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Nu Tek India Ltd

BSE: 533015 | NSE: NUTEK ISIN: INE318J01027
Market Cap: [Rs.Cr.] 7.11 Face Value: [Rs.] 5
Industry: Telecommunications - Equipment

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Management Discussion And Analysis Report


Indian economy GDP growth at factor cost picked up marginally to average 4.7% in2013-14 after slowing to 4.5% in fiscal year 2012-13. India's economy has been draggeddown by slumping industry. Industrial production shrank a provisional 0.1 percent in thefiscal year ended in March, 2014, keeping overall economic growth below 5 percent for asecond straight year. The economic outlook is challenging, but there are signs that theworst is over. Downside risks will persist, reflecting structural bottlenecks. The WorldBank has projected an economic growth rate of 5.7 per cent in FY 2014-15 for India, due toa more competitive exchange rate and several significant investments going forward.

(Source: RBI)



As at 31-Mar’2014, India’s telecom subscriber base was 933 million, which hasclearly shown 3.89% up from 898 million on 31-Mar’2013. The subscriber base has beenbroadening after a steadily shrinking from June, 2012 to March, 2013.

Growth of Subscriber base

(Source: TRAI)

The Telecom Subscriber base growth during the financial year 2013-14 is given below:

(subscribers in Millions) As on 31.03.2014 As on 31.03.2013 % change
Wireless 904.51 867.8 4.23%
Wireline 28.49 30.21 (5.69)%
Total 933.00 898.02 3.89%

Growth in Tele-density

The overall tele- density reached 75.23% at the end of March 2014, as against 73.32% inMarch 2013. Clearly overall growth in Tele-Density has increased. Despite the impressiveoverall growth in the telecom sector in previous years, the rural tele-density in India isquite low as compared to urban tele-density.

The following table depicts the penetration of telecom services in rural & urbanareas in the country:

Tele-density as of Rural (%) Urban (%) Overall (%)
Mar-13 41.02 146.96 73.32
Mar-14 43.96 145.78 75.23

Minutes of Usage ("MoU")

GSM average MoU per subscriber per month has shown an increase of 1.54% YoY (MoU inMar.-2014 was 389 minutes compared to 383 minutes in March-2013) after series of steadydecline from a base of Rs. 360 Minutes per month per subscriber for the quarter endedDecember 31st, 2010. Similarly, CDMA MoU has remained stable with some nominalfluctuations on 275 minutes for Mar.-2014 quarter compared to 275 minutes in March-2013quarter. The table below indicates that MoU is onto an increasing path now after a seriesof decrease during the last few years.

Total MoU/subs./month (minutes) Dec-10 Dec-11 Dec-12 Mar-13 Dec-13 Mar-14
GSM 360 332 359 383 379 389
CDMA 270 226 230 275 272 275

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. Mar.-2014 ARPU has witnessed a growth of 6.70% YoY (ARPU inMar.-2014 was Rs. 113.44 compared to Rs.105 in March-2013) for GSM. Earlier, the blendedGSM ARPU steadily declined from Rs 105 per month per subscriber for the quarter endedDecember 31, 2010 to Rs 97.93 per month per subscriber for the quarter ended December 31,2012. However, the fall in ARPU for the next one year had been very nominal, and settledat Rs 105 per month per subscriber for the quarter ended March 31, 2013.

CDMA ARPU declined from Rs 82 per subscriber per month to Rs 73 per subscriber permonth from Dec’2009 to Dec’2011.Whereas for the quarter ended Dec.2011, ARPUactually increased to Rs. 73 per subscriber per month and thereafter with a constantincrease reached to Rs.104.98 per subscriber per month in March-2014.Clearly even ARPU hasreversed its trend to follow growth path.

ARPU (Rs./subs./month) Dec-10 Dec-11 Dec-12 Mar-13 Dec-13 Mar-14
GSM 105 96 97.93 105.00 111.94 113.44
CDMA 68 73 79.95 95.25 103.60 104.98

Source: TRAI


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


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 theWireless and Data Applications. The CDMA network on the underground section of the DelhiMetro Rail Corridor is 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 services through Nu Tek India Ltd. and alsothrough our subsidiary in Hong Kong, and cater to the growing needs of our clients in theAsia Pacific region and other Emerging Markets like Middle East and North Africa.

