Rolta Ltd

CMP: Rs.98.89

Book Value: Rs.148.75

EPS: Rs.30.71

P/E: 3.22

Industry P/E: 19.37

Dividend: 32.50%
Target: Rs.132
Time: 90 days (3 months)

Introduction: Rolta is a leading provider of innovative IT solutions for many vertical segments, including Utilities, Transportation, Process and Power and Financial Services sectors. These enterprise level solutions are built around Rolta's intellectual properties and domain expertize to offer unique business intelligence for effective decision making. Its solution framework includes Rolta Geospatial Fusion, a suite to integrate disparate special  and business data; Rolta Overview, a BI solution for operational excellence; Rolta IPerspective, a unique platform for SOA and Cloud enablement. Rolta's intellectual repository contains cutting edge software for mapping and earth sciences, providing the foundation for defense, and Homeland Security Solutions, including C4ISTAR Information systems, Military Communications, Digital Soldier, and Vehicle Systems. Rolta Ltd is a multinational organisation headquartered in India, which has executed projects in over 40 countries. Rolta Ltd has country wide infrastructure and international subsidiaries across the globe. Forbes Global has ranked Rolta Ltd as the "Best 200 under a Billion" four times in 6 years.

Shareholding Pattern: The promoters hold 41.97 % while the general public holds 56.35%. Among the public FIIs hold 32.83% while DIIs hold 2.5%.  Shareholding belonging to the category "Public" and holding more than 1% of the Total No.of Shares are given below:

(i) Fidelity Puritan Trust - Fidelity Low Prices holds 1.67%

(ii) Merril Lynch Capital Market ESPANA S A holds 1.32 %

(iii) Morgan Stanley Mauritius Company Ltd holds 1.12%

(iv) RBC Global Asset Management Inc A/c Phillips Hager & North Overseas Equity Fund holds 1.08%

(v)  Oreyfus International Funds Inc-Dreyfls Emerging Markets Funds holds 1.77%

(v) TBC Pooled Employee Funds Emerging Markets Equity Funds holds 3.75 %

(vi)  Seligman Global Fund Series Seligman holds 1.56%

(vii) BNY Mellon Emerging Markets Funds holds 1.30%

(viii) Life Insurance Corporation of India holds 2.42%

(ix) Universities Superannuation Scheme Ltd holds 2.58%

(x) Columbia Seligman Communication & Information holds  1.815

(xi) Virginia Retirement System Managed by The holds 1.16%

(xii) Seligman Global Fund Series Seligman holds 1.56%

Financials:

(i) Consolidated Revenue for Q4 FY-11 at Rs. 476.55crores (Rs. 4.77 Billion) against Rs. 412.06 crores (Rs. 4.12 billion) in FY-10, registering a Y-o-Y growth of 15.7% and sequential growth of 3.5%.

Rolta Ltd

(ii) Consolidated EBITDA for Q4 FY-11 at Rs. 193.44 crores (Rs. 1.93 Billion) against Rs. 160.11 crores (Rs.1.60 billion) in FY-10, registering a Y-o-Y growth of 20.8% and sequential growth of 5.6%.

(ii) Consolidated Profit after Tax for Q4 FY-11 at Rs. 88.59 crores (Rs. 0.89 Billion) against Rs. 69.13 crores (Rs. 0.69 Billion) in FY-10, registering a Y-o-Y growth of 28.1% and sequential growth of 5.4%.

(iii) Consolidated Revenue for FY-11 at Rs. 1,805.62 crores (Rs. 18.06 Billion) against Rs. 1,532.67 crores (Rs.15.33 Billion) in FY-10, registering a growth of 17.8%.

(iv) Consolidated EBITDA for FY-11 at Rs. 720.30 crores (Rs. 7.20 Billion) against Rs. 577.03 crores (Rs.5.77 Billion) in FY-10, registering a growth of 24.8%.

