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Apollo Hospitals
Enterprise Ltd
CRISIL IERIndependent Equity Research
Enhancing investment decisions

Detailed Report
Detailed Report
Zyl og Systems Ltd



CRISIL IERIndependent Equity Research

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-
point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL
Fundamental Grade Assessment
CRISIL
Val uati on Grade Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)




































Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.


Disclaimer:
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(CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to
change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report
constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use
made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This
report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or
communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any
purpose.





Zyl og Systems Ltd
Crui si ng ahead with products and sol utions strategy

Fundamental Grade 3/5 (Good fundament al s)
Valuati on Grade 4/5 (CMP has upsi de)
Industry IT Services
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Zylog Systems Ltd (Zylog) is an IT services and solutions provider deriving majority of its
revenues from the US and Canada. It forayed into the e-governance and wi-fi businesses in
FY10. While CRISIL Research expects Zylog to benefit from an increase in global IT spend,
we remain cautious of the macroeconomic conditions which may damp demand. We continue
to assign Zylog a fundamental grade of 3/5, indicating that its fundamentals are good relative
to other listed securities in India.
Ni che IT solutions player with a large bouquet of service off eri ngs
Zylog is a niche solution provider catering to verticals including BFSI, telecom, pharma,
healthcare and manufacturing. It also offers solutions like field service automation, inventory
management, recycling and reverse logistics and RFID applications for various verticals. This
coupled with a large bouquet of services has enabled it to log strong revenue and PAT
growth over the past few years.
Zylog has been abl e to int egrate al l acquisitions successf ully
Zylog has predominantly used the inorganic route for increasing domain expertise, expanding
service lines, accessing new markets and clients. It has acquired eight companies in the past
three years including Ducont FZ LLC in Dubai in FY09 and Brainhunter in Canada in FY10,
and has been able to gain foothold in geographies like Canada and the Middle East. It has
successfully integrated all acquisitions and is now focussing on cross-selling opportunities to
drive growth.
E-governance and wi-fi t o achi eve scal e over medi um term
Zylog entered the e-governance and wi-fi businesses in FY10. Till date, it has executed
e-governance projects for the Karnataka and Gujarat governments. For the wi-fi services,
Zylog is present in seven states and one union territory and has ~40,000 active clients. The
contribution of both these businesses to the total revenue is small and the wi-fi business is
yet to break even at the PAT level. While we expect these businesses to attain scale over the
medium term, the performance of both businesses remains a key monitorable.
Expect t wo-year revenue CAGR of 9.6% i n US$ t erms
We expect revenues to register a two-year CAGR of 9.6% to US$ 501 mn in FY13 (12% in
rupee terms to Rs 24 bn) driven by ~8% growth in IT services and ~13% growth in IT
solutions. Adjusted PAT margin is expected to increase by 40 bps to 8% in FY13.
Valuati ons the current market pri ce has upside
CRISIL Research has used the discounted cash flow method to value Zylog and maintains
the fair value of Rs 656 per share. This fair value implies P/E multiples of 6.4x FY12E and
5.6x FY13E earnings. We revise the valuation grade to 4/5 from 5/5 earlier, indicating that the
market price has upside from the current levels.

KEY FORECAST
(Rs mn) FY09 FY10 FY11 FY12E FY13E
Operating income 7,511 9,802 19,183 21,871 24,048
EBITDA 744 2,070 3,170 3,616 3,780
Adj PAT 849 1,028 1,453 1,692 1,918
Adj EPS-Rs 51.6 62.5 88.3 102.9 116.6
EPS growth (%) 2.7 21.0 41.3 16.5 13.4
Dividend yield (%) 3.8 1.5 1.8 1.7 1.8
RoCE (%) 9.6 21.1 23.6 20.9 18.3
RoE (%) 18.9 19.3 22.6 21.1 19.5
PE (x) 10.3 8.5 6.0 5.1 4.5
P/BV (x) 1.8 1.5 1.2 1.0 0.8
EV/EBITDA (x) 11.0 4.9 3.5 3.2 2.7
NM: Not meaningful; CMP: Current market price
Source: Company, CRISIL Research esti mat e

CFV MATRIX

KEY STOCK STATISTICS
NIFTY/SENSEX 5281/17446
NSE/BSE ticker ZYLOG
Face value (Rs per share) 10
Shares outstanding (mn) 16.4
Market cap (Rs mn)/(US$ mn) 8,711/178
Enterprise value (Rs mn)/(US$ mn) 11,217/229
52-week range (Rs)/(H/L) 580/330
Beta 1.1
Free float (%) 58.8
Avg daily volumes (30-days) 2,21,647
Avg daily value (30-days) (Rs mn) 112

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKET

Returns
1-m 3-m 6-m 12-m
ZYLOG 23% 31% 34% 32%
NIFTY 1% 12% 11% 0%

ANALYTICAL CONTACT
Chetan Majithia (Head) chetanmajithia@crisil.com
Suresh Guruprasad sguruprasad@crisil.com
Kamna Motwani kmotwani@crisil.com
Client servici ng desk
+91 22 3342 3561 clientservicing@crisil.com
1 2 3 4 5
1
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Valuat ion Grade
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Poor
Fundamental s
Excellent
Fundamentals
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U
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36.7% 36.7%
41.2% 41.2%
0.7% 0.4%
0.4%
1.4%
3.2%
3.1%
3.8% 4.8%
59.5% 59.9%
54.6% 52.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-11 J un-11 Sep-11 Dec-11
Promoter FII DII Others
February 28, 2012

