Nu Tek India Ltd


BSE: 533015 | NSE: NUTEK | ISIN: INE318J01027 
Market Cap: [Rs.Cr.] 10 | Face Value: [Rs.] 5
Industry: Telecommunications - Equipment

 Discuss this stock

Management Discussions

Management Discussion and Analysis

OUR ECONOMY

Indian economy grew at 5% in FY 2012-13, compared to 6.2% in the previous year. Thelower growth in FY 201213 was primarily owing to investment and external demandcontraction, private consumption deceleration, global economic slowdown, domesticinfrastructural challenges, and policy uncertainty. The consumption demand was lower owingto high inflation and higher interest rate.

Growth is likely to improve moderately in 2013-14, supported mainly by a pick-up inindustry on the back of consumption demand and some improvement in investment. Themoderation in core inflation and progress on fiscal consolidation have provided enoughheadroom to reduce interest rates and spur economic activity. The Government is alsotaking steps to control the fiscal deficit for the current year. Such measures wouldrestore confidence in India 's macro-economy policy. The IMF 's growth forecast for Indiain 2013 is 5.7%. Upside risks persist with recent rupee depreciation and rise in crudeprices amidst political uncertainties in the Middle East may keep the pace of recoverylow.

(Source: Macroeconomic and Monetary Developments by RBI; Central StatisticalOrganisation)

INDIAN TELECOM INDUSTRY

CURRENT SCENARIO

As at 31-Mar Rs. 2013, India 's telecom subscriber base was 898 million, down from 951million on 31-Mar Rs. 2012. The subscriber base touched a high of 965.5 million in June2012, and has been shrinking steadily thereafter.

Growth of Subscriber base

The Telecom Subscriber base growth during the financial year 2012-13 is given below:

(subscribers in Million) As on 31.03.2013 As on 31.03.2012 % change
Wireless 867.8 919.17 (5.59)%
Wireline 30.21 32.17 (6.09)%
Total 898.02 951.34 (5.61)%

Growth in Tele-density

The overall tele-density reached 73.32% at the end of March 2013, as against 78.66% inMarch 2012. Clearly overall growth in Tele-Density has decreased due. Despite theimpressive overall growth in the telecom sector in previous years, the rural tele-densityin India is quite low as compared to urban tele-density. The following table depicts thepenetration of telecom services in rural & urban areas in the country:

Tele-density as of Rural (%) Urban (%) Overall (%)
Mar-12 39.22 169.55 78.66
Mar-13 41.02 146.96 73.32

Minutes of Usage ("MoU")

GSM average MoU per subscriber per month has shown increase of 10.62% YoY (MoU in March2013 was 383 minutes compared to 346 minutes in March 2012) after series of steadydeclines from a base of 496 minutes per month per subscriber for the quarter endedDecember 31, 2008 to 332 minutes per month per subscriber for the quarter ended December31, 2011. Similarly, CDMA MoU increased to 275 minutes for March-2013 quarter compared to230 minutes in December-2012 quarter. The table below indicates that MoU is onto anincreasing path now after a series of decrease during the last few years.

Total MoU/subs./month (minutes) Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Mar-13
GSM 496 411 360 332 359 383
CDMA 371 318 270 226 230 275

Note: Quarterly data Source: TRAI

Average Revenue Per User ("ARPU")

The ARPUs in the Indian wireless telecommunications sector, which had seen a decliningtrend over the last few years, has reversed that trend and has witnessed the increase overthe last few quarters. March 2013 ARPU has witnessed an YoY growth of 7.84% for GSM and26.51% for CDMA as compared to March 2012 numbers. Earlier, the blended GSM ARPU steadilydeclined from Rs 220 per month per subscriber for the quarter ended December 31, 2008 toRs 105 per month per subscriber for the quarter ended December 31, 2010. However, the fallin ARPU for the next one year had been very nominal, and settled at Rs 96 per month persubscriber for the quarter ended December 31, 2011.

Likewise, CDMA ARPU declined from Rs 111 per subscriber per month to Rs 68 persubscriber per month from Dec Rs. 2008 to Dec Rs. 2010, whereas for the quarter ended DecRs. 2011, ARPU actually increased to Rs 73 per month per subscriber. Clearly, even ARPUhas revered it falling trend to follow growth path.

