contain selected information and do not purport to be comp
available information and data ("the Information") believed to be accurate and complete. Value Hunt Research & Analytics
to be accurate and complete, nor guarantee its accuracy and completeness. Possible errors or incompleteness of the Inform
liability, neither with regard to indirect nor to direct or consequential damages. All rights reserved.
o not purport to be complete. The reports based on publicly
unt Research & Analytics neither do examine the Information
ompleteness of the Information do not constitute grounds for
.