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1 KAVVERI TELECOM PRODUCTS LTD NVS BROKERAGE PVT. LTD. Aspiring to be a Global Telecom Player Sector : Telecom Manufacturing CMP : Rs Year Target price : Rs. 300 SENSEX : SENSEX P/E : NIFTY : 5068 NIFTY P/E : KTPL Industry P/E Scrip Details Market Cap : Rs. 401 Crs Nominal Value : Rs.10/Share Book Value : Rs.150/Share Equity Share O/S : 2.01 Cr. Shares 52 Week H/L : / BSE Code : NSE Code : KAVVERITEL Shareholding Pattern (%) Categories Mar 12 Mar 11 Promoters FIIs DIIs Public & Others TOTAL Scrip Performance vis-à-vis Sensex Investment Triggers: 8th June 2012 NVS Brokerage, in the research report dated 11th March, 2011, had advocated a Buy on Kavveri Telecom Products ltd. (KTPL), Largest Manufacturer of Antennas and RF products in India, at the price of Rs. 111 with a Target Price of Rs KTPL, with its state of the art manufacturing facility spread over 1,50,000 sq. ft. in Bangalore, is well entrenched in Telecommunications, Defense, Space and Contract Manufacturing and has a capacity to manufacture products over 1000 Crores of Market Value. KTPL s Blue chip clientele includes industry giants such as Cisco, Motorola, Verizon, AT&T, Microsoft, (USA), Alcatel Lucent (France), Ericsson (Sweden), Siemens (Germany) Huawei (China) Tata Teleservices, Reliance Communications, Vodafone, Airtel, Idea, BSNL, ISRO (India) etc. KTPL announced stellar results for the FY , with Total Income growing by 47% to Rs. 454 Crores (FY 11 - Rs. 309 Crs), PAT growing by 25% to Rs. 48 Crores (FY 11 - Rs. 39 Crs). The Board has recommended Dividend of Rs.4/Share for FY12 (40% as compared to 15% last year). The stock has rallied on account of impressive numbers and met our target, currently trading at Rs For the last 6 years the company has been able to achieve 53% CAGR on Sales and 60% CAGR on Profit After Tax. Such a impressive growth has been on account of Organic as well as Inorganic Opportunities such as higher number of Client Agreements in this FY and the Acquisition of various global Telecom companies which has auger well for KTPL to establish a Global Footprint. Based on the performance for FY 2012, we presume, without considering any further acquisitions, the company may post a PAT of Rs. 65 Crs ( 30-35% growth y-o-y) & an EPS of Rs. 30 for FY At the Current Price of Rs. 199, the stock is discounting the FY 13 EPS of Rs.30 by a P/E Multiple of 6.6x, as against the industry P/E of PAT Growth for past 6 years We believe, KTPL, trading at a less than 7 Price Earnings, is currently available at very attractive valuation. We strongly recommend all the individuals, HNIs and Institutional Investors to add KTPL to their investment Portfolio with a one year target price of Rs. 300/share. Particulars Q4 Q4 FY 2012 FY 2012 Full year FY 2013 (Expected) Full Year FY2012 Full Year FY2011 Rs. in Crs Y-O-Y Growth (2012 0n 2011) (%) Standalone Consolidated Total Income EBITDA PAT Equity Share Capital Reserves Networth Kavveri Telecom Products Ltd EPS(Rs./Share) EBITDA Margin(%) 7% 14% 14% 15% 14% PAT Margin (%) 8% 10% 10% 11% 13% NVS Brokerage Pvt. Ltd

