Railtel Corporation of India Limited (Railtel) Largest Neutral Telco Infra Provider Summary
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Company Note RailTel Corporation of India Limited (RailTel) Largest neutral telco infra provider Summary RailTel is a 100% Government of India owned enterprise under the administrative Experience in executing projects of national importance with a pipeline control of the Ministry of Railways. RailTel is conferred with Miniratna (Category – I) of projects: Successfully completed NKN and Bharat Net (formerly, the Public Sector Enterprise status. National Optical Fiber Network) and laying optical fiber cable for connectivity of gram panchayats in India. Also executing projects for Company is an information and communications technology (ICT) infrastructure public sector enterprises including the ESIC and MHRD. provider and is one of the largest neutral telecom infrastructure providers in India. As of June 30, 2020, RailTel has an access to right of way for optical fiber cable Strong track record of financial performance: RailTel revenue has grown network along 67,415 route kilometers over railway tracks and have high capacity at a CAGR of 7.5% from FY18-20. In FY20, RailTel had the highest return optical fiber cable network along 55,000 route kilometers. In addition, company on capital employed (RoCE) among key Telecom companies and key IT/ICT have optical fiber cable network along 8,852 route kilometers over land and building Companies in India, with a RoCE of 14.5%. owned by third-parties. RailTel is professionally managed with strong corporate governance and RailTel also undertake various ICT projects for the Indian Railways, central senior management team with significant industry experience government and state governments, including various train control system projects for Indian Railways. Financial Snapshot (Rs mn) Key Highlights FY18 FY19 FY20 Among the largest neutral telecom infrastructure providers in India with pan-India Revenue 9,768 10,033 11,281 optic fiber network: Railtel has network of 67,415 route kilometer and offer high EBITDA 2,641 3,022 3,338 capacity bandwidth of up to 800G at 60 locations in India. EBITDA Margin (%) 27 30 30 Adj.PAT 1,340 1,354 1,411 Diversified portfolio of services and solutions: Company’s portfolio includes ICT EPS (Rs) 4.18 4.22 4.40 services and solutions including MPLS-VPN, leased lines services, e-Office services, EPS Growth (%) 4 data center services, large network hardware system integration, software and digital services. PE(x) na na na Dividend Yield (%) na na na Key partner to the Indian Railways in digital transformation: RailTel offers variety of EV/EBITDA (x) na na na services to the Indian Railways and have implemented MPLS data network for RoE (%) 11 11 10 integrated payroll and accounting system, unreserved ticketing system, freight Source: RailTel DRHP operations information system and coaching operations information systems. Vishal Periwal | [email protected] | +91-22- 2217 1857 Urmil Shah | [email protected] | +91-22- 2217 1861 October 16, 2020 RailTel | Company Note Disclaimer THIS DOCUMENT IS A RESEARCH REPORT AND IS NOT INTENDED TO BE AN OFFER LETTER, OFFERING CIRCULAR, OFFERING DOCUMENT, DRAFT RED HERRING PROSPECTUS, RED HERRING PROSPECTUS, INVITATION, ADVERTISEMENT OR PROSPECTUS (AS DEFINED UNDER THE COMPANIES ACT, 2013, AS AMENDED, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED AND ANY OTHER APPLICABLE LAW IN INDIA. IT IS CLARIFIED THAT THE RESEARCH REPORT IS NOT INTENDED TO BE AN ADVERTISEMENT OR DOCUMENT INVITING OFFERS OR OFFERING SUBSCRIPTION OR SALE OF ANY SECURITIES FROM THE PUBLIC FOR THE SUBSCRIPTION TO OR PURCHASE OF ANY SECURITIES OR SOLICITATION OF AN OFFER. THE OPINIONS EXPRESSED HEREIN ARE ENTIRELY THOSE OF THE AUTHOR AND ARE GIVEN AS PART OF THE NORMAL RESEARCH ACTIVITY OF IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.) AND ARE GIVEN AS OF THIS DATE AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.) OR ONE OR MORE OF ITS AFFILIATES MAY PARTICIPATE IN OFFERINGS OF SECURITIES OF RITES LIMITED (THE COMPANY) FROM TIME TO TIME. THIS DOCUMENT DOES NOT CONSTITUTE AN INVITATION OR SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES AND NEITHER THIS DOCUMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS OF ANY CONTRACT OR COMMITMENT WHATSOEVER. IF AN OFFERING OF SECURITIES IN THE COMPANY IS MADE, ANY DECISION TO ACQUIRE SECURITIES OF THE COMPANY MUST BE BASED WHOLLY ON THE INFORMATION CONTAINED IN A FINAL OFFER DOCUMENT, INCLUDING THE RISK FACTORS MENTIONED THEREIN, ISSUED BY THE COMPANY IN CONNECTION WITH