GTL (Global Tele): The bad run continues - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

GTL (Global Tele): The bad run continues

Oct 27, 2001

For 2QFY02, GTL has posted a sequential growth of 19% in topline and a dip of 11% in net profits due to declining margins. However, on a YoY basis the company has posted a 33% drop in revenues and a 67% decline in bottomline (excl. extra-ordinary items for FY01). The company’s margins have deteriorated due to the increase in costs for sales and services that have jumped by a significant 71%. However, the company has managed to control its employee costs. The number has shown a steep drop of 37% sequentially.

Though, in the quarter ended September ’01, the company’s business improved compared to 1QFY02. The third and fourth quarter are going to be tough for the company as the tech sector is facing uncertainty post September 11 events. However, the impact could be lower considering the company earns only 6% of its revenues from the US. On a consolidate basis the company’s revenues have grown by 30% sequentially and the net profits have declined by 12%. The drop in margins is even more severe on a consolidated basis.

(Rs m)1QFY022QFY02Change
Sales 1,181 1,407 19.2%
Other Income 157 162 3.0%
Expenditure 867 1,073 23.7%
Operating Profit (EBDIT) 314 334 6.5%
Operating Profit Margin (%) 26.6% 23.8%  
Interest - -  
Depreciation 209 238 13.9%
Profit before Tax262258-1.5%
Tax (9) 18 -298.7%
Profit after Tax/(Loss) 271 240 -11.5%
Net profit margin (%) 22.9% 17.0%  
Diluted number of shares 70.4 70.4  
Diluted Earnings per share* 15.4 13.6  
P/E (at current price)   5.9  
*(annualised)      

While on a sequential basis all the three revenues stream of the company have shown growth, on a YoY basis ENS has shown a marginal decline in revenues of 1%. The SAS business is the hardest hit with a steep fall of 59%. The NE group, however, has shown very strong growth of about 96%.

Service offering (Rs m) 1QFY02% contribution2QFY02% contributionchange
Software and application services 579 49.0% 612 43.5%5.8%
Enterprise network services 427 36.1% 578 41.0%35.4%
Engineering services 176 14.9% 218 15.5%23.8%
Total 1,181   1,407  19.2%

SAS has shown declining trends in domestic as well as international revenues due to slowdown in the licensing business (20% of revenues in FY01). The licensing business is a very risky one to be in. Considering the fact that the company does not have much expertise in software development in case of software becoming obsolete there is not much that GTL can do. There are already cases of VisualSoft and Hughes software suffering due to concentration on products. However, these companies at least make the product themselves. The SI (systems integration) business too has shown signs of slowdown. However, the company wants to gradually get out of this business due to the low margins involved.

Capacity utilization in CRM (Call Centre) is two quarters behind schedule. The company will face stiff competition from software companies that are taking an interest in the area. MsourceE is a subsidiary of Mphasis in the call centre business that has been showing strong growth. The advantage other software companies have over GTL is that these companies have established relationships with the prospective clients.

GTL continues to increase its presence internationally. The company’s margins would continue to be under pressure due to higher personnel and administration costs, particularly in the USA, over the next few quarters.

At the current market price of Rs 80 the stock is trading at a P/E multiple of 5 times its 1HFY02 annualised earnings. The investors should wait for the company to show some consistent results and business focus before considering this as an investment option.

Equitymaster requests your view! Post a comment on "GTL (Global Tele): The bad run continues". Click here!

  

More Views on News

GTL 2020-21 Annual Report Analysis (Annual Result Update)

Nov 1, 2021 | Updated on Nov 1, 2021

Here's an analysis of the annual report of GTL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of GTL. Also includes updates on the valuation of GTL.

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

GTL SHARE PRICE


Dec 7, 2021 12:18 PM

TRACK GTL

COMPARE GTL WITH

MARKET STATS