EQUITY RESEARCH - ELECTRONIC SOFTWARE EQUIPMENT 22nd December 2005

INTELLVISIONS SOFTWARE LTD. BUY:- RS.106

I NITIATING C OVERAGE A PEL@INAPLE .BO
Target:- Rs 195
Purvesh Shelatkar/Subhadip Mitra
purvesh.shelatkar@utisel.com/subhadip.mitra@utisel.com
Innovative Automation Initiative... (91 22) 5551 5912/ 5551 5938

INTELLVISIONS SOFTWARE Ltd. was incorporated in 1995 and Market Cap (mn) Rs 620/$13.5 52 week High 107.4
has since inception been involved in creating dynamic and Issued Shares (mn) 5.8 52 week Low 8.9
innovative products to service the automation & network Avg. Daily Volume (nos) 21925 BSE/NSE Code 531777
BSE Sensex 9394
requirements of Telecom & Banking industries with a wide
range of products. The company specializes in developing
Price Performance (%) 1mth 3mth 12mth
and manufacturing Self-Service Terminals, Bill Payment
Intellvisions Software Ltd. 13.1 10.5 850.0
machines, ATM Surveillance Solutions and a comprehensive BSE Sensex 9.2 12.0 44.9
suite of Network Appliances. (Rs mn)

Year end Mar 2004 2005 2006P 2007P 2008P

• Telecom segment to drive future growth Net Revenues 41.3 53.3 102.6 255.8 447.6
The company has a 4 month order book of Rs. 40 mn from Net Profit 2.2 0.7 28.0 76.3 138.1
various banks and telecom companies for supplying the Bill EPS (Rs) 0.4 0.1 4.8 10.8 19.5
Cash EPS (Rs) 0.7 0.3 4.9 10.9 19.6
Payment Terminal & ATM Surveillance System. Teledensity in
P/E (x) 265 106 22 9.8 5.4
the country is increasing fast with nearly 2mn subscribers ROCE (%) 0.0 0.0 0.3 0.4 0.5
getting added every month. This is expected to increase the ROE (%) 0.0 0.0 0.3 0.4 0.5
telecom base to over 250 mn by 2008. Besides almost 4700 P/BV (x) 8.8 8.7 3.5 2.1 1.5
EV 481.0 480.3 471.8 514.1 567.3
cheques are handled by telecom collection centres every day, EV/EBIDTA (x) 145.0 243.1 11.0 4.4 2.7
which in due course will make manual handling virtually EV/Sales (x) 11.7 9.0 4.6 2.0 1.3
impossible. EBITDA 3.3 2.0 42.9 116.5 210.1
Source : Company reports / UTISEC estimates
• Revenue from Banking products set to jump Shareholding Pattern
Intellvisions has developed Cheque deposit machines,Q FY 05 FY06 (Projected)
manager, Versa Banker & ATM Surveillance, which we expect Promoter
Promoters
would be highly useful in the fast growing automated world. s
40%
42%
Subsequent to the successful testing of its ATM Surveillance
Systems,Cheque Deposit Machine & Digital Video Recording, FII
FII
the company is negotiating with leading private sector & psu Indian
15% Indian
24%
Public Pvt. Corp.
banks for supply of ATM Surveillance Sytems.The potential is 31% NRI/OCB Pvt. Corp. Public
NRI/OCB Bodies
Bodies 26%
huge with more than 19000 ATMs to be covered under ATM 0%
12%
0% 10%

Surveillance. Source : Company reports

• Valuation BSE share relative

The stock is trading at a multiple of 9.8x and 5.4x FY07P and
1200 Intellvision
FY08P earnings respectively. With continuous innovations and
1000
development of new products, we expect the demands for its 800
products to rise thereby augmenting its revenues. We initiate (Rs)
600
400
coverage on the stock with a BUY rating and a medium term Sensex
200
target of Rs 195, based on P/E valuation. 0
May-05
Feb-05

