GTL Infrastructure, established in 2004 and part of Global group, is the pioneer in Shared Telecom Infrastructure in India. GTL Infrastructure offers ready to use passive infrastructure to wireless telecom operators.
This company is in the business of passive telecom infrastructure sharing, setting up of which involves large amount of capital. It's a highly capital intensive business initially, but can definitely reap huge benefits in the long run considering the roll out of 3G and subsequently 4G services.
Not all telecom operators can afford to set up their own towers, and therefore they resort to sharing, which provides ample of opportunities to companies like GTL infrastructure. Companies like Bharti and Rcom have their own tower companies, but the new entrants like swan, telenor, or even the relatively older folks like Aircel, Idea, BSNL, are dependent on the infrastructure set up by GTL or Bharti, Rcom.
At present, GTL can't be valued on the traditional lines of P/E. The company is generating cash from operations, which does not reflect in earnings on account of huge depreciation charge. At present the equity base is Rs 946 Cr, but will swell up to around 1200 Cr, if all the warrants and FCCBs are converted.
The company is in the midst of rolling out a Pan India network of 23,700 towers by 2010/11, and is offering the infrastructure to the leading service providers in India. The company has already approved acquiring 17,500 towers from Aircel and is planning to take its total cell sites to 50,000 in the next three years. Out of the equity funding of Rs 3,400 crore for the acquisition, GTL Infra will be contributing upto Rs 1,750 crore i.e. around 51%, while the rest shall be contributed by GTL Ltd. and other Promoter company.
The Management is expecting assured recurring potential revenue of Rs 700 crore per annum for next 15 years. However, let me point out that as per my understanding only Rs 350 crore shall reflect for GTL Infrastructure on account of its 51% contribution towards the equity of the SPV formed for the acquisition of the towers. The present earnings and the net profit are not the true reflection of the earnings potential of the company. However, looking at the rate of depreciation, and the interest charge, one cannot expect the company to post good results (on the basis of numbers) any time soon. But, the fact is that its telecom infrastructure will always be in demand, especially with the new entrants, and also on account of 3G services.
Thus, if one is ready to hold it for 4 years or so from now, then it can really prove to be a good investment. However, in the medium and shorter term, dont expect much out of this company.
This company is in the business of passive telecom infrastructure sharing, setting up of which involves large amount of capital. It's a highly capital intensive business initially, but can definitely reap huge benefits in the long run considering the roll out of 3G and subsequently 4G services.
Not all telecom operators can afford to set up their own towers, and therefore they resort to sharing, which provides ample of opportunities to companies like GTL infrastructure. Companies like Bharti and Rcom have their own tower companies, but the new entrants like swan, telenor, or even the relatively older folks like Aircel, Idea, BSNL, are dependent on the infrastructure set up by GTL or Bharti, Rcom.
At present, GTL can't be valued on the traditional lines of P/E. The company is generating cash from operations, which does not reflect in earnings on account of huge depreciation charge. At present the equity base is Rs 946 Cr, but will swell up to around 1200 Cr, if all the warrants and FCCBs are converted.
The company is in the midst of rolling out a Pan India network of 23,700 towers by 2010/11, and is offering the infrastructure to the leading service providers in India. The company has already approved acquiring 17,500 towers from Aircel and is planning to take its total cell sites to 50,000 in the next three years. Out of the equity funding of Rs 3,400 crore for the acquisition, GTL Infra will be contributing upto Rs 1,750 crore i.e. around 51%, while the rest shall be contributed by GTL Ltd. and other Promoter company.
The Management is expecting assured recurring potential revenue of Rs 700 crore per annum for next 15 years. However, let me point out that as per my understanding only Rs 350 crore shall reflect for GTL Infrastructure on account of its 51% contribution towards the equity of the SPV formed for the acquisition of the towers. The present earnings and the net profit are not the true reflection of the earnings potential of the company. However, looking at the rate of depreciation, and the interest charge, one cannot expect the company to post good results (on the basis of numbers) any time soon. But, the fact is that its telecom infrastructure will always be in demand, especially with the new entrants, and also on account of 3G services.
Thus, if one is ready to hold it for 4 years or so from now, then it can really prove to be a good investment. However, in the medium and shorter term, dont expect much out of this company.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
- Ekansh Mittal, Lead Associate - HBJ Capital Services Pvt. Ltd
Email: Ekansh@hbjcapital.com
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