Tulip Telecom, a virtual private network (VPN) service provider, has lined up a capital expenditure of about Rs 450 crore during the current fiscal, mainly for laying fibre, H S Bedi, MD and chairman of the firm, told DNA Money.
“We will raise most of the capital internally and only little through equity or debt. We will invest mostly on laying more fibre-based, last-mile connectivity, besides in other areas such as ILD, NLD,” Bedi said.
Tulip has so far laid about 4,000 kms of fibre with 600 clients drawing high bandwidth internet connectivity through it.
Meanwhile, the firm’s managed services business is seeing traction with a $13 million order from a Middle East client.
In a note to clients on April 20, Shobhit Khare, an analyst at broking firm Motilal Oswal, wrote, “Tulip’s ‘one-stop-shop’ approach has warranted adding capabilities like managed services, which fortify its data connectivity business, and downsizing the legacy low-margin network integration business. Recent fibre rollout for the last mile should enable Tulip to tap high-bandwidth connects, complementing its strong foothold in wireless.”
Observers believe Tulip will encounter stiff competition from telecom firms in its enterprise VPN services business where it leads the market.
However, Bedi feels the competition does not exist.
“The telecom firms are not new in this business. They have been at it since the last five years. It is we who came in late and carved the market leadership,” he said.
He also does not see the current auction for WiMax spectrum making much difference in competition. “As things stand today, I do not see WiMax to make sense for many telecom firms. So it depends what way they adopt,” Bedi said.
Sounding upbeat on market opportunity he said, “The competition has led to a price drop of about 15% for sure. But you have to see the market which is growing at 60% year on year. There is huge opportunity that way.”
Tulip posted earnings per share of Rs 94.99 for the fiscal 2010, up 9.95% over the previous fiscal. With an increase in the volumes, the company has realised an Ebidta margin of 26.72% for the fiscal, a jump of 56.07%.
“I expect we will be able to hold on to the operating margin this fiscal as well,” said Bedi. The firm posted revenues of Rs. 530.6 crore for the fourth quarter, up 5.95% sequentially.
The company’s net profit for the fourth quarter and the last fiscal stood at Rs. 79.4 crore (up 15.74% over the previous quarter and at Rs. 275.5 crore (up 9.96% over the previous fiscal), respectively.
Besides data services other analysts see opportunity for Tulip arising from other sectors too.
Harit Shah of Karvy Stock Broking wrote in a May 31 note, “With newer opportunities in the pipeline, such as financial inclusion, the unique identification project and the accelerated power development reforms programme, we expect the company to sustain strong growth.”
Comments