Smart Talk
D-Link India posted a 21 per cent increase in its net profit in the fourth quarter of the financial year 2002-03.
Its net profit grew to Rs 7.12 crore as against Rs 5.92 crore in the corresponding quarter the last fiscal.
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This was helped by the company's significant market share in most of the networking products. D-Link's total income has jumped to Rs 61.39 crore in the quarter ended March 31, 2003, from Rs 50.69 crore in the corresponding period of the previous fiscal.
D-Link is the only company to offer both passive and active networking products.
Consolidated figures of the company show that the infotech player has posted a net profit of Rs 22.15 crore for the last fiscal compared with Rs 18.26 crore the year before.
Its total income has increased 16.7 per cent to Rs 192.04 crore from Rs 164.62 crore in the previous year.
Till last year the company was looking at voice over Internet protocol (VoIP), contract manufacturing and software services for growth.
However, these businesses are at present languishing with revenues from software development slumping by 82 per cent in the fourth quarter of 2003.
The capital employed on software development rose by five per cent in the fourth quarter of 2003.
The VoIP business has also not really taken off as expected. Legal issues and restrictions imposed on Internet telephony have hampered its prospects.
The company plans to export its VoIP products to tide over the crisis. D-Link is also looking to make a foray into the call centre business.
The company is expecting orders from the Andhra Pradesh government and the Life Insurance Corporation (LIC) to drive growth.
D-Link is currently negotiating with personal computer manufacturers such as Wipro, Zenith and HCL for supply of motherboards.
The company has recently tied up with the Taiwan-based Gigabyte Technology to promote a joint venture company called Digi Giga Systems. D-Link will hold a majority stake in the joint venture.
Digi Giga Systems will initially commence marketing, distribution and servicing of motherboards to be manufactured at D-Link`s Goa plant under the brand name Gigabyte in India.
Despite this tie-up, the company still has spare manufacturing capacity. To utilise this, the company is evaluating the possibility of a tie-up with other companies to manufacture and distribute their products in India.
Digi Giga Systems will also deal in add-on and peripheral products of Gigabyte. The company's forte lies in providing a wide range of end-to-end networking solutions to corporates.
The company is counting on fast and efficient service along with the wide array and superior nature of their products to drive growth. D-Link India trades at Rs 48 on the BSE at a p/e of around 8x.
K R Naik, chairman and managing director, D-Link (India) talked to The Smart Investor about the newly formed joint venture with the Taiwan-based Gigabyte Technology. Excerpts:
What is the objective of this joint venture with Gigabyte Technology? How will this deal work out?
D-Link already has a relationship with Gigabyte Technology as we launched motherboards last year, and garnered around a 20 per cent market share by the fourth quarter of fiscal 2003. We aim to sell another 40,000 motherboards in the next six months.
The joint venture with Gigabyte is primarily to tap that company's technology in the computer and computer peripherals segment to ensure greater marketshare. We would initially be marketing, distributing and servicing motherboards under the brand name 'Gigabyte' in India.
Moreover, we would be dealing in additional products of Gigabyte such as add-on cards and peripherals under the 'Gigabyte' brand, the usage of which would be licensed to us by them.
The authorised capital of the company will be $1 million, of which Gigabyte Technology will contribute around 10-15 per cent and the balance will come from D-Link India.
A memorandum of understanding was signed with the company recently and the details of the joint venture will be worked out in due course. The initial capital requirement will not be too much. Gigabyte Technology will invest more eventually once we generate good business.
How do you rate your progress so far? What would be the growth-driver in the future?
Overall we are better off than many of our peers. We have come out with good numbers showing both topline and bottomline growth in spite of adverse conditions.
We provide end-to-end networking solutions to corporates with our range starting from the basic starting level to the high end of line networking solutions. The flipside to this is that for every product we have a different competitor.
However, providing end-to-end solutions is also our biggest strength because once a particular product of ours is approved, getting approval for the rest of the solutions package becomes easier.
We have 16 offices throughout the country and our fast and efficient service along with the wide array and superior nature of our products would be the growth drivers for the future.
How has your Internet telephony venture fared?
We have a wide array of products like IP phones, station gateways, residential gateways and broadband modems.
However, the business has not really taken off as expected. Legal issues and restrictions imposed on Internet telephony have not made things easier.
However, it was an opportunity in a way as our products are gaining interest overseas. The superior quality of our internet telephony products makes for a great export opportunity.
What are your future plans and projections?
After the joint venture with Gigabyte, our product arsenal would be fortified further. We are already selling TFT LCD monitors under the brand name Digi-View. Plans for add-on VGA cards and CD-ROM drives are also underway.
We would also be setting up a 50-seat call centre for our parent company soon. It would be more of a trial version for our in-house requirements with the total expenditure coming to around Rs 25-50 lakh. We remain optimistic on our business because of a number of factors.
We expect to sell around 15,000 motherboards for a Life Insurance Corporation project and more orders from the Andhra Government are expected.
India's backwardness in information technology is also an advantage and the government sanctioning Rs 1,500 crore for enhancing IT is another opportunity.
The value-added tax implementation, which involves invoicing, bar-coding and the like, will require widespread computerisation for a linked system, which would benefit us.