Investor presentation december 2011


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Investor presentation december 2011

  1. 1. INVESTOR PRESENTATIONDecember 2011
  2. 2. DisclaimerThese presentation materials have been prepared by Tulip Telecom Limited (the “Company” or “Tulip”) solely for the use at this presentation and have not been independently verified.You agree to keep the contents of this presentation strictly confidential. This presentation material is highly confidential, is being presented solely for your information and may not be copied,reproduced or redistributed to any other person in any manner. In particular, this presentation may not be taken or transmitted into Canada or Japan or distributed, directly or indirectly, inCanada or Japan. Further, this presentation may only be distributed to (1) to qualified institutional buyers (as defined in Rule 144A of the United States Securities Act of 1933, as amended(the “Securities Act”), and (2) to non-U.S. persons (as defined in Regulation S under the Securities Act) outside the United States.No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or containedin this presentation. Neither the Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any informationpresented or contained in this presentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice and itsaccuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof.This presentation should not be construed as legal, tax, investment or other advice.In addition, certain information and statements made in this presentation contain “forward-looking statements.” Such forward-looking statements can be identified by the use of forward-lookingterminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project,” “trend,” and similar expressions. All forward-lookingstatements are the Company’s current expectation of future events and are subject to a number of factors that could cause actual results to differ materially from those described in theforward-looking statements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-looking statements.Certain data in this presentation was obtained from various external data sources, and the Company has not verified such data with independent sources. Accordingly, the Company does notmake representations as to, and assumes no responsibility or liability for, the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to changebased on various factors.This presentation does not constitute an offer or invitation to purchase or subscribe for any securities of the Company and neither any part of this presentation nor any information orstatement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.By participating in this presentation, you agree to be bound by the foregoing limitations. 1
  3. 3. Agenda Overview 2 Investment highlights 8 Appendix 22 2
  4. 4. Tulip Telecom overviewOverview  Established in 1992 as Tulip Software Private Limited  Market capitalization of US$433mm as on November 11, 2011 on the National Stock Exchange of India Limited  Dedicated focus on providing data services to enterprise customers only  Provides enterprise connectivity services through its wireless & optic fibre last mile network along with data centers & managed services  Widespread presence across India: 2,000+ cities & towns through wireless network and 300 cities through fibre network  Leased and owned fibre network of 16,500+ kms  Leading presence in the domestic MPLS/ IP VPN segment with a market share of 33.4%  Building one of the largest single site third-party data centers in Bangalore – potential floor space of approximately 900,000 sq. ft. floor space with up to approximately 12,000 racks  Revenue of US$480mm & US$277mm and EBITDA of US$135mm & US$79mm, respectively for FY11 & 1HFY12Source: Frost and SullivanNote: US$1 = INR49 3
  5. 5. Additional focus towards high margin managed services and datainfrastructure business Enterprise Telecom Market Data services Fixed services Mobile services Managed services MPLS/ VSAT & IPLC DLC Internet VPN1 Ethernet Network Data center Managed Managed Hosted Unified Cloud Integration Data center Management network security Communication computing Fibre Wireless Main business focus area till 2009 Expansion of target market by laying own intra-city last mile fibre network in 2009 Developing capabilities to further broaden the target marketIPLC: International Private Leased Circuits; DLC: Domestic Leased Circuits; VSAT: Very Small Aperture Terminal1 Includes both domestic & international 4
