Tulip FY 2011

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0 Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 360° Engagement Investor Presentation May 2011

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Transcript of Tulip FY 2011

  • 1. Investor Presentation May 2011360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services0

2. Safe harbor Certain statements in this presentation may be forward-looking statements. Such forward- looking statements are subject to certain risks and uncertainties like government actions, economic developments, technological risks, and many other factors that could cause the actual results to differ materially from those contemplated by the relevant forward-looking statements. Tulip Telecom Limited will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward- looking statements to reflect subsequent events or circumstances.360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services1 3. Agenda Overview Investment highlights Appendix360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 2 4. Tulip Telecom overview Overview Services offered Established in 1992 as Tulip Software Private Ltd. Market capitalization of US$500mn as on May 31, 2011 Provides enterprise connectivity services through wireless and fiber last mile network coupled with data centers Strong financial performance with revenue of US$502mm and EBITDA of US$142mm in FY11 Enterprise dataNetwork Managed Data center connectivityintegration services Widespread Reach: Present in over 2,200 cities across India Shareholding pattern Mar 31st, 2011Leader in the fast-growing MPLS market*Total EDC market Total MPLS marketOthers1 13.3%Tata CommunicationOthers Others 25.9% Tulip Telecom18.7%24.2% 30.6%FIIs 17.7% Bharti BSNLAirtelBharti 10.2% Promoter 69.0%14.5% 17% BSNL 11.8% Sify 9.3% Tulip Telecom Reliance 12.9% CommunicationRCOM 12.2%12.7% FY10: US$1,317mm FY10: US$528mm*Source: Frost and Sullivan FY 09-10Note: US$1 = INR46.8; Others include Mutual funds and public individuals 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services3 5. Shifting towards high margin managed services and datainfrastructure businessVPN businessFiber businessManaged services + Data infrastructure NI businessNI businessFiber business 10%10% 20% VPN business Managed services 66% &VPN business Fiber business Connectivity (Fiber+RF)NI business 20% 70% data infrastructurebusiness20%14%70% Focus area for next level of growth Fixed cost annuity model Improved service offering Higher margins, higher ARPU and larger clients Recurring revenue model ensures visibility and cash flow sustainability Enables provision of other services such as IPLC, DLC and internet Strong margin of 30%+ Key growth and revenue contributor Horizon 1 Horizon 2 Horizon 3 2008 - 10 2010 - 20122015 Core area of operation with expertise in Tulip sources whole sale fiber bandwidth for Significant opportunity in 3rd party data centerproviding data connectivity over a wirelessinter city connectivity on lease from itsservicesnetworkcompetitors Tulip already focusing on growing its data Competitive advantage lies in providing higher Services include symmetric internet center businessprovisioning, rural connectivity solutions and uptime than its competition due to it sourcing fiber bandwidth from multiple vendors Competitive advantage lies in bundling datavirtual private networksservices along with storage offering Comprises of Enterprise IP & rural connectivity360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 4 6. Strong financial performance 500CAGR (06-11): 35.7%$502mm $420mmStrong revenue profile Revenue of US$502mm in FY11 with a 06-11 CAGR of 36%Revenue 400$345mm Revenue growth expected to continue with the ongoing fiber 300$260mm roll-out$180mm ~70% of the order inflow is expected to be contributed by the 200 fiber business in the next few years $109mm 1000FY 2006 FY 2007 FY 2008 FY 2009FY2010FY 2011 EBITDA of US$142mm in FY11 with a 59% 06-11CAGR150EBITDAEBITDA margin CAGR (06-11): 58.9% $142mm50%$112mmRobust EBITDA Business mix has shifted towards the high margin enterprise120 data services margins90$72mm Roll-out of fiber to further increase the EBITDA in the future 16% $52mm 25%60 27%28%13% $28mm 20% 21%30 $14mm 0 0%FY 2006FY 2007FY 2008 FY 2009 FY 2010FY 2011 ROE of 25% in FY11 80 CAGR (06-10): 45.4%Significant return for PAT$65mm$59mm High PAT CAGR of 45% (06-11)$54mm shareholders6040$40mm$21mm20$10mm0FY 2006FY 2007 FY 2008FY 2009FY 2010FY 2011Source: Company filings; Note: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 5 7. