Tulip FY 2011
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Tulip FY 2011 Tulip FY 2011 Presentation Transcript

  • Investor Presentation May 2011 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 0
  • Safe harbor Certain statements in this presentation may be forward-looking statements. Such forward- looking statements are subject to certain risks and uncertainties like government actions, economic developments, technological risks, and many other factors that could cause the actual results to differ materially from those contemplated by the relevant forward-looking statements. Tulip Telecom Limited will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward- looking statements to reflect subsequent events or circumstances. 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 1
  • Agenda Overview Investment highlights Appendix 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 2
  • Tulip Telecom overview Overview Services offered  Established in 1992 as Tulip Software Private Ltd.  Market capitalization of US$500mn as on May 31, 2011  Provides enterprise connectivity services through wireless and fiber last mile network coupled with data centers  Strong financial performance with revenue of US$502mm and EBITDA of US$142mm in FY11 Enterprise data Network Managed Data center connectivity integration services  Widespread Reach: Present in over 2,200 cities across India Shareholding pattern – Mar 31st, 2011 Leader in the fast-growing MPLS market* Total EDC market Total MPLS market Others1 13.3% Tata Communication Others Others 25.9% Tulip Telecom 18.7% 24.2% 30.6% FIIs 17.7% Bharti BSNL Airtel Bharti 10.2% Promoter 69.0% 14.5% 17% BSNL 11.8% Sify 9.3% Tulip Telecom Reliance 12.9% Communication RCOM 12.2% 12.7% FY10: US$1,317mm FY10: US$528mm*Source: Frost and Sullivan FY 09-10Note: US$1 = INR46.8; ¹ Others include Mutual funds and public individuals 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 3
  • Shifting towards high margin managed services and data infrastructure businessVPN business Fiber business Managed services + Data infrastructure NI business NI business Fiber business 10% 10% 20% VPN business Managed services 66% & VPN business Fiber business Connectivity (Fiber+RF) NI business 20% 70% data infrastructure business 20% 14% 70%  Focus area for next level of growth  Fixed cost annuity model  Improved service offering  Higher margins, higher ARPU and larger clients  Recurring revenue model ensures visibility and cash flow sustainability  Enables provision of other services such as IPLC, DLC and internet  Strong margin of 30%+  Key growth and revenue contributor Horizon 1 Horizon 2 Horizon 3 2008 - 10 2010 - 2012 2015 Core area of operation with expertise in  Tulip sources whole sale fiber bandwidth for  Significant opportunity in 3rd party data center providing data connectivity over a wireless inter city connectivity on lease from its services network competitors  Tulip already focusing on growing its data  Competitive advantage lies in providing higher Services include symmetric internet center business provisioning, rural connectivity solutions and uptime than its competition due to it sourcing fiber bandwidth from multiple vendors  Competitive advantage lies in bundling data virtual private networks services along with storage offering Comprises of Enterprise IP & rural connectivity 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 4
  • Strong financial performance 500 CAGR (’06-’11): 35.7% $502mm $420mm Strong revenue profile  Revenue of US$502mm in FY11 with a 06-11 CAGR of 36% Revenue 400 $345mm  Revenue growth expected to continue with the ongoing fiber 300 $260mm roll-out $180mm ■ ~70% of the order inflow is expected to be contributed by the 200 fiber business in the next few years $109mm 100 0 FY 2006 FY 2007 FY 2008 FY 2009 FY2010 FY 2011  EBITDA of US$142mm in FY11 with a 59% 06-11CAGR 150 EBITDA EBITDA margin CAGR (’06-’11): 58.9% $142mm 50% $112mm Robust EBITDA  Business mix has shifted towards the high margin enterprise 120 data services margins 90 $72mm ■ Roll-out of fiber to further increase the EBITDA in the future 16% $52mm 25% 60 27% 28% 13% $28mm 20% 21% 30 $14mm 0 0% FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011  ROE of 25% in FY11 80 CAGR (’06-’10): 45.4% Significant return for PAT $65mm $59mm  High PAT CAGR of 45% (’06-’11) $54mm shareholders 60 40 $40mm $21mm 20 $10mm 0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011Source: Company filings; Note: US$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 5