  6. 6. Additional focus towards high margin managed services and datainfrastructure business (cont’d) Wireless VPN Fibre Network Rollout Managed services + Data infrastructure Responsible for setting up the „Akshaya  Own intra-city fibre network – access  Acquired ~900,000 sq.ft. of space in Network‟, a rural wireless network in to 300 cities & towns Bangalore Mallapuram, Kerala  Expansion of addressable market  Entered into agreements with two Wireless network across India; 2,000+  Approximately 80% of our income leading global IT service providers cities & towns (FY11) from new customers was  Aim to provide full bouquet of attributable to fibre connectivity managed services 2002 2009 2011 onwards  Significant opportunity in third-party data Core area of operation with expertise in center services providing data connectivity over a wireless  Tulip sources whole sale fibre bandwidth for network inter-city connectivity on lease from multiple  Tulip already focusing on growing its data inter-city service providers center business Services include internet provisioning, rural connectivity solutions and virtual private  Competitive advantage lies in providing high  Bundling of data services along with data networks uptimes due to the sourcing of fibre center provides additional competitive bandwidth from multiple vendors advantage 5
  7. 7. Key strategic themes to drive future growth1 Expand our optic fibre network and increase our market share2 Attain leadership position in the high growth data center market3 Transition from being a data connectivity provider to providing a broad suite of enterprise data services4 Focus on government clients5 Strengthen service delivery, assurance and internal processes to support growth 6
  8. 8. Tulip’s progress has been recognized by both its customers andthe IndustrySelect customers Key awards  Frost & Sullivan award for the „Largest BFSI MPLS/ VPN Provider‟ in 2007, 2008 & 2010  Communication, Multimedia & Infrastructure award for the „Largest Indian Enterprise Telecommunication Company‟ in 2011 Telecom  Won a position in the Forbes‟ „Best under a Billion List‟ in 2010  Gold certification from Cisco in 2009  8th „Hot Growth Company‟ by Corporates Businessweek in 2010  Dun & Bradstreet award for top Indian company for „Telecom Equipment and SWAN Projects R-APDRP Projects Support Services‟ in 2010 Uttar Pradesh, Punjab, Government Haryana, West Bengal Uttarakhand, Gujarat &  Dataquest award for Best e-Government Vendor Andhra Pradesh  Outstanding Entrepreneurship Award Winner - Asia Pacific Entrepreneurship Awards 2011 India More than 2,400 large, medium & small enterprise customers 7
  9. 9. Agenda Overview 2 Investment highlights 8 Appendix 22 8
  10. 10. Tulip: Key investment themes Established presence in the high growth Indian EDC market 1 One of the leading players in the Robust financial performance enterprise data connectivity 6 2 industry Expanding data center capabilities, Strong management team 5 3 leverage capabilities to offer diversified enterprise data services 4 Variety of customers across business segments 9
  11. 11. 1 Established presence in the high growth Indian EDC market Overview Key segments of the market  Indian enterprise data connectivity market to grow in the future Enterprise Data Connectivity (EDC)  CAGR (FY11 - 16): 13% from US$1.4bn in FY11 to about US$2.5bn in FY16 US$1,359mm  Key segments: International private leased circuit (IPLC), domestic leased circuit (DLC), MPLS/ VPN, VSAT and internet MPLS/IP  MPLS being a cost efficient and scalable solution is the highest contributor to the IPLC DLC VPN Internet VSAT Ethernet enterprise data connectivity market and is expected to grow at a CAGR of 18% till Fiscal 2016  Domestic MPLS/VPN accounts for ~87% of the total MPLS/VPN market (US$497mm in Fibre Wireless FY2011) of which Tulip Telecom accounts for ~33.4% Strong future growth in EDC market (US$mm) 1,309 2,469 Others 57.4% MPLS/ VPN 1,359 42.6% 579 FY2011 FY2016 FY2011 FY2016 FY2011 EDC Market Enterprise Data Connectivity US$1,359mm MPLS/ VPN market Source: Frost & Sullivan Note: US$1 = INR49.0 10