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1Market leadership in the last mile wireless Over 2,200 strong customer base business with fiber network to boost revenues Customers include more than 90% of 72 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target market Robust financial performance with Indian data center space poised for high growth strong bias to growth Third party Data center space to grow at a Historical top-line growth of 20%+ 63CAGR of 32.8% by 2014 Robust EBITDA margins of 25%+5 4Strong management teamTulip is best positioned to attain market leadership in Led by experienced and visionary managementIndian data center space Prior experience with global firms including HP, Largest single site data center in IndiaIBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 6 8. 1Indian EDC market: Poised for exponential growth going forward Overview Key segments of the market Indian enterprise data connectivity market to show strong growth in future CAGR (FY10 15): 12% from US$1.3bn in 10to about US$2.3bn in 15 Enterprise Data Connectivity Key segments: International private leased circuit (IPLC), domestic leasedUS$1317mm circuit (DLC), MPLS/ VPN, VSAT and internet MPLS/ VPN is the fastest growing segment due to its cost advantages,increased reliability and network securityIPLCDLC MPLS/IP VPNInternet VSATEthernet Key drivers for strong future growth:US$126mmUS$237mmUS$528mmUS$309mmUS$92mm US$25mm Economic growth: GDP expected growth to be 8.5% in FY11 and9% in FY12 Corporate expansion: Geographical expansion and growing demand toOngoingFibreWirelessincrease efficiencyUS$316mmUS$211mmExisting Rural market: e-governance initiatives, Mission mode projects etc Market share (%) Enterprise data connectivityStrong future growth in EDC market (US$mm)Tata Communication Others18.7% 24.2% Bharti Airtel 2271BSNL1,768 2,00117%1,59614.5% 1,317 1,423 Tulip Telecom Reliance Communication 12.9%12.7% FY 2010FY 2011FY 2012FY 2013FY 2014 FY 2015Source: Company website and filings, research reports Includes Asynchronous transfer mode (ATM) and Frame Relay (FR)360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services7 9. 1Key customer segments driving the EDC marketin India Computerization of RRBsBFSI Inter-bank connectivity Interlinking branches & ATM Networks Real time connectivity for usage of Enterprise applications Retail & FMCG Connectivity to warehouses Bandwidth required per store Improving connectivity in rural IndiaState governmentsGovernment E-Governance initiatives State electricity boardNational e-Governance Programs High speed connectivity to remain connected to clients IT/ITeS Voice channels Rising BPO/Back office likely to lead to demand for IP & IPLC Driven by Enterprise applications like ERP, SCM, CRM Manufacturing Investments in IP-VPN & VOIP E-Business to drive cost efficiencies and economies of scale Usage of DLC as backhaul & NLD Traffic carriage Telecom ILD expected to increase with increase in voice trafficEDC market - Split by verticalsEDC market - Split by horizontalsEDC market - Split by geography Others 12%East 5%IT/ITeS 29% SMB 32%North 28% Manufacturing 11% West 33% Large 68% Govt. 20%BFSI 29%South 34%Source: Frost & Sullivan 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 8 10. 1MLPS / VPN continues to the fastest growth segmentwithin the EDC market SegmentOverview of segment Key playersSegment size (US$mm) and growth (%)1 Point-to-point private line communicationOthers 12.4%internationallyBhartiTata126 19%119 113 108103 99IPLC Key demand from IT, ITeS and BFSI sectorsComm.49% Contributes ~10 % to total marketsRCOM FY 2010 FY 2011FY 2012 FY 2013FY 2014 FY 201519.6%2 Point-to-point private line communicationRCOMOthers 11.7%domestically12.6%BSNLDLC Contributes ~18 % to total market Tata39.3% 237 243 249 255 261267Comm.16.0%Bharti 20.4%FY 2010FY 2011FY 2012FY 2013FY 2014FY 20153 Provide access to organizations networkusing public telecom infrastructure MPLS/ VPN Dominant growth driver of the enterprise712844996 1170 528606data market Contributes ~40% of the total market FY 2010FY 2011FY 2012FY 2013FY 2014FY 20154 Most common and widely accepted Others 22.2% Tata Critical to integration of IT and telecom Comm. Internet BSNL 26.1%335364407457infrastructure11.7% 309 315 Contributes ~23% of the total market RCOMBharti 12.0% 26.4% FY 2010FY 2011FY 2012FY 2013FY 2014FY 20155 VSAT (Very Small Aperture Terminal) is 2 wayground station with dish antenna VSAT Used to transmit data from small remote 146 92 100 109120132earth stations Contributes ~7% of the total market FY 2010FY 2011FY 2012FY 2013FY 2014FY 2015Source: Company website and filings, research reports; Note: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 9 11. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5 by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~US$1.2bn in 2015 Best in class customers across business segments 1 Market leadership in the last mile wireless Over 2,200 strong customer basebusiness with fiber network to boost revenues Customers include more than 90% of 7 2 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target market Robust financial performance with Indian data center space poised for high growth strong bias to growth Third party Data center space to grow at a Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by 2014 Robust EBITDA margins of 25%+54Strong management team Tulip is best positioned to attain market leadership in Led by experienced and visionary management Indian data center space Prior experience with global firms including HP, Largest single site data center in IndiaIBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services10 12. 2 Market leadership in India in last mile enterpriseconnectivity Presence across 2,200 cities 4 operational data centers with potential Chandigarh Ruralnetworkcapacity of ~100,000 sqftDelhi LucknowStrong #1 player in MPLS/ VPNBhopal pan-India #5 player in Indian EDC marketAhmedabad KolkataData center presence Mumbai Pune High capacity HyderabadFiberPoint to PointBangalore Wireless ChennaiKochiAhmedabad Chennai Last mile connectivity due to the wireless spectrum held in B Pune BangaloreData CenterHigh Capacity Fiber the 2.8 / 3 GHz band that provides faster connectivity A Point to Point WirelessCentral NOC in New Delhi rollout at lower capexMumbaiHyderabad DRedundant NOC in Mumbai RegionalLast-mile Tie-ups with telcos to lease bandwidth for inter-cityNOCs in all Class B citiesC ISDN RAS in all Class A & B Cities wirelessdata transfer connectivity Uptime of ~99.9%Delhi Competitive advantage in providing higher uptime than its ChandigarhRural networkcompetition due to it sourcing fiber bandwidth fromLucknowmultiple vendorsKolkata BhopalKochiPre-rollout client acquisition ensures quickEnd-to-end offerings help cross selling Focus on Enterprises/Corporatesbreakeven services Tulip typically surveys and identifies potential Tulips dedicated focus on enterprise/corporates vs. Presence in network integration, networkcustomers with minimum connects for quick break-competitors mass market strategy management, data center, SWAN, etc enables it toeven Ideally placed to reap the benefits of growth in MPLS cross sell its high profit data services to customers This model assures that every POP rolled out is VPN segmentprofitable360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 11 13. 2Last mile fiber-based connectivity to turbo-charge revenue growth; to raise addressable market size over 5-fold Amount of bandwidth that can be offered on wireless is limited,Addressable1 Market addressed market post fiberfrom 64 KBPS to 2 MBPSBusiness segment ($mm) pre fiber lay-outlay-out Rolled out its last mile fiber network in the key businessdistricts of 50 major cities including Delhi and Mumbai MPLS VPN wireless 211 211 Why Tulip is 10 key commercial business districts (metros) while other areMPLS VPN (Fiber) 316 investing in fibertier-2 & tier-3 citiesTotal MPLS VPN211 528 business Network caters higher bandwidth requirements in CBDs of (2 IPLC 126MBPS to 155 MBPS) DLC 237 Addressable market increases ~5x and increased servicesInternet 309including DLC, IPLCTotal 211 1,200 Fiber segment expected to contribute 70% of order inflow in nextOrder inputs break-up2few years NI business Has got ~600 customers on board in Q1 with 70% of the 12%Business mix is contracts being fresh deals versus wireless to fibre substitutionchanging Future growth driver for the enterprise marketFiberVPN business Higher margins and higher ARPUFY10business 68% 20% Fixed cost annuity model Fibre business to de-risk its business model which was entirely3dependent on IP VPN segment growth ARPU of fibre business can grow manifold depending onNI businessbandwidth speed offered 10% Higher margin Will yield relatively higher EBITDA margin vis-a-vis TTSL own IP VPN recurring business VPN BusinessbusinessFiberFY12E business Annual recurring revenues at significant 78% in FY10 vis--vis 20%70%one time installation revenues which was over 50% in FY07 Average revenue per connect; Note: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 12 14. 2 Tulip has a pan-India network presence in 2,000 citiesDelhiTelcos with national Fiber Mumbai Bangalore Utilities with national fiberChennai Tulip has significant fiber capacity leased from national players like Reliance Infocomm, Vodafone, Powergrid Using its last mile, Tulip can provide wireless services up to 2MBPSInter-City Primary Link Inter-City Redundant LinkHigh End Router360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services13 15. One of the leading players in the Indian EDC market, 2 with leadership in the MPLS segment Operating metrics Network Integration Segments IPLC DLC VPN/MPLS Managed Services/Data Center Network No of cities22009544NANA Data Center(000 Sqft) - operational100 NA405 45NA EDC Share (FY 10) 12.9%17.0% 12.7% 18.7% 14.5% MPLS Market Share (FY 10) 30.6%10.2% 12.2% 11.9% 11.8%Source: Company filings, research reportsNote: Operating metrics as of December 2009 unless otherwise mentioned360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 