Rolta repurchases US $ 15.00 Mn FCCBs taking the total buyback to US $ 53.31 Mn (PRESS NOTE)

MUMBAI, December 24, 2009 – Rolta India Limited is pleased to announce that it has further repurchased US $ 15.0 Million of the outstanding Foreign Currency Convertible Bonds’s ( FCCB’s), of the original issue of Zero Coupon FCCBs of US $ 150 Million due in 2012. The Bonds of the accreted value of US $ 17.8 Million have been repurchased at a discount of 15.25% resulting in a gain of US $ 2.80 Million (approx Rs.13.00 crores).

In June 2009,the company had, through a tender offer, repurchased FCCB’s of the accreted value of US $ 43.67 million at a gross repurchase value of US $ Rs 32.75 million resulting in a gain of US$ 10.92 million ( Rs 53.50 crores). The aggregate accreted value of all repurchase of FCCB’s till date is US $ 61.47 million ( Face Value $ 53.31 million) and total amount paid aggregates US$ 47.75 million resulting in a gain of US $ 13.72 million (approx Rs 66.50 crores) giving an average discount of 22.3% to the accreted value on all buybacks. This gain has been appropriated into P&L and Reserves in the financial statements of the company. The Company has diligently worked to effect these repurchase transactions to not only take advantage of the window of opportunity provided by government regulations, but also to adopt procedures that kept the interest of investors in focus. With this the company has been able to repurchase 35.5% of the initial issue of Bonds and the aggregate principal value of the Bonds remaining outstanding will be US $ 96.69 Million following completion of this repurchase which are due for redemption in June 2012.

About Rolta
Rolta is an Indian multinational organization that has executed projects in over 40 countries. Rolta serves these markets by providing innovative solutions in Enterprise Geospatial Information Solutions (EGIS), Defense & Homeland Security; Enterprise Design & Operations Solutions (EDOS); and Enterprise Information Technology Solutions (EITS). Rolta, through its joint venture with the Shaw Group Inc. USA – Shaw Rolta Ltd. – provides comprehensive Engineering, Procurement and Construction Management (EPCM) services to meet turnkey project requirements of power, oil, gas and petrochemical sectors. Rolta's joint venture with Thales, France – Rolta Thales Ltd., develops and provides state-of-the-art C4ISTAR information systems, Military Communications, Digital Soldier and Vehicle System solutions, covering the entire “sensor to shooter” chain, under transfer of technology from Thales. Rolta, headquartered in Mumbai, employs over 4500 professionals with countrywide infrastructure and international subsidiaries across the globe. The Company has benchmarked its quality processes with the world's best quality standards. Rolta is accredited with the prestigious BSI ISO/IEC 27001:2005 certification, the ultimate benchmark for information security; the BSI ISO/IEC 20000-1:2005 IT Service Management Standard; and the Company has been assessed at Maturity Level 5 of the Capability Maturity Model Integrated CMMI SW version 1.1 in 2006. The Company is now engaged in upgrading to Maturity Level 5 of version 1.2. Forbes Global has ranked Rolta amongst the "Best 200 under a Billion" for four times in six years. Rolta has been included in the S&P Global Challengers ListTM 2008, by Standard & Poor’s. This List identifies 300 mid-size companies worldwide that have shown the highest growth characteristics along dimensions encompassing intrinsic and extrinsic growth. ROLTA was ranked at the #1 position in Human Relations (HR), and at the 3rd position in overall ranking in the 2009 DATAQUEST survey of Best Employers in the IT sector. The Company is listed on the NSE in cash and F&O segment and forms part of CNX IT, NIFTY Midcap 50 and CNX 500 indices. The Company is also listed on BSE 'A' group and forms part of BSE Midcap, BSE 200, BSE 500, BSE IT and BSE TECK indices. The Company's GDR is listed on the Main Board of London Stock Exchange and its FCCB's are listed on the Singapore Stock Exchange.

>What will happen if the oil price falls to USD 40 per barrel again in 2010?

One should absolutely not underestimate the possibility that the oil price will fall to USD 40 per barrel again in 2010: growth in OECD countries will decline significantly from its 2009 trend; the speculative oil stockpiles may shrink; there is still enormous excess production capacity and OPEC’s discipline may disappear if oil prices start to fall.

The effects of far less expensive oil in 2010 are known: stimulation of consumption, but negative inflation again in OECD countries, and therefore extension of the period of highly expansionary monetary policy since consumption will remain sluggish; difficulties for some oil-producing countries: Russia, Iran, Venezuela; appreciation of the dollar against the euro.

1. It is entirely possible that the oil price will slip back (to USD 40 per barrel??) in 2010.
2. What would happen if the oil price fell back to USD 40 per barrel in 2010?

