Rolta (India): Gentleman’s Game

Rolta India (Rolta), incorporated in 1981, started operations in the data
processing and turnkey solutions market. In 1985, the company ventured into the
CAD/CAE market through a tieup with Integraph, a global leader in the GIS and
PDS market.

Since then, Rolta has grown to be the leader in the CAD/CAM/GIS conversion
market in India with over 2000 employees.

Rolta’s primary operations include manufacturing and sales of engineering
workstations and providing solutions in the CAD/CAM/GIS conversion area. The
company is engaged in providing AM/FM and GIS, Plant Design Automation (PDA) and
Mechanical Design Automation (MDA) and e-services. The company derives major
revenues from domestic operations providing CAD/CAM solutions to government
agencies such as Ministry Of Defence, Indian Institute Of Remote Sensing, MTNL
and ONGC.

In India, Rolta has an exclusive tie up with Integraph, the worldwide leader
in AM/FM and GIS and also for providing on site and off site services on
Integraph’s Plant Design System (PDS). In the Internet area, the company is
into the ISP business and also focuses on providing e-business, e-security and
network management services to the clients. The company is focusing on PDA and
Collaborative Product Commerce services. The company currently has four
international subsidiaries including the new subsidiary formed in Germany in
2001.

Rolta reported decent performance during the nine months ended September
2001. The company reported revenues of Rs. 227.84 crore and a net profit of Rs.
89.95 crore, which were higher by 29% and 39% respectively. While the company’s
revenues have declined marginally on a sequential basis, during the first three
quarters, the net profit has remained stable thanks to an improvement in the
operating margins. The company’s performance in the fourth quarter ended
December 2001, due to be announced shortly, is expected to be better than the
performance in the previous three quarters.

Rolta is currently traded at Rs. 113 discounting our projected December 2002
EPS by 5 times and December 2003 EPS by 4 times. The stock, after touching a low
of Rs 33 last year has rebounded to cross the Rs. 100 levels and currently
trades at around Rs 105-115 levels. With the shadow of the slowdown gradually
passing by and hopes of recovery in the next couple of quarters high, the
valuation of IT stocks is on the upside. In the improving scenario, Rolta is
expected to improve its performance as the investments in manufacturing sector
gain ground. At the current level, Rolta is expected to remain stable and the
upside would depend on the performance of the company in the fourth quarter due
to be announced soon. Hold.

Sushanto Mitra is the founder
of Technology Capital Partners

The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented here.