ARPU (Rs./subs./month) Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Mar-13
GSM 220 144 105 96 97.93 105.00
CDMA 111 82 68 73 79.95 95.25

Source: TRAI

TELECOM INFRASTRUCTURE SERVICES

The Telecom infrastructure services are made up of three components:

1. Passive infrastructure

Passive infrastructure includes of all the passive components of the network: steeltower/antenna mounting structures, BTS room/shelter, power supply, battery bank,invertors, DG set for power backup, air conditioner, fire extinguisher, security cabin,among others. These components are not dependent on the type of communication technologybeing used by the network riding atop the site, namely LTE, GSM, CDMA, 3G, WiMax, FMRadio, digital terrestrial transmission, etc. We estimate that roughly two-third of capexfor a wireless network is spent on passive infrastructure.

2. Active infrastructure

Active infrastructure constitute the electronics that power the network and includesall the active components of a wireless network such as spectrum (radio frequency), radioantenna, BTS/cell site (base transceiver station) and microwave equipment. Each cellularoperator will have to own a BTS at each tower site. A tower site can have 1/2/3/4 or morecell sites, depending on the occupancy level/tenancy ratio of that tower.

3. Transmission Media

Transmission Media is the network that connects the BTS/cell site to a base stationcontroller (BSC) that controls tens or scores of BTS in a particular area. A transmissionnetwork may work on:

• Point-to-point microwave radio transmission

• Point-to-multipoint microwave access technologies like LMDS, WiFi or WiMax;

• Optical fiber links

• Digital Subscriber Line (DSL)

• Ethernet

OUR BUSINESS

We are a telecom infrastructure services company providing rollout solutions forwireless and fixed telecom networks. Our strength lies in the breadth of services we offerin the telecom infrastructure space. The business offerings include services in TurnkeySite Build, Active Equipment Implementations, Technical Support Services and Operations& Maintenance. We are also registered with Department of Telecommunication asInfrastructure Provider - Category I.

In Turnkey Site Build, we provide services right from the site identification anddesigning, to installation of towers and other ancillary passive equipments. This includesentire Project Planning and Management Services. In Active Equipment Implementations, weprovide services like Installation, Commissioning and Integration of active telecomequipment for wireless, wire-line and optical technologies. In Technical Support Services,we provide services in high-end telecom engineering that includes Network planning,Transmission planning, Radio Network Optimization, Networks Benchmarking, and NetworkAuditing. We provide these services on activity/time basis. In Operations &Maintenance, we provide 24x7x365 maintenance services for passive telecom infrastructure(preventive and corrective maintenance on periodic contracts), and first-line maintenanceof active infrastructure.

We are also involved in creation of In-building Networks for the Wireless and DataApplications. The CDMA network on the underground section of the Delhi Metro Rail Corridoris one such example.

The client list constitutes of all the prominent players in the telecom industry thatincludes Third Party Infrastructure Leasing Companies (like Indus Towers, Quippo, WTTIL),Telecom operators (like Airtel, Vodafone, Idea, Reliance Communications, Aircel), andTelecom Equipment Manufacturers (like Ericsson, Nokia Siemens Network, Huawei, ZTE,Motorola).

We have considerable expertise in rolling out projects in the most difficult of theterrains, both in India and Overseas. For our overseas clients, we provide servicesthrough Nu Tek India Ltd. and also through our subsidiary in Hong Kong, and cater to thegrowing needs of our clients in the Asia Pacific region and other Emerging Markets likeMiddle East and North Africa.

BUSINESS PERFORMANCE

Comparison of FY2013 with FY2012

FY2013 was a high growth year for the company, wherein the income from operationsincreased by 45% to reach Rs 119.2 crores. The key reason for the higher sales was 64.1%increase in revenue from Full Turnkey (FTK) business stream. Project related expense forthe year was Rs 91.04 crores compared to Rs 63.25 crores, an increase of 43.9.7% from theprevious year. Employee benefit expense for the year was Rs 18.5 crores compared to Rs15.2 crores for the previous year, an increase of 22.1%. As a result, PBIT (profit fromoperations before other income and finance cost) was reported at Rs 8.5 crores as againstRs 2.5 crores for the previous year. Other income for the year was lower at Rs 1.5 crores,compared to Rs 6.7 crores in the previous year. Higher other income in FY2012 was mainlyowing to foreign exchange gains amounting to Rs 4.5 crores. Consequently, the net profitfrom ordinary activities after tax was higher at Rs 3.9 crores, compared to Rs 2.2 croresin FY2012.