The consequences of a low oil price again in 2010 are quite clear:

a) Stimulation of consumption in OECD countries, as in the second half of 2008 and at the beginning of 2009, by the fall in energy prices, and hence a decline in inflation (Charts 8A
and B), which bolsters real wages (Chart 8C).

b) As inflation will become very low again and growth will be very modest, despite the fall in the oil price, monetary policies in OECD countries are likely to remain highly expansionary.

c) Oil-producing countries that need a high oil price to balance their budgets (Russia, Venezuela, Iran, Chart 10A) will again face problems.

d) Pick-up in the dollar against the euro; it is well known that when the oil price is high, the dollar depreciates against the euro (Chart 11); this is in all likelihood accounted for by the fact that oil-producing countries invest a substantial part of their dollar-denominated oil revenues in euros.

To read the full report: OIL

>Indian mid-cap construction (MACQUARIE RESEARCH)

Event
■ We spoke to managements of various mid-cap construction companies to discuss key issues. We are very positive on the space and believe the recent underperformance is an excellent accumulation opportunity. We think valuations are at very attractive levels of 10–11x FY11E earnings with a very strong order inflow cycle about to begin. The stocks have come under pressure due to shortterm issues like the Dubai credit crisis and statehood demand for Telangana.

Impact
■ Valuations extremely attractive with substantial growth: The mid-cap construction space has underperformed the broader indices recently and trading around 10x FY11E (adjusted for subs valuations) due to short-term irritants, despite we believe substantial growth opportunities beginning in FY11. Interestingly, most of these companies have recently raised equity financing, so the risk of dilution is also substantially reduced in the near term.

■ Near-term sentiment spoilers are temporary in nature: The issues like the Dubai credit crisis and a separate statehood issue in Telangana have created a dampener on stock prices. We strongly believe that these issues are temporary with no material impact and create an opportunity to accumulate these stocks.

■ Substantial structural opportunity to support long-term earnings growth: We expect order inflow in the infra space to strongly rebound in FY11 as governments get their acts together on sectors like roads, ports and continued push in power. In the near term, top-line growth will likely rebound in FY11. Roads, which were around 30% of order backlog, have reduced to close to 10–15%. Roads itself are likely to witness order inflow of US$10bn in FY11. Even without roads, the order backlog for the space remains healthy at 3x last year’s revenues.

■ Lower interest costs can provide upside to earnings estimates: Interest costs have reduced by 150–200bps for construction companies in 2H FY10, which have yet to be reflected in earnings. Recent fundraising will further help in lowering interest costs, which are not built into consensus estimates.

■ Subsidiary valuations are becoming material: For all the three companies, BOT (Build-Operate-Transfer) assets are getting commissioned gradually, which will start contributing to earnings while new BOT assets are being added to the portfolio, hence enhancing the size and valuations. Also, we believe valuations for all these companies’ real estate portfolios have
bottomed out and present upside to the valuations.

Outlook
■ All three stocks seem attractively placed for the short and medium term: We like all the three companies at current valuations with near-term triggers in place. NJCC and PEC have near-term triggers in the form of Q3 FY10 earnings, while in the case of IVRCL, visibility on BOT revenues and the settling down of the Telangana issue will likely be the triggers.

To read the full report: INDIAN MID-CAP CONSTRUCTION

>LOGISTICS: CONTAINER RAIL (IDFC SSKI)

Privatization of container rail operations has enticed 16 players, including incumbent Concor, to the space since 2005. These players are eyeing 3% (97m tonnes) of the overall freight market by trying to shift volumes from road to rail. Operators can ‘create the market’ by offering integrated, value-added logistics solutions with last mile connectivity. However, to attain these capabilities and garner higher volumes, operators need to invest heavily in hard infrastructure. As the business entails a longer gestation period, scale and efficiency (utilization and turnaround times) are extremely critical to generate returns of 15%+ on capital employed. In view of their competitive strength, and thereby ability to attract volumes and drive strong earnings growth, we believe Concor, Arshiya and Gateway Distriparks (GDL) are well positioned to generate superior returns. Reiterate Overweight on the sector.

■ Integrated service offering to attract volumes to rail: While the number of operators appears high at 16, we believe there are enough volumes. With 500 rakes expected to be operational by FY12/13, players are eyeing only 3% (97m tonnes) of the overall freight market. However, volumes are required to be shifted from road to rail, for which operators have to offer timely, reliable and value-added services with last mile connectivity and customized solutions.

■ Returns linked to turnaround times and utilization levels: Container rail is a highly capital-intensive and long gestation business with hefty investments required in rakes (capacity) and rail sidings (cargo consolidation and value added services, etc) to attract volumes. Hence, asset turnaround time and utilization levels assume greater relevance for an operator to derive economies of scale and be profitable. Once an operator achieves critical mass, we believe it can earn RoCE of 15%+, which can be further augmented by offering integrated services.

■ Attractive valuations; Overweight: We believe operators need deep pockets to survive the long gestation period. In this context, Concor, Arshiya and GDL possess the competitive edge in terms of funding and strong infrastructure to secure higher volumes. Arshiya and GDL are fast attaining scale, and their rail operations are likely to turn profitable in FY11, supported by an expected upturn in the trade cycle. With 12-30% earnings CAGR over FY09-12E and attractive stock valuations, we are Overweight on the sector and Outperformer on the three stocks.

To read the full report: CONTAINER RAIL