14 16. Tulip compares well with the international playersOperating and financial metrics (US$mm)Country India Asia N. America & U.S.U.S. & Europe U.S.N. America,EuropeEurope & othersPrimary regional presence NationalMulti-region Multi-regionMetroMetroNational National NetworkRoute miles (000s of miles)4 2967NA 21 28 NA1No. of cities / metro areas2,200 100 16014 21 75 NAFocus areaLarge corporatesLarge corporates Small & medium Small & mediumLarge corporates Large corporates Large corporatescorporatescorporate PresenceLong haul fibre / under sea cableData centre Metro connect FY11A Revenue502 Private 263 4524101,273 2609FY11A EBITDA 142 Private7257.1170436400 FinancialsFY11A EBITDA margin (%) 28.2%Private27.2%12.6% 41.6%34.2%15.3%Market cap 500 Private 711 3931,6352,785924 Source: Company filings, FactSet, Bloomberg Note: Market data as of Mar 04, 2011; SMBLC Small and medium business 1 Figure for Tulip represents number of cities, for Pacnet represents points of presence US$1 = INR46.8; 1km = 0.62mile360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services15 17. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1Market leadership in the last mile wireless Over 2,200 strong customer base business with fiber network to boost revenues Customers include more than 90% of 72 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target market Robust financial performance with strong bias to growth Indian data center space poised for high growth Historical top-line growth of 20%+ 63 Third party Data center space to grow at a Robust EBITDA margins of 25%+CAGR of 32.8% by 20145 4Strong management teamTulip is best positioned to attain market leadership in Led by experienced and visionary managementIndian data center space Prior experience with global firms including HP, Largest single site data center in IndiaIBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services16 18. The global data center sector displays a strong growth profile as3a result of solid underlying business economics Global business and consumer IP traffic (in petabytes per month)CAGR (2009-2013E) Growth rates2009E2010E2011E2012E 2013E Business IP traffic Consumer IP trafficBusiness IP traffic: 31.8%Business IP traffic 37.2%36.3%33.0%29.8% 28.0% 32,129Consumer IP traffic: 38.4%Consumer IP traffic 45.4%45.4%46.2%35.3% 27.7%25,168 18,601 12,72612,83310,0228,7557,7226,0205,8053,103 4,25820082009E2010E 2011E 2012E2013ESource: Cisco, 2009 Overview Main growth drivers The global data center sector is continuing to strongly leverage on:Internet traffic growthThe proliferation of internet-based business and consumer applications; andThe growing migration to outsourced IT infrastructure servicesIncreased need for data Server demand is a function of the growing demand for network-based computing;network-based computing, in its turn, is a function of the organic growth in internetconnectivity, bandwidth, commerce and company-based applicationsTechnology infrastructure Higher broadband penetration, availability and usage should continue to drive a growingbase of IP traffic worldwide which will ultimately benefit a whole spectrum of data centerBandwidth hungry devicesservices, from colocation to complex managed hosting providersOnline storage needControlled supply and surging demand 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 17 19. 3Supply and pricing fundamentals are highly attractive Global internet data center supply and demandGlobal internet data center utilizationChange in Supply Change in Demand 96%91% 16.0% 15.0% 14.0% 14.0%84% 12.0%78% 9.0%73% 7.5% 7.0% 6.0%6.0% 65% 5.0% 3.5% 20082009201020112012 20132008 20092010 20112012 2013Global data center demand is expected to outweigh supplyMajor data center markets will be full by the end of 2012Source: Tier1Research Internet Datacenter Supply 2010Source: Tier1Research Internet Datacenter Supply 2010 Infrastructure-as-a-Service (IaaS) pricing index Wholesale and colocation pricing dynamic$2,900 700 ColocationOverlapWholesale$2,800MRR per cabinet or server 600$2,700 500 Cost per kW$2,600 400$2,500 300$2,400 200$2,300 100$2,200$2,100 0$2,0000250500 750 1000 1250 1500 17502000 1Q07 3Q07 1Q08 3Q081Q09 3Q09 1Q10Committed kW Pricing trends are positive due to increased demand forPricing varies widely depending on geographic locations, services, power and interconnection proximity to dense networks, quality of facility, size of deal, etc.Source: Wall Street research Source: Tier1Research Internet Datacenter Supply 2010 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services18 20. These trends are creating a large and attractive market 3 opportunity Global Data Center Revenue ($bn)Global Data Center Ownership Increasing IaaS Adoption ($bn)$200 Data Center IT Spend45% laaS Spend Insource $180 laaS % of Data Center 40% 84%$160 35% $18.5Outsource $140 30%$15.59% $120 25% $12.9$100 