Mahaveer Infoway Ltd BSE Scrip Code:

Mahaveer Infoway Ltd BSE Scrip Code: 590117 IT Consulting & Software October 18, 2012 Equity Statistics Current Market Price Rs. 7.19 52 Week High/Low Rs. 21.15/7.10 Market Capitalisation Rs. Crores 3.96 Free Float Rs. Crores 2.3 Dividend Yield % 6.95 One Year Regression Beta Times 0.52 BSE Volumes Trend - Average = 46.74 Thousand 400 300 200 100 0 Company Summary Mahaveer Infoway Ltd. (Mahaveer) is into Information Technology, Telecom Products and Education Services. It has facilities at Bangalore and Hubli, along with the Head office at Hyderabad. The company is in existence since 1991 and has strategic partnerships with various companies like Cenzic, IBM, Samsung, PTC, etc. In FY12, Mahaveer reported net sales of Rs.28.1 crore and net profit of Rs.0.2 crore. Mahaveer offers services to the customers in a range of industries, including insurance, banking and financial services, manufacturing, telecommunications, transportation, and engineering services. In space of Education, Mahaveer has been partnering with the Karnataka State Open University and Andhra Government to offer distance education in IT and Telecom programmes to students across India. Mahaveer is currently trading at about 17.5 times FY12 EPS and 0.6 times the adjusted book value. 137 Relative Returns 87 37 Mahaveer Infoway Ltd Sensex Returns 1M 3M 6M 1 Yr Absolute -15% -33% -52% -63% Rel. to Sensex -15% -38% -56% -66% Shareholding Pattern 100% 80% 60% 40% 20% 0% Sep `11 Dec `11 Mar `12 Jun `12 Promoter DII FII Others Board of Directors Person Ashok Kumar Jain Vinit Maharia Vijay Jain Jitendra Bhansali Ramesh Prasanna Dixit Rajendra Kumar Jain Budhi Prakash Toshniwal Vijay Kumar Taori Hanuman Das Malu Role MD Source: AR and CARE Research Note: MD: Managing Director, : Executive Director 1 Initiative of the BSE Investors Protection Fund

Background Mahaveer was incorporated in May 1991 under the name Mahaveer Leafin and Holding Pvt. Ltd., which was later changed to Mahaveer Leafin and Holdings Ltd. in 1996 and to the current name in January 2000. Mahaveer is promoted by Mr Ashok Kumar Jain, Business Professional with experience in Banking, Finance and Business Management Operations. Mahaveer has been successful in establishing partnerships with companies like leading Product companies such as HP, Samsung and Borland to offer products and services to its customers. In space of IT Products, MIL has been successful in establishing partnerships with IBM, Hewlett Packard, Greytip Software, and Cenzic to boost the Product sales to the customers across India. In space of Telecom, Mahaveer has successfully built a 1,000+ dealer network in the state of Karnataka and Andhra Pradesh to facilitate the distribution of Telecom products and services. It has exclusive agreement and collaboration with Karnataka State Open University (KSOU), from which 500+ students successfully passed out. The company has Two Subsidiaries as on March 31, 2012, Mahaveer Projects Private Limited and Mahaveer Telecom Private Limited. Mahaveer has delivery facilities at three locations at Hyderabad, Bangalore and Hubli. Business overview Mahaveer has its business operations across three Business Verticals viz. Information Technology, Telecom Products and Education Services. Each business vertical is headed by experienced and proven professionals. Strengths and growth drivers Core strength is in existing large distribution network with a Wide Distribution reach in South India. Software for Online Tracking of Sales and Service. Exclusive agreement with Mediatek, Taiwan for Hardware Testing with MSAI (Mobile testing Standards Association of india) for IMEI number allocation and product testing. Partners with HP software, Cenzic, IBM and Microsoft, hence improving credibility in the market. Risk and concerns Price Fluctuation, Dollar inflation & sensitive Telecom markets. Low management bandwidth. Lower Exposure to overseas markets. Government Policies against imported assembled Handsets. Recognition by Private bodies for distance education is not great. Foreign Universities entering Indian Market providing distance education programmes. Future strategy and expansion plans The company plans to reach out to more than 5,000 professionals for coming next year which is at 1000% growth. Industry outlook Indian telecom market has evolved with an unmatchable speed over the last decade. The subscriber growth in the last 5 years averaged more than 50%. At the same time, competition in the sector has gone up. The new players like Uninor, Sistema Shyam, S-Tel, etc, who entered market in 2008, rolled out their services heavily in the last 2-3 years. The biggest concern for telecom sector in the near future arises out of regulatory risks. Though recently, the government has clarified some of the policy measures on M&A, spectrum sharing, licenses fees, etc, there are lots of unanswered questions on spectrum refarming, 3G roaming issue, spectrum trading, tax issues related to international M&A, etc. The world healthcare IT market is expected to grow to USD 162.2 bn in 2015, at a CAGR of 10.2% from 2011 to 2015. The need to cut healthcare costs, enhance clinical/administrative workflow of hospitals, and huge demand for faster, error-free, efficient healthcare delivery, is fueling the healthcare provider IT market worldwide. Furthermore, the initiatives taken by various governments for adoption of healthcare IT systems globally are also a significant driving force. The major initiatives expected to hugely impact the market are the U.S Healthcare reforms. The distance education market in India expected to grow at the rate of approximately 24% during 2011-12 to 2015-16. On the back of technological development, increasing awareness, rising faculty crunch, and increasing penetration of internet in the country, this market is anticipated to reach INR 87 Billion by the end of 2015-16. However, the aim of the government to raise its current GER from approximately 13% to 30% by 2020, that will also boost the growth of the distance education in India. It is expected that soon India will emerge as an e-learning and m-learning hub. Rapid growth of the Internet, innovative technology, and multimedia has enabled the world to succumb and brought the regions to each other. E-learning companies are continuously involved in the development of their products and experiencing high demand of more innovative products. 2 Initiative of the BSE Investors Protection Fund

Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) Mahaveer KLGSL RTL Total income 28.1 42.1 77.9 Net sales 23.4 37.7 61.9 EBITDA (3.9) (29.6) (25.9) Ordinary PAT 0.2 (99.0) (72.9) Adjusted PAT 0.2 (100.7) (70.4) Per share data (Rs.) Adjusted BVPS 11.6 86.7 - Diluted EPS 0.4 - - Growth (Y-o-Y) (%) Growth in total income (1.8) (30.9) (17.6) Growth in net sales (1.6) (62.0) (33.8) Growth in EBITDA NM NM NM Growth in adjusted PAT (24.1) NM NM Growth in EPS* (24.1) NM NM Profitability ratio (%) EBITDA margin NM NM NM Adjusted PAT margin 0.8 NM NM Valuation ratios (Times) Price/EPS (P/E) 17.5 NM NM Price/Book value (P/BV) 0.6 0.2 NM Enterprise value (EV)/EBITDA NM NM NM Note: KLGSL: KLG Systel Ltd., RTL: Religare Technologies Ltd. Quarterly financials Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 9.8 6.7 7.9 10.7 8.0 Net sales 9.8 5.8 7.9 10.7 7.2 EBITDA 0.3 (0.7) 0.1 0.3 (0.6) Ordinary PAT 0.1 0.0 0.1 0.2 0.1 Adjusted PAT 0.1 0.0 0.1 0.2 0.1 Growth (Q-o-Q) (%) Growth in net sales 69.9 (27.1) (26.1) 48.5 Profitability ratio (%) EBITDA margin 2.5 NM 1.6 3.1 NM Adjusted PAT margin 0.7 0.4 1.0 2.0 1.7 NM: Non Meaningful; NA: Not Available 3 Initiative of the BSE Investors Protection Fund

Financial analysis In FY12, Mahaveer reported net sales of Rs.23.4 crore with a marginal change from FY11 levels. Total income was also in line with the FY11 income. Majority of the revenue of the company is through the trading of the telecom products. Also, the company in the past five years has not been able to make operating profits except in FY10. Also the PAT margin of the company is also lower due to the trading nature of sales. The company reported adjusted PAT margin of 0.8% in FY12. Also, the leverage of the company increased as on March 31, 2012, as compared with the same period previous year. The total debt as on March 31, 2012, was at Rs.4.7 crore compared with an adjusted networth of Rs.6.4 crore. Mahaveer exhibited a cash conversion cycle of around 75.7 days in FY12. Operating cash flows for the company has been positive though marginal in each of the last five years (i.e. period considered for analysis). The company has paid a dividend of Re.0.25 per share for FY12, resulting in a dividend yield of 6.95% at the current market price of Rs.7.19 per share. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 10.0 12.5 21.4 28.6 28.1 Net sales 9.8 11.9 20.4 23.7 23.4 EBITDA (0.2) (0.3) 0.1 (2.5) (3.9) Depreciation and amortisation 0.1 0.1 0.1 0.1 0.1 EBIT (0.3) (0.4) 0.0 (2.5) (4.0) Interest 0.2 0.1 0.1 0.2 0.5 PBT 0.1 0.1 0.2 1.2 0.3 Ordinary PAT 0.0 0.0 0.1 0.8 0.2 Adjusted PAT 0.0 0.0 0.1 0.3 0.2 Balance sheet (Rs. crore) Adjusted networth 3.1 3.1 5.8 6.3 6.4 Total debt 1.3 1.1 1.1 2.4 4.7 Cash and bank 0.2 0.1 0.3 0.3 0.5 Investments 0.8 0.3 0.7 1.1 2.0 Net fixed assets (incl. CWIP) 0.8 0.8 0.8 0.5 0.7 Net current assets (excl. cash, cash equivalents) 2.5 3.0 5.1 7.0 7.8 Per share data (Rs.) Adjusted BVPS 10.4 10.6 10.6 11.5 11.6 Diluted EPS* 0.1 0.1 0.3 0.5 0.4 DPS - - - - - Growth (Y-o-Y) (%) Growth in total income 24.4 71.5 33.8 (1.8) Growth in net sales 21.3 71.5 16.5 (1.6) Growth in EBITDA NM NM NM NM Growth in adjusted PAT - 250.0 107.1 (24.1) Growth in EPS* - 87.4 107.1 (24.1) Key financial ratio EBITDA margin (%) NM NM 0.4 NM NM Adjusted PAT margin (%) 0.4 0.3 0.7 1.0 0.8 RoCE (%) NM NM NM NM RoE (%) 1.3 3.1 13.5 3.5 Gross debt - equity (times) 0.4 0.3 0.2 0.4 0.7 Net debt - equity (times) 0.4 0.3 0.1 0.3 0.7 Interest coverage (times) NM NM 0.2 NM NM Current ratio (times) 4.1 1.6 3.8 5.0 2.3 Inventory days 15.3 15.5 25.7 54.3 Receivable days 94.8 82.7 62.2 75.7 ; Note: Financial Year (FY) refers to period from April 1 to March 31; NM: Non Meaningful; NA: Not Available 4 Initiative of the BSE Investors Protection Fund

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