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with Indian data center space poised for high growth strong bias to growth ■ Third party Data center space to grow at a ■ Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by 2014 ■ Robust EBITDA margins of 25%+ 5 4 Strong management team Tulip is best positioned to attain market leadership in ■ Led by experienced and visionary management Indian data center space ■ Prior experience with global firms including HP, ■ Largest single site data center in India IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 6
  • 1 Indian EDC market: Poised for exponential growth going forward Overview Key segments of the market ■ Indian enterprise data connectivity market to show strong growth in future ■ CAGR (FY10 – 15): 12% from US$1.3bn in „10to about US$2.3bn in „15 Enterprise Data Connectivity ■ Key segments: International private leased circuit (IPLC), domestic leased US$1317mm circuit (DLC), MPLS/ VPN, VSAT and internet ■ MPLS/ VPN is the fastest growing segment due to its cost advantages, increased reliability and network security IPLC DLC MPLS/IP VPN Internet VSAT Ethernet ■ Key drivers for strong future growth: US$126mm US$237mm US$528mm US$309mm US$92mm US$25mm ■ Economic growth: GDP expected growth to be 8.5% in FY11 and 9% in FY12 ■ Corporate expansion: Geographical expansion and growing demand to Ongoing Fibre Wireless increase efficiency US$316mm US$211mm Existing ■ Rural market: e-governance initiatives, Mission mode projects etc Market share (%) – Enterprise data connectivity Strong future growth in EDC market (US$mm) Tata Communication Others 18.7% 24.2% Bharti Airtel 2271 BSNL 1,768 2,001 17% 1,596 14.5% 1,317 1,423 Tulip Telecom Reliance Communication 12.9% 12.7% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015Source: Company website and filings, research reports¹ Includes Asynchronous transfer mode (ATM) and Frame Relay (FR) 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 7
  • 1 Key customer segments driving the EDC market in India  Computerization of RRB‟s BFSI  Inter-bank connectivity  Interlinking branches & ATM Networks  Real time connectivity for usage of Enterprise applications Retail & FMCG  Connectivity to warehouses  Bandwidth required per store  Improving connectivity in rural India State governments Government  E-Governance initiatives State electricity board National e-Governance Programs  High speed connectivity to remain connected to clients IT/ITeS  Voice channels  Rising BPO/Back office likely to lead to demand for IP & IPLC  Driven by Enterprise applications like ERP, SCM, CRM Manufacturing  Investments in IP-VPN & VOIP  E-Business to drive cost efficiencies and economies of scale  Usage of DLC as backhaul & NLD Traffic carriage Telecom  ILD expected to increase with increase in voice traffic EDC market - Split by verticals EDC market - Split by horizontals EDC market - Split by geography Others 12% East 5% IT/ITeS 29% SMB 32% North 28% Manufacturing 11% West 33% Large 68% Govt. 20% BFSI 29% South 34%Source: Frost & Sullivan 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 8
  • 1 MLPS / VPN continues to the fastest growth segment within the EDC market Segment Overview of segment Key players Segment size (US$mm) and growth (%)1 ■ Point-to-point private line communication Others 12.4% internationally Bharti Tata 126 19% 119 113 108 103 99 IPLC ■ Key demand from IT, ITeS and BFSI sectors Comm. 49% ■ Contributes ~10 % to total markets RCOM FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 19.6%2 ■ Point-to-point private line communication RCOM Others 11.7% domestically 12.6% BSNL DLC ■ Contributes ~18 % to total market Tata 39.3% 237 243 249 255 261 267 Comm. 16.0% Bharti 20.4% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 20153 ■ Provide access to organization‟s network using public telecom infrastructure MPLS/ VPN ■ Dominant growth driver of the enterprise 712 844 996 1170 528 606 data market ■ Contributes ~40% of the total market FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 20154 ■ Most common and widely accepted Others 22.2% Tata ■ Critical to integration of IT and telecom Comm. Internet BSNL 26.1% 335 364 407 457 infrastructure 11.7% 309 315 ■ Contributes ~23% of the total market RCOM Bharti 12.0% 26.4% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 20155 ■ VSAT (Very Small Aperture Terminal) is 2 way ground station with dish antenna VSAT ■ Used to transmit data from small remote 146 92 100 109 120 132 earth stations ■ Contributes ~7% of the total market FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Source: Company website and filings, research reports; Note: US$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 9