Fai r Val ue Rs 656
CMP Rs 530



CRISIL IERIndependent Equity Research
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Tabl e 1: Zyl og Busi ness environment
Product / Segment IT Services Products and sol utions
New busi nesses: Wi -fi and
e-governance
Revenue contribution
(FY11)
63% 37%* NA
Revenue contribution
(FY13)
63% 37%* NA
Product / service off eri ng

ERP implementation, content
management, mobile computing,
data warehousing and business
analytics, IT consultation, migration
services, managed services,
testing, IT virtualisation and
staffing
Field service automation, inventory
management, recycling and reverse
logistics, RFID applications, products for
BFSI, pharma and healthcare
E-governance: implementation of
government IT projects related to road
transports, agriculture and healthcare
Wi-fi: providing wireless internet
connectivity in seven states and one
union territory in India
Geographic presence The US, Canada, Europe, the
Middle East, Asia Pacific
The US, Canada, Europe, the Middle
East, Asia Pacific
E-governance: India, the US, Asia
Pacific
Wi-fi : India
Market posit ion A relatively smaller player in
geographies other than Canada.
Third largest professional services
company in Canada
A relatively smaller player A relatively smaller player
End market BFSI, telecom, pharma, retail and
manufacturing
BFSI, telecom, pharma, retail and
manufacturing
E-governance: Governments of India
and the Middle East
Wi-fi: Retail and corporate clients
Sal es growth
(FY08-FY11 3-yr CAGR)
NA NA NA
Sal es f orecast
(FY11-FY13 2-yr CAGR)
7.8% 12.6%* NA
Demand drivers Increase in global IT spend on
services like ERP, CRM, mobile
computing
Cross-selling opportunities
Leverage on niche products and
solutions offerings
Cross-selling opportunities in
Canada
E-governance: Indian governments
thrust on IT leverage successfully
executed projects
Wi-fi: Expansion into more cities,
ways to beat increasing competition
Key competit ors Global: MTM Technologies, RWD
Technologies
Domesti c: Infosys Technologies,
Tata Consultancy Services, Wipro,
HCL Technologies
Global: Covansys Corp, Syntel Inc,
Trizetto Group, Clicksoft
Domesti c: Infosys Technologies, Tata
Consultancy Services, Wipro, HCL
Technologies
E-governance: TCS, Wipro, Oracle
Wi-fi: All integrated telecom players,
local and national internet services
providers
Key risks Competition from established
competitors
Reduction in IT spend due to
another round of slowdown
Increase in competition in niche
areas
Reduction in IT spend due to
another round of slowdown
E-governance: Low margins and high
debtor days
Wi-fi: Increase in competition which
would result in lower ARPUs, delay in
break even
* Includes revenue from wi-fi and e-governance businesses
Source: Company, CRISIL Research




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Grading Rationale

Niche IT solutions player with a large bouquet of service
offerings
Zylog is a mid-tier IT company providing IT services and solutions. The companys service
portfolio includes ERP implementation, mobile computing, data warehousing and business
analytics, IT consultation, managed services, testing and IT virtualisation. Zylogs solution
offerings are spread across verticals like banking and finance, insurance, telecom, pharma,
healthcare and manufacturing (please refer to page 19 for details of key offerings). Zylog also
offers niche solutions like field service automation, inventory management, recycling and
reverse logistics and RFID applications for various verticals. The large bouquet of services
and niche product offerings have enabled the company to significantly grow its revenue over
the past few years. Zylog also added staffing services to its portfolio through the acquisition of
Brainhunter, Canada in FY10. It also diversified into e-governance and internet services in the
same year.

By following the aforementioned strategies, Zylog has been able to grow its revenue at a pace
better than most of its peers. However, its profitability has been low post the acquisition of
Brainhunter in FY10, whose margins were significantly lower than that of Zylogs.

Fi gure 1: Zyl og s sales have shown robust growth over
FY07-11...
Fi gure 2: ... whi ch i s better than peers though at a l ower
base

Source: Company, CRISIL Research Source: Company, CRISIL Research
4,075 6,094 7,511 9,684 11,587
117
7,596
50.9%
49.6%
23.3%
30.5%
98.1%
0%
20%
40%
60%
80%
100%
120%
-
5,000
10,000
15,000
20,000
25,000
FY07 FY08 FY09 FY10 FY11
(Rs mn)
Zylog Revenue BH revenue Y-o-Y growth (RHS)
4
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FY07-FY11 revenue CAGR
A l arge bouquet of servi ces and
ni che product offeri ngs have
enabl ed Zyl og to gai n a foothol d i n
overseas market



CRISIL IERIndependent Equity Research
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Fi gure 3: Average EBITDA margi n over FY07-11 i s l ower due
to l ower Brai nhunter margi ns
Fi gure 4: PAT growth over FY07-11 has been l ower due to
l everaged acqui sitions

Source: Company, CRISIL Research Source: Company, CRISIL Research

Regional presence in global markets has worked well
Zylog has been present in the US since inception and this geography continues to be the
main revenue contributor. It has also entered regions like Canada, Europe, Asia Pacific and
Middle East over the past two years. It functions predominantly on a global presence/onsite-
based model wherein onsite revenue contributes ~80% of total revenue. This is significantly
higher than that of most of its peers. While this model results in more expenses due to higher
employee cost, it also results in better client relationship management. Thus, Zylog has been
able to garner ~90% repeat business even though it is not a pure-play IT services company.