Jul-05
Jan-05

Jun-05
Dec-04

Aug-05

Sep-05

Nov-05

Dec-05
Apr-05

Source : BSE website

Please see back cover for disclaimer

 Intellvisions Software Ltd.- 22nd December 2005

Investment Rationale
Intellvisions is expected to show double digit growth in revenues as well as net profits for
the next 2-3 years on account of its shift from traditional products to technologically high
end products with higher margins.
Strengthening market presence: The company is already executing orders for ATM
Surveillance Systems & Bill Payment Terminals and is servicing the top banking & telecom
Bill Payment Terminal,
ATM Surveillance & companies in the country. Its customers in the banking segment include marquee names
Cheque Deposit like ICICI Bank, CITI Bank, HSBC, SBI, PNB, UTI Bank & those in the telecom segment
Machines to drive future include Hutch, Airtel and Idea.
Growth Rapid growth in telecom: The month of November 2005 saw an addition of 23 mn new
connections in the Telecom sector. As per the telecom policy, it is expected to touch 250
mn customers by 2008 from present base of 50 mn customers. Further this will also increase
the daily work load faced by the bill collection centres. On an average, total telecom
collection centres receive payments for over 4700 bills in cheques/cash per day, which is
likely to go up massively in the near future as per projected growth in the number of
connections. This makes the automation in bill payment /collection a necessity. We expect
Intellvisions shifting this to propel the demand for companies products. Intellvision’s price for the basic product
from low margins to in this category(bill payment)is around Rs1.85 lakhs per machine, however the cost of fully
high margin business integrated machines(those accepting cheque,cash & credit cards)could go upto Rs.3.5
lakhs.
ATM Surveillance tobe mandatory: As per International regulations as well as RBI guidelines
all ATM centres need to have electronic surveillance,but in India very few banks are curently
following this guideline. Moreover tightening of the norms augurs well for the company as
it is one of the leading surveillance solution providers. The cost is around Rs.65000 per
machine. One of the leading private sector banks has woken up to this fact and Intellvision
got its first ever large order for 1810 ATM Surveillance Systems. These systems, where the
company enjoys a near monopoly, is expected to be one of it’s major revenue drivers.
Market acceptance: Its other banking products like Q- Manager, Cheque/Cash Deposit
Machine, Digital Video Surveillance Systems have just begun to gain acceptability in banks
after almost 2 years of testing, which is reflected in the order book. Also, the company
stands to gain from the annual maintenance contracts, where margins are expected to be
higher.
T+ 0 Settlement: The Cheque Deposit Machines could be a revolutionary product as the
RBI goes ahead with the T+0 settlement cycle for cheque clearance. Asthe RTGS(Real Time
Gross Settlement) system has already spread across more than 7000 branches the T+0
settlement seems like a reality by April 2006. Thus in order to handle the daily cheque
collection of over 2.7 crore cheques, this machine will become a must for the entire banking
system. Further, the flexibility of depositing the cheque anywhere and anytime will be a
major benefit for banks & it’s customers,which will be a revenue driving force for the
company.

EVA (Rs mn)

120
100
80
EVA growth to continue
60
in the future
40
20
0
-20 2004 2005 2006P 2007P 2008P
Source : UTISEC Research

2 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd December 2005

EVA: The company had a negative EVA of Rs. 7.2 mn for FY05, which it is expected to turn
positive for FY 06. The lower EVA can also be attributed to the fact that the company’s spendings
Company does not in the past have been majorly towards R&D.
have any major debt Low debt burden: The company presently does not have any major debt and hence has a very
on its balance sheet low interest cost. Further, it has recently raised Rs81.3 mn by way of shares & warrants issued
to investors as well as promoters which will enable it to take care of its working capital
requirement for the next few years.