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5 by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with Indian data center space poised for high growth strong bias to growth ■ Third party Data center space to grow at a ■ Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by 2014 ■ Robust EBITDA margins of 25%+ 5 4 Strong management team Tulip is best positioned to attain market leadership in ■ Led by experienced and visionary management Indian data center space ■ Prior experience with global firms including HP, ■ Largest single site data center in India IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 10
  • 2 Market leadership in India in last mile enterprise connectivity ■ Presence across 2,200 cities ■ 4 operational data centers with potential Chandigarh Rural network capacity of ~100,000 sqft Delhi Lucknow Strong ■ #1 player in MPLS/ VPN Bhopal pan-India ■ #5 player in Indian EDC market Ahmedabad Kolkata Data center presence Mumbai Pune High capacity Hyderabad Fiber Point to Point Bangalore Wireless Chennai Kochi Ahmedabad Chennai ■ Last mile connectivity due to the wireless spectrum held in B Pune Bangalore Data Center High Capacity Fiber the 2.8 / 3 GHz band that provides faster connectivity A Point to Point Wireless Central NOC in New Delhi rollout at lower capex Mumbai Hyderabad D Redundant NOC in Mumbai Regional Last-mile ■ Tie-ups with telcos to lease bandwidth for inter-city NOC‟s in all Class B cities C ISDN RAS in all Class A & B Cities wireless data transfer connectivity ■ Uptime of ~99.9% Delhi ■ Competitive advantage in providing higher uptime than its Chandigarh Rural network competition due to it sourcing fiber bandwidth from Lucknow multiple vendors Kolkata Bhopal KochiPre-rollout client acquisition ensures quick End-to-end offerings help cross selling Focus on Enterprises/Corporatesbreakeven services ■ Tulip typically surveys and identifies potential ■ Tulip‟s dedicated focus on enterprise/corporates vs. ■ Presence in network integration, network customers with minimum connects for quick break- competitor‟s mass market strategy management, data center, SWAN, etc enables it to even ■ Ideally placed to reap the benefits of growth in MPLS cross sell its high profit data services to customers ■ This model assures that every POP rolled out is VPN segment profitable 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 11
  • 2 Last mile fiber-based connectivity to turbo-charge revenue growth; to raise addressable market size over 5-fold ■ Amount of bandwidth that can be offered on wireless is limited, Addressable1 Market addressed market post fiber from 64 KBPS to 2 MBPS Business segment ($mm) pre fiber lay-out lay-out ■ Rolled out its last mile fiber network in the key business districts of 50 major cities including Delhi and Mumbai MPLS VPN wireless 211 211 Why Tulip is ■ 10 key commercial business districts (metros) while other are MPLS VPN (Fiber) – 316 investing in fiber tier-2 & tier-3 cities Total MPLS VPN 211 528 business ■ Network caters higher bandwidth requirements in CBDs of (2 IPLC – 126 MBPS to 155 MBPS) DLC – 237 ■ Addressable market increases ~5x and increased services Internet – 309 including DLC, IPLC Total 211 1,200 ■ Fiber segment expected to contribute 70% of order inflow in next Order inputs break-up2 few years NI business ■ Has got ~600 customers on board in Q1 with 70% of the 12% Business mix is contracts being fresh deals versus wireless to fibre substitution changing ■ Future growth driver for the enterprise market Fiber VPN business ■ Higher margins and higher ARPU FY10 business 68% 20% ■ Fixed cost annuity model ■ Fibre business to de-risk its business model which was entirely3 dependent on IP VPN segment growth ■ ARPU of fibre business can grow manifold depending on NI business bandwidth speed offered 10% Higher margin ■ Will yield relatively higher EBITDA margin vis-a-vis TTSL own IP VPN recurring business VPN Business business Fiber FY12E business ■ Annual recurring revenues at significant 78% in FY10 vis-à-vis 20% 70% one time installation revenues which was over 50% in FY07 ¹ Average revenue per connect; Note: US$1 = INR46.8 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 12
  • 2 Tulip has a pan-India network presence in 2,000 cities Delhi Telcos with national Fiber Mumbai Bangalore Utilities with national fiber Chennai  Tulip has significant fiber capacity leased from national players like Reliance Infocomm, Vodafone, Powergrid  Using its last mile, Tulip can provide wireless services up to 2MBPS Inter-City Primary Link Inter-City Redundant Link High End Router 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 13
  • One of the leading players in the Indian EDC market, 2 with leadership in the MPLS segment Operating metrics Network Integration       Segments IPLC DLC      VPN/MPLS      Managed Services/Data Center      Network No of cities 2200 95 44 NA NA Data Center(000 Sqft) - operational 100 NA 405 45 NA EDC Share (FY 10) 12.9% 17.0% 12.7% 18.7% 14.5% MPLS Market Share (FY 10) 30.6% 10.2% 12.2% 11.9% 11.8%Source: Company filings, research reportsNote: Operating metrics as of December 2009 unless otherwise mentioned 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 14
