Nu Tek India Limited – IPO

Business of Nu Tek India Limited

Nu Tek is a telecom infrastructure services provider company which offers infrastructure rollout solutions for both fixed and mobile telecommunications network. Nu Tek offers services to telecom equipment manufacturers, telecom operators as well as third party infrastructure leasing companies. Nu Tek undertakes turnkey projects providing management expertise and installation for telecom sites. Nu Tek has site offices and facilities located in all the major cities and have executed projects in all of the 23 telecom circles. Some of the major clients of Nu Tek are Nokia Siemens Pvt Ltd., Ericsson Ltd., Motorola India Ltd., Tata Teleservices Ltd., Reliance Communications, Bharti Airtel, Idea Cellular, VSNL and Essar Ltd.

While the company has an impressing client list it is also dependent on a few customers for most of its revenues, the top customer contributes 57% of its revenues and the top 5 customers contribute 83% of revenues in FY 2007.

Financials of Nu Tek India Ltd.

The sales for Nu Tek have grown steadily in the past few years. From Rs. 181.03 million in the year ending March 2003, it grew to Rs.638.04 million for the year ending March 2007, it was Rs.485.63 the year before and the Income in the past five years has never shown a decline. The profit after tax has also shown a steady growth in the same period and stood at Rs.134.24 million in the past year.

However investors need to bear in mind that the EPS of the company has been far from stable and the EPS in the past three years has been Rs.11.13 for the year ended March 2007, Rs.4.50 for the year ended March 2006 and Rs.363.90 for the year ended March 2005. In this regard while the investor looks at the price band and tries to figure out whether the issue is at a decent P/E multiple or not bear in mind that if you are looking at weighted average figures for past three years then they may not be the best way to judge the right price. The diluted EPS for the period ending September 30 2007 is Rs.5.51.

Objects of the Issue

The primary goals of the IPO are raising funds for capital expenditure, overseas acquisitions and augmenting long term working capital requirements. The capital expenditure is planned on equipments, vehicles and laptops and is earmarked at a sum of Rs. 235.79 million. While Nu Tek has not reveled their target acquisition company in their prospectus they have earmarked a sum of Rs. 210 million for overseas acquisitions. The chunk of the IPO proceeds at Rs. 440 million has been earmarked for augmenting working capital requirements.   

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