NELCO is part of the TATA group which was started in 1940 as an electronics company, NELCO generally operates in connectivity and electronics segment. The company offers solution in the areas of VSAT connectivity, SATcom projects, integrated security and surveillance solutions. The services of the companies are used across the sectors including the various government organizations. Company has proven expertise in consulting, customization, system integration, end to end management, as well as robust infrastructure and processes development.
The services of the company generally include critical services which are essential for the PAN india presence and remote operations, company also offers cost effective satellite communication services and also maintenance activities and creating hybrid hubs networks for its customers.
Company’s technology partners are VT idirect and GILAT satellite networks limited
Looking at the financials in last one decade the highest revenue that company saw was in 2009 which was at 360 odd CR since then the revenue has been on declining path and the company saw its lowest annual revenue at 123 Cr in 2014 since then the revenue has been stagnant and currently the trailing twelve month revenue stands at 230 odd Cr with profitability of 15 Cr. If we look into the balance sheet there is nothing big interesting, reserves has risen steadily as also the borrowings there are no big investments with the company and cash flow over the years have either been negative or to zero. In current scenario also there is no big improvement in cash flow seen and will also not be seen in coming financial year end march 22.
Lets understand what exactly has suddenly worked big wonder for NELCO. Recently government of india has approved backhaul connectivity via VSAT for telecom companies to make sure uninterrupted cell broadband protection. Some of the prominent VSAT service providers in india are reliance jio infocomm, Bharti airtel, BSNL, HCL comnet systems and services, hughes communications and tata net services. Among all above service providers reliance jio infocomm, Bharti airtel are the VSAT service providers which can satisfy their internal needs to the extent of 50%-70% and other services they have to outsource, even if reliance invests more for VSAT in a big way to satisfy its allied services it needs more time for complete range of services within its basket, so some allied services they have to permanently outsource. HCL coment and hughes have limited presence in india, remains is TATA net services. TATA net services has its full fledge infrastructure available for the VSAT services and has the maximum market share in these services. The company can handle its own plus also can provide allied VSAT related services for other telecom companies. They do not have to invest and build any more infrastructure its readily available. Tata group has now planned amalgamate tata net services into NELCO and hence NELCO becomes the core entity for this VSAT related services across india. How exactly financials will play out? If I am not wrong the financials of NELCO will go on to touch over 700 Cr quarterly and profit margins will expand in four figure percentages. This sudden news has spiked up the stock price of NELCO from 180 odd Rs to 900 plus in current market scenario. Although the stock has seen vertical rise, but the fact remains that very soon after amalgamation is completed NELCO will show altogether different set of financials lets say a 700 odd Cr quarterly revenue will not be a big deal on consolidated basis, it will become completely different entity.
Current market price of NELCO is full of optimism and there will also be scenario where stock will see some correction also. But lets say even if it falls back in 600 levels, one should get into the stock. The current market CAP of company stands around 1990 Cr which looks low if we consider amalgamated financials or after amalgamation financials.
It’s a growth story plus an entity suddenly has received a jackpot from its product line which is going to last long atleast for next 5 years, till other telecom companies become self sufficient. Who knows till then we may see NELCO at 5000 or 10000. Targets looks very aggressive but see the jackpot it has it, the arrow has just got hit the right In the middle.
Disclosure: the views above are strictly personal, investors should always invest according to their risk taking ability. The data has been taken from annual reports, and product details have been studied from telecom websites and from core company website.