  • Tulip compares well with the international playersOperating and financial metrics (US$mm) Country India Asia N. America & U.S. U.S. & Europe U.S. N. America, Europe Europe & others Primary regional presence National Multi-region Multi-region Metro Metro National National Network Route miles („000s of miles) 4 29 67 NA 21 28 NA 1 No. of cities / metro areas 2,200 100 160 14 21 75 NA Focus area Large corporates Large corporates Small & medium Small & medium Large corporates Large corporates Large corporates corporates corporate        Presence Long haul fibre / under sea cable Data centre        Metro connect        FY11A Revenue 502 Private 263 452 410 1,273 2609 FY11A EBITDA 142 Private 72 57.1 170 436 400 Financials FY11A EBITDA margin (%) 28.2% Private 27.2% 12.6% 41.6% 34.2% 15.3% Market cap 500 Private 711 393 1,635 2,785 924 Source: Company filings, FactSet, Bloomberg Note: Market data as of Mar 04, 2011; SMBLC – Small and medium business 1 Figure for Tulip represents number of cities, for Pacnet represents points of presence US$1 = INR46.8; 1km = 0.62mile 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 15
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with strong bias to growth Indian data center space poised for high growth ■ Historical top-line growth of 20%+ 6 3 ■ Third party Data center space to grow at a ■ Robust EBITDA margins of 25%+ CAGR of 32.8% by 2014 5 4 Strong management team Tulip is best positioned to attain market leadership in ■ Led by experienced and visionary management Indian data center space ■ Prior experience with global firms including HP, ■ Largest single site data center in India IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 16
  • The global data center sector displays a strong growth profile as 3 a result of solid underlying business economics Global business and consumer IP traffic (in petabytes per month) CAGR (2009-2013E) Growth rates 2009E 2010E 2011E 2012E 2013E Business IP traffic Consumer IP traffic Business IP traffic: 31.8% Business IP traffic 37.2% 36.3% 33.0% 29.8% 28.0% 32,129 Consumer IP traffic: 38.4% Consumer IP traffic 45.4% 45.4% 46.2% 35.3% 27.7% 25,168 18,601 12,726 12,833 10,022 8,755 7,722 6,020 5,805 3,103 4,258 2008 2009E 2010E 2011E 2012E 2013ESource: Cisco, 2009 Overview Main growth drivers  The global data center sector is continuing to strongly leverage on: Internet traffic growth  The proliferation of internet-based business and consumer applications; and  The growing migration to outsourced IT infrastructure services Increased need for data  Server demand is a function of the growing demand for network-based computing; network-based computing, in its turn, is a function of the organic growth in internet connectivity, bandwidth, commerce and company-based applications Technology infrastructure  Higher broadband penetration, availability and usage should continue to drive a growing base of IP traffic worldwide which will ultimately benefit a whole spectrum of data center Bandwidth hungry devices services, from colocation to complex managed hosting providers Online storage need Controlled supply and surging demand 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 17
  • 3 Supply and pricing fundamentals are highly attractive Global internet data center supply and demand Global internet data center utilization Change in Supply Change in Demand 96% 91% 16.0% 15.0% 14.0% 14.0% 84% 12.0% 78% 9.0% 73% 7.5% 7.0% 6.0% 6.0% 65% 5.0% 3.5% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Global data center demand is expected to outweigh supply Major data center markets will be full by the end of 2012Source: Tier1Research Internet Datacenter Supply 2010 Source: Tier1Research Internet Datacenter Supply 2010 Infrastructure-as-a-Service (IaaS) pricing index Wholesale and colocation pricing dynamic $2,900 700 Colocation Overlap Wholesale $2,800 MRR per cabinet or server 600 $2,700 500 Cost per kW $2,600 400 $2,500 300 $2,400 200 $2,300 100 $2,200 $2,100 0 $2,000 0 250 500 750 1000 1250 1500 1750 2000 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 Committed kW Pricing trends are positive due to increased demand for Pricing varies widely depending on geographic locations, services, power and interconnection proximity to dense networks, quality of facility, size of deal, etc.Source: Wall Street research Source: Tier1Research Internet Datacenter Supply 2010 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 18
