Tanla Solutions Limited

Tanla Solutions Limited (Tanla) is engaged in the area of software development and related services. Its telecom products include short message service center (SMSC), optimal routing
solution, signaling system 7 (SS7) voice mail server, welcome roamer, high-density media services, multiple mobile station integrated services digital network (MSISDN), color ring back
tone (CRBT), missed call alert, short messaging service (SMS) direct broadcast and prepaid roaming. Automatic vehicle location (AVL) combines both location determination
technologies, such as global positioning system (GPS) navigation and wireless data for the purpose of tracking, monitoring, and exchanging information between remote vehicles and
fixed bases operators, such as fleet managers. Automated meter reading (AMR) is a special case of field service that represents an opportunity that it warrants its own category.

Website http://www.tanlasolutions.com
Special situation Insider buyings by chairman Uday Kumar Reddy. 1 year price chart
Pro forma valuation
Price ratio LTM 6/08 FY 3/09 E FY 3/10 E
Price to earnings 11.9 10.1 7.5 450
400
Price to free cash flow 15.6 - - 350
Price to tangible book value 2.8 2.2 1.7 300
Enterprise value ratio 250
200
EV / Sales 3.5 2.7 2.0 150
EV / EBITDA 7.8 6.7 5.1 100
EV / EBIT 8.9 7.6 5.6

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EV / EBT 8.6 7.2 5.3
EV / Net income 11.5 9.6 7.1
EV / (EBITDA-capex) 11.9 12.7 11.9
Debt and interest coverage
Net Debt / EBITDA NA NA NA
EBIT / Interest expense NA NA NA
Yield Ratio
Dividend yield 0.0% 0.0% 0.0%
Earnings yield 8.5% 9.6% 12.5%
Notional FCF1 yield 5.7% 4.6% 4.2%
Operating margins
Sales growth - organic 78.3% 25.0% 25.0%
EBITDA 45.2% 40.0% 40.0%
EBIT 39.4% 35.4% 36.3%
Net income 30.6% 27.8% 28.8%
Depreciation Vs. Capex Capex Capex Capex
The above valuation ratios are computed after assuming acquisition of Openfit OY in the LTM financial numbers published by the company. (Refer QAD sheet)
Conclusion
Good operating margin. Mind blowing topline growth. Luckily the recent market crash gives defensive investor a chance to invest in safe bid like this scrip. Debt free company with
fantastic operating margin. Good for long term investment with short term target price of Rs. 272/- and long term target of Rs. 400/-.
Our Verdict: Interesting stock for long term.