Tuesday, April 14, 2009

3i Infotech
3i Infotech (promoted by ICICI Bank, current stake 39%) is a global Information Technology company which provides technology solutions to over 600 customers in more than 50 countries across 5 continents, spanning a range of verticals - Banking, Insurance, Capital Market, Mutual Funds, Government, Manufacturing and Retail. 3i entered the transaction BPO area in US after acquisition of Regulus in April 2008, 10 clients from Regulus are now in top-20 clients of 3i). So the company earns revenues through products, IT services and transaction BPO also.
3i Infotech has pending order book of Rs 1419 Cr as at Dec-2008, orders mainly from South Asian market followed by USA. The revenues have become more diversified. Being a promoter, ICICI Bank was the top client of 3i in 2005 with 26% share of revenues but that share has fallen to 8% in 3rd quarter of FY09, indicating low dependence on a single client.
The company has undertaken 3 new initiatives – Kiosks (E-governance), Taxsmile and Elegon (JV in China); all expected to break-even in FY10.

Growth ahead:-
3i has grown by more than 60% in FY05 through FY08 and further towards FY10 the revenues can grow by more than 20%. Trailing twelve month EPS = Rs12. By most conservative estimates, 3i is expected to post EPS of Rs 14 in FY10, while aggressive estimates take that EPS to Rs 23. Even at Rs 14, 3i trades around 2.85 times at CMP of Rs 40.

Face value=Rs 10 Equity = Rs 130 Cr B.V= Rs 49.30 Cash = Rs 200 Cr

FCCBs a concern:-
3i has FCCB worth Euro 30mn and US $100 mn trading at discount on Singapore Exchange. Already it has bought back Euro 3mn and US$ 8.1mn worth of FCCBs i.e. around 10% of total. These bonds are due for redemption latest by July 2012. More buyback will be a fresh upside trigger for the stock.

Technical Evaluation:- CMP Rs 39.50
3i Infotech is rising in up-channel with good volumes. The stock has very good support near Rs 33-35 levels and on the upside it can reach Rs 51-53. Buy at current levels as well as accumulate in dips.

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