  • These trends are creating a large and attractive market 3 opportunity Global Data Center Revenue ($bn) Global Data Center Ownership Increasing IaaS Adoption ($bn) $200 Data Center IT Spend 45% laaS Spend Insource $180 laaS % of Data Center 40% 84% $160 35% $18.5 Outsource $140 30% $15.5 9% $120 25% $12.9 $100 20% $10.8 Long-Term $80 Lease 6% $60 15% $40 10% $20 5% $0 0% 2009 2010 2011 2012 2009 2011 2013 2015 2017 2019  The industry will benefit from the continued  Data center capacity remains primarily in-  IaaS adoption will grow to 40% of data growth in annual spending on Internet data house (84%) and the market for colocation center spending by 2020 center revenue services remains under penetrated  Growth will continue to be fueled by  Revenue growth in the market is  Industry surveys indicate that 67% of favorable secular trends projected to grow 20% annually companies will need data center space  IaaS spending is projected to reach ~$80 within 36 months billion by 2020  New York, Silicon Valley, Northern – Additionally, 24% have reported they  70% of companies have indicated they Virginia, Chicago, Dallas and Los have already run out of capacity will need at least 3k sq. feet of space Angeles are the leading North American internally within the next 3 years markets Large market Under-penetrated Strong growthSource: Tier1Research, Gartner, IDC, Wall Street research 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 19
  • 3 Data infrastructure opportunity in India Market size and Growth rate (FY10–11) Segment size (US$mm) and growth (%) 3rd party data 25 Managed Security center 662 726 791 855 534 20 321 Growth rate–FY10–11 (%) Third party data center FY10 FY11 FY12 FY13 FY14 15 Mgd. Security 662 10 470 534 321 406 256 470 FY10 FY11 FY12 FY13 FY14 5 Unified Communications Un. Comm. 0 0 100 200 300 400 500 600 700 800 900 1,000 449 470 513 556 620 Market size FY11: US$1,453mm FY10 FY11 FY12 FY13 FY14 Data Centre Managed Security Unified Communications Colo and Hosting  Colo Identity access  Federated access control IP  IP Telephones  Hosting  Single sign on/access control  IP contact center  Authentication  IP and Hybrid PBX Op Center  OP center Managed services  Managed Services and Content/Application  Content acceleration Perimeter protection  IDS/IPS and integration Integration acceleration  Application acceleration  Content filtering, Firewall Platform security  Vulnerability management, NAC Unified  Unified Communication Storage  Storage advanced services communication  Server security mgmt  Managed storage  Desktop/laptop mgmt Video conferencing  Video conferencing SSL VPN  SSL VPN Source: Company‟s internal estimates worked out in 2010 ; Note: FY refers to year ending March 31; US$1:INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 20
  • 3 Indian Data Center sector–Poised for strong growth… Indian Data Center market revenue forecast (US$mm) Market overview ■ Indian Data Center market is expected to touch US$2.1bn by 2011 from US$1.4bn in 2009 2,162 ■ Current penetration of Data Centers in India is ~54.5% 1,722 ■ 3rd party datacenter space in 2009 was ~2mm sq ft, which is expected to 1,435 grow at a CAGR of 32.8% to reach ~8.8mm sqft by 2014 ■ Broker research estimates that 6-7 mm sq ft of new data center space will be needed in India over the next four years (2014), of which over 90% will be used to hosted / outsourced data centers FY 2009A FY2010E FY2011E ■ Manufacturing, BFSI and IT/ITeS are key verticals driving demand Key growth drivers Data Center vertical split (US$mm) Demand for increased productivity and reduction in costs Others Others Issues like cost pressures, increasing management time and high 10% 11% investments in technology and infrastructure Communication Communication Manufacturing and media 6% and media 6% 53% IT/ITES Dropping International bandwidth cost IT/ITES 14% 15% BFSI Better technology BFSI 16% Manufacturing 15% 54% Compliance to clauses of the Indian IT Act or ISO certification FY09: US$1,435mm FY11: US$2,162mm SMEs now embracing these technologies faster than ever beforeSource: IDC Note: US$1:INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 21
  • 3 … supported by significant Third party Data Center opportunity Favorable third party data center opportunity Key advantaged from third party/hosted Data Center Third party  Minimal investment in Capex 17.9% Lower Capex  Reduced cash outflows requirement  Better return on investment  Regulatory need of maintaining historical Captive Focus on core data for companies 82.1% business  Focus on core competency Adoption in 2009  Huge scale of operations Economies  Cost efficient business model of scale Third party 23.3%  More accountability to different clients Operational and  Deployment of latest technology power efficiency Captive  Redundancies in safety of data 76.7% Enhanced  Superior investments in technology to ensure security maximum security Future adoption by 2011Source: IDC Report (Dec 2009) 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 22
