BUY Sensex: 9018 CMP: Rs. 88 Price Target: Rs.137 ANALYST Sheetal Aggarwal +91442530-7360 sheetala@dbschola.murugappa.com FORECASTS AND VALUATION

FY June (Rs. Cr) 2008 2009F 2010F Turnover 1072.21 1501.09 1801.31 EBITDA 389.73 555.40 684.49 Pre-tax Profit 268.46 393.68 450.84 Net Profit 230.59 330.69 374.20 Net Pft (Pre Ex.) 230.59 330.69 374.20 EPS (Rs) 14.33 18.70 21.16 DPS (Rs) 3.00 3.00 3.00 BV Per Share (Rs) 78.94 88.90 107.06 PE (X) 6.14 4.71 4.16 Net Div Yield (%) 3.41 3.41 3.41 P/BV (X) 1.14 1.01 0.84 ROE (%) 19.83 24.49 21.59

AT A GLANCE Issued Equity Capital (Cr. shrs) 16.09 Mkt. Cap (Rs.in Crs/US$m) 1448/308 Major Shareholders Promoters (%) 40.25 Free Float (%) 59.75 Avg. Daily Vol.(‘000) 712.83 Sector: IT Bloomberg/Reuters Code: RLTA.IN/IROLT.BO

Story: The Indian IT industry will continue to deliver modest growth inspite of global slowdown due to critical and value added services provided to the customers worldwide. Besides cost savings, customers derive great value from transformation of processes, access to critical resources, quality trained workforce and reduced reaction time, from Indian IT industry. India offers the best solution to manage resources and IT budgets and improve competitiveness, even in today’s difficult environment. According to Nasscom, factoring the impact of the global economic crisis in the second half of 2008-09, the industry is expected to grow by 16-17% by March 2009. Despite an uncertain economic environment, the Indian IT-BPO industry will see sustainable growth over the next two years and according to Nasscom’s estimates the industry will clock revenues of USD 60-62 billion by FY 11. This apart, the global outsourcing market is about USD 800 billion out of which India’s share is less than 10%. This opportunity provides a lot of scope for Indian IT industry to grow.

Point: Rolta offers high-end services in Geospatial Information Systems (GIS), and Engineering Design to key players in the infrastructure, power, oil & gas and defence sectors. These sectors are poised for high capacity additions in the coming years. Rolta’s joint venture company Stone & Webster Rolta Limited (SWRL) continues to report steady growth with several large projects from petrochemical companies and large refineries apart from providing engineering design services for global projects of Stone & Webster. Rolta Thales Limited (RTL) the company’s Joint Venture with Thales has made significant progress in introducing various new technologies to the Indian Defence segment. To continue with its expansion and growth plans Rolta issued FCCBs worth Rs. 611 crore in 2007. The company has recently acquired WhittmanHart Consulting, industry leading provider in Business Intelligence arena and acquired Piocon IPR which primarily serves Oil & Gas sector. Rolta is currently having a healthy order book of Rs.1590 crore 75% executable over FY09. Moreover the company derives around 25% of its revenue from government projects and the increased defence expenditure in the government’s interim budget will provide further boost to the order book.

Relevance: Rolta with its leadership position in serving niche markets and low exposure to the struggling sectors like BFSI and high domestic order book is better placed as compared to other mid-cap IT companies. However, order intake has started showing signs of slowdown which would affect growth momentum for FY10 and onwards. We believe Rolta’s focussed core competencies and systematic extension into new business lines will aid them in weathering the challenges. At the current market price the stock is quoting at 4.71X its FY09E EPS and 4.16X its FY10E EPS. We reiterate our BUY rating on the stock with a target price of Rs.137.

India

Company Focus

DBS Cholamandalam Securities 25 February 2009

Rolta India Limited

IT industry is expected to grow by 16-17% by March 2009.

Investment Highlights Information Technology making room for growth The Indian IT industry will continue to deliver modest growth inspite of global slowdown due to the value added services provided to the customers worldwide. Besides cost savings, customers derive great value from transformation of processes, access to critical resources, quality trained workforce and reduced reaction time, from Indian IT industry. India offers the best solution to manage resources and IT budgets and improve competitiveness, even in today’s difficult environment. According to Nasscom, factoring the impact of the global economic crisis in the second half of 2008-09, the industry is expected to grow by 16-17% by March 2009. Despite an uncertain economic environment, the Indian IT-BPO industry will see sustainable growth over the next two years and according to Nasscom’s estimates the industry will clock revenues of USD 60-62 billion by FY 11. This apart, the global outsourcing market is about USD 800 billion out of which India’s share is less than 10%. This opportunity provides a lot of scope for Indian IT industry to grow.

Indian IT revenue share

Source: CRISIL

The current order book stands at Rs. 1590 crore, with GIS at Rs. 710 crore, EDA at Rs. 500 crore and E-ICT Rs. 380 crore.

