Dalal Street Investments

Rolta India – Revenue Visibility in GIS

August 11, 2010

Rolta India Revenues at Rs4.1b were up ~4% qoq (CIRA exp: Rs4.1b) with EBITDA margin expansion of ~100bps qoq (CIRA exp: ~50bps decline). This led to profits at Rs691m, up ~3% qoq vs. our expectations of Rs672m (flattish qoq).

Management has guided for revenue growth of ~12-15% yoy in FY11 with EBITDA margins in the range of 37-38% (FY10: 37.6%). Further, the net profit guidance is in excess of 15% yoy. Though the revenue growth guidance looks muted and is below our estimates, the profits are largely inline with our estimates.

The order book at the end of the quarter stood at Rs17.9b, up ~1% qoq (~11% yoy) with the book-to-bill ratio at ~1.0x, down from ~1.2x witnessed in Q3. Management commented that this was due to: (a) currency headwinds and (b) the element of seasonality involved in the domestic business with the March quarter being the fiscal end quarter for most Indian entities, leading to a surge in orders.

Headcount declined by ~100 as the company shifts more toward solutions. (2) Billing rates, on a qoq basis, were largely stable across
segments. (3) Margins expanded in the EGIS business while it declined for EDOS/EITS. (4) Cash balance was ~Rs500m. (5) Gross debt (including FCCBs) was ~Rs12.6b. (6) DSOs were 149 days (FY09: 158 days). (7) The company has given salary hikes to offshore employees at ~10% effective July 1.

Rolta India Software is expected to report an EPS of Rs 18 and 21 for fy 11 and fy 12 respectively.


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