Re-iterate Buy on Tulip Telecom - Motilal Oswal

Tulip Telecom: Acquires data center for Rs2.3b; re-iterate Buy

Tulip Telecom has acquired Bengaluru based data center (900,000 sq ft) from SADA IT Parks Private Limited for Rs2.3b.

This will be operated through a wholly owned subsidiary which will be India's largest and world's third largest single site data center.

Tulip already has four operational data centers ; and the company plans to transfer existing data centers to the wholly owned subsidiary.

Data center is a high margin (but capital intensive) business and will be synergistic to Tulip's data connectivity offering.

While Motilal Oswal has incorporated the investment of Rs 2.3b and the associated finance cost, we have not modelled any revenue/earnings from data center operations, resulting in a downgrade of 2-3% in earnings. Our DCF remains unchanged as we value this investment at book value. Our revised FY12 EPS is Rs25.9 (Rs 26.8 earlier) and FY13 EPS of Rs27.5 (Rs 28.5 earlier). We reiterate buy with DCF based price target of Rs250.

Source : Equity Bulls

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