Tera Software Ltd - 45.00 Rs

Founded in 1994, Tera Software Ltd (TSL) is one of the leading e-governance solution providers. It undertakes data entry/scanning works for digitization of information maintained under Right to Information Act. It focuses mainly on long term projects under BOOT/BOOR/BOMT for providing the end-to-end solutions to the different public interface departments for effective e-governance and good governance. It also undertakes short-term projects like issue of photo ID cards, ration cards and election commission cards. Currently, TSL caters to transport, land registration, revenue management for distribution and supply companies of electricity and water, sales tax, education and public distribution systems. Company also helps in creating IT infrastructure, facility management (maintaining database) and logistics operations. Its customers include the most prominent state governments active in the e-governance space like government of Karnataka, Andhra Pradesh, Kerala, Goa, Maharashtra, West Bengal and Bihar. Besides it also serves to various public sector enterprises, govt. of India undertakings and many large organizations spread across the India including Indian Railways, BHEL, BESCOM, NRSA, NIC, SARC, Zee Telefilms, Shantha Bio to name a few.

Although major revenue comes from e-governance, TSL also offers IT enabled services, software development and consultancy, system integration and networking which contributes nearly 20% of revenue. For this it has entered into strategic partnership with companies like CISCO, EPSON, HP, Wipro, IBM, D-Link, EMC etc. It even operates an in-bound as well as out-bound BPO service in a small scale at Hyderabad. However in consortium with Electronics Corporation of India Ltd (ECIL), TSL has bagged huge e-governance order, taking its total order book position to around 250 crore to be executed in next five year. Its current project includes:

• Complete automation of department - Road Transport Authority, Kerala and AP
• Capturing beneficiary information and printing of Biometric ration cards - Civil Supplies Dept, AP.
• Computerization in schools and high school - Directorate of Education, Goa
• Supply and installation of spot billing machines along with software – MSEB, Pune
• Computerization of sales tax department – Maharashtra
• Total revenue management solution for electric company – Karnataka, Maharashtra & WB

Importantly, TSL has bid for number of other projects like issue of ration card in the state of MP, Jharkhand & Orissa, computerization of transport dept – Karnataka, Punjab & Bihar, sales tax automation in Goa and West Bengal, land computerization in the state of Kerala, contract for Nagaland, revenue management for electricity boards in Orissa and Rajasthan. Moreover, couple of months back company has been selected as empanelled vendor for rollout of IT services in govt sector through National Informatics Centre Services Inc (A Government of India Enterprise under NIC), Ministry of Communications & Information Technology for a period of one year which can be extended for another one year. This will boost the topline by another Rs 15~20 cr per annum. In short the future earning visibility is very strong and with government increasing the budget allocation every year for computerization and e-governance, TSL is bound to grow at a healthy CAGR of around 30% for next few years.

Notably, TSL derives 100% of its revenues from the domestic markets and is therefore unaffected by the recent rupee appreciation against US dollar. It recorded 70% growth in its topline to 60 cr and net profit was up 90% to 11.70 cr for FY07 thereby registering an EPS of 10 Rs. For the first nine months, its revenue increased by 45% to Rs 44 cr whereas profit increased by 35% to Rs 9 cr. Accordingly, for FY08 it may report total revenue of 75 cr and PAT of Rs 14 cr which translates into EPS of Rs 11 on equity of Rs 12.50 cr. And for FY09 it is estimated to register an EPS of Rs 14. Secondly, TSL has 20 acres of land with 1.60 lakh square feet constructed area, which it plans to either sell or enter into JV with infrastructure company. Once this long pending decision is taken, it will trigger the share price to new high. Meanwhile at a very modest discounting by 8x times against FY08 earnings, share price can go up to Rs 90 in 9~12 months.

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