During the year, the revenue contribution from different services witnessed a nominalchange, wherein the revenue contribution from FTK services was 70.4% compared to 62.2% inthe previous year. The contribution of Operations & Maintenance (O&M) servicesdropped to 5.5% (13.3% previous year). The contribution of Technical Support Services(TSS) and Telecom Implementation (TI) services remained almost constant at 17.4% and 6.6%,respectively, compared to 17.9% and 6.7% in FY2012.

On a consolidated basis, income from operations during FY2013 stood at Rs 153.2 crores,compared to Rs 143.5 crores in FY2012. PBIDT (profit from operations before interest,depreciation, and tax) was reported at Rs 14.7 crores as against Rs 11.6 crores in theprevious year. However, net profit after tax for FY2013 was lower at Rs 2.3 crores,compared to Rs 4.0 crores in FY2012, mainly owing to higher depreciation expenses duringthe year.

Business Review and Outlook

The Indian telecommunication sector has registered a phenomenal growth during the lastdecade and has emerged as the second largest network in the world after China. From 2001to 2011, the total number of telephone subscribers has grown at a Compound Annual GrowthRate (CAGR) of 35 per cent. However, the composition of the subscribers shows that mobilesubscribers have led the way. The increase in teledensity has mainly been driven by theincrease in mobile phones.

International comparisons show that India has one of the lowest mobile tariffs in theworld. Between 2007 and 2010, prepaid and blended rates show a decline of 25.3 and 21.5per cent, respectively. This low cost model has been a major reason of high growth intelecommunication industry

Usage statistics also show that Indians talk more on the phone than their internationalcounterparts. The revenue statistics show that service providers are earning 50 per centof their revenue from calls and 8.3 per cent from Short Message Service (SMS). Size of theVAS market is also growing over time. On the other side, there is a slowdown in subscribergrowth. With rural network expansion still slow and disconnections increasing due tooperators ridding their bases of dormant accounts, we expect a subscriber growth towitness a negative growth as we have seen in FY 2012-2013. However, with already hightele-density, especially in urban areas, Indian Telecom Operators are now focusing toincrease their growth with increase in ARPU i.e. average revenue per user. Most privateoperators have witnessed rising ARPUs in FY 13. The rising trend in ARPUs is mainly due todiscontinuation of promotional vouchers, discontinuation of various freebies and reductionin free minutes under various schemes. This increase in ARPUs, bringing in overall gainsfor operators, may be ploughed back into the network operations for improving the overallnetwork quality and overall user experience. Your company plays a major role in the areaof telecom networks testing, optimization and improvement of network quality working oncontracts for major Telecom OEMs.

On back of ongoing investments into infrastructure, the country is projected to witnesshigh penetration of Internet, broadband, and mobile subscribers in the near future, as peran RNCOS report.

The last two-three years have been quite challenging for the Telecom Infrastructuremarket in India due to a number of factors that, amongst others, included cancellation oftelecom licenses, policy paralysis, litigations, and clouds of uncertainty. The newroll-outs were affected owing to organizational / management changes at some largeIndependent Tower Owning companies (IP-1 companies), which delayed the roll-out by thesecompanies. Many a tower sites owned by IP-1 companies, which otherwise were rented-out tothe operators whose licenses got cancelled, were dismantled and relocated to other siteswhere new roll-outs were planned.

However, due to the cancellation of 122 telecom licenses and further new spectrumallocation in 2012 and 2013, market has witnessed an increase in Site Swapping and SiteRelocation Activities. Further, in FY 2012-2013, one of the major OEM of Indian TelecomMarket has commenced rollout of 14.37 Million Lines for one of the major PSU Operator.Also, work for 3.22 Million Lines (ADSL) Project of a major PSU of Indian Telecom Marketcommenced in FY 2012-2013. Indian Telecom Market is also expecting much from new LTEdeployments.

Your company has been shortlisted by a Telecom OEM major to execute part projects forboth 14.37 million lines and 3.22 Million Line projects. We expect these projects topickup pace further in FY 2013-2014.

Your company has signed a contract with a major PSU operator, for maintaining theirnetwork in Kashmir for the next three years. Your company is in advance stages to extendits contract with major PSU for providing Telecom Installation Services for next one yearin Bihar Telecom Circle.

Apart from this, your company is shortlisted by one of the major OEM to provide End toEnd services for LTE deployment for one of the largest Private Operators of India.

Your company 's subsidiary has taken up a project with a Mineral Company in SierraLeone, Africa for maintaining their internal network so as to provide 24 X 7 networkavailability and also working on a Radio Network Optimization contract with a majorTelecom OEM for optimizing the Telecom Networks in Malawi, Madagascar and Zambia owned bya major Indian Operator.