SWOT Analysis
Strengths Weaknesses
Company has 3 IPR’s • Strong innovative Technology Driven • The company lacks visibility in the market.
registered for its products with 3 IPR’s. • It is struggling to get a foothold in this
products • Bills Payment Terminals/ Cheque Deposit segment for the last 3 years. As it deals with
Machine to contribute substantially to the security systems, any adverse development
revenues. can jeopardise all its future growth plans.
• Strong entry barriers ensure lead time of
around 2 years for any new players.
Opportunities Threats
• Potential demand for ATMs/ Cheque Deposit • Larger players like NCR may pose a serious
Machines/ Bill Payment Terminal. threat in the banking automation sector. The
• Huge growth in telecom will provide telecom opportunity although very huge can
opportunities for a techno base products attract bigger players to enter this segment.
company like Intellivisions. • Innovative technologies such as quick touch
Lead time of 2 years / biometrics transaction processing pose a
for any new player to threat.
get established in Cost Advantage due to Automation :- The savings on account of the deployment of machine
this segment is the
can be seen from the table below. Here the per shift cost of human labour is equated with the
major entry barrier
machine cost, amounting to substantial savings.

COST OF MACHINE
Details (Amt in Rs.)
Bills payment terminal 185000
Bills payment terminal(cash+cheque+card) 350000
The machine has a low maintainnance contract rate of just 5-10% this effectively means the cost
of machine is far cheaper than manual labour with no time limit involving as barrier.
SAVINGS
If we presume a machine life of 4-5 years
Due to automation
Cost per machine 350,000
their is a tremedous
Maintenance cost per year (assumed to be 10%) 35,000
cost advantage to
Maintenance cost for 5 years 175,000
the company
Total cost of machine (A) 525,000
Total cost on manual for 5 years for 1 Shift
Cost of Employee per month 9000
per year 108000
(B) For 5 years 540000
Savings : per machine (A-B) per shift 15,000
Savings : If 100 machines installed (Considering 2 shifts) 55,500,000

We have considered both 1 & 2 shifts because, as per industry standards private sector banks
normally have 2 shifts while public sector banks have 1 shift.

3 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd December 2005

Potential growth in sales

Following table indicates the price per machine and the potential sales volume growth.
Price per machine 2006 POTENTIAL
Orders in Amt. Potential Amt.
Hand (in Rs. mn) Order (in Rs. mn)
ATM Surveillance 56,000 1,200 67.2 4110 230.2
Cheque Deposit Machine 125,000 100 12.5 -
Bill Payment Terminal 185,000 100 18.5 -
Q-Manager 75,000 55 4.1 -
Digital Video Survillance 56,000 - - -
I-Serve Terminal 300,000 - -
Self Banking Terminal 350,000 - -
bill payment terminal 350,000 - -
bill payment terminal
(cash+cheque+cc) RENTED 420,000 - 3000 1,260.0
Utility Bills Payment Terminal 350,000 - 4000 1,400.0
Huge growth potential
Total 102.3 2,890.2
in telecom, utility and
Source : UTISEC Research
banking segment
We have presumed only 1200 ATM Surveillance Systems for FY06 in our projections. The
Optimistic Scenario is projected on the basis of 3 potential major orders from, a leading
Bank, Telecom operator & Utility company which are being negotiated as of date.

ATMs - Bank Group wise Share

On-site Off-site Total ATMs

45
40
35
Percent

30
25
20
15
10
5
0
Nationalised Banks State Bank Group Old Pvt. Sector New Pvt. Sector Foreign Banks
Banks Banks
Source: RBI Report on Trend and Progress of Banking in India, 2004-2005
As per the RBI report on trend and progress of Banking in India, there were 17,642 ATMs in
the country as on March 2005. Presently the same number has risen to around 19,000
ATMs. Further the branch network as of March 2005 stood at 53,726. This leaves tremendous
scope for products like ATM & Branch Surveillance Systems, Cheque /Cash Deposit Terminals
in the banking sector (especially in the urban branches and ATMs).
Rural Semi-Urban Urban Metro Politan
90.0
80.0
70.0
60.0
Percent

50.0
40.0
30.0
20.0
10.0
0.0
Nationalised State Bank Group Old Pvt. Sector New Pvt. Sector Foreign Banks
Banks Banks Banks
Source: RBI Report on Trend and Progress of Banking in India, 2004-2005
The above table shows the segmentwise details about the branch networking. Here the
point to be noted is the number of Urban branches are a little over 11000, which will be
covered under Branch Surveillance in due course.

