1. October 16, 2012
Tulip Telecom Ltd.
Buy This Satyam On The Way Down
• Get a call option on it’s assets
Rohan J. Admane
rohan@keynoteindia.net
Keynote Capitals Research is also available on
Bloomberg KNTE <GO>, Thomson One Analytics, Reuters Knowledge, Capital IQ,
Keynote Capitals Institutional Research –awarded “India’s Best IPO Analyst 2009” by MCX-Zee Business

2.
Tulip Telecom Ltd. October 16, 2012
Key Stock Data Falling share price of Tulip Telecom hides its business strengths
Telecom -
Sector Service and positive long term outlook
CMP `37.55
52wk High/Low 160 / 34
Market Cap `Cr 544 Our Line of thought
6m Avg. daily vol 15,06,966
BSE Sensex 18,793 Current stock price performance is not relevant to Tulip’s
BSE Code 532691
NSE Code TULIP strong business position and robust outlook
Face Value `2
FCCB worries and pledged shares sold by lenders recently
Shareholding pattern
th
(30 June, 2012)
weighed on the stock price
Public Institutio
4% ns
Foreign 1%
15%
Corporat However, strong asset base makes a compelling case of
e
10%
Promote company’s long term survival
r
70%
Brave investors will get outstanding returns as the company
Price Performance %
rolls over or gets acquired from the company with similar
1 Month 3 Months 6 Months 1 Year
-43.36 -68.00 -60.54 -74.99
business models or comes up with money in the last minute
Stock Price Performance
140%
Investors should buy deep value
120%
100%
80%
60% Tulip
Sensex
40%
20%
0%
Oct-11
Apr-12
Oct-12
Nov-11
Dec-11
Aug-12
Sep-12
Jan-12
Jun-12
Jul-12
Feb-12
Mar-12
May-12
2 Keynote Capitals Ltd.

3.
Company Background
Tulip Telecom is India’s largest MPLS VPN player and provides complete
Largest MPLS VPN player,
provides complete
infrastructural IT solutions to mission critical industries. The company is a data
infrastructural IT solutions telecom service and IT solutions provider that offers innovative IP based
infrastructural solutions. It is a front-runner in provisioning and managing multi
location wide area networks for various industry verticals.
Tulip Telecom has fiber optic network across all Metros and wide range of wireless
Fiber optic network across
presence all across India. The company has established itself as one of the
all metros, data network has
the reach of over 2000 strongest data connectivity players in the industry. It is India’s leading Enterprise
locations in India Communications Service provider. The Company’s data network has the largest
reach of over 2,000 locations in India and partnerships to reach every part of the
world.
Designs, implements and
manages communication Tulip designs, implements and manages communication networks of large
networks of large
enterprises on long term contracts to include enterprise communications
enterprises on long term
contracts
connectivity, network integration, managed and value added services.
Robust sales growth and strong operating margins
2500 30.0%
2000 25.0%
20.0%
1500
15.0%
1000
10.0%
500 5.0%
0 0.0%
FY07 FY08 FY09 FY10 FY11
Sales Profit OPM
High Debt to Equity is a risk
2.50 45.0%
40.0%
2.00 35.0%
30.0%
High financial leverage but 1.50
stable ROE 25.0%
20.0%
1.00
15.0%
0.50 10.0%
5.0%
0.00 0.0%
FY07 FY08 FY09 FY10 FY11
Debt to Equity ROE
3 Keynote Capitals Ltd.

4.
FCCB defaults twice but strong asset base makes a compelling case
However, Tulip's thirst for inorganic growth created capex burden and heavy asset
The company defaulted business model, which also led to huge debt burden on the company. The company's
FCCB repayment twice, in
debt to equity rose from 0.5x in FY07 to 1.47x in FY11. The average cost of debt is
August and September 2012
10.3% per annum. Tulip's debt also includes FCCB payment of Rs 728 Cr. The
company defaulted redemption of FCCB twice on August 27 and September 10, 2012
due to short fall of funds. According to Fitch, the company could manage arranging $72
million by way of rupee debt against $140 million redemption amount.
FCCB Issue details
Total FCCB obligation of Rs The company had issued US$ 150 million zero coupon convertible bonds in
728 cr June 2007 (“Bonds”), which were due for redemption on 26 August 2012
(“Maturity Date”).
Issued Rupee value at the Rupee Current Current 3 year
Particulars Issued Maturity date
date time of issued value Mn 1USD maturity CAGR
26th August
FCCB $150Mn 2007-08 40 6000 52 7800 7%
2012
Current outstanding positions of FCCBs
The Company had bought back a portion of the Bonds during 2009; and as
on 26th August 2012, the aggregate principle amount of Bonds outstanding is
US$ 97 million, which represents a redemption obligation of US$ 140.1708
million (prior to withholding tax).
Rupee
Rupee Current
Bought Issued Maturity value at Current 3 year
Particulars Redemptions value maturity
back date date time of 1USD CAGR
Mn amount
issued
26th
Outstanding 2007-
$52.99Mn $140Mn August 40 5600 52 7280 7%
FCCBs 08
2012
Company’s performance for the year FY08 to FY11 Rs Cr
Particulars FY08 FY11 3 year CAGR
Revenue 1219 2351 24%
EBITDA 269 663 35%
PAT 187 306 18%
Operating cash flow 147 350 34%
Total Debt 894 1777 26%
Cash position 6.38 214 223%
FCCB payment rescheduled and company’s repayment strategy
The company has commitments of $50million in a fresh FCCBs and funds from bank
sanctions and internal accruals of $72Mn, a total of $122Mn. It plans to raise the balance
$18mn in a timely manner to pay the FCCBs within the time extension sought from
investors. The company asked extension of time till September 10, 2012. However, no
further development was recorded by the company on the stock exchanges till date.
4 Keynote Capitals Ltd.

