Stocks To Watch Out For ( SELAN / SPANCO / IVR )

Spanco Telesystems & Solutions Ltd. (Code: 508976) Rs.197.90
Established in 1995 by Mr. Kapil Puri and Mr. Rajesh Chhabria primarily to manufacture and supply of EPABX, Spanco Telesystems & Solutions Ltd. (STSL) is one of the leading telecom systems integration and IT services company in India. From providing telecom integration services to MNCs, PSUs and the Defence sector, STSL has evolved to extend its expertise into the dynamic space of Business Process Outsourcing (BPO) and Radio-frequency identification (RFID). In short, the company is operating in following four business segments:
I. Turnkey Solutions: STSL’s core competency lies in offering telecom systems integration which includes implementation of multi-location, multi-services converged networks for carrying diverse multimedia traffic (voice, data & video) based on latest technologies like ATM, MPLS, Frame Relay, TCP/IP etc. In other words, the company undertakes the turnkey responsibility of supplying requisite products and services under the PDIM (Plan, Design, Implement & Manage) model, thereby taking care of the networking and networking infrastructure requirements of its customers. It also offers network engineering services and acts as an ideal intermediary between Network Equipment Providers and Operators for the roll out of GSM/CDMA infrastructure across the length and breadth of the country. Notably, STSL has alliances with leading global companies like Alcatel, Nortel, Key Mile, Apropos, DMC Stratex Networks which help it in bidding for large Indian contracts.
II. Business Process Outsourcing (BPO): After hiving off its domestic BPO ‘Sparsh’ to Intelenet, SSTL currently manages ‘Respondez’ state-of-the-art international call centre in Mumbai serving clients in the USA and UK. It offers BPO solutions in the entertainment, retail, telecom, healthcare, banking and financial services sectors and also provides technical support to gaming companies. Importantly, SSTL along with 50:50 joint venture with the Spice group bagged a 10-year contract to set up, operate and maintain Interactive Voice Response System (IVRS) and Regional Call Centres (RCC) for the Indian Railways. In alliance with BSNL as the telecom service provider, the company obtained the licence to operate the various passenger & tourism information services on behalf of Indian Railways. Accordingly, the Integrated Train Enquiry System (ITES) in the four North, East, West and South zones is serviced by SSTL only.
III. IT Services: SSTL offers specialized IT solutions for an extensive range of embedded systems comprising device drivers, OS porting on newly designed chips and mobile programming. Besides offering e-governance, ERP product etc., SSTL is among the early few to provide mobile application solutions like bill payments through the mobile etc. In fact, the company is looking to get patent for its M-Money product through which one can make payment or literally transfer money through the cell phone. Moreover, it is one of the pioneering companies in India in the field of GPS/GIS, which is actually a satellite-based locating and navigating utility that determines a user's precise latitude, longitude and altitude by tracking signals from satellites.
IV. Radio-frequency identification (RFID): In 2006, SSTL ventured into RFID space by acquiring 51% stake in Skandsoft Technologies - a pioneering software solutions company that is dedicated to revolutionise the upcoming world of automated business processes through technologies like Radio Frequency Identification (RFID) and Automatic Identification and Data Capture systems (AIDC). This company has a patented platform (middleware), SETU™, which allows organizations to make the optimal usage of RFID technology.
On the infrastructure front, apart from 8 regional offices in India, SSTL has over 60 service and support facilities across the country. Internationally, it is present in the US, UK, Singapore and UAE. Besides, the company has formed a joint venture ‘Spanco-GKS’ with Golden Key Solutions of Oman to replicate its Indian business in the Gulf region as well. It also has some technical tie-up with Great Wheel Corporation, Singapore. Further, the company is looking to acquire an RFID service entity having presence in the international market. In the BPO segment, the company is once again focusing largely on the domestic market and intends to become one of the largest domestic BPOs with about 25,000 employees and 15,000 seats in the next 2-3 years. Recently, SSTL has decided to transfer all its BPO related businesses including Respondez (international BPO), domestic call centre operations and the IRCTC project (a 50:50 JV with spice telecom group) into a separate subsidiary. This step may be a precursor to unlock value by hiving-off or de-merging its BPO business into separate listed company in future. Financially, the company is faring well. Considering its strong order book position, it may end FY08 with sales of Rs.625 cr. and profit of around Rs.48 cr. on a standalone basis. This translates into an EPS of Rs.23 on its current equity of Rs.20.65 cr. whereas on its diluted equity of Rs.23.50 cr. (post conversion of 28.50 lakh warrants) the EPS works out Rs.20. Investors are strongly recommended to buy at current levels with a price target of Rs.280 (i.e. 40% returns) in a year’s time.