Expects about 8-10% of the total USD 50-60 bn spend on nuclear power over a period of 10-15 years. The government increased defence expenditure by 24% to Rs 1.4 lakh crore

Leader in niche markets with healthy order book Rolta is a leader in niche markets with over 70% share of the domestic GIS market and over 90% share of the domestic EDA market. The served markets are poised for continuous upgradation of IT infrastructure and have design requirements in domestic power and refinery build outs, need for digital mapping by local governments and utilities and need increasing offshoring of engineering services. The company also has a credible earnings profile backed by a strong order book. The company has a healthy order book of Rs.1590 crore at the end of December 2008. With Geospatial Information services at Rs 710 crore, Engineering Design services at Rs 500 crore and Enterprise – ICT at Rs380 crore. Domestic order book currently constitute for about 57% of the total while rest is international executable over a 15-18 month period. In Jan 2008 the company acquired Broech Corporation, doing business in the name of “TUSC", an IT Consulting Company specializing in ERP applications as well as Database and Business Intelligence solutions, based on Oracle technologies which also resulted in increase in EICT order book. The company expects the order book to grow considerably for both domestic and international in the next quarter. The next quarter being the financial year closing for the government as well as other companies will help in finalization of projects. Company’s latest acquisition of the Piocon IPR which primarily serves Oil & Gas sector will also help in gaining new business. About 13% of the current order book accrues from the Oil & Gas sector.

Expect to benefit from Nuclear business

Rolta, through its joint venture partner Stone & Webster Rolta Ltd. is uniquely positioned to address the emerging opportunities in the nuclear power sector by leveraging Shaw Group’s strength in this field. The Shaw Group Inc., USA, a world leader in nuclear power plant design and construction, has 70-80% of world market for nuclear power plants design and for installation and commissioning. The Shaw Group also has a strategic stake in Westinghouse – a world leader in manufacturing nuclear reactors. India plans to increase the installed capacity of nuclear energy to 20,000 MW from the current’s 4,000 MW by the year 2020 by setting up 15 nuclear plants over the next 20 years. The overall investments would be in the range of USD 50-60 billion scattered over 10-15 years. Out of this, about 8-10 % would go into project design, installation, commissioning and project management and would be the likely addressable opportunity for Stone & Webster Rolta Ltd. Moreover, Rolta is one of the few EPC vendors in the country which is well positioned to capitalise on this opportunity, owing to its joint venture with Shaw Stone & Webster. Increase in defence budget will provide further thrust The government in its interim budget has increased the defence expenditure by 24% to Rs 1.4 lakh crore in 2009-10. Out of which, Rs 58,000 crore will be spent towards capital expenditure, including IT spends. Industry observers feel that at least 10% of the defence capex, or Rs 6,000 crore, would be spent on revamping technology this year. This will be targeted towards mapping technologies, surveillance, reconnaissance (reconciling enemy data from various sources) and intelligence. The management of Rolta expects defence to witness increased government interest and sees opportunities from higher government spending on technology upgradation and advancement in homeland security. Currently Rolta earns around 25% of its revenues from the government projects and has a technical tie-up with Thales, a French defence solutions provider.

50:50 joint venture with Stone and Webster formed in 2003 to tap opportunities in the Indian power and infrastructure market.

51:49 JV Rolta Thales (RTL), formed in 2005 aimed at the Indian defence sector also to benefit from the offset clause in the defence contracts

Acquired the consulting Division of WhittmanHart Inc., providing value driven solutions in digital communications, process improvement, and enabling technologies.

Strong growth from JVs and acquisitions expected

Stone & Webster Rolta Limited (SWRL) the joint venture company continues to report steady growth with several large projects from petrochemical companies and large refineries including one in the Far East for Exxon Mobil for the largest plant of its kind in the world. They also provide engineering design services for global projects of Stone & Webster.

Rolta Thales (RTL), the company’s JV with Thales, France, launched state of the art solutions C4ISTAR information systems, Military Communications, Digital Soldier & Vehicle Systems, covering the entire 'sensor to shooter' chain, under transfer of technology from Thales. RTL has also signed MOU with Thales for the 'Offset' program of Indian Defence. The Company has received Defence Industrial Licenses for manufacturing of Maritime, Aerospace, Electronic Warfare, Optronics and Communications equipment and systems. Reinforcing its leadership in the Indian Defence Geospatial market, Rolta has developed and deployed complex software solutions for precise target location, UAV video integration, oblique imagery analysis, high-speed image compression, critical incident monitoring/hot-spot identification and the planning/guidance system for the BRAHMOS cruise missile.

