Tanla Solutions
Tuned well for consistent high growth
Focused on global market for mobile content services, the company continues to hold excellent growth potential on the back of faster growth in value added services, expansion in service offerings, new geographies and new technologies
| Buy | Tanla Solutions |
| BSE Code | 532790 |
| NSE Code | Not listed |
| Bloomberg | TANS@IN |
| Reuter | TNSL.BO |
| 52-week High/Low | Rs 820/ Rs 377 |
| Current Price | Rs 534 (as on 17th April 2008) |
Over the past few years Tanla Solutions has become and end-to-end service provider to telecom companies and relevant content providers. Tanla Solutions commenced commercial production of telecom signaling solutions in 2000. It specialises in providing SS7 (Signaling System 7) messaging infrastructure software products including short messaging service centres (SMSCs), high density media servers (HDMSs), optimal routing solutions, welcome roamers, voice mail servers and caller ring back tone servers. It also offers messaging applications and billing services (aggregator services) and offshore services including software development, infrastructure management services and technical support services. Tanla Solutions provides telecom-signaling products to operators of mobile communications networks and aggregator services to content providers in connecting mobile operators.
Mobile penetration levels the world over are peaking. Coupled with this, voice tariffs are falling
due to competition. Mobile operators are thus under intense pressure to find alternate ways to boost their average revenue per user (ARPU). They are looking at consumer data applications such as ringtones,
games, mobile video services and other premium content to augment data revenues and increase ARPUs. Moreover with the advent of data-friendly technologies like 3G and Worldwide Interoperability for Microwave Access (WiMax), it is expected that mobile data usage would contribute substantially to total mobile revenues in future. The value-added service (VAS) for the mobile market will thus grow at a fast pace.
Currently Tanla is focused on UK and Ireland teleom markets. The UK telecom market is one of the most advanced in Europe with a high market penetration of 118% (EU average: 108%), and high Data ARPU (20%-30% of total ARPU). The wireless market is intensely competitive with the top 4 players having almost equal market share. The key differentiation is expected to come from value-added services (VAS) and increased penetration of 3G services. Tanla, with its end-to-end product basket catering to most these leading players, is well placed to capture this opportunity, Tanla Solutions experiencing increasing interest in its new mobile payments service "Payforit" which operates in partnership with all UK Mobile Operators including 3, O2, Orange, Vodafone, Virgin Media and T-Mobile. Tanla Solutions has also signed agreements with mobile messaging and payments partners in Spain and South Africa as part of its global geographical expansion plan.
Tanla Solutions is focused on providing vertical market solutions enabling mobile payments, advertising and entertainment services. The global market for mobile content services is expected to grow to $35 billion per year by the year 2012 according to research firm Informa Telecoms. Additionally the Mobile Advertising and Mobile Payments market will fuel mobile commerce and create a huge revenue opportunity for Tanla Solutions.
There are three important factors which will continue to fuel growth in this sector. Firstly, the introduction of high bandwidth mobile internet services, 3G and multimedia handset capabilities in developed European and American markets is encouraging global brands to launch mobile internet portals and services leading to increased commerce transactions and the consumption of richer content formats and media on handsets. Secondly, the continued subscriber growth in developing Asian, African and Latin American Markets is propping the demand for telecommunication infrastructure, mobile content and applications. Finally, the convergence of digital media, the internet and mobile is creating an enormous opportunity for companies to develop completely new business models, channels and services. It has become imperative for brands to have a mobile web presence and develop a mobile communications strategy.
Hitherto focused on global markets, Tanla has also entered Indian market by signing business agreements with Airtel, BSNL, Idea, Reliance and Vodafone. Tanla will now also be focusing on benefiting from the increasing demand for value added services in India and other developing Asian markets.
For the third quarter ended December 2007, Tanla Solutions reported 11% sequential growth in operating revenues at Rs 119.34 crore backed by growth in aggregator business. OPM improved 160bps at 47.6%. The net profit was up 18% at Rs 43.27 crore. On y-o-y basis, Tanla reported 110% growth in topline at Rs 119.34 crore and bottomline rose 88% at Rs 43.27 crore.
For the nine months ended December 2007, Tanla recorded 120% rise in consolidated operating revenues at Rs 316.12 crore backed by growth in aggregator business.. PAT surged 93% at Rs 113.11 crore.
