VOLTAS

From ACs to mega projects

Belonging to the illustrious business house of Tatas, Voltas is a leading player in the residential air-conditioner (RAC) in India and fast moving electrical goods (FMCG) segment in India. It also enjoys a strong position the projects business in both the domestic and international markets. Prospects for the company are quite promising.

Consider:

• Voltas offers a comprehensive range of cooling solutions, including air-conditioners, air coolers, water coolers, water dispensers and commercial refrigeration products. The company is the undisputed market leader in a highly competitive residential air-conditioner market dominated by domestic and global players. What is more, it has enjoyed this position for the last six years and is likely to do so for several years as the number two is still far away. In the air cooler segment, the company reached the level of the top 2/3 players within the last six years, having launched its product in 2015. Today, the company has a hefty 26 per cent marketshare in the air cooler segment.
• The company has entered the booming Rs 76,400- crore white goods market through a joint venture with Arcelik, a leading Turkish company, whose appliances are being sold under the brand name Voltas-Beko and include refrigerator, washing machines, microwave ovens and dish washers. Today, the consumer durables market is highly underpenetrated in the country and Voltas is well-positioned to capture the opportunity with more than 19,000 consumer touch points and 130+ EBOs.
• Besides a strong market presence, Voltas has a vast distribution network. During the last ten years, its distribution network has grown 15 times to more than 19,000 consumer touch points across the length and breadth of the country. The company is focusing on expanding the footprint through more exclusive brand outlets across tier 2 and 3 cities. The Voltas and Voltas-Beko brands are now available at 130+ EBOs in the country.
• Besides cooling solutions and home appliances, Voltas is also engaged in providing engineering solutions. As a project specialist, it enjoys a strong presence in India, the Middle East, South East Asia and Africa. Recognised throughout the world for its engineering prowess, the company’s projects business provides MEP (mechanical, electrical and plumbing) and HVAC (heat, ventilation and air-conditioning) solutions and has successfully implemented several landmark projects in India and overseas. The company also works closely with the Government of India for various rural electrification and water management projects. The engineering products and services business represents leading equipment manufacturers in textile machinery and mining and construction equipment for sale, distribution and after-sales service.
• The company is steadily growing on the financial front. During the last five years, its sales turnover expanded from Rs 6,410 crore in fiscal 2017 to Rs 7,358 crore in fiscal 2020, before declining to Rs 6,878 crore in fiscal 2021 on account of the pandemic. Likewise, the profit at net level also inched up from Rs 486 crore in fiscal 2017 to Rs 670.crore in fiscal 2020 before declining to Rs 570 crore in FY 2021. The company’s financial position is very strong, with reserves at end of March 2021 standing at Rs 4,952 crore – almost 150 times its equity capital of Rs 33 crore. The company has a net debt-free balance sheet. Also, it has a strong cash flow from operating activities which helps to keep the balance sheet strong and allows it to take up new ventures.

The company is a good investment bet. It has a diversified revenue stream with a presence in unitary products, engineering projects and engineering products. It also has a diversified portfolio of rural electrification (including solar) and water treatment plants across the government as well as the private sector. Besides, the management’s approach is investor-friendly. Last year, the company paid a dividend of 500 per cent. It’s a scrip worth including in the portfolio of every intelligent investor.

CONSOLIDATED PERFORMANCE INDICATORS (Rs. in crore)

BIRLASOFT LTD

Growth rides healthy deal pipeline

Birlasoft is a global infotech company set up in 1995 and part of the CK Birla group, a $ 2.3 billion conglomerate with interests in industry segments ranging from cement, auto components, precision bearings and paper to building materials, consumer durables, IT-enabled services and heavy engineering equipment. The group is present across five continents and has 41 manufacturing facilities, 21 delivery locations and over 25,000 employees. Birlasoft features in the top 100 IT companies recognized by The International Association of Outsourcing Professionals (IAOP). Today, the company is addressing the next wave of globalisation to deliver accelerated technology solutions with a focus on value and innovation.

Birlasoft is a multi-shore business application global IT services provider with a presence in the US, Europe, Asia Pacific and India. It operates development centres in the US, China, Poland and India. It counts Fortune 100 enterprises across sectors like manufacturing, banking and financial services, insurance, media and healthcare as its clients.

HUGE DIVIDENDS

The company is steadily going from strength to strength on the financial front. During the last five years, its sales turnover has expanded from Rs 1,350 crore in fiscal 2017 to Rs 1,641 crore in fiscal 2021 with the profit at net level inching up from Rs 169.29 crore to Rs 193.56 crore during the same period. Its financial position is very strong, with reserves at the end of March 2021 standing at Rs 1,338 crore — over 24 times its paid-up equity capital of Rs 55.46 crore, that too after making 1:1 bonus issues twice – in 2006 and 2012. What is more, the company is paying handsome dividends, the rate for the last year being a hefty 200 per cent. Future prospects are highly promising.

Consider:

• Birlasoft has an established position in the BFSI, hi-tech, media, energy, utilities and life sciences segments. It also has a well-established client base which includes large, global organisations. The company has a long track record in the IT consulting business, a reputed client base, and alliances to drive business growth. Higher utilization, pyramid rationalization and cost optimization can help report strong revenue and profitability growth going forward. Large deal flows and cross-selling can provide revenue visibility for the next few years. The recent improvement in margins looks sustainable.
• It has a healthy deal pipeline to drive double-digit revenues. The company is witnessing healthy traction in cloud migration, app modernisation and workplace modernisation. Further, the company has partnered with Microsoft to drive cloud migration. In addition, the company has improved its annuity revenues by 67 per cent and is targeting 70 per cent in 2022. This, coupled with a healthy deal pipeline and a focus on multiyear deal wins, gives Birlasoft the confidence of achieving double-digit revenues in fiscal 2022. In addition, the company’s client mining, a healthy order book, a focus on niche verticals, cross-selling opportunities and expansion in Europe and Asia Pacific bode well for long-term revenue growth. Dollar revenues are expected to increase at a CAGR of 9.4 per cent in fiscal 2022. What is more, sustained improvement in margins is expected going forward.
• In 2019, Birlasoft was merged with KPIT, which led to restructuring of the company. KPIT had two business verticals – ITes and engineering. Later, the combined company was demerged into two companies — Birlasoft with the IT business and KPIT Engineering with the engineering business. Due to harmonisation and integration of the two companies, the financial performance of Birlasoft was adversely affected in the first two quarters of fiscal 2020 but a turnaround was staged from Q3 and the company re-entered the growth path.

MERGER SPIN-OFF

Birlasoft is now all set to go from strength to strength. A strong client base and strategic alliances will expand business. Today, the company has around 400 active clients in multiple verticals across various industry segments. The company is a good investment bet on account of its sound fundamentals led by robust debt metrics, healthy liquidity and an attractive dividend yield.

PERFORMANCE INDICATORS (Rs. in crore)