4 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd December 2005

COMPANY BACKGROUND
Intellvision Software Ltd being incorporated in 1995,has been serving the market with a
wide range of electronic software based products since inception. The company specializes
in developing and manufacturing Self-Service Terminals, Bill Payment Terminals,ATM
Surveillance Solutions and a comprehensive suite of Network Appliances for Banking as
well as Telecom Sector. The company has recently started getting recognition for the quality
of its products. It entered the field of Professional Services starting with the Banking and
the Telecom Industry, focusing on developing embedded system software. Almost 40% of
its employees are involved in software development and rest are in support functions.The
current employee strength of the company is around 62 ,majority of whom are engineers.

Management
Mr. S. Nair : Managing Director of the company is a former Banker.He has worked extensively
in the Financial Sector, Advertising, Manufacturing and Retail Sector before establishing
Intellvisions Software Limited. Mr. Nair is a gold medalist in Economics with a Masters
Company mangement Degree in Marketing. He also serves as a director in various Manufacturing and International
specialises in businesses.
technology related to
banking & software Mr. Raj Menon : Co-founder/Chief Software Product Designer had started his career in the
ERP business before he co-founded the company. He spearheads all the technological
initiatives of the company. He holds a Masters Degree in Computer Applications.

Mr. Paresh Patel: Executive Director had commenced his career in one of India’s leading
Engineering Design Consultancies. He holds a degree in Engineering and a Masters in
Management.

Products
Banking Automation/ Telecom Automation
The Banking Automation Division of company is operational since 2000 and has introduced
several user friendly machines having multiple applications in the banking industry. The
Company specialises in R&D group constantly scans the rapidly changing technology requirements and develop
Embedded software suitable end-to-end solutions. It has developed Self Service terminals, MICR Cheque
and technology driven Processing solutions. The latest offering by the company is a digital Image enabled Cheque
banking and telecom Processing solution. Various banking products supplied by it are:
ATM Surveillance Self Service Terminals Q-Managers Bill Payment Terminals
instruments
Digital Video Surveillance MICR Readers Quick Pay Versa Banker

ATM Surveillance- This machine is also called I-watch. Built on embedded digital
architecture, it provides full motion, real time, broadcast of quality images. It can be
activated on motion or event based recording. It can be connected from anywhere in the
world through remote control via internet and has multiple levels of password protection &
biometrics access control. It also has an alarm notification through E-mail, page, phone or
fax. The company enjoys near monopoly in this product. It is normally sold in a set of 7
connected cameras at a cost of Rs 65000 per machine. The same machine can also be
Company has a converted into a branch surveillance system (whose cost ranges between Rs 1.5 - Rs 5.0
monopoly in ATM lakhs).
Surveillance machines.
Cheque/Cash Deposit Machines - The company has also developed digital cheque/cash
deposit machines, which would substantially reduce the clearance time for domestic as
well as outstation cheques. The time taken by conventional cheque clearing systems is

5 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd
14 December 2005

around 3 working days, whereas this machine will reduce the entire manual process of
cheque clearing /collection to a few minutes. The moment a cheque is deposited in the
machine it’s digital image is created and transmitted to RBI, through which it is routed to
Bills Payment Terminal the issuing bank which in turn will clear the same. The next instant, funds transfer would
is useful for Telecom & take place in the reverse order and the customer’s account would get credited in a matter
Utility companies in of minutes. In the process the only time taken will be for the signature verification which
urban as well as rural may involve manual intervention. This is one of the major innovations and key drivers for
areas the future growth of the company.