In Jan 2008, Rolta acquired Broech Corporation, doing business as "TUSC" an IT Consulting Company specializing in ERP applications as well as Database and Business Intelligence solutions, based on Oracle technologies. TUSC has customers in diversified sectors like Utilities, Energy, Engineering, Manufacturing, Finance, Insurance, Retail, Government, Healthcare, Services, Transportation, and Technology. TUSC‘s 2007 revenues were in excess of USD48 million, with a CAGR of more than 30% over the past 4 years. Rolta’s E-ICT segment registered a growth of 222% Y-o-Y in Q4 FY08 and registered 124% growth for the full year FY08 on the back of consolidation of TUSC’s revenue for Q3 and Q4. TUSC contributed about USD12 to 13 mn of service revenues.

Recent acquisitions - WhittmanHart Consulting

Rolta issued FCCBs worth Rs.611 crore in FY07 to continue its systematic and aggressive growth plan by doing acquisitions and growing inorganically. The company on July 28, 2008 acquired WhittmanHart Consulting, the consulting division of WhittmanHart Inc., a premier Chicago based firm providing value driven solutions in digital communications, process improvement, and enabling technologies for over 20 years. The company is recognized as an industry leading provider of consulting services in Business Intelligence (BI) arena, particularly focused on the Hyperion software technology. The assets and business opportunities acquired through this transaction will be readily integrated into the operations of Rolta- TUSC. This acquisition will position Rolta more strongly to offer full end-to-end continuum of services to customers.

Acquired 100 % stake in Piocon technologies, a premier provider of Oracle-based technology solutions.

…and Piocon Technologies

Rolta India Ltd. acquired 100% stake in the US based Piocon Technologies, which primarily serves Oil & Gas sector. Piocon Technologies is a premier provider of Oracle-based technology solutions, offering Professional Consultant Services, Training programs and Oracle Software resales. With expertise in Oracle Business Intelligence, Data Warehousing, Oracle Fusion Middleware, Oracle Portal, Database Administration (DBA), Oracle Application Server, Oracle Identity Management and more. Rolta has acquired some Oracle based companies in the past and believes that this would be a strategic fit to the business and will take it to the next level to address critical operational needs of refineries in the Oil & Gas sector. The acquisition would also provide Oracle expertise to majority of Rolta’s customer base using oracle databases.

The strategic move will provide Rolta a unique template-based solution which is based on the Institute of Nuclear Power Operations (INPO) AP-913 standard. The solution can be scaled to address process improvements in a refinery to achieve downtime reduction, inventory rationalization, optimization of crude selection, and improved refinery planning. The solution is eminently suited to be extended beyond refinery operations to up-stream and down-stream operations in Oil & Gas, and to other process industries like petrochemicals, mining, power, and especially highly regulated sectors like pharmaceuticals and nuclear power. When fully deployed the management believes that the clients would be able to save almost four times they spend on the solution, ensuring very high returns on their investment. Based on market research, it has been estimated that the size of the addressable market for such solutions would be of the order of USD1billion annually and out of which Rolta’s management expects revenue generation of around USD100 million over a period of 3-4 yrs on a cumulative basis.

Focus on Middle East and Latin America could derive benefits

Currently, both Middle East and Latin America are highly under-penetrated in terms of IT. These regions are rich in natural resources and are home to the largest oil and mining companies with global scale and reach. Also, these companies are relatively at the lower end of the IT adoption scale and hence offer tremendous potential for Indian players. Another important reason to focus on these markets is their cultural proximity to India. Rolta currently has strategically placed 15 offices and 68 support offices in different parts of the country and is present worldwide through ten subsidiary companies. Rolta has projects coming up in 35 countries.

Besides, since these countries have relatively low IT adoption, the legacy impact of using IT systems from global Tier I IT providers is low. Hence the ability of Indian players to compete with these legacy providers is higher as compared to in the developed markets of the US and the UK. This gives an added advantage to Rolta to concentrate on this region.

Rolta’s JVs, Acquisitions and Strategic Alliances

Joint Ventures

SWRL JV

50:50 joint venture (JV) formed in 2003 to tap opportunities in the Indian power and infrastructure market; Stone and Webster is a leading US based EPC contractor and has a significant share of the US nuclear power market.

Thales JV

51:49 JV formed in 2005 aimed at the Indian defence sector also to benefit from the offset clause in the defence contracts

Acquisitions

Orion Technology

Acquisition consideration of about USD10m; Orion allows Rolta to provide integrated web-based GIS enterprise solutions complementing its existing portfolio of GIS solutions; revenue run rate at the time of acquisition was approx. USD5m. Incremental revenue from Orion expected at USD100m over the next three to five years.

Broech Corp (TUSC)

IT Consulting Company specializing in ERP applications as well as Database and Business Intelligence solutions, based on Oracle technologies. The acquisition consideration was about USD45mn and revenue run rate at the time of acquisition was approximately USD48mn

WhittmanHart

Consulting

The consulting Division of WhittmanHart Inc., a premier Chicago based company providing value driven solutions in digital communications, process improvement, and enabling technologies.

