TSL has aggressively invested in R&D and is focused in developing newer products in FY 2008. It is expected to spend Rs 220 million for FY08 in R&D. Non voice revenues are expected to grow YoY across all the telecom markets in the world.
TSL would grow at a CAGR of 59% in FY07-09E at net levels and have a terminal growth of 3% for DCF calculations. This gives a target price of Rs 706 for the stock, Rs 646 for the core business and Rs 60 for its non-core business. TSL trades at 14.4x and 9.35x its FY08E and FY09E earnings of Rs 31.18 and Rs 48.15 respectively. Hence one can assign a PE Multiple of 24.8 for FY08E and 15.1 for FY09E on core business.