Q-Manager - This machine is very useful in the retail banking segment. It tracks the time
taken by the bank (i.e. by it’s employees) in servicing it’s customers highlighting any
scope for improving efficiency. This helps in reducing the time taken by a bank for processing
any transaction substantially.
A leading private sector bank has very successfully implemented this machine and reaped
benefits from its use. Judging the pace of growth in the retail banking industry, this
machine will become a must for every branch of the bank. India has over 50,000 bank
Q-Manager is CMM branches, which creates a huge potential demand for this product.
Level V category
machine Versa Banker/ Bill Payment Terminal - This machine is primarily for collecting payments
through Cash, Card and Cheques. It is thus useful for utility &telecom bill collections. The
telecom segment is growing at an accelerated rate and is expected to double its subscriber
base in the next 12 months. This will exert pressure on the manual system, which will
automatically make these cost & time efficient machines a necessity for all the players.

Product Patents
The company has patented 3 of its products. These are basically product patents and the
cost incurred on each patent is almost Rs. 5 lakh.

Revenue Model
During the year 2004-05, a major chunk of Intellivision’s revenues comprised of sales of
various embedded software based products. However, the quantum of sale was very low as
Company will have
many bankers/telecom operators purchased the products mostly on trial basis. Now as the
revenue shift from large
company’s products have gained acceptance in the market, we expect, it to do well in
orders
these high margin products : Cheque Deposit Machines, Bills Payment Terminal and Low
Cost ATMs. These products are now expected to contribute to the revenues & profitability
to a large extent and eventually become key growth drivers for the company.

Competitors
The company faces competition from organised players (like NCR, HCL Peripherals, Diebold
& Aplab), while competition from the unorganized sector is non existant. Intellivisions
products are of such a nature that they get recognition in the market only after careful
scrutiny and successful implementation over the years. This is exactly the reason, why
Business is highly brand
unorganised players stay away from these businesses due to high gestation period. Even
driven hence no
an organised player like NCR, is able to maintain it’s majority market share (currently
competition from
95%) due to high market recognition and customer confidence.However Intellvisions enjoys
unorganised sector
an advantage over NCR in terms of cost effectiveness. We feel company will be able to bag
a reasonable share of this fast growing market on account of its superiority in quality of
service delivered and market acceptability of it’s products, which it has earned in the
recent past ,as is evident from the order book.

6 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd December 2005

Research & Development

Intellivision’s core strength lies in developing innovative products at a low cost. It has
successfully delivered various made to order machines to various banks in the past.

Future Growth Drivers

New Business Area
The company is planning to tap the Aviation Industry, Utility & Government companies in
a big way. It has developed and supplied one machine to Jet Airways for Ticket Booking
Airlines &
Government will and is hopeful of supplying more in the near future.
drive future growth It is also in advanced stages of negotiation with organisations like MSEB for supplying
made to order machines for the purpose of bill collection. On an average 6000 bills are
handled by any collection centre of MSEB per day. This volume is likely to go up in future,
therefore the automatic bill payment terminal is a must for such an organisation. We feel
company would do well in procuring large orders from such big players.

Exports
Company presently is making an attempt to sell its products in the export market. In this
regard,it is participating in various trade fairs organised by various countries. It has
recently formed a consortium with National Bank of Kuwait, Baharin Telecom & Al-Ghanian
Company is planning group of Kuwait for marketing its product abroad. It is expecting to export atleast 50-100
to tap export markets machines to Kuwait in FY06. It is also attempting to export its products to countries like
which has a huge
South Africa, Lebnon & Mauritius. Normally 45 days is the time taken by the company for
potential
fulfilling any order in the Domestic as well as Export market.