  12. 12. 1 Key customer segments driving the EDC market in India We believe the following factors would drive growth in the EDC market  Computerization of RRB‟s  Intra-bank connectivity BFSI  Expansion of branch network  ATM connectivity for additional services  Real time connectivity for usage of enterprise applications Retail & FMCG  Connectivity to warehouses  Bandwidth required per store  Improving connectivity in rural India Government  e-Governance initiatives  High speed connectivity to remain connected to clients IT/ITeS  Voice channels  Rising BPO/KPO industry  Driven by enterprise applications such as 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 11
  13. 13. 2 One of the leading players in the enterprise data connectivity industry  Widespread presence across India: 2,000+ cities and Extensive network reach towns through wireless network & 300 cities through optic fibre Strong  Inter & intra city optic fibre network of approximately 16,500kms pan-India presence  Leases inter-city optic fibre network Rural  #1 player in domestic MPLS/ VPN Chandigarh network Delhi Lucknow Bhopal Ahmedabad Kolkata  Last mile wireless connectivity through the spectrum Data center High capacity Pune allotted in the 2.8 / 3.3 GHz Mumbai fibre  Hyderabad Point to Point Tie-ups with telcos to lease bandwidth for inter-city data Wireless Last-mile transfer Bangalore Map not to scale Chennai wireless  Uptime of ~99.9% Kochi connectivity  Competitive advantage in providing high uptimes due to the sourcing of fibre bandwidth from multiple vendors B Ahmedabad Chennai Data center Pune Bangalore High Capacity fibre A Point to Point Wireless Central NOC in New Delhi Mumbai Hyderabad  Given limited bandwidth capabilities of wireless network, D Redundant NOC in Mumbai Regional NOC‟s in all Class B cities expanded into setting up own last-mile optic fibre ISDN RAS in all Class A & B Cities C network in 2009 Expansion by  Increased addressable market from ~US$0.6bn to Delhi investing in ~US$1.4bn Rural last mile fibre  Fibre segment contributes significantly to new order Chandigarh network inflow Lucknow Kochi Kolkata Bhopal 12
  14. 14. Tulip leverages on existing fibre network setup of other telcos & utilities for2 its pan-India presence… Telcos with national fibre Delhi Mumbai Bangalore Utilities with national fibre Chennai  Tulip has significant fibre capacity leased from national players like Reliance Infocomm, Vodafone, Powergrid, Bharti Airtel, Idea Cellular, Tata Indicom, Rail Tel, SAIL and BSNL Inter-City Primary Link Inter-City Redundant Link High End Router 13
  15. 15. 2 … And has entered into agreements with global providers for a worldwide reach London New York Los Angeles Mumbai Chennai Singapore Operational POP’s Map not to scale International expansion ■ Set-up POPs in East and West Coast of USA, London, Singapore, Mumbai & Chennai ■ In FY11, the Company entered into a global joint marketing agreement with Hutch to jointly provide IP VPN and Virtual Private LAN services to Indian customers with global connectivity needs ■ Gained access to 200,000kms of Hutchison‟s fibre network spread across 190 countries ■ Commenced delivery of orders across BFSI, Government and Private Sector leveraging the above network 14
  16. 16. Tulip plans to be a market leader in data center management and expand its3 portfolio of managed services New under construction data center at Bangalore Existing data centers  Acquired in FY11, we believe it to be one of the largest single site third-party  Tier III compliant & operational data centers with total floor space of ~90,000 sq data centers in the world ft in Delhi, Bangalore and Mumbai  ISO 20000-1 and 27001 certified  Facility has potential floor space of ~900,000 square feet and can house up to approximately 12,000 racks  We believe that our data centers provide our customers with world class infrastructure to co-locate their business critical IT equipment  Expected capital expenditure of US$184mm over three years of which  Key customers ~US$74mm has been spent as of September 30, 2011  Proposed facility to be LEED1 certified and would be Tier IV & III compliant  Appointed IBM as the design consultant & Schnabel AG, Germany as a peer review consultant Managed services  Peak level full capacity power requirement will be ~80MW  Software and hardware co-location services  Recently entered into an agreement with two leading global IT service provider  Cloud enabling services for providing floor space at the facility for a period of 5 years  Managed services  Server management  Managed router solutions  Commenced operations by providing floor space to a leading IT service provider  Network management  Managed voice solutions and have further accelerated the deployment of furture floor space  Database administration  Managed information security services  Disaster recovery and business continuity services Note: US$1:INR49.0 1 LEED: Leadership in Energy & Environmental Design 15