During the year FY2013, your company witnessed a substantial change in revenue mix fromearlier years wherein the revenue contribution was almost equal from all FTK, TI, TSS andO&M services. However, owing to intense competition in the sector, margins at all theverticals in the Telecom value chain have been under pressure. Going forward, thecontribution from FTK and O&M Services will be higher than the TI and TSS services.Since FTK work involves a lot of material and O&M services being low margin-highvolume business, the margins will continue to remain under pressure. However, a lot ofchurn is expected in the space and we expect some competition to weed out, after whichsome pressure on margins may be relieved.

Your company is executing a project with a PSU company in the Petroleum Sector, thusproviding the visibility in the direction of revenue diversification. It 's a prestigiousproject which your company won through a competitive bidding, and we look forward toparticipate in more of such projects on an on-going basis.

The company is also making headway into the business of natural resources, like tradingand import-export of Iron ore, Coal and Fuel Oil. The business will currently focus onoff-shore trade without actually importing goods into Indian shores.

SWOT Analysis

Strengths

• Existence for last 20 years in the Telecom industry. Having establishedrelationship with almost all OEMs, Telecom operators, and Infrastructure Providers.

• Presence across the length and breadth of the Indian Telecom market. Experiencedand skilled work force of around 1,200 people.

• Overseas presence (Central America, Africa, Nepal) to seize the businessopportunities in these markets. Weaknesses

• Longer Working Capital Cycle

• Client Concentration

Opportunities

• 4G / LTE next big thing in the Indian Telecom Industry. New businessopportunities would be on offer.

• Changing landscape owing to MNP. Requirement of Network strengthening and betterconnectivity by 2G operators.

Threats

• Increasing competition putting margin pressures

• Our revenues are closely aligned to the Telecom Industry. Any adverse impact onthe industry would directly affect our business

   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
H F C L 1,070.84 7.78 1.70 12.81 9.1 6.3 0.45
S Mobility 631.19 19.10 1.00 11.52 10.1 11.5 0.00
Astra Microwave 502.15 9.71 2.50 3.66 20.0 24.0 0.28
ITI 476.64 0.00 -0.31 0.00 0.0 0.0 0.00
GTL Infra. 450.19 0.00 0.27 36.65 0.0 0.0 3.20
FCI OEN Connect. 437.98 243.54 2.80 0.00 2.1 0.6 0.00
GTL 257.81 0.00 0.40 22.36 0.0 0.0 3.63
AGC Networks 153.60 0.00 0.64 17.04 -14.8 -2.2 0.65
NELCO 93.11 0.00 10.25 0.00 0.0 0.0 4.79
Punjab Commun. 89.43 0.00 0.80 0.00 0.3 0.4 0.00
Punjab Wireless 75.95 0.00 1.44 0.00 -113.9 -15.9 2.90
ADC India 59.80 45.94 1.29 0.00 -4.3 -3.3 0.00
Shyam Telecom 29.70 0.00 0.57 3.68 0.2 4.7 0.40
Goldst.Infratec. 29.44 14.32 0.40 5.92 2.7 7.9 0.50
Kavveri Telecom 28.17 0.00 0.15 0.00 -11.0 -2.0 0.41

Futures & Options Quote

 
Expiry Date
NA
Instrument: NA
Expiry Date: NA
Strike Price: NA
Open Price: NA
Average Price: NA
No. of Contracts Traded: NA
Open Interest: NA
Underlying: NA
Option Type: NA
Market Lot: NA
Previous Close: NA
Day’s High | Low: NA | NA
Turnover (Cr.): NA
Open Int. Change: NA | NA
View detailed F& O quotes >>

Key Information

Key Executives:

Inder Sharma , Chairman & Managing Director  

Vineet Sirpaul , Whole-time Director  

Sumati Sharma , Director  

Sanjay Kumar Singh , Company Secretary  


Company Head Office / Quarters:
A-213 Road No 4 Gali No 11,
Mahipalpur,
New Delhi,
New Delhi-110037
Phone :
Fax :
E-mail :
Web : http://www.nutek.in
Registrars:
Aarthi Consultants Pvt Ltd
1-2-285
Domalguda
J B Apartments
Hyderabad - 500 029

Fund Holding

 
Scheme Name No. of Shares
No data found

Calendar

Apr-2014
M T W T F S S
14 15 16 17 18 19 20
IPO
listNo IPO today
Economic Events
list No economic event today
Results
list No result today