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with Indian data center space poised for high growth strong bias to growth ■ Third Party Data center space to grow at a ■ Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by FY 2014 ■ Robust EBITDA margins of 25%+ 5 4 Tulip is best positioned to attain market Strong management team leadership in Indian data center space ■ Led by experienced and visionary management ■ Largest single site data center in India ■ Prior experience with global firms including HP, IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 23
  • 4 Tulip plans to be a market leader in data infrastructure sectorExisting data centers New acquisitions 4 operational data centers Inorganic expansion plans (mm sq ft)■ 1 in Delhi & Bangalore and 2 in Mumbai  SADA - Located in Bangalore; India‟s largest data■ New data centers coming up in Hyderabad, Chennai, Pune and 0.9 1.0 center, 3rd largest single site data center in the world Potential capacity of ~100,000 sqft 0.1 when it goes live Only provider to have termination from all telcos Current SADA Total Margins linked to utilization (can go up to 50%) acquisition  Facility can house up to 16,000 racks Funding plan: US$190mm Key customers Debt 11%  60MW power supplied through 3 x 20MW substations Equity partner(s) Tulip 34%  Provision to house over 2,000 technical staff 25% Internal accruals 30% Source of funds (1st 3 years) Bangalore Data Center–3rd largest Data Center globally and largest single site Data Center in Asia000’s Sqft 1,100 990 900 750 750 700 550 538 485 470 407 Lakeside Tech QTS Metro, Tulip Telecom, NAP of Next Microsoft, Microsoft, Phoenix One, DuPont Fabros, Microsoft, SuperNAP, Las Center, Georgia Bangalore Americas, Generation Chicago Dublin Phoenix Chicago Quincy & San Vegas Chicago Miami Data, Cardiff AntonioSource: Company; 1 TDCSPL indicates Tulip Data Center Services Private Ltd;Note: US$1:INR46.8; Tata Communications (Chennai and Mumbai (Prabhadevi)) have presence in managed services; Data center for Tulip compared against peers refers to proposed facility at Bangalore when fully completed 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 24
  • 4 Tulip compares favourably with peers in the industry … 990,000 Built up Current raised Built-up and 575,000 650,000 Current raised 495,000 400,000 280,000 187,500 210,000 80,000 150,000 60,000 82,000 (Sq. ft.) No. of 5 9 4 4 6 9 data centers Pune New Delhi Pune Noida Location Kolkata Delhi Hyderabad Delhi Hyderabad Mumbai Mumbai Chennai Mumbai Chennai Mumbai Chennai Mumbai Chennai Mumbai Chennai (3) (3) (2) (2) (4) Bangalore (2) Bangalore Bangalore Bangalore Bangalore Bangalore (3)  Government, BFSI, Telecom,  BFSI and ITeS  Government and IT/ITeS  Manufacturing, BFSI and  Media, Telecom, BFSI,  BFSI, Manufacturing, Manufacturing and IT/ITeS IT/ITeS and C ontent providers ITeS and M/E Industry focusSource: IDC Report (Dec 2009), Research reports 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 25
  • 4 … and is a complete service provider 1 Co-location and hosting       services Managed services      Portfolio Value addedof services      services Professional services       EDC        Acquired a 900K sq.  Globally consistent  Strong bandwidth  First play er to offer  Backing of existing  Largest built-up data ft. data center in product line player cloud computing enterprise customers center space rd India (3 largest  Investing heavily in  Strong collocation service  Strong bandwidth  Strong bandwidthStrengths globally) India and hosting player  Strong in energy player player  Diversified into all efficient data centers  Aggressiv e service offerings marketing  Focus on capacity  Leverage brand  Targeting  Growing traction in  Leverage its existing  Traction from SME expansion image of Tata group government and mobility and other set of customers and SMB s egment  Traction from  Partnering with education sectors value added  Capacity expansion  Expected hugeOpportunities increased service group c ompanies  Focus on providing services in 1-2 years demand for Green IT offerings like TCS for e- additional value  Focus on SME and BCDR services Governance projects added servic es segment hosting1Service portfolio for Tulip includes capability to be added from newly acquired facility at BangaloreSource: IDC Report (Dec 2009), Company website, Factiva, Equity research; Note: BCDR indicates Business Continuity and Disaster Recovery 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 26