Piocon

Technologies

Premier provider of Oracle-based technology solutions, offering Professional Consultant Services, Training programs and Oracle Software resales.

Technology Partners

Intergraph

Exclusive distributor of its entire product range in India for over 20 years

Parametric Technology Corp. (PTC)

Partnership to provide PTC’s MDA solutions in India was later expanded into a global services agreement.

CA (formerly

Computer Associates)

Three year agreement to provide implementation, customization and integration of CA's eSecurity solutions across North America signed in 2005.

Background Incorporated in 1989 Rolta India provides a full complement of specialized services in Geospatial/GIS, Engineering Design , Ship Design, Software Engineering & Development, eSecurity & Enterprise IT Management, ERP Consulting & Deployment and Interactive Media & Games Development. With headquarters in Mumbai, the Company operates through a network of 15 regional offices across India combined with its seven subsidiaries located in the USA, Canada, the UK, the Netherlands, Germany, Saudi Arabia and the United Arab Emirates. The subsidiaries of Rolta are Rolta International Inc., Rolta Saudi Arabia Ltd, Rolta Middle East FZ LLC, Rolta UK Ltd, Rolta Benelux BV and Rolta Deutschland GmbH.

Rolta is the only CAD/CAM/GIS Company that provides end-to-end IT Solutions and services that address a customer's total requirements for engineering and its e-enablement. Rolta India has a technical collaboration with Intergraph Corporation, US, a world leader in CAD/CAM interactive graphics. The company expanded the scope of the partnership to provide Geospatial services to users in Americas in the area of project consulting, digital mapping, photogrammetry and software development. Rolta also entered a strategic joint venture with Stone & Webster, Inc. to provide cost-effective engineering, design and procurement management (EPCM) services to power, refinery and petrochemical projects worldwide. Stone & Webster is a leader in these sectors and a dominant player in the nuclear energy sector. Rolta's joint venture with Thales, France, expanded the capability to provide state-of-the-art Command, Control, Computers, Communications, Intelligence, Surveillance Target Acquisition and Reconnaissance (C4ISTAR) solutions and also enlarged the markets it serve, in the defence, aerospace and security segments globally.

The company has organized its business into three business groups: Engineering Design & Automation (EDA), Geospatial Information System (GIS) and Enterprise Information & Communication Technology (E-ICT). The EDA and GIS combined form the CAD/CAM/GIS business segment, which is the company's IT-based Engineering business and the E-ICT forms the eBusiness segment which is the company's IT service business. Rolta is a market leader in IT-based geospatial solutions, and caters to industries as diverse as infrastructure, telecom, airports, defence, homeland security, urban development, town planning and environmental protection. Rolta enjoys a market share of over 70% of the Geospatial business in India. Rolta's Geospatial-based operations and intelligence solutions have been adopted as the standard by Indian Armed Forces, resulting in a 95% market share. The company is also a leader in the engineering design automation and plant information management solution, with over 90% market share in India. Rolta’s 65% of EDA work is done for refinery projects, 30% for power sector and the balance for ship building industry. In EDA, they serve EPC (Engineering, Procurement & Construction) companies. Reliance Industries is one of the biggest customers in this segment along with some of the oil & gas downstream companies.

In the Geospatial Information Systems (GIS) segment, the company has significantly enhanced its portfolio of solutions and services by innovatively blending the capabilities of OnPoint, Periscope and other business intelligence tools from its bank of IP, to create Geospatial Fusion, a very unique solution that enables instantaneous fusion of various disparate geospatial & non-spatial databases and software applications for generating real time reports and immediate decision making.

Business Model and Revenue Contribution 45% 32% 23%

25% 45% 30% 35% 60% 5%

• Digital mapping • Photogrammetry • Remote sensing • Transmission

networks etc.

Rolta India Ltd.

Geospatial Information

Services (GIS)

Engineering Design

Automation (EDA)

Enterprise Information

Control Technology

(E-ICT)

Defence Utilities & Telecom

Civil Areas

Power Oil & Refineries

Ship Design

• Enterprise application • Internet services • Project &software

development

• Plant design automation & engineering

• Mechanical design automation

• Plant/Process lifecycle management etc.