2 Kavveri combines expertise with experience to deliver state-of-art products and solutions spanning the wide spectrum of Wireless Telecommunications with diverse range of products manufactured. Kavveri has the capacity of manufacturing 200,000 High Quality Antennas and RF components per month. KAVVERI CORPORATE PROFILE Kavveri Telecom Products Ltd., formerly Kaveri Telecoms Ltd. (Kavveri) was incorporated in 1996 and is engaged in the designing, development and manufacturing of RF products and Antennas for Telecom, Defense and Space Applications in India and abroad. Kavveri enjoys the status of being the largest manufacturer of Antennas & RF Products in India. Kavveri also provides total Turnkey solutions for coverage and capacity enhancement requirements for GSM, 3G and CDMA carriers in India. Kavveri continues to invest in the research and development of Telecom products and the diversification of product offerings, and has one of the industry s leading product portfolios in terms of performance and features. Kavveri has over 500 R&D man-years of experience is uniquely positioned to offer an array of world-class products and solutions to meet all hardware requirements of telecom manufacturers. Kavveri s in-house R&D Centre has been recognized by the Ministry of Science and Technology since 1996 while developing Antenna Coupler and Pass Filters for Defense and Microwave application Antennas approved by Telecom Engineering Centre, New Delhi. Kavveri is the only company in India with Global OEM Supply Agreements and exporting RF Products & Antennas to North America. Product Profile Kavveri is working directly with mobile carriers to introduce innovative approaches that extend wireless coverage indoors while preserving network integrity. Segment Telecom - Base Station Solution Telecom - Coverage & Capacity Enhancing Defence, Aerospace, Homeland Security Contract Manufacturing RF products Filters, duplexers Products Combiners and RF amplifiers (TMAs,TMBs) Repeaters, Indoor / outdoor coverage products Complete DAS systems Antennas Receivers & Transmitters Interference e systems Microwave components Customized RF products and Antennas.

3 PRODUCT OFFERINGS Products for Exports: 4-way power splitter with Amplifier for GPS Panel Antenna, GHz, 20dBi Yagi, MHz, 18dBi Monopole Antenna, MHz CPE Antenna ( ) GHz, 15dBi Dual Band Outdoor Omni, 5dBi Antenna Sector Antenna, MHz, 12dBi Products for Defence and Space: Dual Frequency LO Generator L&S band Power divider L band Receiver Bias Tee with Coupler Wide band Microwave Power divider Customized filter products Slotted Blade Antenna, S-Band Slotted Blade Antenna, P-Band Monopole Antenna, P-Band Monopole Antenna, L-Band Monopole Antenna, UHF KTPL offers a range of customized ready-to-use products to suit specific requirements and diverse telecom needs of clients. KTPL with its technological expertise and experience designs and develops technologically advanced range of products such as Antennas, RF Components, Cables & Connectors, Repeaters, TMA/TMB and energy conserving Solar Products. Antennas KTPL offers antennas for key markets including wireless infrastructure and microwave applications. The portfolio includes Base Station Antennas, Microwave Antennas, Broadband In-building Antennas and other customized design Antennas. RF Components KTPL offers wide range of RF components for various telecom applications, which includes Base Station and High Rejection Filters, Duplexers, Diplexers, Triplexers, Point of Interconnect, Couplers, Bias Tees, Splitters, Combiners, Isolators, Circulators and Lightening Arrestors. Capacity Enhancers KTPL offers wide range of Capacity Enhancers like TMA, TMB & MCPA systems. The product portfolio includes Tower Mount Amplifier, Tower Mount Booster, MCPA that covers all major frequency bands. Coverage Products: KTPL offers Distributed Antenna Systems for In - building wireless mobile coverage services. In - building products are used to enhance and extend inbuilding coverage for mobile and other Communications systems. The coverage products covers all major frequency bands such as CDMA, GSM, DCS, PCS, UMTS, Wifi & Wimax etc.