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11..5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with Increasing focus on Indian data center market strong bias to growth ■ Third Party Data center space to grow at a ■ Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by FY 2014 ■ Robust EBITDA margins of 25%+ 5 4 Strong management team Tulip is best positioned to attain market ■ Led by experienced and visionary management leadership in Indian data center space ■ Prior experience with global firms including HP, ■ Largest single site data center in India IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 27
  • 5 Led by competent and visionary managementLt. Col.H.S. Bedi Deepinder Bedi Sanjay Jain Rahul Ahuja Jitendra Israni Rajesh Duggal Chairman & Executive Director Chief Executive Officer Chief Financial Officer Chief Service Officer President – Govt BusinessManaging director CEO President President Chief Financial Chief Marketing & Chief Service Chief HR Officer Enterprise Government Officer Product Officer Officer Business Business Chief Regional Marketing Business Commercial Head Head - North Officer Ministries Regional CSO- North Regional Head of Business Procurement Product Head Head - South Regional Central Bodies CSO- South Regional Revenue Business Assurance Head - East Regional State Bodies CSO- East Regional Legal Business Regional Head - West CSO- West Local Bodies Channels Others NOC Manager Network Planning 360° Engagement Strategic Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services Pre Sales Alliance BFSI 28 Accounts
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with Increasing focus on Indian data center market strong bias to growth ■ Third Part Data Center Space to grow at a ■ Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by 2014 ■ Robust EBITDA margins of 28%+ 5 4 Strong management team Tulip is best positioned to attain market ■ Led by experienced and visionary management leadership in Indian data center space ■ Prior experience with global firms including HP, ■ Largest single site data center in India IBM, Cisco, EMC 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 29
  • 6 Robust financial performanceRevenue (US$mm) and segment split (%) PAT (US$mm) and margin (%) PAT % PAT margin % EBITDA margin Network integration Enterprise data 80 75% $65mm $180mm $260mm $345mm $420mm $502mm 100% 60 $54mm $50mm 50% 38% $40mm 75% 54% 40 71% 27% 88% 89% $21mm 20% 21% 28% 25% 50% 20 63% 16% 15% 16% 13% 25% 12% 12% 46% 29% 0 0% 12% 11% 0% FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 EBITDA (US$mm) and Capex (US$mm) Dividend (US$mm) and payout ratio (%) 200 EBITDA Capex Dividends Payout ratio $157mm 8 40% $142mm 150 $6mm $6mm $112mm $112mm 6 30% 100 $67mm $72mm 4 20% $3mm $52mm $53mm $41mm 50 $28mm 2 $1mm $1mm 10% 10% 8% 5% 7% 4% 0 0 0% FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011Source: Company filingsNote: Capex includes purchase of fixed assets and capital work-in-progressUS$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 30
  • 6 Recent developments P&L* (US$ in millions) Balance sheet* (US$ in millions)All figures in US$mm FY 11 FY 10 4Q’FY11 4QFY10 All figures in US$mm March 31st, 2011 March 31st, 2010Sales 502 420 136 120 Gross Block 494 336EBIT 105 83 30 30 Net worth 259 198 % margin 20.9% 19.7% 22.1% 25% Total Debt 380 260EBITDA 142 112 40 33 FCCB 94 93 % margin 28.2% 26.2% 29.3% 29.1% Others 286 167Profit before tax(Operating) 87 68 24 33 Cash & cash eq. 54 74 Total Debt to Equity 1.47 1.32 % margin 17.3% 16.2% 17.6% 22.7% Net Debt to equity 1.26 0.94Profit after tax 65 49 18 14 Total Debt to EBITDA 2.68 2.32 % margin 13.0% 11.8% 13.0% 12.4%Source: Company filings ROCE (annualized) 18.7% 18.1%Note: US$1 = INR46.8*Consolidated 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 31
  • 6 Tulip P&L P&L (US$ in millions) All figures in US$mm 2007–08 2008–09 2009–10 2010-11 Sales 260 345 420 502 EBIT 48 70 93 105 % margin 18.6% 20.4% 22.2% 20.9% EBITDA 52 72 112 142 % margin 20.2% 20.9% 26.7% 28.2% Profit before tax 43 61 68 87 % margin 16.5% 17.6% 16.2 % 17.3% Profit after tax 40 54 49 65 % margin 15.4% 15.5% 11.8% 13.0%Source: Company filingsNote: US$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 32
  • 6 Tulip Balance sheet Balance sheet (US$ in millions) All figures in US$mm 2007–08 2008–09 2009–10 2010-11Shareholders equity 95 146 198 259 Loan funds Secured Loans 42 110 117 261 Unsecured Loans 149 130 143 118 Deferred Tax Liability (Net) 0 0 1 0.7 Total Liabilities 286 386 459 280 Fixed assets 111 260 284 405 Investments 0 0 0 33 Net Current Assets 175 126 175 201 Total assets 286 386 459 639Source: Company filingsNote: US$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 33