  17. 17. 4 Variety of customers across business segments Focus on Enterprises/Corporates Select customers  Dedicated focus on enterprise customers  Includes large, medium and small enterprises across business verticals, such as BFSI, BFSI consumer goods, IT, logistics, media and telecommunications  Provides fast & immediate connectivity options with target uptimes of ~99.9% Pre-rollout client acquisition ensures quick breakeven Telecom  Tulip typically surveys and identifies potential customers with minimum connects for quick break-even  Tulip believes that this model enables POPs that are rolled out are profitable Corporates End-to-end offerings help cross selling services  Presence in network integration, network management, data center, SWAN, etc enables it to cross sell its high profit data services to customers SWAN Projects R-APDRP Projects Haryana, West Bengal Uttar Pradesh, Punjab, Government Uttarakhand, Gujarat & Andhra Pradesh 16
  18. 18. 5 Led by competent and visionary management  Lt. Col. H.S. Bedi,VSM, (an ex-army personnel) is the Chairman &  Mr. Deepinder Singh Bedi is an Executive Director of the Company Managing Director of the Company  Responsible for all marketing and sales support activities within the  Served in the Indian Army Company Deepinder Bedi Executive Director Lt. Col.H.S. BediChairman & Managing director  Mr. Rahul Ahuja is the Chief Financial Officer (CFO) of the Company  Mr. Sanjay Jain is the Chief Executive Officer (CEO) of the Company  He is responsible for the financial and operational functions of the Company  He is responsible for driving the business augmentation and service excellence for the Company Rahul Ahuja Chief Financial Officer Sanjay Jain  Mr. Sanjay Verma is the President – Managed Services Chief Executive Officer  He is responsible for leading managed services business for the  Mr. Rajesh Duggal is the President - Government Business domestic and international markets  He is responsible for leading the Government, Defense and PSU business Sanjay Verma President - Govt Business  Mr. Jitendra Israni is the Chief Service Officer (CSO) of the Company Rajesh Duggal President – Govt Business  He is responsible for efficient delivery of services to the customers  Mr. Deepak Khanna is the President - Enterprise Business  He is responsible for leading enterprise business Jitendra Israni Chief Service Officer  Mr. Ashu Malhotra is the HR Head of the company.  He is responsible for end to end HR Life Cycle of the firm Deepak KhannaPresident - Enterprise Business Ashu Malhotra Head- HR 17
  19. 19. 6 Robust financial performance Revenue (US$mm) EBITDA (US$mm) and Capex (US$mm) EBITDA Capex 479.8 182.6 401.3 150.3 329.5 135.3 276.9 107.2 79.2 87.2 68.7 51.1 FY2009 FY2010 FY2011 H1FY12 FY2009 FY2010 FY2011 H1FY12 PAT (US$mm) and margin (%) Key comments PAT % PAT margin % EBITDA margin ■ Revenue of US$480mm in FY11 with a 09-11 CAGR of 20.7% 80 75.0% ■ Achieved revenue growth of 22.2% in H1FY12 over H1FY11 62.5 60 51.1 ■ Revenue growth expected to continue with the ongoing fibre roll-out & 47.3 50.0% expansion in to data center business 40 33.7 28.2% 20.9% 26.7% ■ EBITDA of US$135mm in FY11 with a 40.3% 09-11CAGR 28.6% 25.0% 20 ■ Increased EBITDA margin of 20.9% in FY09 to 28.6% in H1FY12 15.5% 13.0% 12.2% 11.8% 0 0.0% ■ Business mix has shifted towards the high margin enterprise data FY2009 FY2010 FY2011 H1FY12 services Note: Capex includes purchase of fixed assets and capital work-in-progress, purchase of goodwill & investment in JVs/ subsidiaries US$1 = INR49.0 18