4 KTPL - The Strong Client Profile Ericsson (Sweden) Alcatel Lucent (France) Microsoft (USA) CISCO (USA) Verizon (USA) AT&T (USA) Motorola (USA) Huawei (China) Reliance Communications (India) ZTE (Africa) Airtel (India) Vodafone (India) ISRO (India) Nokia (Finland) Idea (India) Aircel (India) BSNL (India) Tata Indicom (India) Tata Teleservices (India) World Space (USA) MTNL (India) Bharat Electronics (India) Airport Authority of India (India)

5 INORGANIC GROWTH STRATEGY Acquisition of Rymsa Telecom, Spain. To-date, TIL-TEK has supplied antennas in over 100 countries for a variety of major wireless projects. KTPL acquired a European Telecom Company, Rymsa Telecom, in November The acquisition enhanced the Product Portfolio of KTPL as well as expanded the existing sales channels in Europe and Latin America. DCI Digital Communications Inc specializes in Radio Frequency Interference (RFI) products, which reduce interference problems in the 30 MHz to 6 GHz range. Spotwave Wireless Limited provides carrier-approved, indoor wireless coverage solutions; giving you reliable, "always-on" wireless coverage indoors. Rymsa has a dominant market share in Europe and Latin America and is growing their market share in Middle East, CIS and Africa. Since the past, the company has been on a acquisition spree for growing inorganically, having acquired, Til-Tek Antennae inc. (a leader in the design and manufacture of cost effective, high quality antenna products for over 25 years), DCI - Digital Communications Inc (specializing in Radio Frequency Interference (RFI) products), Spotwave Wireless Limited ( indoor wireless coverage solutions and introduced the world s first Adaptive Repeater Solution), Trackcom Systems International Inc (innovative, reliable and cost-effective baseband and radio frequency technology and products) By acquiring these companies, KTPL has added considerably to its overall product portfolio as well as opened new markets for its products. Since its foundation in 1999, TSI has made significant contributions to the industry development with its cost efficient and flexible TDC-100 point to point transceiver family covering most popular unlicensed bands.

6 KTPL - India s Leading In - Building Solutions (IBS) Provider Kavveri Telecom Infrastructure Ltd (KTIL), a subsidiary of KTPL, is India s largest Neutral Host Provider (NHP) of IBS on Build-Operate-Lease model. For providing the In-Building solutions, KTIL has Tie-ups with reputed Builders and Business Houses Future group, Phoenix group, Brigade group, Salarpuria group Leela group, Mariott group etc. Along with that, KTIL has signed agreements with leading Operator clients such as. Airtel, Aircel, Idea, Reliance, Vodafone, Tata Tele, Uninor etc. It currently operates on around 37 mn sq.ft. area and plans to expand to 70 mn sq ft further. According to Global Mobile Data Traffic Forecast Update, , mobile data is increasing at a CAGR of 108% with almost 85% of data and 70% of voice traffic generated In-Building. Increasing Data Usage within Buildings due to 3G, BWA, 4G, which due to their high frequency bandwidth cannot penetrate buildings easily and Policy changes that would mandate most government and public buildings to have IBS are the few reason for increase in the need for In-Building Solutions. IBS-Addresses the coverage, quality and capacity requirements of In-Building mobile users. A few benefits of In-Building Solutions are, Flexible-Works with Multi-technology, Multi-vendor, Multi-operator scenarios Simple-Turnkey solutions, one-point contact for end-to-end solutions Technology-ready for all technologies expected in the next 10 years Vertical Integration -Most of the equipments required are procured from the parent. Faster Turnaround Time and Cost Advantage Exclusive Rights -Exclusive Rights for 7-10 years in all the properties Annuity Business Long Term Contracts with Operators provide Business Visibility Return Ratios Higher EBIDTA Margins and sharp RoI increases with higher tenancy