Business Performance

Comparison of FY2014 with FY2013

FY2014 was another growth year for the company, wherein the income from operationsincreased by 16.80% to reach Rs 139.23 crores as compared to Rs.119.21crores duringprevious year. Project related expense for the year was Rs 108.58 crores compared to Rs85.27 crores. Employee benefit expense for the year was Rs 20.59 crores (includes expensestowards salary and wages of Rs.1.96 crores as compared to Rs.1.75crores in last year)compared to Rs 18.5 crores for the previous year, an increase of 11.29%.Other expenses forthe year was Rs.39.72crores as against Rs.10.88 crores during FY2013. During the year theCompany suffered Liquidity

Damages of Rs.15.03Crores and Unserviceable Projects under Progress for Rs.14.82Crores.This resulted into negative profit of (Rs.25.69) crores as against Rs 8.6 crores for theprevious year. Other income for the year was stable at Rs 1.6 crores, compared to Rs 1.6crores in the previous year. During FY2014, the net profit from ordinary activities aftertax was lower at (Rs.28.04) crores, compared to Rs 3.94 crores in FY2013.

On a consolidated basis, income from operations during FY2014 stood at Rs 156.54crores, compared to Rs 153.20 crores in FY2013. PBDT (profit from operations beforedepreciation and tax) was reported at (Rs.23.39) crores as against Rs 10.56 crores in theprevious year. Consequently, net profit after tax for FY2014 was lower at (Rs.30.33)crores, compared to Rs 2.29 crores in FY2013.

Business Review and Outlook

Telecom sector is one of the sunrise sector in which India has made a mark with thesecond largest telephone network in the world, next to China. The Indian telecom industryhas been the flag-bearer of the Indian liberalization /reforms process drivingconnectivity from a meager 0.8 per 100 persons in 1994 to over 73 per hundred personstoday. As per Industry estimates, telecom sector contributed 6.9 per cent of GDP in2012-13 providing employment to more than 5.7 lakh employees.

However, total telecom connections declined to 899.86 million as on 30th Sept, 2013 ascompared to 965.5 million as on 30th June, 2012. This decline in telecom user base hasbeen primarily due to removal of inactive mobile telephone connections by the serviceproviders. Teledensity (the number of telephones per 100 population) which is an importantindicator of telecom penetration, increased from 18.22 per cent in March 2007 to 73.01 percent as on 30th Sept 2013, with urban teledensity at 144.02 per cent and rural at 41.70per cent, providing the best possible services at one of the most affordable ratesglobally. Moreover, the Telecom sector's revenue grew by 13.4 per cent to reach US$ 64.1billion in 2012-13.

As per a study of Cisco Systems, Inc., Internet traffic in India is expected to reach2.5 exabytes per month in 2017 from 393 petabytes per month in 2012. In addition, thewireless connectivity in India is expected to grow at about 40 per cent traffic by 2017,up from 38 per cent in 2012.

As per the Network Readiness Index 2013 issued by the World Economic Forum (WEF) onparameters like Broadband Internet subscriptions, Mobile Broadband subscriptions per 100population, India is ranked 102 out of 144 countries. Incidentally the same index ranksIndia at number 6 and 4 on Affordability in terms of Mobile Cellular tariffs and Fixedbroadband and internet tariffs respectively at PPP levels.

However, the recent controversies related to this sector have taken away the shine fromthis sector. Investment in India in networks last year was USD 3 billion as against USD 55billion in China. Nevertheless this is still a promising sector. There are many issues inthe telecom sector like multiple levies and duties, license fees computations includingunrelated activities etc., and hiccups in policies and procedures.

The issues on Telecom sector such as spectrum reforms in terms of method of allocation,auction, linking the reserve price to economic downturn, trading and sharing of spectrum,unutilized spectrum and unified licensing, etc. need to be addressed and the road map onSpectrum needs to be laid down.

There is also the need to bridge the growing rural-urban digital divide in teledensity(41.70 % vs. 144.02 %), support and deliver the benefits of broadband revolution to thecommon man and the rural heartlands. In addition, new technologies and businessrequirements growing at unprecedented scales are emerging fast e.g. machine to machine(M2M), Cloud communication, Mobile-governance, etc. However, in order to power thisrevolution, going forward, significant capital infusion is still required along withcontinued supportive Government policies, as the sector is under acute debt andoperational burden. Debt levels are unsustainable for majority of operators.

During the year FY2014, 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. The Company is more focused in engineering workwhere the margins are high. The company is also making headway into the business ofnatural resources, like trading and import-export of Iron ore, Coal and Fuel Oil. Thebusiness will currently focus on off-shore trade without actually importing goods intoIndian shores.

SWOT Analysis


• Existence for last 21 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.


• Longer Working Capital Cycle

• Client Concentration


• 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.


• Increasing competition putting margin pressures

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


Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Inder Sharma , Chairman & Managing Director

Sumati Sharma , Director

Sanjay Kumar Singh , Company Secretary

Amar Sarin , Director

Company Head Office / Quarters:

A-213 Road No 4 Gali No 11,
New Delhi,
New Delhi-110037
Phone : New Delhi- / New Delhi-
Fax : New Delhi- / New Delhi-
E-mail : info@nutek.in
Web : http://www.nutek.in


Aarthi Consultants Pvt Ltd
1-2-285,Domalguda,J B Apartments,Hyderabad - 500 029

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