Money Times: Bets for the Week

Avaya GlobalConnect Ltd. (Code: 500463) Rs.159 Incorporated in 1986, Avaya GlobalConnect Ltd. (AGCL), the erstwhile Tata Telecom Ltd., is India’s leading provider of intelligent communications solutions, systems and services focused on meeting the needs of organizations large and small. It offers a comprehensive suite of solutions for Contact Centres, Business Process Outsourcing and end-to-end converged communications. By designing, building and managing some of the world’s most advanced communications solutions, AGCL is helping its customers achieve sustained advantage through superior business results. Notably, it has initiated strong branding on Intelligent Communications covering IP Telephony, Contact Centres, Unified Communications and Communications Enabled Business Processes (CEBP) Solutions. In fact, the company continues to command leadership position across various market segments in the Convergence and Contact Centre domain. In order to provide best-in-class converged communications products and solutions, AGCL has partnered global technology leaders such as Polycom- the worlds leading video-conferencing solutions provider and NICE Systems-the Israel-based customer experience management specialist. It also has strategic alliances with systems integrators such as IBM, HP, Netsol and Servion.

With strength of around 800+ professionals, AGCL has over 30 offices spread across the country from Jammu to Trivandrum to Ahmedabad to Siliguri. The company has an extensive distribution network comprising over 50 systems integrators, channel partners and dealers. With over 6,000 customers, it provides world-class service support through a remote maintenance integration (RMI) system. It has a state-of-the-art Lab and a world class Customer care centre in Gurgaon, Customer studio in Mumbai and Development & Solutions support centre in Pune. Today, the role that communications networks play extends far beyond basic connectivity. The effective use of communication tools can have a major impact on any company’s success by enabling delivery of better customer service, help empower key decision makers and enhance the brand image. To remain competitive, enterprises are looking at emerging technologies to utilise the common infrastructure for voice, data and multimedia applications and also expect to deploy Modular Messaging, Unified Communications and high-end Video conferencing Solutions in the near future. This all augurs well for AGCL, which is uniquely positioned to offer solutions of convergence for such customers. Accordingly, the company has been expanding its focus on `3C’ strategy of converged communications, contact centers and customer services to address specific industry verticals. The industry verticals approach helps it to differentiate its products and solutions in a highly competitive market environment.

Last year, AGCL launched new products and solutions like customer interaction express solution to address the needs of domestic call centre customers, high definition video end point (HDX) and IP based high definition multi conferencing unit (RMX) for video conferencing and wireless infrastructure and handheld devices for mobile computing to address the needs of key vertical segments like retail, hospitality, etc. It is also planning to develop domain knowledge of Banking & Financial Services, retail & manufacturing and Travel & Logistics. Its endeavour is to tap large investments in these sectors by developing and deploying new applications/solutions and thereby create an experiential selling environment. On the other hand, its WOS in Australia has expanded its geographical/customer base and now has presence in Sydney, Melbourne, Adelaide, Brisbane and Perth with over 100 customers. Financially, the company reported disappointing results for last the 2-3 quarters. Yet, on a conservative basis it is estimated to clock a turnover of Rs.550 cr. with PAT of Rs.30 cr. for FY08 ending 30 th September 2008. This translates into an EPS of Rs.21 on its current equity of Rs.14.20 cr. Investors are advised to buy at current levels with a target price of Rs.250 (i.e. 55% appreciation) in 12-15 months.

Shilchar Technologies Ltd. (Code: 531201) Rs.123 From a modest beginning of manufacturing only R core transformers in 1989, Shilchar Technologies Ltd. (STL), erstwhile Shilchar Electronics Ltd., today boasts of manufacturing various types of transformers and cores catering to a wide cross section of the industry segments ranging from highly competitive consumer goods to the tech savvy industrial segment, both at home and abroad. Backed by a state of the art manufacturing facility in Vadodara, Gujarat, and its competitive pricing strategy, STL holds a dominant position and is recognised as a world class manufacturer of transformers and cores. It has UL and CSA approvals for its products and caters directly to the market requirement as well through its franchisees in different parts of the country. Notably, it serves a wide range of industrial segments which can be gauged from the product profile mentioned below.

• Power Transformers: STL can manufacture and test transformers upto 66 KV Class and 15 MVA capacity. It makes Three Phase oil cooled transformers with and without OLTC and with or without RCC Panel. Presently, it has an installed capacity of 1000 MVA for power transformers alone.

• Distribution Transformers: Under this division, STL can manufacture and test transformers up to 33 KV Class and 10 MVA capacity with an installed manufacturing capacity of 200 MVA per annum. It specialises in producing single phase oil cooled up to 100 KVA, three phase oil cooled transformer up to 2 MVA, 33 KV class and three phase dry type transformers up to 1 MVA, 11 KV class.

• Linear Transformers: STL manufactures new age power rangers for all electrical needs. Be it for computers/peripherals, telefax/copiers, audio/video equipment, medical or communication equipments, STL has an extensive range from R core transformers to El Transformers and Toroidal to Current transformers used in electronic energy meters. These transformers are supplied according to customer requirement of different class of thermal insulation, cut-offs, static-magnetic shielding, special mounting, epoxy moulding, vaccum impregnation etc.

• Telecom Transformers: With engineering support from Custom Magnetics-USA, STL manufactures telecom and data transformers with the highest quality standard for all sorts of telecom equipments. Its ferrite transformers are exported regularly and used by leading telecom giants of the world.

• Core & Laminations: STL manufactures various types of cores including R-Cores, R-Toroid cores, rectangular cores, cut C cores, split cores etc on SPM Japanese winding machine and using M2H/M4 grade CRGO material. On the other hand, it produces EI lamination using M6 grade CRGO material of 0.35 mm.

• Bobbins: STL has set up its own Plastic Bobbins manufacturing unit to support the needs of the industry for high- grade quality bobbins. This division also makes plastic parts for the transformer industry using all engineering plastics viz. Nylon 6, PBT, Ploycarbonate, ABS, Glass filled Nylon 6, Nylon 66 etc depending on the requirement. The Indian transformer market is estimated at Rs.10,000 cr. and is likely to grow by 8% to 10% annually in the coming 10 years. The growth is mainly due to large power generation projects coming up in various parts of the country. The electrification of rural areas all over the country will require many transformers and the present capacity in the country is not enough to meet the growing demand. Hence to cash in on this opportunity, STL is in the midst of expansion and modernisation of its plant and has also enhanced the existing production capacity up to 20 MVA Transformers from 15 MVA earlier. Last year, the company bought land, installed modern plant and machinery and completed the construction of a new building for manufacturing of power & distribution transformers up to 500 KVA. It also merged its wholly owned subsidiary called Shilchar Payton Technology Ltd. with itself. For FY08, it is expected to clock a turnover of Rs.75 cr. with PAT of Rs.4.25 cr. i.e. an EPS of Rs.11 on its equity of Rs.3.80 cr. The considerable rise in steel and copper wire prices is, however, a cause of concern. Still for FY09 the company has the potential to register a topline of more than Rs.100 cr. with profit of around Rs.6 cr. i.e. an EPS of Rs.16. This means that the company is currently available at a P/E ratio of less than 8 times its FY09 earnings. Investors are advised to accumulate this scrip at sharp declines for a price target of Rs.190 (i.e. 50% appreciation) within a year.

Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.