Rolta India Rs 411.45 PE 23.13

As Indian companies in the services sector move up in value chain more and more companies are expanding outside India. Rolta India is a leading provider and developer of information technology-based geospatial information systems (GIS), engineering design automation solutions and eSecurity services worldwide. Forbes ranked Rolta amongst Asia’s best 200 small and mid-size enterprises with under $1 billion in sales, for the fourth time in the last six years.

Rolta, through its joint venture (JV) Stone & Webster Rolta Ltd, provides comprehensive engineering, procurement and construction management (EPCM) services to meet turnkey projects in power, oil, gas and petrochemical sectors. The company’s JV with French company Thales gives it access it to cutting-edge technologies, systems and solutions. This has pushed Rolta to the leadership position in the Indian market.

Financials

The company’s consolidated revenue for the March quarter was at Rs 185.59 crore as against Rs 141.91 crore in the corresponding quarter of the previous year, a year-on-year (y-o-y) growth of 30.8 per cent. Consolidated revenue for the quarter registered a quarter-on-quarter (q-o-q) growth of 10.4 per cent. Consolidated profit after tax for the quarter ended 31 March 2007 was Rs 45.54 crore, a robust y-o-y growth of 37.9 per cent from Rs 33.03 crore in the corresponding quarter of the previous year. The consolidated net profit for this period grew at 11.2 per cent, over that of the quarter ended 31 December 2006. Consolidated earnings per share for the quarter was Rs 5.70 after considering the dilution of GDR issue, as against Rs 5.20 in the corresponding quarter last year. Consolidated net profit margin improved to 24.5 per cent in the quarter as against 23.3 per cent in the corresponding quarter last year.

Investment rationale

Rolta has put in place a stronger leadership team, added top-class talent across the organisation and has increased focus on delivery, production and support to its customers worldwide. All the subsidiary groups and international operations have been re-grouped and strengthened to ensure delivery of better results.

In the geospatial information systems space the JV with Thales has received approvals have been received from the French and Indian governments. In engineering design automation with multi disciplinary project experience and domain expertise in the refinery, petrochemical and power sectors, the company is uniquely positioned to address the emerging huge demand in India and overseas. It is executing several large projects from petrochemical companies and large refineries apart from providing engineering design services for global projects of Stone & Webster.

In eSolutions services the company is providing game development services in Europe and the US.

The stock has underperformed the Sensex in last five years. But, it has gained over 206 per cent in the last one year against 42 per cent gain registered by the Sensex. This indicates investor interest in the company. Rolta has also consistently given dividends of 30 per cent or above since 2001. The company currently trades at earning multiple of 23. Going forward we believe positive developments in each segment of the company will increase earnings and net margins. The company is also expecting an increase in number of orders, and has inducted more than 200 technical professionals in the last quarter.

(Source: Internet)