5.
Statement by Tulip Management on 27th August 2012 (Defaulted payment on 26th
August 2012)
While the Company has partial resources towards the redemption, it is awaiting sanction
Management is confident
that it will arrange the and disbursements from some of the lenders to raise the balance amount, besides the
necessary amount to pay funds from the issuance of new FCCBs of approximately US$50 million. The Company
FCCB endeavors to complete this process at the earliest and expects that the same may be
completed by 10th September 2012. The Company has a firm intent to honour its
obligations to the bondholders at the earliest.
Statement by Tulip Management on 10th September 2012
Over last few weeks, the Company has made significant progress in its fund raising
exercise through various instruments and internal accruals. The Company is making all
reasonable endeavours to meet its full redemption obligation. The Company will keep
stakeholders updated on further progress on this front. The Company's underlying
business performance remains robust and it remains fully committed to meet its
outstanding obligations in full.
However, the company’s strong asset base makes a compelling case for the investors.
As per FY11 annual report, the company’s asset base was
The company has strong • Net Block – Rs 1450 cr
asset base • Building – Rs 106 cr
• Land – Rs 2.8 cr
• Equipment – Rs 1689 cr
• Inventory – Rs 99 cr
• Cash and Bank Balance – Rs 249 cr (Unlike Satyam Computer, it does exist )
Recently, Tulip acquired a Data Centre of around 9mn sqft in Bangalore for Rs 230 cr,
this increased the total area covered by Data Centre to 10mn sqft. The company has five
data centres viz., one in New Delhi, two in Mumbai and two in Bangalore. All these
assets have not reflected in the company’s current market valuation of Rs 619 cr.
Lenders are selling stocks is a major blow for company’s share price
Lenders of pledged shares
of promoters sold almost Tulip faced severe damage in its stock price performance after few of its lenders are
4.4mn shares during first consistently selling the pledged shares of promoters in the open markets. Few of the
ten days of October lenders such as ECL Finance and Religare Finvest sold 43.70 lakh shares during last 8
days. However, during the period the shares in the company were bought by an Escrow
account from JP Morgan.
Lenders / Investors Date No. of shares Share Price Transaction
ECL Finance 01-Oct-12 1363794 46.34 Sell
Religare Finvest 01-Oct-12 877238 44.72 Sell
JPMSL A/c Copthall Mauritius Investment 01-Oct-12 809812 45.9 Buy
Religare Finvest 04-Oct-12 1308732 41.23 Sell
ECL Finance 08-Oct-12 821000 43.82 Sell
Best case for acquisition if management doesn't able to manage funds
Lucrative asset base allows
Tulip to raise more funds Tulip’s ability and resources to tackle the legal cases are limited in case of default of
FCCB again. The management is also unable to stop lenders from selling the pledged
shares in the open market.
5 Keynote Capitals Ltd.

