Indian Stock Analysis: GTL Infrastructure [NSE: GTLINFRA, BSE: 532775]

     1. Company & Business Strength: 3/10

GTL Infrastructure Limited is a Global Group Enterprise and is India's independent telecom Tower Company. It is a pioneer in the Shared Passive Telecom Infrastructure space in India.

It has headquarters in Navi Mumbai, India, GTL Infra has about 28,000+ towers located across 22 telecom circles in India, which enables telecom service providers to offer 2G, 3G and 4G services across the country.

In the late 1990s, the telecom sector in India was liberalised which led to a boom in the telecom industry. All telecom players benefited from the explosive growth and opportunities which led to growth in GTL too.

 In 2006, GTL Infra became the first company in the shared telecom space to be listed on stock exchanges (BSE & NSE). 

In 2007, the company came out with a rights issue of US$83.86 million.

In 2010, GTL Infra acquired 17,500 towers and 21000 tenants from Aircel. 

In 2010, the telecom industry in India took a serious hit, when the government cancelled 122 telecom licences owing to the 2G license case. GTL Infra too suffered with the cancellation of licences as its customers reduced because of issues faced by Aircel and Maxis and subsequent cancellation of ROFR by Aircel.

Later the company started making a heavy loss and with high debt it had to pledge shares also the banks and financial institutes had to acquire shares for debt restructuring.

GTL Infra is contributing to making the vision of connected India a grand reality, by keeping everyone connected through our state-of-the-art network of mobile towers, thereby enabling the vision of Digital India.

Business Segment:

They have a portfolio of about 28,000 towers located across all the 22 Telecom Circles in India enabling 2G, 3G, 4G and future 5G.

The business model of infrastructure sharing enables the Telecom Operators to convert their capital expenditure to a fixed and predictable operational expenditure, allowing them to divert precious capital towards core activities. 

Their revenues arise under long terms like 5-10-15 years contracts with the Wireless Telecom Operators. Contracts are renewable upon expiry of the term, at the option of the Telecom Operators.

Infrastructure Sharing:

They enable Telecom Operators to host their active equipment at our sites by providing space in shelters and optimum heights for mounting antennae on towers. Also, bring benefits to our customers through infrastructure sharing.

Energy Management:

They deliver uninterrupted power on towers at predetermined costs to their customers. They optimally utilize energy sources and storage solutions through technology and skills. They also jointly work with our customers for Demand Management and clean energy solutions deployment.

2. Competitive Strength: 5/10

GTL Infra asana is an Indian company in Telecom Equipment & Infra services, it has competitors like ITI, HFCL, Astra microwave, Avantel, Nelco, ADC India, Punjab comm and others.

3. Stock Analysis Return & PE Ratio: 2/10

GTL Infra Stock is listed both in NSE, and BSE and currently trading around 2 (Jan 2022), with 52 highs of 4s and a low of 0.65s.

It has a market cap of 2500+ which is Micro cap, GTL Infra used to be one of the leading companies in this space during the late 1990s Telecom boom, Stock was listed in 2006 and was the first company in this space to be listed but until 2010 when telecom sector took a massive hit with government cancellation of 2G licences, GTL took a massive hit and suffering till date.

The stock has given a 3-year CAGR of 20% which is fair. 

The face value is 10, so expect Split, bonus and buybacks. But note here this stock is a Loss making company. So unless profitable and good growth, this seems to be not considered.

PE Ratio: GTL Infra has a PE of 0( Negative) currently which means no earning and a loss-making company. 

4. Dividend: 1/10

The stock has been giving no dividend (0.0%).

Generally, we expect a growing company to give at least a 1% dividend which is a good gesture and sign unless high Capex is planned.

Financial Ratios:

5. Sales Growth/Revenue: 1/10

The Sales growth indicates that the company can capture the market, and which may increase profitability. 

GTL Infra has a 3-year median Sales growth of -15.6%  which is poor. Current year (2021) growth stands at -0.57%. For Micro caps, we consider the growth of at least 20%+ as healthy sales. 

6. Profit Growth: 5/10

Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.

GTL Infra Profit growth stands at a 3-year median of 9.94% which is fair, Current year stands at 31.81%. For Micro cap, atleast 20% is considered healthy growth in Profitability.

7. [ROE] & [ROCE] %: 1/10

Return on Equity:

ROE indicates the ability to generate profits from shareholders/Equity Investments. GTL Infra ROE has a 3-year median of -105.13%.  The current year stands at 0.0%. 

We consider a healthy ROE to be atleast 20% for growth companies.

Return on Capital Employed:

ROCE indicates the ability to use its capital employed for business. GTL Infra ROCE has a 3-year median of -16.8%.  The current year stands at -15.56%. 

We consider a healthy ROCE to be atleast 20% for growth companies.

8. Debt/Equity: 2/10

D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability. 

GTL Infra has a D/E of 3.38+ which is Terrible. Unless capital expansion or any other is required, a low debt is always good to maintain profitability.

We consider debt-free or D/E<0.1 to be healthy. 

9. Shareholding %: 1/10

The company has a high Promotor holding of 3.33%. The FII and DII of  1.9% and 51.72% indicate Institutions have good holding but its not. Since the debt is not cleared the banks and financial institutions have acquired equity from the promotor in the Debt restructuring scheme. The remaining are of the Public.

Note: The Promoter Pledging % is 100% which is terrible, generally no pledging indicates a good sign.

Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems bad too.

10. Future Prospects: 2/10

Pros:

No such pros as of now. It has never been a profitable company since 2010. 

Cons:

Very High Debt with D/E greater than 3.

Very less promotor shareholding and 100% pledged too. Also, the shareholding has been taken by DIIs for debt restructuring.

Poor Financials like Revenue, profit, ROE, ROCE, Reserves and a loss-making company.

Investment Hacks Score Card: 

The average score of GTL Infrastructure based on all factors comes to be 2.3/10.

Conclusion:

Overall GTL Infrastructure was one of the leading companies to be benefited from the telecom boom before 2010, but after 2010 it has never been profitable and also debt has been increasing to the range of pledging and banks acquiring shares.

 The stock has been a wealth destroyer until now after 2010. 

The Future cannot be said but unless they become debt free or if the company is funded/acquired by another company in future or be a major role in 5G infrastructure it can be a game changer only then.

Since this is a penny stock, high volatility can be seen in upper and lower circuits unless a major change happens in fundamentals.

Disclaimer:

Since this is an educational opinion, Please research thoroughly or consult your financial advisor before Investment.

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Team Investment Hacks