The Board has recommended a dividend of Rs. 3.50 per share for FY 2010-2011.

Rolta India Ltd. (Rolta) has delivered a decent set of numbers for Q4FY11 (end June 2011 or in normal way Q1FY12). The total revenues of the company for Q4FY11 came out to be Rs.402.08 Cr as against Rs.342.04 Cr in the same period previous year. The PBDT of the company came out to be Rs. 200.39 in Q4FY11 as against Rs.184,20 Cr in the same period previous year. The net profit for Q4FY11 decreased slightly and came out to be Rs.102.96 Cr as against Rs.103.50 Cr in the same period previous year. The EPS of the company for Q4FY11 (or Q1FY12) came out to be Rs.6.40 as against Rs.6.40 in the same period previous year. However, there is a slight decrease in both operating and net profit margins in Q4FY11 on Q-o-Q basis.

Triggers:

• Rolta’s flagship geospatial segment (EGDS) continues to grow at a healthy pace. The segment grew 5% sequentially. Rolta improved its margins from this segment by nearly 100 bps during the quarter to 53.7%. However, engineering design & automation continued to remain under pressure post the Shaw – Rolta (SWRL) JV exit. While the segment grew 2% sequentially, it declined by 4% on a YoY basis. It is expected that that EDOS will take some time to pickup as Rolta’s employee strength within this segment was reduced substantially once the joint venture ended.
• Rolta’s order-book stood at Rs.20.5 bn (1 bn= 100 Cr) as of date and is 80% executable over FY12. However, the management is cautious about the future given the uncertainty in the global markets. It has guided revenue growth in the range of 13% – 15% and 15% net profit growth in FY12. On the capital expenditure front, the company has guided around INR 2.5 bn. The management expects the company’s effective tax rate to be around 16% -18%. The management has also indicated that number of orders is in the pipe-line with many of them in the advanced stage.
• The IP driven revenues could give margins, the much needed boost as the industry encounters uncertain economic conditions in the coming future. In the coming 3 – 5 year period, revenue from IP business is expected to rise from the current 15% to nearly 25% -30% range.
• Very recently Rolta Ltd announced that Qatar's pubic works authority, Asghal, in partnership with Rolta Ltd has successfully implemented a unique geocentric system for capital project request management "Moazanah". The successful implementation of the project reinforces Rolta Ltd's strong record in providing domain expertise and sophisticated technology solutions to lead and manage innovative large projects.
• Rolta Ltd yesterday, announced the release of Version 3.0 of its flagship product Rolta OneView™ Enterprise Suite for Process Industries including Upstream and Downstream Oil and Gas, Petrochemicals, Chemicals, Power and Metals. Rolta OneView™ is an innovative BI solution with field-proven benefits for plant operators to significantly improve operational efficiencies and reliability. This Suite has been developed by leveraging Rolta’s deep understanding of Process and Power operations coupled with its technology expertise in Business Intelligence and Enterprise Integration. This latest suite features a powerful Universal Connector Framework built on Rolta’s patent-pending iPerspective™ integration suite. One View™ interfaces with all commonly used point-solutions, and has pre-built but extensible Key Performance Indicators, and versatile calculation engines. The Rolta OneView™ solution is available on BI technology platforms from global leaders. According to the management the innovative Rolta OneView solution is gaining rapid acceptance across the globe.
• The Company’s solutions-oriented approach gained further recognition and momentum during the FY11. Through in-house development and strategic acquisitions, Rolta has built a rich repository of Intellectual Property (IP). To build and sustain this IP-driven strategy, the Company has further strengthened its product development and delivery organization, especially by inducting senior and highly skilled staff. During the year, 2010-11, the Company received numerous awards in recognition of its innovative solutions from prestigious industry bodies, such as a “Titan” award from Oracle, the “Award for Excellence in Science, Technology and Technological Innovation” from FICCI, IBM’s “The Great Mind Challenge for Business 2010”, and many more.
• The Company unlocked value by selling its 50% stake in SWRL -- its joint venture with The Shaw Group, Inc., USA, resulting in substantial return on its investment in the venture.
• A top ranked official of the company said, “During the year (FY11—June-to-June), the Company made strategic investments in creating intellectual property through in-house initiatives, coupled with acquisition of best-of-class technologies. This approach is bearing fruit, with the Company now able to offer differentiated solutions that not only command higher value, but also establish a growing base for annuity revenues and improved margins.”
• The Company continues to maintain its leadership in the Indian Defense and Security markets by deploying its expanding range of C4ISTAR solutions, based on Rolta IP, across the country. With a sharp focus on enhancing its state-of-the-art solutions portfolio, the Company has developed and acquired various technologies and Intellectual Property during the year, FY11 (June-to-June). For example, the Company acquired perpetual rights to the complete portfolio of Geo-Imaging technologies, including source code, from various leading vendors, Maritime (coastal) security solutions from Mariner Group of USA, and the full portfolio of software technology for homeland security, public safety and emergency response from ACLS Systems. In addition, Rolta has built and strengthened its partnerships with world-leading defense companies, like Selex (Italy), QiOptiq (UK), Controp (Israel) and Rheinmetall (Germany).