During the December quarter Tanla Mobile Middle East FZ-LLC, Dubai started its commercial operations, for which Tanla Solutions Limited provided Service Delivery Platform & technical support services. All inter company transactions are considered in consolidated financials as per Indian Accounting Standards.
From FY0503 to FY0703, Tanal’s consolidated sales have shot up from Rs 22.39 crore to Rs 221.85 crore and consolidated net profit has surged from Rs 6.84 crore to Rs 92.79 crore. For FY2008, Tanla is expected to report consolidated sales of Rs 448.59 crore and consolidated net profit of Rs 161.43 crore, giving an EPS of Rs 32.3, which is expected to rise to Rs 41.7 in FY2009 on current face value of Rs 2. The company has announced split in face value from Rs 2 to Re 1. Current price of Rs 534 discounts the expected FY2009 EPS by only 12.8 times.
| | 0503 (12) | 0603 (12) | 0703 (12) | 0803 (12P) | 0903 (12P) |
| Sales | 22.39 | 63.02 | 221.85 | 448.59 | 605.59 |
| OPM (%) | 34.2 | 55.7 | 49.8 | 46.7 | 46.7 |
| OP | 7.65 | 35.09 | 110.49 | 209.38 | 282.81 |
| Other Income | 0.34 | 0.10 | 7.37 | 19.10 | 21.01 |
| PBIDT | 7.99 | 35.19 | 117.86 | 228.48 | 303.83 |
| Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| PBDT | 7.99 | 35.19 | 117.86 | 228.48 | 303.83 |
| Depreciation | 0.26 | 0.79 | 8.04 | 18.47 | 25.86 |
| PBT | 7.73 | 34.40 | 109.82 | 210.01 | 277.96 |
| Tax | 0.89 | 4.15 | 17.03 | 48.58 | 69.49 |
| PAT | 6.84 | 30.25 | 92.79 | 161.43 | 208.47 |
| EPS (Rs.)* | 1.4 | 6.1 | 18.6 | 32.3 | 41.7 |
| * on equity of Rs 10 crore | |||||
| Tanla Solutions: Consolidated Results |
| | 0712 (3) | 0709 (3) | Var. (%) | 0609 (3) | Var. (%) | 0712 (9) | 0612 (9) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Sales | 119.34 | 107.33 | 11 | 56.73 | 110 | 316.12 | 143.80 | 120 | 221.85 | 63.02 | 252 |
| OPM | 47.6 | 46.0 | | 52.2 | | 46.1 | 51.6 | | 49.8 | 55.7 | -5.9 |
| OP | 56.83 | 49.33 | 15 | 29.63 | 92 | 145.80 | 74.27 | 96 | 110.49 | 35.09 | 215 |
| Other Income | 4.69 | 4.09 | 15 | 0.02 | 999 | 13.85 | 0.08 | 999 | 7.37 | 0.10 | 999 |
| PBIDT | 61.52 | 53.43 | 15 | 29.65 | 107 | 159.64 | 74.34 | 115 | 117.86 | 35.19 | 235 |
| Interest | 0.00 | 0.00 | | 0.00 | | 0.00 | 0.00 | | 0.00 | 0.00 | |
| PBDT | 61.52 | 53.43 | 15 | 29.65 | 107 | 159.64 | 74.34 | 115 | 117.86 | 35.19 | 235 |
| Depreciation | 5.02 | 4.45 | 13 | 1.05 | 380 | 12.80 | 2.35 | 445 | 8.04 | 0.79 | 915 |
| PBT | 56.50 | 48.97 | 15 | 28.60 | 98 | 146.85 | 72.00 | 104 | 109.82 | 34.40 | 219 |
| Tax | 13.23 | 12.39 | 7 | 5.56 | 138 | 33.74 | 13.25 | 155 | 17.03 | 4.15 | 310 |
| PAT | 43.27 | 36.58 | 18 | 23.04 | 88 | 113.11 | 58.75 | 93 | 92.79 | 30.25 | 207 |
| EPS (Rs) # | 34.6 | 29.3 | | 18.4 | | 30.2 | 15.7 | | 18.6 | 6.0 | |
| # Annualized on equity capital of Rs 10 crore. | |||||||||||
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