Provides intelligence solutions to Indian defence services and has a 95% share

GIS Rolta provides specialized services and solutions to implement geospatial systems to defence, utilities and civil work in the form of digital mapping, transmission networks and remote sensing and other specialized services. Dominating share in defence services: The company is providing GIS services to the ministry of defence for the past 19 to 20 years which currently accounts for a revenue stream of around Rs.150-200 crore annually. The management expects a steady growth of around 15-18% in this space. Rolta's Geospatial-based operations and intelligence solutions have been adopted as a standard by Indian Armed Forces, resulting in a 95% market share. The entry barriers are very high in this space as the services provided are critical, thereby restricting the competition. Rolta through its 51:49 joint venture Rolta Thales Ltd (RTL), France, launched state of the art solutions C4ISTAR information systems, Military Communications, Digital Soldier & Vehicle Systems, covering the entire 'sensor to shooter' chain, under transfer of technology from Thales. Utilities and telecom: In utilities segment the company does projects in outage management, network management and asset management for power distribution, gas distribution, water distribution and telecom companies. The company is currently executing 11 such projects. International projects accounts for almost 62% of the revenues while the rest comes from domestic projects. In the domestic space Government and PSU projects accounts for 70% of the projects undertaken.

Civil areas: The Company does digital mapping under civil projects for government and Municipal Corporation. The company has done 3-D city mapping project for the entire Dubai city. The international projects earn the maximum revenue for the segment as the domestic demand is still developing for these specialized services.

Billing rates: The offshore billing rates for the entire GIS segment is around USD16-17 per hour, onsite billing rates are around USD65-75 per hour while the blended billing rates are around USD19-20 per hour.

Highest contribution to company’s total income: More than 40% of Rolta’s revenues come from the GIS segment. The global market size for GIS segment is around USD2.02bn growing at rate of around 9% per annum. Within the GIS segment defence accounts for 25%, utilities accounts for 45% and civil work accounts for 30%. The government and PSU projects contribute almost 60% of the total business in this space which makes the revenue stream to be much safer and deliver stable growth. Going forward the management expects the EBIT margins to be at 26-27%.

Market leader with 90% domestic share

Uniquely positioned with its 50:50 JV with Shaw group to address the emerging oppotunities in nuclear power .

EDA Leader in India: Rolta is a leading player in the engineering design automation and plant information management solution, with over 90% market share in India. The company provides a complete range of advanced engineering design services encompassing the entire plant life cycle designing, modeling, detailing, analysis, operations, maintenance and simulation. The main focus for the company in this segment is plant and process engineering for power and refinery companies. The company provides engineering design solutions to EPC (Engineering, Procurement & Construction) players along with some owner operators like Reliance, NTPC, ONGC, and Indian Oil. Segmental contribution: Nearly 60% of the company’s EDA work is done for refinery projects, 35% for power sector and the balance for ship building. In the refinery segment the company does majority of its project for Middle East companies. In the power segment the company is expected to benefit from government of India’s plans to add 70,000 MW to the current energy capacity. The expansion would involve capex of around Rs.280 bn which would in turn give Rolta an addressable market of 4-5%. Ship designing is a new space for the company and is currently doing a bulk of the work for European players. Korea is a major player in the ship building space and the company is currently facing some difficulty to penetrate this market. However given that ship building is a relatively new area for Rolta it views the under penetration as a huge opportunity going forward. Strong relationship with Shaw group: The Company has 50:50 joint venture with Shaw group, known as Stone & Webster Rolta Ltd, through which it is uniquely positioned to address the emerging opportunities in the nuclear power sector by leveraging the strengths of its Joint venture partner. The Shaw group has a leadership in this field and has offered a wide range of nuclear services to commercial and government clients worldwide. The Shaw group provides services to 95% of all U.S. nuclear plants and has a 20% stake in Westinghouse – a world leader in manufacturing nuclear reactors. In India the revenues from the nuclear power would start coming in another 1-2 years. Before which Rolta with its joint venture would be doing international projects for nuclear power and get the prequalification required. This will give Rolta an edge over its competitors while bidding for the projects in India. High International contribution: About 70-75% of revenues in EDA space comes from international projects and the rest from domestic projects. But in terms of billing around 65-70% of the revenue is billed in Indian currency as these international projects are contracted to Indian EPC companies who in turn outsource the designing component to Rolta. Going forward the management expects a growth rate of about 20% in the EDA segment with EBIT margins at around 25-26%.

Aquisition with TUSC and WhittmanHart provide strong growth visibility

E-ICT Rolta offers eSecurity and Enterprise IT Management services to seamlessly integrate diverse ICT applications. In partnership with CA (Computer Associates), Rolta provides high end consulting, application development and testing services for IT infrastructure and network security projects worldwide. Acquisitions as a strategy to growth: Rolta has adopted a clear acquisition strategy of taking over companies that provide a synergetic mix of Technology and IPR, enabling Rolta to move up the value chain. In keeping with this strategy, the Company acquired “Orion”, a Canadian geospatial technology company and “TUSC”, a US IT consulting company specializing in ERP applications and services based on the complete range of Oracle technologies. The company recently acquired Whittman Hart Consulting, the consulting arm of Whittman Hart Inc., a premier Chicago-based company providing value driven solutions in digital communications, process improvement, and enabling technologies. Going forward the management expects an inorganic growth of around14-15% in this segment. Growing contribution to total income: The Company has continued to grow its e-security and network management business across Europe, North America and the Middle East. With the addition of Oracle applications and ERP practice, the EICT segment now contributes significantly to the Company’s business and its share is expected to increase from the current 18% to 30% in the coming years. Almost 95% of the work done in this segment is done onsite and thus attracts higher cost.