20%$10.8Long-Term $80 Lease 6%$60 15% $40 10% $20 5%$0 0% 20092010201120122009 2011 201320152017 2019 The industry will benefit from the continued Data center capacity remains primarily in- IaaS adoption will grow to 40% of datagrowth in annual spending on Internet datahouse (84%) and the market for colocationcenter spending by 2020center revenueservices remains under penetrated Growth will continue to be fueled by Revenue growth in the market is Industry surveys indicate that 67% of favorable secular trends projected to grow 20% annuallycompanies will need data center space IaaS spending is projected to reach ~$80 within 36 monthsbillion by 2020 New York, Silicon Valley, Northern Additionally, 24% have reported they 70% of companies have indicated they Virginia, Chicago, Dallas and Loshave already run out of capacity will need at least 3k sq. feet of space Angeles are the leading North Americaninternally within the next 3 years markets Large market Under-penetrated Strong growthSource: Tier1Research, Gartner, IDC, Wall Street research 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services19 21. 3 Data infrastructure opportunity in IndiaMarket size and Growth rate (FY1011) Segment size (US$mm) and growth (%) 3rd party data 25 Managed Security center662726791 855 534 20 321 Growth rateFY1011 (%) Third party data center FY10 FY11 FY12FY13 FY14 15 Mgd. Security662 10 470 534321406 256470 FY10 FY11 FY12FY13 FY145Unified Communications Un. Comm.00 100 200300400500600 700 800 900 1,000449470513556 620 Market sizeFY11: US$1,453mm FY10 FY11 FY12FY13 FY14Data Centre Managed SecurityUnified CommunicationsColo and Hosting ColoIdentity access Federated access control IP IP Telephones Hosting Single sign on/access control IP contact center Authentication IP and Hybrid PBXOp Center OP centerManaged services Managed Services andContent/Application Content accelerationPerimeter protection IDS/IPS and integrationIntegrationacceleration Application acceleration Content filtering, FirewallPlatform security Vulnerability management, NACUnified Unified CommunicationStorage Storage advanced servicescommunication Server security mgmt Managed storage Desktop/laptop mgmt Video conferencing Video conferencingSSL VPN SSL VPN Source: Companys internal estimates worked out in 2010 ; Note: FY refers to year ending March 31; US$1:INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services20 22. 3 Indian Data Center sectorPoised for strong growth Indian Data Center market revenue forecast (US$mm) Market overview Indian Data Center market is expected to touch US$2.1bn by 2011 fromUS$1.4bn in 20092,162 Current penetration of Data Centers in India is ~54.5% 1,722 3rd party datacenter space in 2009 was ~2mm sq ft, which is expected to1,435grow at a CAGR of 32.8% to reach ~8.8mm sqft by 2014 Broker research estimates that 6-7 mm sq ft of new data center space will beneeded in India over the next four years (2014), of which over 90% will beused to hosted / outsourced data centersFY 2009AFY2010E FY2011E Manufacturing, BFSI and IT/ITeS are key verticals driving demandKey growth drivers Data Center vertical split (US$mm) Demand for increased productivity and reduction in costsOthers Others Issues like cost pressures, increasing management time and high 10%11% investments in technology and infrastructure Communication CommunicationManufacturing and media 6%and media 6%53%IT/ITES Dropping International bandwidth costIT/ITES14%15% BFSIBetter technology BFSI 16% Manufacturing 15%54%Compliance to clauses of the Indian IT Act or ISO certificationFY09: US$1,435mm FY11: US$2,162mmSMEs now embracing these technologies faster than ever beforeSource: IDC Note: US$1:INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services21 23. 3 supported by significant Third party Data Center opportunity Favorable third party data center opportunity Key advantaged from third party/hosted Data CenterThird party Minimal investment in Capex17.9% Lower Capex Reduced cash outflowsrequirement Better return on investment Regulatory need of maintaining historicalCaptive Focus on core data for companies82.1% business Focus on core competencyAdoption in 2009 Huge scale of operationsEconomies Cost efficient business modelof scaleThird party23.3% More accountability to different clients Operational and Deployment of latest technology power efficiencyCaptive Redundancies in safety of data76.7%Enhanced Superior investments in technology to ensure security maximum securityFuture adoption by 2011Source: IDC Report (Dec 2009)360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services22 24. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015 Best in class customers across business segments 1Market leadership in the last mile wireless Over 2,200 strong customer base business with fiber network to boost revenues Customers include more than 90% of 72 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target market Robust financial performance withIndian data center space poised for high growth strong bias to growth Third Party Data center space to grow at a Historical top-line growth of 20%+ 63 CAGR of 32.8% by FY 2014 Robust EBITDA margins of 25%+5 4Tulip is best positioned to attain marketStrong management teamleadership in Indian data center space Led by experienced and visionary management Largest single site data center in India Prior experience with global firms including HP,IBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 23 25. 4 Tulip plans to be a market leader in data infrastructure sectorExisting data centers New acquisitions 4 operational data centers Inorganic expansion plans (mm sq ft) 1 in Delhi & Bangalore and 2 in Mumbai SADA - Located in Bangalore; Indias largest data New data centers coming up in Hyderabad, Chennai, Pune and0.9 1.0 center, 3rd largest single site data center in the world Potential capacity of ~100,000 sqft 0.1 when it goes live Only provider to have termination from all telcos Current SADA Total Margins linked to utilization (can go up to 50%)acquisition Facility can house up to 16,000 racks Funding plan: US$190mmKey customersDebt 11% 60MW power supplied through 3 x 20MW substationsEquity partner(s) Tulip 34% Provision to house over 2,000 technical staff 25% Internal accruals30%Source of funds (1st 3 years) Bangalore Data Center3rd largest Data Center globally and largest single site Data Center in Asia000s Sqft 1,100990900 750 750 700550 538485 470 407Lakeside TechQTS Metro,Tulip Telecom,NAP of Next Microsoft,Microsoft,Phoenix One, DuPont Fabros,Microsoft,SuperNAP, Las Center,GeorgiaBangaloreAmericas,GenerationChicagoDublin Phoenix Chicago Quincy & SanVegas Chicago Miami Data, Cardiff AntonioSource: Company; 1 TDCSPL indicates Tulip Data Center Services Private Ltd;Note: US$1:INR46.8; Tata Communications (Chennai and Mumbai (Prabhadevi)) have presence in managed services; Data center for Tulip compared against peers refers to proposed facility at Bangalore when fully completed360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services24 26. 4Tulip compares favourably with peers in the industry 990,000Built up Current raised Built-up and 575,000650,000 Current raised 495,000 400,000 280,000 187,500 210,000 80,000150,00060,00082,000 (Sq. ft.) No. of59 4 4 6 9 data centersPune New Delhi Pune Noida LocationKolkataDelhiHyderabadDelhiHyderabad Mumbai MumbaiChennai MumbaiChennaiMumbaiChennaiMumbai ChennaiMumbaiChennai(3) (3) (2)(2)(4) Bangalore (2) BangaloreBangalore Bangalore BangaloreBangalore (3) Government, BFSI, Telecom, BFSI and ITeS Government and IT/ITeS Manufacturing, BFSI and Media, Telecom, BFSI, BFSI, Manufacturing, Manufacturing and IT/ITeS IT/ITeS and C ontent providersITeS and M/E Industry focusSource: IDC Report (Dec 2009), Research reports 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 25 27. 4 and is a complete service provider 1 Co-location and hosting services Managed services Portfolio Value addedofservices services Professional services EDC Acquired a 900K sq. Globally consistent Strong bandwidth First play er to offer Backing of existing Largest built-up dataft. data center inproduct line player cloud computingenterprise customerscenter space rdIndia (3 largest Investing heavily in Strong collocation service Strong bandwidth Strong bandwidthStrengths globally) Indiaand hosting player Strong in energy playerplayer Diversified into allefficient data centers Aggressiv eservice offeringsmarketing Focus on capacity Leverage brand Targeting Growing traction in Leverage its existing Traction from SMEexpansion image of Tata groupgovernment and mobility and other set of customersand SMB s egment Traction from Partnering witheducation sectorsvalue added Capacity expansion Expected hugeOpportunities increased service group c ompanies Focus on providing services in 1-2 yearsdemand for Green ITofferings like TCS for e-additional value Focus on SME and BCDR servicesGovernance projectsadded servic essegmenthosting1Service portfolio for Tulip includes capability to be added from newly acquired facility at BangaloreSource: IDC Report (Dec 2009), Company website, Factiva, Equity research; Note: BCDR indicates Business Continuity and Disaster Recovery 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services26 28. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11..5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR toreach~ US$1.2bn in 2015Best in class customers acrossbusiness segments 1 Market leadership in the last mile wireless Over 2,200 strong customer base business with fiber network to boost revenues Customers include more than 90% of 72 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target marketRobust financial performance withIncreasing focus on Indian data center marketstrong bias to growth Third Party Data center space to grow at a Historical top-line growth of 20%+ 63 CAGR of 32.8% by FY 2014 Robust EBITDA margins of 25%+5 4 Strong management team Tulip is best positioned to attain market Led by experienced and visionary management leadership in Indian data center space Prior experience with global firms including HP, Largest single site data center in IndiaIBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services27 29. 