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Wednesday, April 22, 2009

Tata Elxsi Ltd:-A safe defensive bet from the TATA stable

Scripscan:Tata Elxsi Ltd
Traded in:Nse-bse

Story:Tata Elxsi provides systems integration and software development services in the information technology field.It includes industries such as automotive, consumer electronics, entertainment,multimedia, medical instrumentation, semiconductors, networking and wireless.During 2007-08, the company reported a decent 30.5 per cent year on year growth in revenue notwithstanding an uncertain demand environment and volatile currency movements.The year saw major capital expenditure ( Rs 42.4 crore) stemming from new development centres at Coimbatore and Hyderabad along with expansion of existing capacity at Bangalore centre.Meanwhile, headcount increased from 2,761 employees last year to 3,568 employees. C.f. 2006-07 sales grew by 30 per cent while employee costs increased 38 per cent, depreciation increased 54 per cent and SG&A increased 41 per cent. Consequently, profit after tax grew 1.4 per cent over the previous year while profit after tax margin declined by 378 basispoints.For the first time in several years, the company has taken debt on its books (Rs 55.3 crore secured loan) to fund its expansion plans and working capital needs.I expect revenues to grow at 20 per cent CAGR over FY08-10E while earnings are expected to grow at 18 per cent CAGR. At market price of Rs 92 the stock trades at around 6 times its fy09 earnings.A good safe bet for long term returns.

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