Pay Per Use (PPU)

Company is also evaluating the option of Pay per User model (PPU) vis a vis conventional
outright sale. The PPU model is suitable for the company as it normally recovers its cost
within 15-18 months of operation. The normal terms are Rs 30,000 p.m. + 2% of the
collections. In this model, from the third year onwards the company has an opportunity of
making supernatural profits(even if we consider fixed rentals of Rs30,000 only).
Customers prefer this model where the machine may be required for a short period of
time.This option also gives them some time in trying out the products . In case of SBI,
which is a leading PSU bank more than 75% (In FY05 60%) of the transactions in the current
Renting Machines on financial year would be routed through automatic machines. This will allow company to
pay per user basis will rake in higher revenue in the times to come.
improve revenue
substantially. Potential Revenue under Pay Per Use System
Amt collected at PPU rentals (Amt in Rs.) Amt in Rs Crores
Average Bill amount collected per person 300
No of bills collected per day per machine 470
Total amount collected 141000
Charges @2% per day collection 2820
Charges in a month 84600
Collection in a year 1015200 0.1
If 100 machines are rented on PPU 101520000 10.2
Fixed cost per machine per month 35000
Fixed cost per machine per year 420000

7 UTISEC - Equity Research

 Intellvisions Software Ltd.- 22nd December 2005

Potential Growth in Telecom Sector

Company hopes to cash-in on the rapidly growing telecom demand. Telecom sector is likely
to grow at an accelerated rate as per projections made by the TRAI & Telecom Ministry.
From monthly new-subscribers additions of around 2 mn, it is expected to reach a level of
Large number of biIl around 4 mn per month. If the growth is sustained at projected levels ,it will result in
Payment Terminal/ extreme load on the existing manual system of bill collections.Globally around 46% of
Cheque Deposit Machine/ subscriber base is presently made up of post-paid connections. In India over 20 mn of the
ATMs to be set up in the subscribers are having post-paid connections, where company’s products are a requirement.
next 2-3 years This will immediately boost demand for company’s products.
no. of subscriber( in Mn)
30

20

10

0
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007
Source: Trai website
2004-05 Banking sector will also be a major revenue driver once Cheque Truncation System
becomes a reality. Here the digital copy of cheque will be presentated for clearance, which
Electronic will reduce the manual intervention of collecting and presenting the cheque to RBI. The
28%
human error of posting , time taken for physically carring the cheque will also be reduced.
The cheque 21 as it is called in US, will facilitate the T+0 settlement for the entire banking
system. Company’s products like Cheque Deposit Machine will continue be the major
Paper-based revenue earner as paper based system still accounts for 72% of clearing transaction. The
72%
importance can be derived from the fact that daily around 3.6 mn cheques are presented
Source: RBI Report on Trend and for clearing.
Progress of Banking in India, 04-05
Interim Results
Paper-based versus (Rs.mn)
Electronic Transatctions- Year end 31st March 2QFY06 1QFY06 4QFY05 3QFY05 2QFY05
Relative Flows (Value) Net Sales 19.6 9.3 27.7 12.0 7.4
% Growth 111.8 -66.6 130.4 62.5
Operating & other Exp. 16.6 9.0 24.9 12.2 7.4
Other Income 0.1 0.2 0.1 0.1 0.0
EBIDTA 3.1 0.5 2.8 -0.1 0.0
% Growth 505.9 -82.0 -3637.5 -260.0
Depreciation 0.2 0.2 0.2 0.2 0.2
Total Interest 0.0 0.0 0.0 0.0 0.0
PBT 2.9 0.4 2.6 -0.3 -0.2
Growth registered since % Growth 708.3 -86.2 -941.9 72.2
Taxes 0.9 0.1 0.4 0.0 0.0
last quarter is expected
PAT 2.0 0.3 2.2 -0.3 -0.2
to continue in future % Growth 680.8 -88.3 -816.1 72.2
EPS (Rs) 0.4 0.1 0.4 -0.1 0.0
no. of shares ( in mn) 5.0 5.0 5.0 5.0 5.0
Source: Comapny Reports/UTISEC Estimates