Selan Explorations Technology Ltd. (Code: 530075) Rs.157.90
Incorporated in 1985, Selan Exploration Technology Ltd. (SETL) is one of the few private sector companies engaged in oil exploration and production. In fact, it was amongst the first private sector companies to have obtained rights to develop oilfields way back in 1992 when the government of India (GOI) opened the oil sector to the private sector for exploration and production of hydrocarbons. Earlier, it used to undertake seismic data acquisition work for ONGC because of which it has extensive domain knowledge and experience in geophysical data acquisition, processing and interpretation in petroleum exploration, development and production. Based on this expertise, it ventured into developing proven oil fields and was awarded three oil fields in 1993. Subsequently in 1997, SETL received Letters of Intent (LOI) for two additional fields of which one was a gas field. Since then, the company is involved in onshore drilling for exploration of oil and gas.
Presently, SETL boasts of owning four oil fields Bakrol, Indrora, Lohar, Ognaj and one gas field Karjisan - all in and around Ahmedabad in Gujarat. Incidentally, all the blocks have a well laid out infrastructure with easy accessibility and are in close proximity to the government's crude gathering station as well as in close proximity to a large industrial town. The company has been producing crude from three oilfields only as the mining lease for Ognaj oilfield is still awaited from the Government of Gujarat. But its Bakrol field alone is stated to have oil/gas reserves of around 45 million barrels, which is huge by any standard. But due to limitation of funds and conservative management, SETL produced only 100,000 barrels of crude in FY07 and is expected to produce 1,40,000 barrels in FY08, which may move up to 2,00,000 barrels in FY09. With assured offtake of the entire oil and gas production from these blocks by the government, as per the terms of the production sharing contract, there is zero marketing risk for the company. To take advantage of high crude oil prices, SETL has been aggressively drilling new wells and is busy analysing the well logging data to identify prospective drilling locations that could be taken up for drilling in the foreseeable future. Fortunately, these new wells are yielding good production levels.
With international crude oil prices hovering around US $100 per barrel and expected to remain high, the future earnings of the company appear very encouraging. Secondly, the company is constantly following up with the government of Gujarat for the mining lease of the Ognaj oilfield. Once this lease is obtained, the company will initiate the development activities in the block. Meanwhile, this debt-free company is expected to clock a turnover of Rs.35 cr. with net profit of Rs.15 cr. for FY08. This leads to an EPS of more than Rs.10 on its equity of Rs.14.40 cr. However, for FY09 it is estimated to post an EPS of Rs.15. Considering the company’s proven huge oil reserve and encouraging future prospects, the scrip is trading fairly cheap at the current market cap of merely Rs.225 cr. Investors are advised to accumulate at declines as the scrip can appreciate 50% in 15 months.

IVR Prime Urban Developers: A good contrarian pick
IVR Prime Urban Developers Ltd. (IVRPUD) is a 12-year old Hyderabad based company incorporated in 1996 as IVR Realtors Ltd. The company’s name was changed to the present one in 2001 and it is a subsidiary of IVRCL Infrastructures & Projects Ltd.
Since inception, the company has been in the business of real estate development. Its principal activity is to develop and construct properties and projects, which include residential and commercial construction including hotels, retail malls, IT parks, etc. in various parts of India. It is a growing real estate development company focused on integrated townships. Mr. E. Sudhir Reddy is the chairman while Mr. E. Sunil Reddy is the managing director of the company.
The company entered the capital market during 2007 with a public issue of 1,41,50,000 equity shares of face value of Rs.10 each at a premium of Rs.540 per share for cash, aggregating to Rs.7782.50 million by way of 100% book building process. The issue evoked good response from the investing public.
The company has 12 subsidiaries which include IVR Hotels & Resorts Ltd., IVRCL Mega Malls Ltd., Agaram Developers Pvt. Ltd., Annupampattu Developers Pvt. Ltd., Papankuzhi Developers Pvt. Ltd., M.M. Kuppam Developers Pvt. Ltd., Kunnam Developers Pvt. Ltd., Ilavampedu Developers Pvt. Ltd., Samatteri Developers Pvt. Ltd., Mummidi Developers Pvt. Ltd., Velursantha Developers Pvt. Ltd. and Tirumani Developers Pvt. Ltd. It has entered into a Master Agreement with IVRCL governing business arrangements and areas of cooperation and resProjects: IVRPUD’s projects include construction of shopping malls, SEZ, IT Parks, Hotels etc. in Hyderabad, Visakhapatnam, Chennai, Pune, Noida and Bangalore.
Land Reserves: The company has land reserves of 2850 acres in Tier-I cities of Chennai, Hyderabad, Pune, Bangalore, Visakhapatnam and Noida totalling approximately 75.45 million sq. ft. of saleable area including 0.1 million sq. ft. in relation to unsold villas and flats in Hill Ridge Project.
Performance: For FY07, its income from operations was Rs.1477.62 million with net profit of Rs.206.79 million netting an EPS of Rs.4.60ponsibility in relation to real estate projects between the company and IVRCL.
Latest Results: The company announced excellent results for Q3FY08 as it notched up an income of Rs.2959.51 million with net profit of Rs.1163.23 million posting a whopping basic & diluted EPS of Rs.18.13. The annualised EPS works out to a fabulous Rs.72.52.
Financials: The company has an equity base of Rs.64.15 cr. with a book value of Rs134.01 per share.
Share Profile: The share of IVRPUD with a face value of Rs.10 is listed and traded under the ‘A’ group the BSE and NSE. Its share price touched a high of Rs.509.90 and a low of Rs.165 since lisShareholding Pattern: The promoters hold around 77.94% while the balance of 22.06% is held by non-corporate promoters and the Indian public. A host of mutual funds like Kotak, DSP ML, Escorts, HSBC etc. have been adding the thing company’s share to their various schemes..
Conclusion: IVRPUD is the construction arm of the renowned infrastructure giant IVRCL. The company has carved out an enviable space in the construction business for constructing top quality projects in tier I cities.
At its current market price of Rs.246.55, the share price is discounted less than 4 times its estimated earnings against the industry average P/E multiple of over 40. The share is lying low in sympathy with other realty stocks, which are undergoing a sharp correction. The share is going very cheap and is available at more than 50% discount to its public issue price of Rs.550. Considering its good pedigree, fabulous performance; the share may be added even at the current levels for significant appreciation in the long-term. In this connection, it is pertinent to note that the land bank of 2850 acres has not been factored into its share price. The share is a good contrarian pick for long-term investment.