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Extraordinary income props up Global Tele's performance

NetScribes/Ganesh Ramamoorthy

An extraordinary income of Rs 281 million and a surge in non-operational income have helped Global Tele-Systems (GTL) post a 234.85 per cent jump in net profit for the quarter ended September 30, 2000. On Monday, the company announced a net profit of Rs 1.01 billion for the quarter, compared to Rs 303.2 million in the previous corresponding quarter.

A huge 1,636 per cent growth in export revenues also made a difference to the topline. Export revenues, which rose from Rs 37.2 million in September 1999 to Rs 645.8 million this quarter, now contribute 31 per cent to GTL's total turnover of Rs 2.24 billion.

While the results are in line with expectations, analysts say the market will now watch the company's moves more keenly, especially in light of the recent merger of Global Electronic Commerce Services (GECS) and the acquisition of Thermax Software and Systems Ltd (TSSL).

"The business is doing well, the bottomline growth is good. While they will remain that way, what is to be seen is how the company will manage the GECS merger and the TSSL acquisition without affecting its growth and margins," says a fund manager at a Bombay-based brokerage.

Analysts, however, are concerned about the marginal 19 per cent growth in topline. While total income for the quarter is up from Rs 1.88 billion in September 1999 to Rs 2.24 billion now, it has to be seen in the context of an incremental rise in other income and the significant contribution of extraordinary income.

Other income for the period, which includes an interest income of Rs 88.14 million and Rs 37.02 million from foreign exchange differences, has risen from Rs 1.96 million in Q2 2000 to Rs 125.16 million in the current Q2.

GTL has reported an extraordinary income of Rs 281 million on account of profit from the sale of investments in GECS. Net profit before extraordinary items has risen 142.14 per cent to Rs 734.1 million, while net sales are up from Rs 1.88 billion in the previous Q2 to Rs 2.12 billion. Gross margins have gone up to 48 per cent from 37 per cent in the previous corresponding quarter.

The company has managed a definite shift in focus from products to services during the quarter under review. There is a strong emphasis on software rights, intellectual property, development of software, e-commerce, call centers and engineering and project services. GTL has initiated development of industry vertical solutions in the areas of payment gateway, electronic procurement and ERP online through its tie-up with Oracle.

The shift in focus is apparent from the changes in the business mix. During the quarter, e-commerce, software and Internet contributed to 67 per cent of its revenues (51.16 per cent in FY 2000), while engineering services made up 27 per cent (43.41 per cent) of the revenues.

On Tuesday the GTL scrip closed at Rs 1090 lower than its previous close of Rs 1,101.60 on BSE. The scrip is currently trading at a price-earnings multiple of 34.48 times its annualised FY2001 earnings and a price-earning growth ratio of 0.56.

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