GTL, the network engineering and IT services company, has announced disappointing bottomline figures for its September quarter. For 2QFY03, it has reported a seqeuential 35% fall in consolidated net profits. The consolidated topline has grown by a marginal 4%, on a QoQ basis. Not accounting for the other income and extraordinary item figures net profits have still declined by 16%. Fall in other income and jump in extraordinary items have further depressed net profits.
Revenues from its network engineering business have grown by 12% in 2QFY03. Overseas focus has led to a considerable growth in Global Tele's revenues from the network engineering business. GTL's call centre operations have registered a 10% growth in the same period. The company's call centre business has customers across verticals like banking, insurance and telecom. Revenues from this business have been growing consistently as more and more multinationals are outsourcing their call centre operations to India due to its low cost proposition. However, on a comparative basis the growth in call centre revenues is rather disappointing as other players like Mphasis have reported 56% QoQ growth in its call centre revenues on a similar base.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
The performance of entreprise solutions business of GTL has been disappointing. Enterprise solutions business has degrown by 2% in 2QFY03 on a QoQ basis. The company has been losing business in this segment consistently due to the slowdown in spending on networking technologies. Increasingly companies are focusing more on generating better returns on the investments they have already made on information technology.
Operating margins have also taken a hit, falling by 230 basis points. A 26% and 30% QoQ jump in employee and selling and distribution (S&D) costs has led to this fall in operating margins. Net profits of the company have been affected further due to lower other income and higher extraordinary expenses (Rs 18 m). An appreciating rupee has been the main reason for fall in other income.
At the current market price of Rs 75, the stock is trading at a P/E multiple of 8x its annualised 2QFY03 earnings. Going forward the growth drivers of the company will be its network engineering division and its call centre business. Global Tele on account of being an early entrant in to the call centre business is likely to maintain healthy growth rates in this business. On the other hand performance of its network engineering division will depend largely on the fortunes of the telecom sector. The stock is unlikely to witness any major activity in the short term as investors may choose to put their money in other technology stocks that have shown better performance in the current quarter.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407