Revenue by strategic business group

50%

32%

18%

GIS EDA E-ICT

Source: Company data, DCSEC Research

Total income grew by 51% while the operating profits grew by 36%

Financials

Performance of the year ended June 2008 Consistent growth in financial performance Rolta registered 51% YoY growth in total revenues at Rs 1072.21 crore for the year ended June 2008, on the back of 31% growth in Geospatial business at Rs 530.55 crore, 58% growth in Engineering Design business at Rs 347.70 crore and 124% growth in e-Solutions at Rs 193.96 crore. The operating margins dipped 400bps at 36.3% on the back of lower margin business added by TUSC while the operating profits grew by 36% at Rs 389.74 crore.

The company’s strategic business groups have registered a consistent track record with a CAGR of 27%, 50.8% and 99.2% over FY 05-08 in the GIS, EDA and E-ICT segments respectively.

Full year Revenue growth

0

200

400

600

800

1000

1200

Revenue 535 711 1072

2005-06 2006-07 2007-08

0

100

200

300

400

500

600

GIS 329 404 531

EDA 153 221 348

E-ICT 52 87 194

2005-06 2006-07 2007-08

Source: Company data, DCSEC Research

CAGR: 41.6%

Registered a growth of 53% in the total income for the half year ended December 2008

Net Profit after minority interest was down 26% at Rs 84.46 crore as forex losses on translation of FCCBs was up at Rs 84.01 crore.

Half Year Performance ended December 2008 Good roll on topline numbers. . .

For the first half year ended December 2008, Rolta registered 53% growth in operating revenues at Rs 708.09 crore on the back of 23% growth in Geospatial business at Rs 303.82 crore, 37% growth in Engineering Design business at Rs 215.39 crore and 248% in e-Solutions at Rs 188.88 crore (aided by acquisitions). The operating profits grew 38% at Rs 244.58 crore.

Half year revenue growth

0

100

200

300

400

500

600

700

800

Revenue 463 708

H1 FY08 H1 FY09

0

100

200

300

400

H1 FY 08 251 157 54

H1 FY 09 304 215 189

GIS EDA E-ICT

Source: Company data, DCSEC Research MTM losses subdued the bottomline

Other Income was up 23% to Rs 24.49 crore, interest cost was Rs 1.14 crore and depreciation charge for the period increased 22% at Rs 79.17 crore. The resultant PBT before forex loss on FCCBs increased 44% to Rs 188.75 crore. Forex loss on translation of FCCBs was Rs84.01 crore. PBT after forex losses was down 20% at Rs 104.75 crore. Tax provision for the period was up 18% at Rs 20.65 crore with effective tax rate at 10.9% down 240bps. Net Profit after minority interest was down 26% at Rs 84.46 crore. Net profit excluding forex losses was up 48% at Rs 168.47 crore. The EBIT margins dipped 370bps to 34.5%.The EBIT margins for the GIS segment declined by 120bps at 38.58%, for EDA segment EBIT margins declined by 165bps to 37.28% and for e-Solutions segment dipped 432bps to 24.68% on the back of integration of TUSC acquisition and Whitman Hart Consulting acquisition.

CAGR: 53%CAGR: 23%

CAGR: 36.8%

CAGR: 247.8%

Segmental Performance

Particulars (in Rs. cr.) H1 FY 07 H2 FY 07 H1 FY 08 H2 FY 08 H1 FY 09

Sales 322.70 388.50 462.70 609.40 708.04

GIS 185.91 218.30 251.00 279.50 303.75

E-ICT 39.06 47.47 54.3 139.66 188.88

EDA 97.76 122.78 157.05 190.29 215.38

EBIT 128.46 158.15 176.77 212.80 244.51

GIS 75.52 94.76 99.87 112.31 117.20

E-ICT 14.49 14.53 15.75 26.03 46.62

EDA 38.45 48.86 61.15 74.62 80.30

EBIT Margins 39.81 40.71 38.20 34.92 34.53

GIS 40.62 43.41 39.79 40.18 38.58

E-ICT 37.10 30.61 29.01 18.64 24.68

EDA 39.33 39.79 38.94 39.21 37.28 %)

