Tulip IT Services: blooming networks

Updated: Dec 29 2007, 06:20am hrs
It is in time of rapid expansion that network service providers gain investor attention, when markets stabilise, they are treated as commodity businesses involved in data carriage. Tulip IT Services is poised to grow in this area as connecting India and its organisations will see a sustained 17% compounded growth in the next four years to eventually be a Rs2,800 crore industry. Tulip is clearly one of the leading players in the network integration business, which contributes around 63% of its revenues. It is also aiming to get a strong hold on the IP VPN business. Here, IP VPN as a technology has advantages as installation charges of Rs 75,000 and recurring charges of Rs 75,000 compare well with other alternatives like VSAT networks and leased lines.

RBI guidelines specify that for online banking and e-commerce based services, banks and financial institutions must avoid any direct connection between internet and their core system. Analysts add that the best option available to them is of placing their core network on IP VPN. Apart from the banking sector, other IT spenders like the BPO industry are also expected to be adapters. The government, through its various e-governance initiatives, is also a big customer. The company has already won two key mandates and is bidding for more.

The management at Tulip see the corporate network and data services to grow and dominate the revenue share from the 37% share. It would then improve overall operating margins from the current 15% levels as operating margins in the corporate business is around 45% margins. However, these margins are expected to go down as there are other bigwigs like Reliance Com, Sify and Bharti Airtel, compete hard in this segment. This could have the company scale down its margins.

Contributed by Akash Joshi