The revenues of company has shown a decent increase of 265% for the quarter ending
September 2005 as compared to the quarter ending Sept. 2004. Revenues were higher by
112% QoQ due to implementation of telecom and banking orders. The company has already
received orders for its Bills payment terminal, Q-Manager, Cheque Deposit Machines and
ATMs. Its current order book is around Rs 40 mn & a few more orders are expected during
the year. The impact of this will be visible in 3rd and 4th quarter of FY06. We believe that
the company will register a strong growth in the second half of FY06 as orders for supplying
various machines would add to the topline & bottomline

8 UTISEC - Equity Research

 Share of Net Revenues (FY05) Income Statement
Year end 31st March (Rs mn) 2004 2005 2006P 2007P 2008P
Operating Net Sales 41.2 53.1 102.3 255.8 447.6
Other Exp Profit Other Income 0.1 0.2 0.3 0.0 0.0
4% Raw Materials
1% Total Expenses 38.0 51.3 59.8 139.2 237.4
51%
EBIDTA 3.3 2.0 42.9 116.5 210.1
Depreciation 1.0 0.8 0.6 0.8 0.9
Total Interest 0.0 0.1 0.1 0.1 0.0
Staff Cost
PBT 2.3 1.1 42.2 115.7 209.2
44%
Taxes 0.3 0.3 14.2 39.3 71.1
PAT 2.0 0.8 28.0 76.3 138.1
Operating Profit 4.0 1.8 42.6 116.5 210.1
Balance Sheet
Year end 31st March (Rs mn) 2004 2005 2006P 2007P 2008P
Equity Capital 50.0 50.0 58.6 70.8 70.8
Share Application Money 0.0 0.0 0.0 0.0 0.0
Preference Capital 0.0 0.0 0.0 0.0 0.0
Net Revenue & Adj. PAT
Fully Conv. Warrants(12mn) 0.0 0.0 12.2 0.0 0.0
Net Revenue PAT Share Premium 0.0 0.0 60.6 149.1 149.1
500 160 Reserves & Surplus 4.3 5.0 30.0 100.7 231.7
140 Total Loans 0.4 0.3 0.3 0.0 0.0
Net Revenue (Rs mn)

Adj. PAT (Rs mn)

400 Other liab.(deffered tax liab.) 0.0 0.1 0.0 0.0 0.0
120
Total Liabilities 54.7 55.3 161.6 320.6 451.6
300 100
Net Fixed Assets + Cap. WIP 3.6 2.5 3.8 5.3 7.0
80 Total Investments 12.8 10.2 10.2 10.2 10.2
200 60 Sundry Debtors 6.4 13.6 26.3 65.9 115.3
40 Cash & Bank Balance 3.4 4.5 98.7 215.3 293.1
100 Other Current Assets 29.5 28.0 25.7 32.7 41.4
20
Total Current Liab.& prov. 0.9 3.6 3.1 8.8 15.5
0 0
Net Current Assets 38.3 42.6 147.6 305.1 434.3
2006P

2007P

2008P
2004

2005

Miscellaneous Expenses 0.0 0.0 0.0 0.0 0.0

Total Assets 54.7 55.3 161.6 320.6 451.6
Cash Flows
Margin Trend (%) Year end 31st March (Rs mn) 2004 2005 2006P 2007P 2008P
Profit before Tax 2.1 0.8 42.2 115.7 209.2
EBIDTA Margin Net Margin Depreciation 1.0 0.8 0.6 0.8 0.9
non operating income 0.0 0.0 0.0 0.0 0.0
100% non operating exp 0.8 0.0 0.0 0.0 0.0
tax paid 0.0 0.0 14.3 39.3 71.1
50% Net Change in WC -3.1 -3.1 -10.9 -40.8 -51.5
Cash from operating activities 0.8 -1.5 17.6 36.3 87.5
Cash from operating activities
0% (after adj. Dividend received) 0.8 -1.5 17.6 36.3 87.5
2004