  • Tulip: Key investment themes Strong play on the high growth Indian EDC market ■ EDC market to grow at a CAGR of 11.5% by 2015 ■ MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless ■ Over 2,200 strong customer base business with fiber network to boost revenues ■ Customers include more than 90% of 7 2 ■ Dominance in the last mile connectivity Top 500 ET companies ■ 5x increase in target market Robust financial performance with strong bias to growth Increasing focus on Indian data center market ■ Historical top-line growth of 20%+ 6 3 ■ Third Part Data Center space to grow at a ■ Robust EBITDA margins of 25%+ CAGR of 32.8% by 2014 5 4 Strong management team ■ Led by experienced and visionary management Tulip is best positioned to attain market ■ Prior experience with global firms including HP, leadership in Indian data center space IBM, Cisco, EMC ■ Largest single site data center in India 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 34
  • 7 Tulip’s progress has been recognized by both its customers and the IndustryWireless Key awards FinalistFibre 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 35
  • Agenda Overview Investment highlights Appendix 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 36
  • Key milestones: Strong market knowledge with over 20 years of experience in the country 2009-11 Network locations2500  Opened data centers in Mumbai, Navi Mumbai and 2,0002000 1,700 Bangalore1500  Acquired World‟s third largest Data center facility(900,000 8001000 Sqft) in Bangalore 500 25 0 2006-08  Commenced international connectivity services in 5 FY 2005 FY 2007 FY2010 1HFY2011 continents across the globe  Implemented Haryana SWAN  Stabilized the fiber network operations by having compete  Set up the first data center in Delhi ring networks in place  Won the first Frost and Sullivan award for 2002-05 the largest MPLS VPN provider  Entered into a JV with Qualcomm for broadband wireless access with investment of US$30mm for 13% stake  2002: Set-up the world’s largest rural  Increased employee base to 2,300 from wireless network in Kerala 4 in 1992 1992-01  2004: Established VPN network across  Revenue (FY11): US$502mm India  EBITDA (FY10): US$142mm  1992: Incorporated as Tulip IT services, a software reseller  2005: Went public through an IPO and  Network integration contribution reduced to 11% in FY11 got listed on BSE & NSE  Revenue (FY08): US$260mm  Commenced operations in Mumbai  Won the R-APDRP projects in UP and Gujarat with a  EBITDA (FY08): US$52mm and Bangalore combined value of US$34mm for 5 yrs  Won the SWAN projects of Haryana,  Raised INR1.1bn from IPO  Won the R-APDRP projects in Uttarakhand and Punjab for West Bengal, Assam and Madhya value of US$3mm and US$8mm respectively  Bagged major orders for VPN Pradesh  Emerged as largest reseller for connectivity  Won R-APDRP project in Andhra Pradesh for value of USD Cisco in India 7 Mn  Revenue (FY05): US$73mm  Revenue (FY01): US$9mm  EBITDA (FY01): US$0.3mm  EBITDA (FY05): US$4mm  100% network integration 1992 2002 2004 2006 2007 2009 2010 Strong and consistent performance Revenue CAGR of 40% and Net Profit CAGR of 54% over the last 4 yearsSource: Company filings and website; Note: US$1 = INR46.8 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 37
  • Regulatory framework Key categories Rules and regulations  FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route  One time entry fee for new ISP license is INR3mm for Category A and INR1.5mm for Category B ISPs; no new Category C Internet service licenses are being issued provider (ISP)  Annual license fee of 6% of Adjusted Gross Revenue (“AGR”)  FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route  One time non-refundable entry fee of INR100mm, INR20mm and INR10mm for Category A,B and C respectively Virtual Private Network  Annual license fee of 6% of Adjusted Gross Revenue (“AGR”) generated under the license (VPN)  FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route  Entry Fee for new NLD license is INR29.25mm NLD & ILD License  Annual license fee of 6% of AGR  FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route VSAT commercial  Entry fee for new commercial VSAT license is INR3mm non-refundable/ non-adjustable  Annual license fee of 6% of AGRSource: DoT website, research reportsNote: Category „A‟: All India ISP License; Category „B‟: 20 territorial Telecom Circles, four Metro Districts- Delhi, Mumbai, Calcutta or Chennai and four major Telephone Districts- Ahmedabad, Bangalore, Hyderabad or Pune; Category „C‟: License in any Secondary Switching Areas (SSA) of DOT with geographical boundaries as on 1.4.98 (Revenue district in most cases) 360° Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 38
  • Typical Network 64 K to any bandwidth on DR Site wireless Fibre / High speed radio Central site 360° EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 39