  20. 20. 6 Profit & Loss Statement P&L (US$ in millions) All figures in US$mm 2008–09 2009–10 2010–11 H1’FY11 H1’FY12 Sales 329.5 401.3 479.8 226.7 276.9 % growth 21.8% 19.6% 22.2% EBITDA 68.7 107.2 135.3 62.2 79.2 % margin 20.9% 26.7% 28.2% 27.5% 28.6% EBIT 60.3 79.6 100.3 46.0 59.0 % margin 18.3% 19.8% 20.9% 20.3% 21.3% Profit before tax 68.9 65.6 83.0 38.4 44.7 % margin 20.9% 16.4% 17.3% 16.9% 16.2% Profit after tax 51.1 47.3 62.5 29.0 33.7 % margin 15.5% 11.8% 13.0% 12.8% 12.2% Note: US$1 = INR49.0 19
  21. 21. 6 Balance sheet Balance sheet (US$ in millions) All figures in US$mm 2008–09 2009–10 2010–11 Sep „11 Shareholders equity 139.2 189.4 247.5 281.2 Loan funds 229.1 248.8 362.6 453.2 Secured Loans 104.9 111.8 250.9 313.0 Unsecured Loans 124.1 137.0 111.7 140.2 Deferred Tax Liability (Net) 0.2 0.6 0.6 0.7 Total Liabilities 368.4 438.7 610.7 735.1 Goodwill 0.0 0.0 25.4 25.4 Fixed assets (including CWIP) 247.9 271.4 361.9 428.8 Investments 0.0 0.0 31.6 31.7 Net Current Assets 120.4 167.3 191.7 247.1 Misc Exp (not yet written off) 0.1 0.1 0.1 2.1 Total assets 368.4 438.7 610.7 735.1 Note: US$1 = INR49.0 20
  22. 22. Conclusion One of the leading MPLS/VPN provider in India Continues to grow the addressable market Increasing wallet share from existing customers by expanding into managed services segment Geared up to offer services in emerging areas such as cloud computing Consistently increasing customer stickiness 21
  23. 23. Agenda Overview 2 Investment highlights 8 Appendix 22 22
  24. 24. Regulatory frameworkKey categories Rules and regulations  FDI limit of 74% with 49% allowed under automatic route and above that under the government 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 licenses Internet service 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 government route  One-time non-refundable entry fee of INR100mm, INR20mm and INR10mm for Category A,B and C respectively Virtual Private Network (VPN)  Annual license fee of 6% of Adjusted Gross Revenue (“AGR”) generated under the license  FDI limit of 74% with 49% allowed under automatic route and above that under the government route  Entry Fee for new NLD license is INR25mm NLD & ILD License  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) 23
  25. 25. Focus on the government segment to reap benefits ■ Tulip has been granted 4 SWAN projects - on BOOT basis, which Won SWAN projects in states of Haryana, West involves supply & installation of network equipments and Bengal, Assam and Madhya Pradesh with operation & maintenance of projects for 5 years. aggregate project size of US$52mm Tulip has currently undertaken 4 SWANs ■ The revenues are recognized over quarterly installments, post completion of the SWAN project ■ Utilities/State Electricity Boards incur large losses annually in Won the five R-APDRP projects in states of Uttar transmission and distribution Pradesh, Gujarat, Uttarakhand, Andhra Pradesh IT solutions offered and Punjab with a combined value of US$49mm to under APDRP would ■ Government has launched Revised Accelerated Power be spread over 3 to 5 years require a robust Development and Reforms Programme (R-APDRP) connectivity backbone ■ Involved in various eGovernance initiatives of the Government of Initiatives undertaken by the State and Central India, which aim to improve the infrastructure in rural areas governments Financial inclusion Accelerated Power Development & Reforms initiatives Program (APDRP)Note: US$1:INR49.0; SWAN indicates state wide area network 24
  26. 26. Profit & Loss StatementP&L (INR in millions)All figures in INR mm 2008–09 2009–10 2010–11 H1’FY11 H1’FY12Sales 16,144 19,664 23,511 11,107 13,568 % growth 21.8% 19.6% 22.2%EBITDA 3,367 5,255 6,631 3,050 3,880 % margin 20.9% 26.7% 28.2% 27.5% 28.6%EBIT 2,953 3,902 4,917 2,255 2,892 % margin 18.3% 19.8% 20.9% 20.3% 21.3%Profit before tax 2,835 3,216 4,065 1,881 2,192 % margin 17.6% 16.4% 17.3% 16.9% 16.2%Profit after tax 2,505 2,316 3,064 1,421 1,653 % margin 15.5% 11.8% 13.0% 12.8% 12.2% 25
  27. 27. Balance sheet Balance sheet (INR in millions)All figures in INR mm 2008–09 2009–10 2010–11 Sep „11Shareholders equity 6,819 9,279 12,125 13,779Loan funds 11,224 12,191 17,769 22,206 Secured Loans 5,141 5,476 12,296 15,339 Unsecured Loans 6,083 6,715 5,473 6,868Deferred Tax Liability (Net) 9 29 32 35Total Liabilities 18,053 21,499 29,926 36,019Goodwill 0 0 1,244 1,244Fixed assets (including CWIP) 12,148 13,296 17,732 21,011Investments 0 0 1,549 1,555Net Current Assets 5,901 8,198 9,395 12,108Misc Exp (not yet written off) 4 4 4 102Total assets 18,053 21,499 29,926 36,019 26