ANY SUCH OFFER AND NOT ON THE CONTENTS HEREOF. THIS DOCUMENT IS BEING FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. UNDER NO CIRCUMSTANCES MAY THIS DOCUMENT OR ITS CONTENTS BE PASSED OR COMMUNICATED IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN ANY FORM OR BY ANY MEANS TO THE MEDIA. IN PARTICULAR, NEITHER THIS DOCUMENT NOR ANY COPY THEREOF MAY BE TAKEN, TRANSMITTED INTO OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, CANADA OR JAPAN OR DISTRIBUTED TO A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED). THE DISTRIBUTION OF THIS DOCUMENT IN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. THIS DOCUMENT HAS BEEN PRODUCED INDEPENDENTLY OF THE COMPANY AND ANY FORECASTS, OPINIONS AND EXPECTATIONS CONTAINED HEREIN ARE ENTIRELY THOSE OF IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.) AND ARE GIVEN AS PART OF ITS NORMAL RESEARCH ACTIVITY AND SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORISED OR APPROVED BY ANY OTHER PERSON. IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.) HAS NO AUTHORITY WHATSOEVER TO GIVE ANY INFORMATION, MAKE ANY REPRESENTATION OR WARRANTY ON BEHALF OF THE COMPANY, ITS SHAREHOLDERS, ANY OF ITS ADVISORS, OR ANY OTHER PERSON IN CONNECTION THEREWITH. WHILE ALL REASONABLE CARE HAS BEEN TAKEN TO ENSURE THAT THE FACTS STATED HEREIN ARE ACCURATE AND THAT THE FORECASTS, OPINIONS AND EXPECTATIONS CONTAINED HEREIN ARE FAIR AND REASONABLE, IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.) HAS NOT VERIFIED THE CONTENTS HEREOF AND ACCORDINGLY NONE OF IDBI CAPITAL MARKETS & SECURITIES LTD. (FORMERLY IDBI CAPITAL MARKET SERVICES LTD.), THE COMPANY, ITS AFFILIATES, THEIR RESPECTIVE ADVISORS OR ANY OTHER PERSON IN CONNECTION THEREWITH NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS OR EMPLOYEES, SHALL BE IN ANY WAY RESPONSIBLE FOR THE CONTENTS HEREOF AND NO RELIANCE SHOULD BE PLACED ON THE ACCURACY, FAIRNESS, OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS DOCUMENT. NO PERSON ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM THE USE OF THIS DOCUMENT OR OF ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION THEREWITH. NOT FOR DISTRIBUTION IN THE UNITED STATES, CANADA OR JAPAN OR TO A U.S. PERSON. 2 RailTel | Company Note Industry Overview Structure of the telecom and telecom data services industry in India The Indian telecom services industry can be broadly segregated into wireless, wireline and enterprise services. Wireline services are traditional landline calling services and wired broadband service. Wireless service includes mobile calling, short messaging service (SMS), wireless broadband, video conferencing service, triple play service, and over-the-top (OTT) platforms. Enterprise services provide network connectivity across locations and users in an organization. Structure Wireline Fixed line telephony Broadband Wireless Calling SMS Wireless broadband Video Conferencing Triple play OTT Enterprise Services Fiber leasing Tower colocation VPN VSAT NLD ILD DLC IPLC Data Centre DTH Source : RailTel DRHP NOT FOR DISTRIBUTION IN THE UNITED STATES, CANADA OR JAPAN OR TO A U.S. PERSON. 3 RailTel | Company Note Various Enterprise services Fiber leasing: Typically, dedicated fiber leased lines fulfil two common purposes: (i) they provide corporate offices with high capacity connection to the internet, and (ii) they connect the local network of several corporate offices to form a widearea- network. In this case, individual subscribers could be organizations using fiber for business purposes. Leased fiber line provides various benefits, including faster connection speeds, connection reliability, stronger signal, low latency (time taken for data transmission) and symmetrical speed (in terms of equal download and upload speeds). Bharti Airtel Limited, Bharat Sanchar Nigam Limited (BSNL), RailTel Corporation of India Limited (RailTel), Tata Communications Limited, and Vodafone Idea Limited are the major players providing such services in India. Tower co-location: This is a service provided by an infrastructure provider (IP) companies who lease out their existing base transceiver stations (BTS) and RF/IP antennas to wireless communication providers for data and voice transmission. IP companies receive rent from wireless telecom companies that do not have funds or do not want to undertake significant capital expenditure to set up their own BTS network. Co-location involves mounting of nodes on existing tower infrastructure to receive and transmit data and voice packets wirelessly. Bharti Infratel Limited, Bharti Airtel Limited, GTL Infrastructure Limited, Indus Towers Limited,