3i Infotech Ltd - 145.00 Rs & Bihar Tubes Ltd - 200.00 Rs

3i Infotech Ltd - 145.00 Rs

Established in 1993 by ICICI Bank, 3i Infotech (3i) has progressed over the years from a back office processing unit of the ICICI group to a technology company providing IT services and solutions to over 500 clients in more than 50 countries through 10 offices worldwide and 10 development centres in India. Infact it has emerged as the fourth largest Indian software products company offering a comprehensive range of software products & solutions primarily for banking, insurance, capital markets, mutual funds, telecom, manufacturing, retail & distribution industries. In addition, it offers a broad range of software services such as custom software development, IT consulting, enterprise application integration (EAI), business process outsourcing (BPO), managed IT Services, and specialized services such as product re-engineering, compliance consultancy, data warehousing, business intelligence etc. Besides, 3i is recognized as one of the major national players in the e- Governance consultancy space in India. Importantly, 3i derives revenues from products and services in a 1:1 ratio which differentiates it from other IT companies. Premia, Kastle, Amlock, iBoss, Data Scan, Awacs, Mfund, Veda, Xroadz etc are few of its popular software products for core banking, insurance, stock exchange surveillance, treasury, risk & wealth management, mutual funds etc. It also has an ERP product suite, providing solutions for the retail, manufacturing, distribution, trading, fashion, and automotive, pharmaceutical and chemical industries. Interestingly, 3i provides complete end-to-end outsourcing solutions to various industries mainly in the domestic market and specializes in non-voice based BPO services. This division is doing extremely well with nearly 15% of the total revenue coming from it. 3i’s quality certifications include SEI CMMI Level 5 for software business and ISO 9001:2000 for infrastructure services and BPO operations.Geographically, 3i derives around 30% revenue from India, 25% from USA, 20% from Western Europe, 15% from Middle East & Africa and the balance 10% from Asia Pacific region. Apart from ICICI group being its largest customer, 3i boast of serving international biggies like Prudential Assurance, Finansa, AIG, Emirates Bank, RAK Bank, Hong Leong Bank, SBI Factors, Oriental Insurance, HP, GSK, Al Ansari, Solidarity Islamic Insurance, Commercial America Insurance, Standard Chartered, Deutsche Bank, Pidilite Industries etc. In order to beat the competition and grow at a rapid pace, company is betting high on inorganic route and has adopted an acquisition-led strategy to acquire new capabilities and foray into new geographies in the BFSI space. Ironically, it has made over 20 acquisitions globally in last few years and is further looking for acquisition opportunities in China, North America (Brazil and Spain) market. At the same time it is also growing organically and has launched its first International Data Centre in Chennai which will offer managed hosting services for application and disaster recovery solutions. Additionally, it has introduced its remote IT infrastructure management services through its global network and security operations center. Meanwhile, it also setting up mini centres of excellence for operating systems (Microsoft, Red Hat Linux, AIX, Solaris), databases (Oracle, MS SQL, MySQL, DB2), messaging solutions and IT security labs for ethical hacking and vulnerability assessments and niche application infrastructure solutions.And most importantly, with net dollar inflow of less than 10%, 3i is hardly affected by the rupee appreciation compare to its peers. In short, company has a well diversified and a de-risked business model in terms of offerings (products/services nearly 1:1 with coverage of entire BFSI spectrum), geography (no region >30% of revenues) and customers (ICICI Bank and other Top 10 clients’ concentration has been on a decline). To fund its various acquisitions, company raised nearly Rs 175 cr and Rs 400 cr in April’07 & July’07 respectively thru FCCB route. These are convertible into equity shares @ Rs 154 & Rs 166 respectively leading to an equity dilution of approx 30% going forward. On the back of excellent H1FY08 nos and considering the strong order book position, company is expected to report total revenue of Rs 1200 cr and net profit of Rs 175 cr. This translates into an EPS of Rs 13.50 on current equity of Rs 130 cr. But on a fully diluted equity of around Rs 175 cr, EPS works out to Rs 10. Due to strong economic growth in India & acquisition led strategy; 3i has the potential to post an EPS of about 13 Rs for FY09. Hence at a reasonable discounting by 18x against FY09 earnings, scrip can move up to Rs 230 (i.e. 60% appreciation) in 12~15 months.


