Alert

This stock has limited liquidity and little trading activity in the market. Both in the public domain and online, information on the company is scant. Furthermore, there is no realistic method of physically verifying the company’s operations. Despite these constraints, we are presenting this firm because of its remarkable financial performance.

The stock is only available on the BSE India and is part of the X group, which means that it cannot be purchased on margin. Investors must obtain physical delivery of the stock. As a result, if you’re thinking about investing in this stock, proceed with care. We are personally unsure about investing in this stock due to its high risk. Before making any financial decisions, it is critical to fully understand and appreciate the related risks.

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Elnet Technologies Ltd

Current Market price on the date of publishing this report-: 270 Rs

Introduction

Incorporated in August 1990, Lnet Technologies Limited (ETL) emerged as a Public Limited Company, with backing from Electronics Corporation of Tamil Nadu and Stur Technologies Pvt Ltd (previously known as New Era Technologies Private Limited) and its affiliated entities. ETL’s primary expertise lies in the creation and administration of Software Technology Parks, a pioneering concept introduced in India. In 1996, ETL, through a joint venture (JV) involving Stur Technologies Pvt Ltd and Electronics Corporation of Tamil Nadu Ltd (ELCOT), established one of Chennai’s earliest IT parks.

Heading ETL is Ms. Unnamalai Thiagarajan (Managing Director), who boasts over two decades of experience in real estate and construction. She spearheads the company’s day-to-day operations. ELCOT, a wholly-owned entity under the Government of Tamil Nadu, is dedicated to fostering, establishing, and managing State Public Sector Enterprises for electronics. ELCOT also extends its support to any endeavor aimed at the advancement and growth of the electronics domain.

ELNET received the coveted ISO 9001-2000 accreditation on January 24, 2007. In addition, on December 7, 2009, the firm passed a re-certification assessment conducted by the prestigious accrediting agency TUV. ELNET obtained ISO 9001:2008 certification after demonstrating a successful audit conclusion.

The proprietors of ETL have a lot of expertise, having successfully established and run another IT Park in Chennai, IG3 Infra Limited, with a leasable space of around 34 lsf.

Business IT Park

Elnet Software City occupies a 3.16-acre parcel of land in the vibrant Taramani district, adjacent to TIDEL PARK along the bustling IT corridor. This complex boasts a super built-up area of 200,000 sq.ft., encompassing a lettable space of 170,000 sq.ft.

With its close proximity to the city center, well-constructed office buildings of superior quality, well-developed social infrastructure, and adjacency to key residential areas, this region has emerged as a magnet for major IT/ITES players. The IT Park benefits from excellent connectivity via roadways, suburban railway systems, and convenient access to the airport.

Strategically situated within Taramani, Old Mahabalipuram Road (OMR), the IT Park enjoys a highly advantageous location, serving as a thriving hub for IT/ITES enterprises in Chennai. This locale stands out as the preferred choice for offices within the IT/ITES sector, drawing a concentration of notable corporations such as TCS, CTS, Accenture, Wipro, HCL, and more.

Employing approximately 2500 professionals, the complex significantly contributes to the state’s software export efforts. Among its distinguished occupants, Logitech Engineering & Designs India Pvt. Ltd. is a prominent presence within the complex.

The company ensures uninterrupted operations with a 100% diesel generator backup, a robust 900 TR split packaged air conditioning system, and a parallel redundant setup of 12 x 120 KVA uninterrupted power supply systems, all serving as vital components of the additional infrastructure available to tenant companies. To facilitate seamless data transfer, the complex is equipped with a point-to-point microwave link connecting it to prominent entities such as TATA VSNL, STPI, Reliance, Airtel, and BSNL earth station. Looking ahead, the company envisions expansion, with plans to establish essential infrastructure for BPO operations, thereby playing a pivotal role in boosting exports and fostering growth.

ETL has established lease agreements with diverse tenants, encompassing contract periods primarily spanning 3 to 5 years. These agreements feature lock-in periods ranging from 1 to 5 years, followed by a provision enabling tenants to terminate the lease with 6 months’ notice, free of charges. The presence of lock-in periods within the lease arrangements fosters stability in occupancy rates and attracts clientele seeking extended leasing commitments. Currently, the occupancy rate stands at an impressive 100%, accommodating a diverse array of clients engaged in software development, data processing, and related fields.

