#9 ITI: Surprise package

A new entrant in VOICE&DATA's prestigious Top10 tally is the state run ITI
that has been making losses for the past seven years. In the FY 2009-10, the
manufacturer took a giant leap, recording a 171.8% growth with a record turnover
of Rs 4,732 crore against Rs 1,741 crore in the previous year.

Interestingly, the provisional turnover the company achieved in FY 2009-10 is
more than double than its previous high of Rs 2317.63 crore earned in FY
2001-02. Setup in 1948, ITI has seen a glorious past, having contributed nearly
50% of the present national telecom network. ITI has six manufacturing units,
including three in Uttar Pradesh (Mankapur, Rae Bareily and Naini), one each in
Srinagar in Jammu & Kashmir, Palakkad in Kerala and the main facility in
Bengaluru. Three out of the six units are said to be profitable. However, over
the past few years it had a downfall. To save the ailing establishment, the
government announced plans to write-off Rs 2,820 crore losses accumulated by the
company to enable the company to hive off its viable units to private partners.
This is the second time it had to extend a helping hand. A bailout package of Rs
1,025 crore was given during FY 2005-06.

The government has been asking the company to look at strategies that will
help it to regain its financial health. Media reports hint that the company
might be asked to expand its range of products and find space in the emerging
technological areas, including the fast rising mobile phone market. During the
FY 2009-2010, ITI established the manufacturing facility for Gigabit Passive
Optical Network (GPON) at its Rae Bareli plant in Uttar Pradesh and successfully
supplied equipments to the tune of Rs 270 crore to BSNL. ITI became the first
company in the country to get Technical Approval Certificate (TAC) for the GPON
products. The company has also implemented successfully the 'National Population
Register' project of the Ministry of Home Affairs at its Palakkad plant in
Kerala. The ITI-Huawei combination has enabled BSNL to launch 3G services in the
south zone. In an effort to save the sinking company, ITI has initiated actions
for the establishment of a joint venture company at its Rae Bareli, Naini and
Bengaluru plants for the manufacture of WiMax, GPoN and NGN IP systems.

The company set up a Rs 77 crore data center, which will provide
customer-centric services to the government and private enterprises at Bengaluru,
in collaboration with the Mumbai based leading IT infrastructure and services
firm-Trimax Datacenter Services. The fifty seater ITI data center will offer a
range of services, including co-location services; hosting services; and managed
services such as server management, network management and security management.
The prime business focus of the facility will be value added services such as
messaging solutions, videoconferencing and remote infrastructure management.

As per the agreement, 82% of the revenues generated by the data center will
be credited to Trimax, while the rest will accrue to ITI. The collaboration is
targeting Rs 50 crore in the first year (FY 2009-10) of operations; and is in
the final discussion stage with RailTel Corporation of India, Karnataka Police
Housing, Business Intelligent Technologies, Glodyne and Madhucon to engage them
as customers for data center services. An additional Rs 143 crore would be
invested in the data center during the second phase of expansion by this year
end. As part of ITI's diversifying strategy, it plans to set up two more data
centres at Lucknow and Palakkad. The company's reins have been handed to KL
Dhingra, who has served as the CMD in Housing and Urban Development Corporation
and at other PSUs.

This fiscal is more challenging than the previous one

The state-run ITI has clocked a record turnover. How difficult was it to attain this in the presence of stiff competition from international players? We could achieve this, and all credit largely goes to the good order book position and on-time completion and commissioning of our major production activities. The competition remains stiff as ever and margins are slim. How do you rate ITI's performance over the last couple of years? ITI has recorded the highest turnover of Rs 4,732 crore for the year ending March 31, 2010. This is a quantum jump of 171% when compared to the previous year's turnover of Rs 1,741 crore. I am happy over this achievement but would like the company to carry on the good work in every front-production, marketing and sales in particular-so that we regain the ground we lost, especially in the last one decade. KL Dhingra CMD, ITI ITI's last quarter performance was impressive. How optimistic are you about the new fiscal? I believe that the current fiscal (FY 2010-11) is more challenging than the previous one. Pressure to perform is much more given slimmer profit margins and higher performance base of the last year. We need to look beyond our customary BSNL-MTNL orders. I am trying my level best to get diversified and meaningful additional customers for ITI. Our marketing team is going all out in achieving this. What are the key factors that accelerated ITI's growth in the last fiscal? During FY 2009-10, ITI established the manufacturing facility for gigabit passive optical network (GPoN) at its Rae Bareli plant in Uttar Pradesh. The company also implemented successfully the National Population Register Project of the Ministry of Home Affairs at its Palakkad plant in Kerala. ITI enabled BSNL to launch 3G Services in the south zone. These were some of the aspects of our growth last year. What is the update on the disinvestments front? ITI is already a listed company. The government has no plans to disinvest its stake in ITI in the near future. However, as a part of its revival, ITI is inviting bids to setup joint ventures (JVs). The JVs are being planned at Rae Bareli and Naini in Uttar Pradesh and at Bengaluru in Karnataka. The interested parties need to submit the technical bids by July 15, 2010 and the financial bids by July 20, 2010. Highlights ITI established the manufacturing facility for GPON at its Rae Bareli plant Became the first company in the country to get Technical Approval Certificate for GPON products Implemented the National Population Register project for the Ministry of Home Affairs at its Palakkad plant in Kerala ITI-Huawei combination has enabled BSNL to launch 3G services in the south zone Set up a Rs 77 crore data center at Bengaluru Is ITI looking at more collaborations like the one with Trimax last year? Last year, we established data center facilities in Bengaluru in collaboration with Trimax. We remain open to all business opportunities if we find them viable. What were the big orders that ITI received last year? As has been the case in the previous years, BSNL remained our main customer last year. However, some of our other customers included defense and other government agencies.