Bihar Tubes Ltd - 200.00 Rs

Incorporated in 1986, Bihar Tubes Ltd (BTL) is primarily engaged in manufacturing of steel pipes & tubes. It has broadly divided its product range into four segments – galvanized pipes, ERW pipes, pre-galvanized pipes and hollow pipes. The first two categories are the most common type of pipes manufactured by several organized as well as unorganized players under stiff competition with low margin. But for the third segment i.e. pre-galvanized pipes, BTL is the pioneer and only company in India producing it. Although a new product in India, pre-galvanized pipes & tubes are very successful in international market due to saving on zinc cost as they have a zinc coating of 80-120 gm/mt while that for galvanized tubes is 400 gm/mt. And for the last segment viz. square and rectangular hollow pipes, BTL is the second largest manufacturer in the country after Tata Steel. Hollow pipes are mainly used by construction and infrastructure industry as the cement concrete structures are being replaced by steel sections. Today BTL, possess the capability to provide nearly 150 kinds of tubes across thickness, layering, treatment and chemical composition, thereby emerging as a one-stop shop for customers with varied requirements. To summarize, company’s products are used in diverse sectors linked closely to India’s growth like oil and gas, water management, mass rapid transportation, construction, engineering, automobiles, sugar, power and agricultural equipment industries. Moreover around 10% of revenue comes from export to over 35 countries like US, Colombia, Nigeria, Ireland, Middle East, Africa and Germany.BTL currently has four tube production mills in Sikandarabad, UP out of which three have their technology imported from Kusakabe, Japan. To cater the rising demand, last fiscal only company has increased its overall capacity of steel pipes and tubes from 60,000 to 125,000 MTPA. BTL has a network of 100 distributors throughout the country with a strong presence in north and south India where it markets products under the popular 'APL Apollo' brand name. It also sells directly to various institutional customers from engineering and construction space such as L&T, BHEL, Reliance, Nagarjuna Construction, BSNL, Suzlon Energy, Era Construction, Simplex Infrastructure. Indian Railways, Tata motors, Gammon, BL Kashyap, Triveni Engineering, among others. As a step towards backward integration, BTL took over a small company called Apollo Metalex having a capacity of 24,000 MTPA for galvanising sheets. Besides to improve its profit margin, it is shifting its product mix in favour of hollow sections and pre-galvanized products since these earn relatively higher realizations. It is also aggressively setting up branches across India with a view to having a pan-India presence. For future growth, BTL is foraying into the automobile sector by creating a capacity of 35,000mtpa for boiler tubes, air heated and shock absorber tube. It is setting up a facility in Maharashtra to manufacture infrastructure pipes, API grade pipes and precision tubes. The company is also looking to scale up the value chain via the manufacture of 20”- diameter tubes and is currently setting up a tube mill for this purpose. With a view to curtail input costs, company is undertaking backward integration via the set up of a fully integrated 100,000 MTPA HR skelp plant at Sikandarabad.In a bid to ramp up its capacity and expand its geographical reach, BTL is making an acquisition in western India and is in the final stages of negotiation. In future company intends to have total installed capacity of 300,000 MTPA along with its own coating plant. Moreover, recently BTL has entered into 80:20 joint venture agreement with Kusakabe to set up a 12,000 MTPA facility for manufacture of stainless steel pipes and tubes with an investment of 20 cr. To fund its growth plans, company has already issued 31.75 lac warrants to be converted @ Rs 140 per share. Further, company is contemplating to come out with an FCCB issue to the tune of US $ 20 million. On the back of strong performance for the first two quarter, BTL is expected to end FY08 with sales of Rs 260 cr and NP of Rs 16 cr. This leads to an EPS of Rs 25 on current equity of Rs 6.40 cr whereas the diluted EPS works out to Rs 17 on equity of Rs 9.60 cr. Investors are advised to buy at sharp declines with a price target of Rs 300 (i.e. 50% returns) in 12~15 months.


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Courtesy - Saarathi.blogspot.com