Clients

• AGS Health India Pvt. Ltd
• Allsight Software India Pvt. Ltd.
• AXISCADES Engineering Technologies Limited
• Banca Sella SPA – Chennai Branch
• Coastal Training Technologies – India Pvt. Ltd
• Crayon Data ( India) Pvt. Ltd
• Pearson India Education Service Private Limited
• Quest Global Engineering Pvt. Ltd.,
• eNoah iSolution India Pvt. Ltd.,
• Enzen Technologies Pvt. Ltd
• Fifth Generation Technologies India (P) Ltd.
• Island Pacific Retail Systems Pvt. Ltd
• Information Dynamics India Pvt Ltd
• Infotrellis India Pvt Ltd
• Inlogic Technologies Pvt Ltd
• Logitech Engineering & Designs India Pvt Ltd
• Pradot Technologies Private Limited.
• VP Petro6 Engineers and Consultants Pvt Ltd

Financials

For Q4 FY 23

Net Sales demonstrated a growth of 14.33%, reaching Rs. 6.46 crore in March 2023, compared to Rs. 5.65 crore in March 2022.

For the same period, Quarterly Net Profit exhibited an increase of 9.84%, achieving Rs. 2.79 crore in March 2023, up from Rs. 2.54 crore in March 2022.

EBITDA showed a marginal rise of 2.07%, reaching Rs. 3.46 crore in March 2023, in contrast to Rs. 3.39 crore in March 2022.

For the year ended March 23

Net Sales achieved Rs 25 crore in 2023, marking an increase of 13.64% from Rs 22 crore in 2022.

Net Profit recorded Rs 14 crore in March 2023, reflecting a rise of 7.69% from Rs 13 crore in March 2022.

EBITDA amounted to Rs 16 crore in March 2023, showcasing a growth of 0.00% from Rs 16 crore in March 2022.

It’s worth noting that the company is entirely debt-free.

As of March 2023, the company holds cash and equivalents totaling around 35 crores. Considering its market capitalization of 100 crores, this signifies a substantial 35% cash balance.

When considering the total number of shares, the cash balance translates to approximately 87.5 Rs per share.

The company has consistently maintained a Return on Capital Employed (ROCE) of around 16% over the past several years.

Given the notable recent increase in the stock’s price and the broader market’s positive trend, it’s prudent to exercise caution, as the company might not be able to sustain such exceptional returns over the upcoming period.

Management’s comments

Given the relatively modest size of the company, the management typically refrains from offering guidance, comments, or extensive information, especially in the early stages of its development. This approach is observed until the company attains a certain level of maturity. As a result, there is currently no specific information available to include in this context.

Sectoral Overview

As the company is presently engaged solely in the operation and maintenance of an IT park, with no further details provided, discussing a sectoral outlook would be of limited relevance. The company’s operations are relatively modest, encompassing aspects of the BPO segment. However, it is advisable to avoid excessive embellishment of the sector’s significance, as this could inadvertently magnify the company’s standing. With this in mind, we have chosen to abstain from elaborating further on this matter.

Conclusion

Elnet Technologies, a completely debt-free and financially robust company established in August 1990, possesses a modest share capital. The company specializes in pioneering Software Technology Parks, an innovative concept that originated in India. Over a span of 3 and 5 years, while the increase in the company’s sales remains moderate, its net profit has seen noteworthy growth. It’s noteworthy that ETL appears to exhibit a high level of illiquidity, primarily due to a significant concentration of shares held by its promoters. However, with a substantial net cash balance of 35 crores against a market capitalization of 100 crores and no outstanding debt, the company’s financials evoke curiosity. Looking ahead, the company’s trajectory could take divergent paths. The pursuit of fresh opportunities or expansion initiatives might position it favourably, but the absence of such moves could potentially lead to stagnant or even negative returns. As the current market attains all-time highs, we advise cautious consideration when contemplating an investment in the company.