5Led by competent and visionary managementLt. Col.H.S. BediDeepinder BediSanjay Jain Rahul Ahuja Jitendra Israni Rajesh Duggal Chairman & Executive Director Chief Executive Officer Chief Financial Officer Chief Service OfficerPresident Govt BusinessManaging director CEO President President Chief Financial Chief Marketing & Chief Service Chief HR OfficerEnterprise Government OfficerProduct Officer Officer BusinessBusinessChief Regional MarketingBusinessCommercial HeadHead - NorthOfficer Ministries RegionalCSO- NorthRegional Head ofBusiness Procurement Product HeadHead - SouthRegionalCentral Bodies CSO- South RegionalRevenue Business Assurance Head - EastRegional State BodiesCSO- East Regional LegalBusiness RegionalHead - WestCSO- WestLocal BodiesChannels OthersNOC Manager Network Planning 360 EngagementStrategic Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services Pre Sales AllianceBFSI 28Accounts 30. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR to reach ~ US$1.2bn in 2015Best in class customers acrossbusiness segments1 Market leadership in the last mile wireless Over 2,200 strong customer basebusiness with fiber network to boost revenues Customers include more than 90% of 7 2 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target marketRobust financial performance with Increasing focus on Indian data center marketstrong bias to growth Third Part Data Center Space to grow at a Historical top-line growth of 20%+ 6 3 CAGR of 32.8% by 2014 Robust EBITDA margins of 28%+ 5 4Strong management team Tulip is best positioned to attain market Led by experienced and visionary management leadership in Indian data center space Prior experience with global firms including HP, Largest single site data center in India IBM, Cisco, EMC360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 29 31. 6Robust financial performanceRevenue (US$mm) and segment split (%)PAT (US$mm) and margin (%)PAT % PAT margin % EBITDA marginNetwork integration Enterprise data 80 75% $65mm$180mm $260mm$345mm$420mm $502mm 100%60 $54mm $50mm50% 38%$40mm75%54% 4071% 27%88% 89% $21mm 20%21%28% 25%50% 20 63%16% 15%16%13%25%12%12% 46%29%00%12% 11% 0% FY 2007 FY 2008 FY 2009FY 2010 FY 2011FY 2007 FY 2008 FY 2009 FY 2010FY 2011 EBITDA (US$mm) and Capex (US$mm)Dividend (US$mm) and payout ratio (%) 200 EBITDACapexDividendsPayout ratio$157mm 840%$142mm 150 $6mm$6mm$112mm$112mm 630% 100 $67mm$72mm420%$3mm $52mm$53mm$41mm 50 $28mm 2 $1mm $1mm10% 10% 8% 5%7%4%000%FY 2007FY 2008FY 2009FY 2010FY 2011FY 2007FY 2008 FY 2009FY 2010 FY 2011Source: Company filingsNote: Capex includes purchase of fixed assets and capital work-in-progressUS$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services30 32. 6Recent developments P&L* (US$ in millions) Balance sheet* (US$ in millions)All figures in US$mmFY 11 FY 104QFY11 4QFY10 All figures in US$mm March 31st, 2011 March 31st, 2010Sales502 420136120Gross Block 494 336EBIT 10583 30 30Net worth 259 198% margin 20.9% 19.7%22.1%25%Total Debt380 260EBITDA 142 112 40 33 FCCB 94 93% margin 28.2% 26.2%29.3%29.1% Others 286 167Profit before tax(Operating)8768 24 33Cash & cash eq. 54 74Total Debt to Equity1.47 1.32% margin 17.3% 16.2%17.6%22.7%Net Debt to equity1.26 0.94Profit after tax6549 18 14Total Debt to EBITDA2.68 2.32% margin 13.0% 11.8%13.0%12.4%Source: Company filings ROCE (annualized) 18.7%18.1%Note: US$1 = INR46.8*Consolidated360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services31 33. 6Tulip P&L P&L (US$ in millions) All figures in US$mm200708200809 200910 2010-11 Sales260345 420 502 EBIT48 7093 105 % margin18.6%20.4% 22.2% 20.9% EBITDA52 72 112 142 % margin20.2%20.9% 26.7% 28.2% Profit before tax 43 616887 % margin16.5%17.6% 16.2 %17.3% Profit after tax40 544965 % margin15.4%15.5% 11.8% 13.0%Source: Company filingsNote: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 32 34. 