6.
Case I:
Asset base is so much lucrative enough that borrowing will be possible
Case II:
Hammering kills capitalization but assets attract buyer
Building on Case II
Tulip Telecom’s market capitalization is only 19% of its total asset valuation against an
average of 64%.
Total Assets Market Cap % of
Price P/B P/S Mkt Cap ($bn) Employees
($bn) Total Assets
Cisco Systems, Inc. 18.90 1.95 2.17 100.22 66,639 91.76 109%
Alcatel Lucent SA 1.01 0.47 0.12 2.29 76,002 31.19 7%
Juniper Networks 16.61 1.24 1.97 8.75 9,129 10.04 87%
Polycom Inc 10.32 1.22 1.12 1.82 3,839 1.90 96%
Tulip Telecom 41.00 0.39 0.27 0.12 5,000 0.63 19%
Deals in this space
Tulip Telecom building the world's third largest data centre
Tulip had acquired a data center facility in Bangaluru by purchasing 100 per cent shares
of SADA IT Parks Private Ltd for Rs 230 cr in January 2011. The company chose IT
major IBM and data centre consultant Schnabel to establish a data centre in Bengaluru,
which the company said was to be India's largest and the world's third largest data
centre. The data centre was spread across 9 lakh square feet. It would be built with an
approximate investment of Rs 900 cr, spread over three years.
The company expected data centre will have a revenue generation potential of Rs 1000
cr when it reaches its peak capacity in the next three years.
Cisco Acquisitions
Acquisition of vCider
On October 4, 2012 Cisco acquired of vCider, headquartered in Mountain View,
California. vCider has expertise in the development of virtual network overlay technology
for secure data center infrastructure virtualization. vCider will be integrated into Cisco's
Cloud Computing organization, reporting to Lew Tucker, chief technology officer, Cloud
Computing, and will play an important role in the Cisco Open Network Environment
(ONE) strategy, particularly in support of OpenStack.
Acquisition of Virtuata
On July 13, 2012 Cisco completed the acquisition of Virtuata. Virtuata provides
innovative capabilities for securing virtual machine level information in data centers and
cloud environments.
6 Keynote Capitals Ltd.

7.
Zayo acquired AboveNet
Zayo, a provider of fiber-based bandwidth services, acquired AboveNet for a whopping
$2.2bn in March 2012. AboveNet, which was also in the business of providing bandwidth
services, operates a fiber network of about 13,000 in mostly metropolitan areas. This
business will then be combined with Zayo’s 45,000-route-mile network that covers 42
states. Both companies primarily provide service to enterprise-level customers, carriers,
and governments.
Equinix Sells Off 16 Data Centers to 365 Main
Equinix, Inc, a provider of global data center services, announced plans to sell 16
International Business Exchange™ (IBX®) data centers located throughout the United
States to an investment group consisting of 365 Main, Crosslink Capital and Housatonic
Partners in a transaction valued at approximately $75 mn. After the close of the
transaction, 365 Main will own and manage the 16 data centers, led by industry veterans
Chris Dolan, CEO, and Jamie McGrath, COO. The transaction is expected to close in Q4
2012, subject to customary closing conditions.
Conclusion
Risky bet for 50-70% return with 6-9 months as stock recovers
7 Keynote Capitals Ltd.

8.
KEYNOTE CAPITALS LTD.
Member
Stock Exchange, Mumbai (INB 010930556)
National Stock Exchange of India Ltd. (INB 230930539)
Over the Counter Exchange of India Ltd. (INB 200930535)
Central Depository Services Ltd. (IN-DP-CDSL-152-2001)
The Ruby, 9th Floor
Senapati Bapat Marg
Dadar (W), Mumbai – 400 028.
T: +91-22-30266000, F: +91-22-30266088
www.keynotecapitals.com
DISCLAIMER
• This report has been prepared and issued by Keynote Capitals Limited, based solely on public information and sources
believed to be reliable.
• Neither the information nor any opinion expressed herein, constitutes an offer, or an invitation to make an offer, to buy or
sell any securities or any options, futures or other derivatives related to such securities and also for the purpose of trading
activities.
• Keynote Capitals Limited makes no guarantee, representation or warranty, express or implied and accepts no
responsibility or liability as to the accuracy or completeness or correctness of the information in this report.
• Keynote Capitals and its affiliates and their respective officers, directors and employees may hold positions in any
securities mentioned in this Report (or in any related investment) and may from time to time add to or dispose of any
securities or investments.
• Keynote Capitals may also have proprietary trading positions in securities covered in this report or in related instruments.
• An affiliate of Keynote Capitals Limited may also perform or seek to perform broking, investment banking and other
banking services for the company under coverage.
• If ‘Buy’, ‘Sell’, or ‘Hold’ recommendation is made in this Report, such recommendation or view or opinion expressed on
investments in this Report is not intended to constitute investment advice and should not be intended or treated as a
substitute for necessary review or validation or any professional advice. The views expressed in this Report are those of
the analyst which are subject to change and do not represent to be an authority on the subject. Keynote Capitals may or
may not subscribe to any and/ or all the views expressed herein.
• The opinions presented herein are liable to change without any notice.
• Though due care has been taken in the preparation of this report, Keynote Capitals limited or any of its directors, officers
or employees shall be in any way be responsible for any loss arising from the use thereof.
• Investors are advised to apply their judgment before acting on the contents of this report.
• This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Keynote
Capitals
8 Keynote Capitals Ltd.