Stock of this PSU telecom equipment firm has doubled in four months

Shares of ITI hit a record high of Rs 378 on rallying 20 per cent on the BSE in Tuesday's intra-day trade amid heavy volumes

Shares of ITI rallied 20 per cent on BSE to a record high of Rs 378 in Tuesday’s intra-day trade amid heavy volumes.

In the past four months, the stock price of the state-owned telecom equipments and accessories company has zoomed 100 per cent; while in the past one year, it has skyrocketed nearly 250 per cent.

At 02:50 PM; the stock was quoting 16 per cent higher at Rs 366.60 as compared to a 0.20 per cent decline in the S&P BSE Sensex.

The average trading volumes on the counter jumped over eight-fold today. A combined 41.12 million equity shares, representing 41 per cent of total free-float equity of ITI, changed hands on the NSE and BSE.

As on December 31, 2023, the promoters held 90.28 per cent stake in ITI. While the remaining 9.72 per cent or 93.35 million equity shares held by Special National Investment Fund (7.61 per cent), individual shareholders (1.87 per cent) and others.

ITI is involved in manufacturing telecom equipment and providing solutions to telecom service providers, the Ministry of Defence and other Government agencies.

The company’s product portfolio includes GSM & CDMA products, defence products and other diversified products.

ITI’s service portfolio includes managed leased-line networks, standalone signalling transfer-point networks, turnkey telecommunication solutions, data centres, etc.

ITI has won key projects like BharatNet Phase-II, ASCON Phase IV Project of the Ministry of Defence, supplying smart energy meters, network for spectrum, etc.

ITI also has a preferred supplier status among its key customers. It has also bagged a Purchase Order (PO) from BSNL worth Rs 2421.49 crore for its 4G rollout.

The revenue visibility remained healthy with a strong order book of over Rs 11,460.14 crore as of June 2023.

In December 2023, the rating agencies ICRA, Brickwork Ratings and Acuite Ratings and Research downgraded the ratings for the bank facilities of ITI.

The downgrade reflects ITI’s delays in debt servicing (principal) in respect of a term loan facility of Rs 120 crore availed by the company from Canara Bank.

The delay is stated to be on account of the delay in project receivables realisation (ASCON Project) and strained liquidity. The company is expecting net project realizations to the tune of Rs 540 crore by March 2024.

The rating agencies said the downgrade takes into consideration delays in debt servicing in the recent past on one of its working capital loan facilities for the months of October 2023 and November 2023, owing to poor liquidity position on account of delays in recoveries from its clients, particularly for one big order.

The said order witnessed delays in execution as well which resulted in moderation in operating income as well as margins in FY23.

However, ITI is expecting realization from the said project very shortly and this will be used to pay off the current outstandings, albeit with a delay, as per ICRA. 

Going forward, timely completion of the projects and timely collection of the receivables and regularisation of the debt servicing will remain key monitorable, ICRA said.

ITI reported a net loss of Rs 228.4 crore for H1FY24 due to lower booking of revenue and increased operating costs.

While recovery is expected in second half with improved order executions and billing, ITI’s ability to control its fixed overheads and improve the collection of pending receivables etc will be critical to improve its financial profile, ICRA adds.

The company’s operations are working capital intensive and due to the lumpy nature of the order inflows and execution of bulk tender contracts, the revenue bookings and earnings are volatile, it said.