Focuses on niche defense supplies

Government’s emphasis on indigenisation of defense production augurs well for the company

Avantel is engaged in manufacturing of wireless front-end, Satellite Communication, Embedded systems, Signal Processing, Network management and Software development. It supplies mainly to defence establishments and allied departments in the public and private sectors.

The company set up in 1990 in Vishakhapatnam was promoted by A Vidyasagar, a technocrat. Promoters and promoter group holds 40.14% stake as end of Dec 2022.   

As part of diversification strategy, Avantel has floated a fully owned subsidiary M/s. Imeds Global Private Limited in September 2021 and established manufacturing facility in Andhra Pradesh Medical Tech Zone (APMTZ), Visakhapatnam. The company envisions itself to offer various indigenous medical devices which are the need of the hour post COVID pandemic.

Contributing to self-reliance in the strategic segment with well spread product offerings

Avantel has been contributing to self-reliance in the strategic segment for close to three decades and has been offering fully indigenous solutions through its well spread product offerings. It has been operating in niche defense supplies and provides customized wireless solution and satellite communications (SATCOM) solution and products.

The company provides customized solutions through process-oriented design, development and manufacturing of RF subsystems, RADAR subsystems, software defined radios and satellite communication systems. The company offerings are either import substitutes or purely indigenous thus directly contributing towards making India truly self-reliant. 

The company has developed SATCOM products for data, voice & multimedia applications using INSAT 3C, GSAT-6 and GSAT-7 and company has long association with ISRO in development of terminal and SATCOM applications. It is also involved in development and implementation of network systems for ships, submarines, surface vehicles and aircrafts.

Established track record of three decades in electronic and telecom equipment business has enabled Avantel to offer a unique combination of embedded systems and related software used in defense and telecom sectors.

Reputed clientele   

The company mainly operates in Aerospace & Defence sector and holds Defence Industrial Licenses issued by government and its customers mainly come from the strategic sector such as space, defence, transport and telecommunications.

The company maintains healthy and long-term relationships of over two decades with reputed clientele that includes Indian Army, Indian Railways, Indian Air force, Indian Navy, ISRO, DRDO, Goa Shipyard Limited, The Boeing Company, Larsen & Toubro Limited (L&T), etc

Strong order book and order pipeline provides revenue visibility

Indigenous high performance (HF) systems demand is on strong growth especially from strategic customers in India and the company with its range/configuration of indigenous HF equipment is a major gainer.  The company is currently executing two large HF orders i.e. the 1 KW HF project for Indian Navy awarded to it in FY 2020-21 and 5 KW HF transmitters for one strategic customers. The company has already delivered 71 out of 125 HF Sets for Indian Navy and the balance order book is under execution.  Similarly, the 5KW HF transmitter order is also under execution. 

In March 2022, the company has been awarded with another high value contract from L & T worth Rs 125.68 crore for supply of 6300 loco units for Real Time Train Information Systems to be supplied to Indian Railways.

Strong emphasis from Government of India on domestic sourcing backed by greater defence capital outlay augurs well for the company in-terms of demand for existing portfolio of products as well as development of new products lines and strengthens the strategic capabilities of India.

The new DAP (Defence Acquisition Procedure) 2020 has given a stronger push to indigenization. The provisions of DAP 2020 will help the company to expedite the current procurement cases and open new avenues for business. In a recent initiative, to expedite the process of “Atmanirbharatha” in Defence, MoD has listed around 310 items for indigenization in a phased manner. The indigenization list released by the government would further open up many opportunities for the company for diversification / introduction of new product lines.

With Avantel‘s SATCOM, Radar and RF subsystems witnessing steady growth and new customers evincing interest in Avantel‘s solutions, the company is assured of strong business for next 2 years.

Augments capacity

The company proposes to expand its capacity for Development and Production of Software Designed Radios by setting up an additional facility at E-City, Raviryala Village, Maheshwaram Mandal, Ranga Reddy District of Telengana State. The project cost is approximately Rs 27 crore and will be funded partly through internal accruals and partly by borrowings.    This additional facility will help the Company for Electronics Design, Manufacturing and Engineering Services in its diversification plans to meet emerging demands of its Customers and Industry.  The project is likely to commence operations by Jun 2024.

Encouraging show in Q3FY23

For the quarter ended Dec 2022, the consolidated sales were up 33% to Rs 38.71 crore. Further with operating profit margin expanding by 180 bps to 28.9%, the operating profit was higher by strong 42% to Rs 11.20 crore.  Other income jumped by 172% to Rs 0.28 crore and thus the PBIDT was up 44% to Rs 11.49 crore. The interest cost was up 271% to Rs 1.55 crore and the depreciation was up 54% to Rs 1.52 crore. Thus the PBT was up 28% to Rs 8.42 crore. With taxation standing higher by 45% to Rs 1.73 crore, the PAT was up 24% to Rs 6.69 crore.

For the nine-month period ended Dec 2022, the consolidated sales were up 75% to Rs 101.92 crore. With OPM contracting by 210 bps to 28.1%, the growth at OP was restricted at 63% to Rs 28.68 crore. Eventually the PAT was up 45% to Rs 17.21 crore.

Outlook

Strong order book on hand and strong order pipeline as brightened by the defence procurement plans with emphasis on indigenization, the company is expected to keep up the strong growth momentum going forward.

In the current financial year, the  company has developed new variants of Mobile satellite services products including Airborne versions and High Power (5 KW) HF systems. In the medical segment, Imeds has developed Skin Staplers, Removers and Oxygen Concentrators. Further, the company is developing Software Defined Radios in line with global standards.

Valuation

# EPS can not be annualised due to seasonality in business Source: Capitaline Databases

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