Company Overview. Industry Overview. Financial Performance

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1 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Vedavaag Systems India Limited CMP: December 3, 215 Stock Details BSE code BSE ID VEDAVAAG Face value ( ) 1 No of shares (m) week H/L 51.75/8.61 Market cap ( m) day avg. vol (No) 92,776 Free float ( m) 518 Stock performance (%) 1M 3M 12M Absolute 69.5% 168.7% 337.3% Rel. to Sensex 7.2% 169.4% 342.5% Shareholding Pattern* (%) Promoters FIIs DIIs Others 18.37%.%.% 81.63% *As of September 215 Relative Chart Company Overview Vedavaag Systems India Limited (VSIL) is a software developer with a niche in E-Governance projects. The company was an early entrant to the IT infrastructure services industry and has expanded the scale of operations over the years, establishing a strong presence in governance projects. Industry Overview The National e-governance Plan (NeGP), formulated by the Department of Electronics and Information Technology (DEITY) and Department of Administrative Reforms and Public Grievances (DARPG) approved 27 Mission Mode Projects (MMPs) and 1 components in 26. According to Gartner, spending on IT products and services by the Government is expected to increase 5.2% to US$6.9 billion in FY Initiatives by the NeGP continues to provide large market opportunities for IT companies as the Government both at the Central and the state level implement e-governance projects. Financial Performance Vedavaag s revenue from operations for FY15 rose 6.% to 671 million compared to 63 million in the previous year Vedavaag systems (LHS) Sensex 31, 3, 29, 28, The company reported a net profit of 29 million or 2.6 per share in FY15, which corresponds to a 17.2% growth compared to FY , 26, 2 25, 1 24, 23, 22, Table1: Key Financials (Y/e March) Source: Bloomberg Sales ( m) YoY Growth (%) 31% 24% 6% EBITDA ( m) EBITDA Margin 17% 17% 19% PAT ( m) EPS ( ) YoY Growth (%) 326% -32% -2% Source: Company, Karvy Investment Advisory 1

2 Background and Business Description VSIL was established in 1998 and initially executed many intranet and client specific applications for customers such as Oriental Bank of Commerce, Andhra Bank, Nokia, Web Sprocket Inc, Information Logistics, Singapore, among others. Over the years, the company has evolved as a niche player in the e-governance solutions and citizen services infrastructure management. Since 26, VEDAVAAG is ISO 91:28 certified for its e-governance applications delivery and services management. VSIL s strategic relationship with Electronics Corporation of India (ECIL), a public sector undertaking, helped it to enter e- governance sector. In 21, VSIL bagged its first e-governance project along with ECIL to execute a five year contract for computerized bus pass services for Delhi Transport Corporations. Subsequently, the company bagged similar projects from other state road transport corporations in Karnataka, Tamilnadu, and Maharashtra. Another key e-governance project executed by VEDAVAAG was local body management for municipal e-governance covering Panchayats, Nagar Palikas and Municipal Corporations. In 23, the company bagged its first project to deliver local body e-governance solutions to Municipal Corporation of Delhi that accelerated VEDAVAAGs growth in e- Governance sector. VEDAVAAG has established more than 2 citizen services centers in Delhi, Haryana and Bihar to reach out to people to provide various G2C, B2C and B2B services. The company has launched various citizen services under the brand ABHEE and plans to setup these centers as free standing units on franchise basis. Business verticals: VSIL operations are categorized into four verticals namely: E-Governance Solutions Covers Local body management solutions, Employment Exchange Solutions, and Tourism & Transport solutions Knowledge Center Solutions Includes Infrastructure Management Solutions, Content Delivery Management Services, and Pre-Employment Training Solutions Citizen Service Delivery Platform Management Includes Abhee (service at the door step) New Services e-integration - VEDAVAAG is replicating its solution in other states and in B2C and B2B segment. Proposed services include rural e-med delivery services, Private functional hall booking services, mobile retail mart, door delivery of e-governance services in other states based on its proven models in Delhi, Haryana and Bihar. Key Strengths and Future Prospects VSIL has established a niche in the e-governance solutions, executing large projects for the Government. The Company continues to bag good e-governance projects such as national population register and Biometric data collection for Aadhaar card generation and more recently project from Stock Holding as Business Associate. Leveraging its experience in setting up Citizen Service Bureaus (CSBs) in Delhi, the company is positioned to expand its presence in this segment as Government of India is planning huge investments (estimated in thousands of crores) in CSBs. IL&FS has been appointed as the NLSA for the CSC (Common Services Centers) project. The company believes that it has a good change in bagging CSC project and positioned for multi-fold growth as IL &FS has been a strategic investor in VEDAVAAG. 2

