countries.
Seekport is not only spreading its wings geographically but has also become a talk of the press and television media. The
company has strongly grown in Germany, France and the UK. Seekport provides search technology to internet
advertising agencies like Espotting on a B2B basis or to retail users on its portal on a B2C basis and its speed can be
favourably compared to Google or Yahoo.
In 2004, AL also acquired 17% stake in V-Soft Inc., a US based company headquartered in Saratoga, California. V-Soft is a
provider of high quality customized engineering solutions to clients in USA using engineering resources from India. The
company has retained the option of acquiring V-Soft after a period of four years.
V-Soft provides a single, local contact for all business and technical communication making the management interface
between USA and India effectively transparent for its US clients. V-Soft has chalked out a growth plan for its operations
covering the entire US market, utilising the engineering skills of the company as its prime business partner. V-Soft's
clientele includes HP and Honeywell in the Business Process Outsourcing (BPO) segment. Microchip, Alcatel, Cisco
Systems and FEI are a few examples in the engineering services sector.
AL has acquired a stake in Elven Micro Circuits with the intention to integrate the company fully with itself. Elven is in
the open system interconnection model that depicts communication as a structured, seven-layer stack. Elven in turn has
bought C2Silicon, a Bangalore based company. AL has successfully completed the merger of Elven Micro Circuits Pvt. Ltd
(Elven) and C2Silicon Software Solutions Pvt. Ltd. (C2) with itself.
Recently, AL bought 25% stake in Pune-based Digihome Solutions, which provides digital home gateway solution
addressing six different needs of any modern home siz. security, safety, automation, entertainment, information and
communication including video surveillance, fire and smoke detection and access control in homes and townships. AL is
slowly increasing its stake to become a 51% shareholder. It has also appointed Grant Thornton as its auditors for shaping
up for a rerating.
With core competency in communications, AL is now into networking, telecommunications, semi-conductors and
automobile verticals offering customised application development products engineering and soft testing services. Today,
its market spreads in Europe, Australia, UK, Spain, Germany, France, Japan and the USA.
Due to increasing complexities, the size of IT projects rapidly changing technology and lack of skilled resources, many
organisations are outsourcing their IT services to external providers. Global IT spending is dominated by key industry
segments, such as government, banking and financial services, manufacturing, infrastructure, retail and healthcare.
Global IT services spending are projected to grow at a CAGR of 6.4% to reach $512.8 billion by 2008 according to
International Data Corporation.
Elven and C2 have enhanced AL's embedded skills by bringing embedded ICs or VLSI skills to the company. Apart from
marquee clients in Japan and USA, this merger has positioned AL very strongly in the Embedded Engineering Services
market. Looking at Nasscom's report, it appears that this is the next big thing that is happening with maximum growth
attributed to this sector. It is expected that Engineering Services would grow from the current US $4.9 billion to $50 billion
by 2020. Automotive, Aerospace, Technology, Telecom, Utilities are expected to be the top 5 verticals in the Engineering
Services Outsourcing.
Based on the current going, AL is all set to post a consolidated net profit of Rs.110 cr. on sales of about Rs.400 cr. in FY08.
This would give an EPS of Rs.11.8. The AL share is currently traded at Rs.52.85 at a P/E of 4.7 on its estimated EPS of
Rs.11.8 against the industry average P/E of 14.
In view of the bright prospects of the IT industry, the excellent outlook for the AL's business, the AL share is
recommended with a target price of Rs.75 in the medium-term. The 52-week high/low of the share has been Rs.103/46.
*****
The share of VST Tillers Tractors Ltd. (VSTTTL) (Code: 531266) (Rs.161.10) is recommended for decent appreciation in
the medium-to-long-term. An analyst with a reputed brokerage house recommends the share with a target price of Rs.225
in the medium-term.
VSTTTL is a major player in the power tiller industry and is cashing in on the tractor boom. It also has an integrated
facility for engine components. Its products find application in dry tilling, cultivating, deweeding, water pumping,
ploughing, ridging, wet puddling and transportation of goods. Its engine components have great export potential.
During FY07, sales moved up by 25% to Rs.162 cr. (Rs.130 cr.) and net profit advanced by 69% to Rs.12.5 cr. (Rs.7.4 cr.)
yielding an EPS of Rs.21 and it paid a dividend of 40%. During Q3FY08, VSTTTL posted 6% lower net profit of Rs.3.4 cr.
on 11% increased sales of Rs.40.5 cr. compared to Q3FY07. For the first nine months of FY08, sales advanced by 13% to
Rs.131 cr. as compared to Rs.45 cr. in the same period of FY07, and the net profit at Rs.9.3 cr. advanced by 9%.
Against VSTTTL's tiny equity of Rs.5.8 cr., the reserves stood Rs.52 cr., which gives its share a book value of Rs.99 making
it a potential bonus candidate. The value of its gross block is a whopping Rs.53 cr. With borrowings of just Rs.7.8 cr., its
debt-equity ratio works out to 0.13: 1.