H1FY09 Results summary & comments

Particulars (in Rs. Crore) H1 FY09 H1 FY08 YoY H2 FY08 Comments

Revenues 708.08 462.73 53.02% 609.48

consolidation of TUSC acquisition

Expenses 463.5 285.96 62.09% 396.51

EBIDTA 244.58 176.77 38.36% 212.97

Depreciation 79.17 65.11 21.59% 73.14

Other Income 24.48 19.87 23.20% -2.9

Interest 1.14 0 0.00% 0

PBT 188.75 131.53 43.50% 136.93

Tax 20.65 17.48 18.14% 21.29

Extraordinary income 84 0 0.00% -0.87 Add/(Less) Minority Share in Loss/(Profit) 0.37 0 0.00%

Adjusted PAT 84.47 114.05 -25.94% 116.51

EBIDTA margin 34.54% 38.20% 34.94%

Tax rate 10.94% 13.29% 15.55%

Net profit margin 11.93% 24.65% 19.12%

Income Statement

FY June (in Rs. Cr.) FY07 FY08 FY09E FY10E

Turnover 711.41 1072.21 1501.09 1801.31

Expenses 424.79 682.47 945.69 1116.81

Operating Profit 286.62 389.74 555.40 684.50

Other Income 10.25 16.97 18.00 18.00

Interest 0.74 0.00 0.00 0.00

Depreciation 101.83 138.25 179.73 251.63

PBT 194.30 268.46 393.68 450.87

Tax 21.66 38.78 62.99 76.65

Extraordinary Income 0.00 -0.91 0.00 0.00

PAT 172.64 230.59 330.69 374.22

Sales Growth (%) 29.01% 50.72% 40.00% 20.00%

EBITDA Growth (%) 28.60% 35.98% 42.51% 23.24%

EBIT Growth (%) 32.99% 38.17% 46.64% 14.53%

Effective Tax Rate 11.15% 14.45% 16.00% 17.00%

Balance Sheet

FY June (in Rs. Cr.) FY07 FY08 FY09E FY10E

Share holders Equity 80.12 160.90 160.90 160.90

Reserves and Surplus 966.48 1023.24 1205.81 1456.46

Total Debts 617.68 695.33 693.79 693.79

Current Liabilities 142.57 283.96 375.27 450.33

Total Liabilities 1806.85 2163.43 2435.77 2761.48

Net Block 472.42 849.30 920.97 1042.97

Capital WIP 146.28 172.92 225.16 270.20

Investments 97.61 281.63 281.63 281.63

Current Assets 1125.13 899.11 1008.01 1166.68

Net Deferred Tax -34.59 -39.53 0.00 0.00

Misc. exp not w/o 0.00 0.00 0.00 0.00

Total Assets 1806.85 2163.43 2435.77 2761.48

Rates and Ratios

FY June FY07 FY08 FY09E FY10E

EBITDA Margins (%) 41.73% 37.93% 38.20% 38.00%

EBIT Margins (%) 27.42% 25.04% 26.23% 25.03%

Net Profit margins (%) 24.27% 21.51% 22.03% 20.77%

ROAE (%) 16.50% 19.40% 24.20% 23.14%

ROCE (%) 11.72% 14.28% 19.11% 19.51%

Dividend Payout Ratio (%) 19.17% 18.82% 11.09% 8.33%

Debtors Turnover (days) 193 171 183 183

Creditors Turnover (days) 11 16 13 13

Inventory Turnover (days) 11 7 5 4

Current Ratio 7.9 3.2 2.7 2.6

Net Debt Equity Ratio -0.02 0.37 0.43 0.37

Concerns Weakening macro environment may dampen order inflow

Rolta continues to have a healthy order book and a change in its customer’s pipeline but the weakening micro environment could be a concern to Rolta’s earnings indicating a likely slowing of new orders. Though the management indicated order book slowdown and decline in book-to-bill ratios but believes that they will be able to meet its FY09 guidance.

Buyback of FCCBs might require additional funding

Rolta currently has USD 150 million of FCCBs on its balance sheet, which were issued for overseas acquisitions, capital expenditure and expansion of facilities. These FCCBs have tenure of 5 years and 1 day, are convertible at a conversion price of Rs. 368.70 per share. The Company has got in-principle approval from board for buyback of FCCBs. The buyback will be partly funded by ECBs (External Commercial Borrowing) and partly by domestic funds. The company is proposing to appoint BNP Paribas Capital (Asia Pacific) as advisor in this regard.

Outlook

Rolta with its leadership position in serving niche markets and low exposure to the struggling sectors like BFSI and high domestic order book is better placed as compared to other mid-cap IT companies. However, order intake has started showing signs of slowdown which would affect growth momentum for FY10 and onwards. We believe Rolta’s focussed core competencies and systematic extension into new business lines will aid them in weathering the challenges. At the current market price the stock is quoting at 4.71X its FY09E EPS and 4.16X its FY10E EPS. We reiterate our BUY rating on the stock with a target price of Rs.137.