• Rolta earlier announced that it has signed a Strategic Partnership Teaming Agreement with SELEX Communications, a Finmeccanica company, for the Indian Tactical Communication System (TCS) program, in the frame of which the companies will collaborate to provide comprehensive tactical military communications solutions to Indian Army; after meeting the stringent standards of the Indian armed forces under the Government of India’s defense modernization and capacity building programs.. Under this agreement, SELEX Communications will undertake transfer of its state-of-the-art technology for Radio Relay systems, Switching systems and Field Wireless systems etc, to address the TCS program needs. With a high level of Indian content, these sophisticated military communication systems will fulfill the long-standing national need of indigenous technology in this critical area. SELEX Communications’ world-class technology, coupled with Rolta’s deep understanding of Indian defense needs and systems integration expertise, is expected to make the package comprehensive and fully compliant with the demanding performance requirements of Indian TCS program.
• With its ever increasing capabilities, including a strong track-record, cutting-edge technologies, world-class partners and tremendous domain expertise, Rolta is very well positioned to address the large, multi-billion dollar, Defense and Security modernization programs, like Tactical Communication Systems, Battlefield Management Systems, Digital Soldier, Vehicle Systems, Crime & Criminal Tracking Network Systems, etc. In fact, the Company has already been selected or is one of the select few shortlisted for final consideration, in some of these programs, which have come to an advanced stage.
• In the commercial and government GIS space, the Company has had significant success worldwide. The Company’s BI and enterprise integration suite, Geospatial Fusion™ has been received very well in the developed markets. The Company added to its high-end consulting and systems integration credentials in the areas of Electric Utilities, Telecom, Water and Gas through induction of subject-matter experts and industry specialists. Rolta is continually adding functionality and features to the Geospatial Fusion™ suite to address new verticals, and offer greater breadth; for example the OneView Mobile solution for integrated field operations for Utilities. At the same time, Rolta continues to win large orders for solutions and services in its traditional areas of mapping and earth sciences in the developing/emerging markets.
• The Company signed a formal MOU with Central Board of Secondary Education (CBSE) for vocational courses on Geospatial Technology. Under this MOU, Rolta will provide technical assistance to create the curriculum and impart advanced training to CBSE teachers. Rolta will provide “Rolta Geomatica”, its premier geospatial software, to 11000 CBSE Schools.
• The Company today addresses the large on-going Business Intelligence (BI) requirements of operating plants with Rolta OneView™ – a set of solutions built by leveraging Rolta’s domain expertise in engineering and BI. This solution has evolved beyond its initial focus on the downstream Oil & Gas segment to now also address the BI needs of upstream operations and petrochemical plants. With successful deployments in these segments, OneView™ has matured with significant traction world-wide. The Company is building new functionality into OneView™ to not only offer broader coverage within these segments, but also to expand the offerings into new high-growth segments such as Utilities and Power.
• Rolta continues to strengthen and build its EITS portfolio and capabilities to focus on high-end solutions in Cloud Computing, EAI, SOA, Data Integration and Business Intelligence. The division is focused on developing and upgrading the Company’s IP to enhance the value proposition to customers, and strengthening Rolta’s standing in the market by offering unique technological approaches. For example, Rolta’s iPerspective™, an innovative enterprise-level suite of software is at the heart of a sophisticated solution being built for a government agency for setting up a highly secure and flexible “Private Cloud Computing” environment, a project won against competition from leading global IT vendors. During the year (FY11, June-to-June), EITS won large and prestigious orders for solutions and services world-wide, especially by taking its offerings to Rolta’s customers in geospatial and engineering segments.
• About 55% of the revenue derives from the services rendered in India and about 32% of the revenue comes from North America and 13% comes from Europe. This enables Rolta to participate in India's growth story and mitigate currency Risks. In India, the Company provides Geo-spatial services to the nodal agencies like Ministry of Defence, Survey of India, Airport Authorities and other government nodal agencies. This has provided safety band to the company’s revenue against any economic slowdown.
• Rolta has an Impressive clients list: British Telecom (UK), Dubai Municipality (UAE), Saudi Telecom (Saudi Arabia), Ministry of Defence (India), Verizon (USA), Qwest (USA), TELUS (Canada), IBM (USA), MTNL, BEST, CESC Ltd. Reliance Inds (India), Indian Oil , ONGC, Bechtel (UK), DPS Bristol (UK), Pfizer (UK), Saudi Aramco (Saudi Arabia), Dow Chemical (USA), NANA/Colt (USA), 3M (USA), Siemens, Samsung, Reliance Industries, BHEL, Essar. HSBC (UK), SITA (UK), AXA (UK), MasterCard (USA), Citigroup Technology (USA), FEDEX (USA), Raymond James (USA), HP, Deloitte, HDFC Bank, Larsen & Turbo.
• Rolta enjoys long-term relationships with its customers. Many have been with the company for over two decades. Not only have these customers given repeat business year after year, they have also served as excellent reference sites for new business, by being extremely appreciative of products and services provided by Rolta. All the major clients in the refining, power and Oil & Gas sectors continue to make huge investments to fill the demand-supply gap. The fact that most of the clients are government organizations which brings the confidence about the inflow of revenue.

