Friday, August 7, 2009

Buy Rolta India

7 steady-rise stocks to buy

Rolta India

Rolta India is an information technology (IT)-service provider with three lines of business -- geospatial information system (GIS) services, engineering design (ED) services, and enterprise information and communication technology (EICT) services.

Its shares have been constantly under pressure since September 2008. The fear is related to dollar funds raised by the company through foreign currency convertible bonds (FCCB).

The loan burden in terms of rupees increased as the rupee depreciated against the dollar. As an accounting norm, the company marked incremental burden as loss in its income statement.

But the loss was notional in nature as there was no cash outflow. Market participants ignored this fact and the company's shares have fallen 85 per cent since September 2008. But its fundamentals did not support this kind of a drop. Sales during the quarters ended September 2008 and December 2008 grew 56.60 per cent and 49.7 per cent, respectively. Net profit suffered, but only because of notional losses.

Now, as the accounting norms have been relaxed, the company can reverse these notional losses suffered earlier as profit in the March 2009 quarter. The result is that the company has posted a sales growth of 15 per cent and profit growth at a higher rate of 102.6 per cent.

Moving ahead, Rolta has strong earnings visibility. It has an order book of Rs 1,552 crore to be executed in 12-18 months. Also, it caters to governments and utility sectors, which are stable sources for its revenue. Therefore, the current drop in Rolta's share price provides a great opportunity for stock pickers.

Image: Rolta India
Photographs: Courtesy, Outlook Money