E-mail id - customercare@dbschola.murugappa.comTo open Trading Account SMS CDWM TA to 55050

BEM PHONE NUMBERS E-MAIL IDMr.Mehul M Min 079 - 64500318/19 mehulmm@dbschola.murugappa.com Mr. Sajesh M sajeshm@dbschola.murugappa.com Mr. Krishna Kumar R M krishnakumarrm@dbschola.murugappa.comMr. Vishal Arora 0172 - 26248051 vishalarora@dbschola.murugappa.com

Mr. Baskaran S 044 - 26198919/16 baskarans@dbschola.murugappa.comMr. M Sundaresan 044- 25307247 sundaresanm@dbschola.murugappa.comMr. Preethi Damiyan 0484- 3073859 preethid@dbschola.murugappa.comMr. Mohan V N 0422- 4292041 mohanvn@dbschola.murugappa.comMr. Kunal kaushish 011- 66134224/25 kunalkaushish@dbshcola.murugappa.comMr. Anupum Periwal 040- 64550572/77 anupamp@dbschola.murugappa.com Mr. Srinivasa Reddy D V 040- 23316567/68 srinivasardv@dbschola.murugappa.comMr. Amit Kumar Mahto 0657 - 2320098/177 amitkumarm@dbschola.murugappa.com

Mr. Kumar Gaurav kumargaurav@dbschola.murugappa.com Mr.Subhrodeep Chatterjee subhrodeepc@dbschola.murugappa.com

Mr. Navneet Kedia 022- 66156591 navneetk@dbschola.murugappa.com

Ms Shweta Shantaram Padhey 022- 66574000 shwetasp@dbschola.murugappa.comMs. Sheetal Bheda 022 -22153610 sheetalbheda@dbschola.murugappa.com Mr.Sanjay Kumar 0612 - 2500008 sanjaykumarr@dbschola.murugappa.comMr. Sujit Arvind Gaidhani 020 - 30264811/12 sujitag@dbschola.murugappa.com Mr. Sanjiv Kumar 0651 - 6453496 sanjivkumar@dbschola.murugappa.com

Mr. Lakshmanan T S P 9840019701 lakshmanantsp@dbschola.murugappa.comMr. Ananthanarayan 9930103070 ananthanarayanj@dbschola.murugapa.comMr. Ajay Kumar Minocha 9838074353 ajaykm@dbschola.murugappa.comMr. Shankar P V 9840494132 shankarpv@dbschola.murugappa.com

Head of Equities 044-25307216 raichuraS@dbschola.murugappa.comBanking & Financial Services 044-25307204 alagappana@choladbs.murugappa.comMetals, Tea 044-25307363 rohithtm@dbschola.murugappa.com Auto Components & Hotels 044-25307365 shreepriyav@dbschola.murugappa.comTelecommunication 044-25307360 ramasubramanianp@dbschola.murugappa.com

Information Technology 044-25307360 sheetala@dbschola.murugappa.comTechnicals 044-25307353 radhakrishnanR@dbschola.murugappa.comStrategy 044-25307361 balajin@dbschola.murugappa.comMutal Fund Analyst 044-25307225 sathyajithn@dbschola.murugappa.com

Mr Guruswamy Raj Manager-Compliance guruswamyrg@dbschola.murugappa.com

This report is for private circulation and for information purposes only. It does not provide individually tailor-made investment advice and has been prepared without regard to anyspecific investment objectives, financial situation, or any particular needs of any of the persons who receive it. All investors may not find the securities discussed in this report to besuitable. DBS Cholamandalam Securities Limited recommends that investors independently evaluate particular investments and strategies. Investors should seek the advice of afinancial advisor with regard to the appropriateness of investing in any securities / investment strategies recommended in this report. The appropriateness of a particular investmentor strategy will depend on an investor’s individual preference. Past performance is not necessarily a guide to future performance. Estimates of future prospects are based onassumptions that may not be realized. . Re-publication or redistribution in any form, in whole or in part, is prohibited.

STOCK RATINGS : Strong BUY: >30% upside in the next 6 months; BUY: >20% upside in 12 months; Hold: 10% to 20% upside over the next twelve months; Fully Valued Trade within a +/-10% range over the next 12 months; Sell: >10% downside over the next 12 months

Mr. Balaji Natraj

DISCLAIMER:The views expressed are those of the analyst and the Company may or may not subscribe to all the views expressed therein DBS Cholamandalam Securities Limited reserves the rightto make modifications and alterations to this statement as may be required from time to time without any prior approval. DBS Cholamandalam Securities Limited, its affiliates,directors and employees may from time to time, effect or have effected an own account transaction in or deal as agent in or for the securities mentioned in this report. The recipientshould take this into account before interpreting the report.

Mr. Sathyajith N

COMPLIANCE

DBS Cholamandalam Securites LimitedMember: BSE, NSE, MSERegd. Office: Dare House, 2 (Old # 234) N.S.C. Bose Road, Chennai – 600 001.Website : www.choladbsdirect.com

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