Conclusion: From the charts it is seen that the scrip is about to give a decisive break out, the other parameters are more or less in the buy mode. The demand for GIS application is growing at the faster pace. The requirement of better planning- better security, has made the use of GIS a necessary tool these days. The GIS application also helps to tackle the problems like terrorist attacks which is now major problem all over the world. Rolta enjoys strong leadership in GIS segment with the market share of over 70% in India and is well placed to grab a large chunk of various GIS requirements in the future. Rolta's delivery centre in Mumbai is one of the largest GIS facilities of its kind, with a highly skilled and dedicated team of 2,067 technical professionals working on GIS projects. It is one of the leading providers of Geospatial services and photogrammetric mapping for the segments such as Infrastructure, Telecom, Electric, Airports, Urban Development, Town planning and Environmental Protection.
Now, with the company’s strong order-book, dominant position in the geospatial imaging space and increasing IP driven business, Impressive client base, and De-risk business model, Experience of more than two decades in Indian Defense force (Indian Defense is expected to do the capex of Rs.100 bn for expenditure on IT), in depth Domain Knowledge, Positive outlook about the Industry,  Rolta Ltd at the CMP of Rs.98.89 is available at cheap valuations relative to its peers. The stock should be bought at the current market price, to get steady returns going forward; please keep a SL of Rs.91.70. It is a must for every portfolio.