2005

Change in Fixed Assets 0.5 -0.3 1.9 2.3 2.7

2006P

2007P

2008P

Change in Investments 2.5 -2.5 0.0 0.0 0.0

Income/Int.from Subsidiaries 0.0
Cash from Investing Activities -3.0 2.8 -1.9 -2.3 -2.7
Share Cap. Raised/ Redeemed -0.1 0.0 81.3 88.6 0.0
Loans Raised/(Paid) 0.4 -0.2 0.0 -0.3 0.0
ROE & ROCE (%)
Dividends Paid 0.0 0.0 2.9 5.7 7.1
ROE ROCE Cash from Financing Act. 0.4 -0.2 78.4 82.6 -7.1
0.50 Chg. in Cash & Cash Equi. -1.9 1.2 94.1 116.7 77.8
Ratio Analysis
0.40
Year end 31st March 2004 2005 2006P 2007P 2008P
0.30 Operating margin 9.7% 3.3% 41.6% 45.6% 47.0%
0.20 PBT margin 5.6% 2.1% 41.2% 45.2% 46.7%
PAT margin 4.9% 1.5% 27.3% 29.9% 30.9%
0.10
DPS (Rs) 0.00 0.00 0.00 0.50 0.80
0.00 Cash EPS (Rs) 0.7 0.3 4.9 10.9 19.6
Book Value (Rs) 10.9 11.0 27.5 45.3 63.8
2006P

2007P

2008P
2004

2005

Gearing 0.8% 0.5% 0.2% 0.0% 0.0%

Charts end at prior week’s closing price unless specified otherwise Source: Company Reports/UTISEC Estimates
DCF Valuation

Rs mn 2006P 2007P 2008P 2009P 2010P

PAT 28.0 76.3 138.1 246.9 373.8
Depreciation 0.6 0.8 0.9 1.2 1.5
Capex 1.9 2.3 2.7 3.2 3.9
Change in NWC 10.9 40.8 51.5 91.7 107.4
FCF 15.8 34.0 84.8 153.2 264.0
Terminal Value 3268.9
Discounted Value 14.1 26.9 59.7 96.0 1969.4
Total PV 2166.2
DCF valuation per share
Total PV of CF from above table 2166.2
Less:Present Debt 0.3
Sharehoders value 2165.9
Value per share 369.5

ANALYST STOCK RATINGS

Rating Indicative Absolute Price Returns

Buy Estimated upside of 20% from the current price level
Market Outperformer Estimated upside of 10%-20% from the current price level
Market Performer Estimated to move in-line with market with movements of +/- 10% from the current level
Market Underperformer Estimated downside of 10%-20% from the current price level
Sell Estimated downside of 20% from the current price level
• The above rating structure is based on our 12-month view of expected price performance. Short term fluctuations need not
necessarily reflect these medium to long term expectations
• The market price targets are dependent on the analyst’s subjective assessment of the company’s fundamentals and future outlook.
Investors must bear in mind that stock prices are impacted by both systemic as well as stock specific risks.

Institutional Desk Tel No. (022) 5551 5999 Fax : (022) 5551 5998 Tel No. (Direct)
Milind Pradhan Head of Equities pradhan@utisel.com (022) 2658 0701
Nikhil Thacker Head of Research nikhil.thacker@utisel.com (022) 5551 5917
Equity Research
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Komal Iyer Auto & Auto Ancillaries komal@utisel.com (022) 5551 5914
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Akshit Shah Information Technology akshit.s@utisel.com (022) 5551 5939
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Padmaja Ambekar Production padmaja@utisel.com (022) 5551 5915
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Gitu Singh Equity Sales gitu@utisel.com (022) 2658 0702
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Sunil Pandit Equity Sales sunil@utisel.com (022) 2658 0708
Derivatives Desk
Sanjay Singh Head of Derivatives (Institution) sanjay.singh@utisel.com (022) 2658 0706

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