6Tulip Balance sheet Balance sheet (US$ in millions) All figures in US$mm 200708 200809 200910 2010-11Shareholders equity95146198 259 Loan funds Secured Loans42110117 261 Unsecured Loans 149130143 118 Deferred Tax Liability (Net) 001 0.7 Total Liabilities 286386459 280 Fixed assets111260284 405 Investments000 33 Net Current Assets175126175 201 Total assets286386459 639Source: Company filingsNote: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 33 35. Tulip: Key investment themesStrong play on the high growth Indian EDC market EDC market to grow at a CAGR of 11.5% by 2015 MPLS is expected to grow at 17.2% 10-15 CAGR toreach ~ US$1.2bn in 2015 Best in class customers across business segments 1Market leadership in the last mile wireless Over 2,200 strong customer base business with fiber network to boost revenues Customers include more than 90% of7 2 Dominance in the last mile connectivity Top 500 ET companies 5x increase in target marketRobust financial performance withstrong bias to growthIncreasing focus on Indian data center market Historical top-line growth of 20%+ 6 3 Third Part Data Center space to grow at a Robust EBITDA margins of 25%+ CAGR of 32.8% by 201454 Strong management team Led by experienced and visionary management Tulip is best positioned to attain market Prior experience with global firms including HP,leadership in Indian data center spaceIBM, Cisco, EMC Largest single site data center in India360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 34 36. 7Tulips progress has been recognized by both its customers andthe IndustryWireless Key awardsFinalistFibre360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services35 37. Agenda Overview Investment highlights Appendix360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 36 38. Key milestones: Strong market knowledge with over20 years of experience in the country 2009-11 Network locations2500 Opened data centers in Mumbai, Navi Mumbai and2,0002000 1,700 Bangalore1500 Acquired Worlds third largest Data center facility(900,000 8001000 Sqft) in Bangalore 50025 0 2006-08 Commenced international connectivity services in 5 FY 2005 FY 2007FY2010 1HFY2011continents across the globe Implemented Haryana SWAN Stabilized the fiber network operations by having compete Set up the first data center in Delhi ring networks in place Won the first Frost and Sullivan award for2002-05 the largest MPLS VPN provider Entered into a JV with Qualcomm for broadband wireless access with investment of US$30mm for 13% stake 2002: Set-up the worlds largest rural Increased employee base to 2,300 fromwireless network in Kerala4 in 19921992-01 2004: Established VPN network across Revenue (FY11): US$502mmIndia EBITDA (FY10): US$142mm 1992: Incorporated as Tulip ITservices, a software reseller 2005: Went public through an IPO and Network integration contribution reduced to 11% in FY11got listed on BSE & NSE Revenue (FY08): US$260mm Commenced operations in Mumbai Won the R-APDRP projects in UP and Gujarat with a EBITDA (FY08): US$52mmand Bangalorecombined value of US$34mm for 5 yrs Won the SWAN projects of Haryana, Raised INR1.1bn from IPO Won the R-APDRP projects in Uttarakhand and Punjab forWest Bengal, Assam and Madhya value of US$3mm and US$8mm respectively Bagged major orders for VPN Pradesh Emerged as largest reseller forconnectivity Won R-APDRP project in Andhra Pradesh for value of USDCisco in India 7 Mn Revenue (FY05): US$73mm Revenue (FY01): US$9mm EBITDA (FY01): US$0.3mm EBITDA (FY05): US$4mm 100% network integration 1992 200220042006 2007 20092010Strong and consistent performance Revenue CAGR of 40% and Net Profit CAGR of 54% over the last 4 yearsSource: Company filings and website; Note: US$1 = INR46.8360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 37 39. Regulatory framework Key categories Rules and regulations FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route One time entry fee for new ISP license is INR3mm for Category A and INR1.5mm for Category B ISPs; no new Category C Internet service licenses are being issuedprovider (ISP) Annual license fee of 6% of Adjusted Gross Revenue (AGR) FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route One time non-refundable entry fee of INR100mm, INR20mm and INR10mm for Category A,B and C respectivelyVirtual Private Network Annual license fee of 6% of Adjusted Gross Revenue (AGR) generated under the license (VPN) FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. route Entry Fee for new NLD license is INR29.25mm NLD & ILD License Annual license fee of 6% of AGR FDI limit of 74%, with 49% allowed under automatic route and above that under the govt. routeVSAT commercial Entry fee for new commercial VSAT license is INR3mm non-refundable/ non-adjustable Annual license fee of 6% of AGRSource: DoT website, research reportsNote: Category A: All India ISP License; Category B: 20 territorial Telecom Circles, four Metro Districts- Delhi, Mumbai, Calcutta or Chennai and four major TelephoneDistricts- Ahmedabad, Bangalore, Hyderabad or Pune; Category C: License in any Secondary Switching Areas (SSA) of DOT with geographical boundaries as on 1.4.98 (Revenue district in most cases) 360 Engagement Enterprise Data Connectivity | Network Integration | Data Centre | Managed Services 38 40. Typical Network64 K to any bandwidth on DR SitewirelessFibre / High speed radio Central site360 EngagementEnterprise Data Connectivity | Network Integration | Data Centre | Managed Services 39