3 Risks & Concerns VSIL s primary focus is on e-governance projects, which involve various types of risks including unclear problem definition, ambiguity in understanding the goal and objective of projects, and delays in completing projects and payments. Board of s Table 2: Composition of Board Name JSR Durga Prasad J Murali Krishna V Umapathi Dr. G T Murthy B Locabhiram J Sujatha Source: Company Relation with Company Chairman Managing Industry Overview According to NASSCOM, India is the world's largest Information Technology (IT) services outsourcing destination industry, accounting for 67% of the US$13 billion market. By 225, the Indian IT sector is expected to triple its revenues to US$35 billion, growing at a CAGR of 11%. The industry employs about 1 million people and has transformed the economic well being of the country. Key reasons for the competitive advantage of India include cost, skilled professionals, and fluency in English language. Apart from IT outsourcing projects from the U.S. and Europe, domestic IT projects particularly from the Government present a large opportunity for software companies. The National e-governance Plan (NeGP), formulated by the Department of Electronics and Information Technology (DEITY) and Department of Administrative Reforms and Public Grievances (DARPG) approved 27 Mission Mode Projects (MMPs) and 1 components in 26. NeGP aims at improving delivery of Government services to citizens and businesses and encompasses various elements including Common Support Infrastructure; Governance and monitoring of the projects; Centralised Initiative and Decentralised Implementation; and Public-Private Partnerships, among others. According to Gartner, spending on IT products and services by the Government is expected to increase 5.2% to US$6.9 billion in FY Initiatives by the NeGP continues to provide large market opportunities for IT companies as the Government both at the Central and the state level continue to implement e-governance projects. Competition analysis Company CMP ( ) Mcap ( m) Rev ( m) OPM (%) EPS ( ) PE (x) Vedavaag systems % Rolta ,141 18, % I Infotech 4.9 3, % -1.9 nm IntraSoft Technologies Limited 434 6, % Source: BSE 3

4 Financial Analysis For the period ending 31 March, 215 Vedavaag reported a 6.5% increases in revenues to 671 million. The company s EBITDA margin increased from 17% in FY14 to 19% in FY15, attributable to the decline in company s operating expenses. It also reported earnings per share of 2.6 for FY15. Year end March Income statement ( million) Revenue % growth 31.4% 24.4% 6.5% EBITDA % EBITDA margin 17% 17% 19% Depreciation and amortisation EBIT Interest PBT Tax Net profit % growth net profit 18.8% -32.6% 17.2% Balance sheet ( million) Shareholder fund Long term liab Current liab Fixed assets Current assets Cash & cash equi Cash flow statement Cash flow operations Cash flow from investing Cash flow from financing Per share data EPS ( ) CEPS ( ) NA NA NA DPS ( ) NA NA NA BVPS ( ) Financial Ratios % ROE 13.3% 7.6% 8.8% ROCE 13.1% 1.9% 11.1% Debt/Equity 9.1% 9.4% 1.3% Interest coverage ratio nm Current ratio Cash ratio

5 Source: Company, Karvy Investment Advisory Financial Snapshot Revenue growth (%) EBITDA margin (%) Revenue ( m) % growth 35% 3% 25% 2% 15% 1% 5% % EBITDA ( m) % EBITDA margin 19% 19% 18% 18% 17% 17% 16% 16% Net Profit Margin (%) 8% 6% 4% 2% % BVS & EPS Net Profit ( m) % net profit margin Book value per share ( ) EPS diluted ( ) 2. Liquidity ratios.2 Profitability ratios % % %...% Current ratio Cash ratio ROE ROCE 5

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