7 Telecom - Sector Outlook The Cellular Industry in India is growing rapidly and the number of subscribers has reached approximately 950 mn subscribers as on 31st March 2012 as per Department of Telecom. TRAI has projected need of additional 330,000 cell sites, enabling seamless connectivity to the targeted subscribers and thus providing strong thrust to the telecom equipment manufacturing companies like KTPL. The outlook for KTPL' s products in Telecom in India are very encouraging with the 3G rollout and growing network roll out action plans of various operators to meet the demands of the increasing subscribers. Major Telecom operators heading towards tapping the rural market for data, the new technology of Wi-MAX plays a major contributor. KTPL provides ready to offer solutions to meet the vast requirements in terms of Wi-MAX Antennas and GPS Systems. There is a significant Telecom Equipment manufacturing base in the India and there has been a steady growth of the manufacturing sector during the past few years. The figures for production and export of Telecom Equipment are shown in the Table given below (Rs. In Crs) Year Production Export Exports to Production (%) Source : DOT

8 FINANCIAL PERFORMANCE - FY 2012 (Rs. in Crores) Particulars Q4 FY 2012 Q4 FY 2012 Full year FY 2013 (Expected) Full Year FY2012 Full Year FY2011 Y-O-Y Growth (2012 0n 2011) (%) Standalone Consolidated Total Income EBITDA PAT Equity Share Capital Reserves Networth EPS(Rs./Share) EBITDA Margin(%) 7% 14% 14% 15% 14% PAT Margin (%) 8% 10% 10% 11% 13% Y-O-Y Growth Total Income 47% EBIDTA 57% PAT 25% Net Worth 65 % EPS 12 % Return On Equity % Return On Capital 19.83% Employed The revenues have grown, 47% in FY12 standing at Rs.454 crs. vis-à-vis Rs.308 crs. last year whereas profits have grown, 25% standing at Rs.48 crs. vis-à-vis Rs.39 crs. last year. Consistent financial performance; achieved CAGR(FY 06-12) of 53% in Revenue, 66% in EBITDA & 62% in PAT. Strong growth from structural telecom growth, favorable policies, broad product portfolio for a diverse clientele, and contract manufacturing for global OEMs. Contribution of New Acquisition RYMSA for only 5 months 8.66% (Turned profitable after 11 years within 5 months post acquisition) The company has low-cost manufacturing, R&D driven products and strong partnerships: KTPL s sustainable competitive advantages. IBS KTIL the largest IBS player in India with plans to treble the space under coverage Karnataka Kavveri Telecom Bank Ltd. Products Ltd NVS Brokerage Pvt. Ltd.

9 Robust Fund Raising & Expanding the Balance Sheet In September, 2011; the company raised around 39 Crores through QIP route at Rs. 135/Share for expanding the capital base and to take more leverage on the Balance Sheet. To expand the capital base further, 15,80,000 share warrants have been issued to the Promoters in May Rs. 170/share increasing their stake in the company, thereby highlighting the confidence the Promoters possess in the company. Earlier in February, 2011 KTPL s promoters were allotted 40 Lakhs Equity Shares of Face value Rs. 10 on Preferential basis, along with 10 Lakh warrants convertible into equity shares, both at Rs. 113 each. In the same month, KTPL had also allotted 20 Lakh warrants convertible into equity shares, to strategic investors / non promoters; at a price of Rs. 113 each. KTPL - Capital Structure Rs. In Crs. Particulars Equity Reserves Equity & Reserves as on 31/03/ Preferential Amount on Feb 2011, 40 lacs Equity Shares of Rs 10 each at Rs. 113 / share 4 41 Addition to Reserves through Profits for FY 2011 (net of dividend) 37 Equity & Reserves as on QIP Placement in September 2011, Equity Shares of Rs. 10 each at Rs. 135/share 3 37 Addition to Reserves through Profits for FY 2012 (net of dividend) 40 Conversion of 30 Lakhs warrants issued in February Rs. 113 each 3 31 Equity & Reserves as on Conversion of 15.8 Lakhs warrants issued in May Rs. 170 each 2 25 Addition to Reserves through Profits for FY 2013 (net of dividend)* 57 Equity & Reserves as on * FY 2013 Profits assuemed at around Rs. 65 Crores and the dividend payout assumed 40% (Same as FY 2012) As we can see, the Net Worth of KTPL, through consistent capital raising exercises by Promoters as well as through other routes, has almost quadrupled in just 3 years. The net worth which was Rs. 109 Crores as on 31st March, 2010, has poised to become Rs. 388 Crores by the end of FY With the net worth rocketing, the company has built additional appetite to raise debt to fund any more acquisitions keeping the debt equity ratio at a comfortable level. The total debt stands at Rs. 123 Crores as on today, when compared to present net worth of Rs. 305 Crores, translates into a comfortable debt equity ratio of 0.36:

10 VALUATION & RECOMMENDATION KTPL is a leading Telecom products manufacturer, providing world-class, hardware products and solutions for telecom, space and defense applications. KTPL continues to enhance its leadership position in Indian market by providing inbuilding solution infrastructure to the cellular operators as a Neutral Host Provider under build, own, operate and lease model over a longer 10 year terms. KTPL s R&D continues to thrive to build new products and processes for all wireless technologies with the new RF products being launched into global markets and thus providing a key source of future revenues. We believe KTPL s North American operations continue to grow through increased revenues of the existing businesses and the strategic acquisition of new companies while making India as a global hub of manufacturing for all wireless telecom companies abroad. In September, 2011; the company raised around 39 Crores through QIP route at Rs. 135/Share for expanding the capital base and to take more leverage on the Balance Sheet. To expand the capital base further, 15,80,000 share warrants have been issued to the Promoters in May Rs. 170/share increasing their stake in the company, thereby highlighting the confidence the Promoters possess in the company. KTPL announced stellar results for the FY , with Total Income growing by 47% to Rs. 454 Crores (FY 11 - Rs. 309 Crs), PAT growing by 25% to Rs. 48 Crores (FY 11 - Rs. 39 Crs). The Board has recommended Dividend of Rs.4/Share for FY12 (40% as compared to 15% last year). For the last 6 years the company has been able to achieve 53% CAGR on Sales and 60% CAGR on Profit After Tax. Such a impressive growth has been on account of Organic as well as Inorganic Opportunities such as higher number of Client Agreements in this FY and the Acquisition of various global Telecom companies which has auger well for KTPL to establish a Global Footprint. KTPL s forward P/E for FY 2013 of 6.6x is significantly lower than the Industry P/E of 11.9 as well as BSE 100 P/E of 16.87, BSE 500 P/E of and Sensex P/E of making it a highly undervalued and attractive investment opportunity. P/E P/Bv Kavveri Sensex BSE BSE We believe, KTPL, trading at a less than 7 Price Earnings, is currently available at very attractive valuation. We strongly recommend all the individuals, HNIs and Institutional Investors to add KTPL to their investment Portfolio with a one year target price of Rs. 300/share.

11 NVS BROKERAGE PRIVATE LIMITED Registered Office: 1 &1-A, 3rd Floor, Birla Mansion, 134,Nagindas Master Road, Fort, Mumbai Corporate Office: 702/703, Embassy Centre, Nariman Point, Mumbai EQUITY RESEARCH DESK Boardline : Mr. Nalin Shah Tel : / 09 / 10 Mr. Jesal Shah Mr. Omkar Bibikar Fax : / Mr. Tejas Parekh research@nvsbrokerage.com Mr. Percy Wadia Web : EQUITY DEALING DESK Mr. Nalin Shah Mr. Jesal Shah Ms. Krishna Jagad Disclaimer: This document has been prepared by the Research Desk of M/s NVS Brokerage Pvt. Ltd. and is meant for use of the recipient only and is not for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to support any security. The information contained herein is obtained and collated from sources believed reliable and we do not represent it as accurate or complete and it should not be relied upon as such. The opinion expressed or estimates made are as per the best judgment as applicable at that point of time and are subject to change without any notice. NVS Brokerage Pvt. Ltd. along with its associated companies/ officers/ employees may or may not, have positions in, or support and sell securities referred to herein.