Fi gure 5: Hi gh gl obal/onsi te presence has resulted i n better
cl i ent management... Fi gure 6: ... whi ch has resulted i n hi gh repeat busi ness

Source: Company, CRISIL Research
* FY07 data was not available
Source: Company, CRISIL Research

Zylog has tried to reduce dependence on the US
In FY09, revenue from the US accounted for ~97% of total revenue. However, this dropped to
~54% in 9MFY12 mainly due to the acquisition of Brainhunter, Canada, which contributed
1
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81.5
82.4
80.7
81.6
82.9
85
78
79
80
81
82
83
84
85
86
FY07 FY08 FY09 FY10 FY11 9MFY12
(%)
Global/onsite revenue
90.1
91.1
88.3
88.5
87.8
86
87
88
89
90
91
92
FY07* FY08 FY09 FY10 FY11 9MFY12
(%)
Repeat business
80% of Zyl og s revenue comes
from gl obal /onsite l ocati on



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~37% to total revenue in 9MFY12. Also, the company has increased its presence in
geographies like the Middle East and Asia Pacific. Also, it has diversified into new India-based
businesses like e-government projects and wi-fi.

Fi gure 7: Dependence on the US has decli ned due to Brainhunter
acqui si ti on
Source: CRISIL Research

Client concentration is low
Unlike most other mid-tier IT companies, Zylog is not excessively dependent on the top
clients. It derives ~30% of its revenues from its top 10 clients. The company has chosen to
focus on SME clients where most big IT companies have less focus. It had 194 active clients
in FY09 and 583 active clients in FY10 (including Brainhunter clients). FY11 client details are
not available.

Fi gure 8: Dependence on top cl i ents i s l ow
Source: CRISIL Research

97.2 78.3 51.1 53.9
10.3
39.9
37
2.3
4.1 2.7
2.6
4.8 3.1 3
0.2 1.2
1.7
0.3 1.1 1.5
3.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY09 FY10 FY11 9MFY12
USA Canada Europe Middle East India Asia Pacific
3.8
4.2
5.3
5.8
7.0
6.5
15.4
17.1 17.3
18.7
22.9 23.2
25.7
26.8
27.4
29.1
30.6
31.3
0
5
10
15
20
25
30
35
FY07 FY08 FY09 FY10 FY11 9MFY12
(%)
Top client top 5 clients Top 10 clients
Zyl og deri ves ~30% of its
revenue from top 10 cli ents



CRISIL IERIndependent Equity Research
6
Inorganic route has proven to be fruitful
Zylog has predominantly used the inorganic route for increasing domain expertise, expanding
service lines, accessing new markets and clients. Over the past three years, it has acquired
eight companies including a strategic stake in a Malaysian company. These acquisitions were
funded through a mix of debt and internal accruals and except Brainhunter, all the acquisitions
were small ones. Each of these acquisitions has opened up a new avenue of growth for Zylog.
For instance, acquisition of the UK-based insurance solutions provider Anodas Software
added end-to-end core insurance solution to Zylogs offerings. It has also enabled Zylogs
entry into the UK through the existing clients of Anodas Software. The acquisition of Ducont
FZ LLC in Dubai in FY09 strengthened Zylogs presence in the Middle East. Importantly,
Zylog has been successfully able to integrate all the acquired companies, including
Brainhunter which was as big as Zylog in revenue terms.

Successful integration and turnaround of Brainhunter has strengthened
Zylogs presence in Canada
Zylog acquired Brainhunter Inc., Canadas third largest professional services company, in
February 2010 for an enterprise value of US$ 37 mn. Brainhunter was a staffing and
engineering consulting and professional services provider in Canada with a major presence in
government, telecom, banking, financial services and insurance (BFSI), and oil and gas
verticals. It had 1,860 employees and about 400 customers in the telecom, banking and
government verticals at the time of acquisition. In FY09, ~95% of its revenue came from
providing IT and engineering staffing consultants on a contract basis to its clients. It also sold
recruitment related software including applicant tracking systems (ATS) and vendor
management software.

At the time of acquisition, Brainhunters revenue was US$ 194 mn and it had been loss-
making during the five years before the acquisition. It had filed for bankruptcy protection in
2009 as it had invested heavily in IT solutions R&D at the time of global economic downturn
and had funded it through short term debt.

This acquisition was funded through US$ 10 mn cash accruals and balance debt which was
taken on the books of Brainhunter. Zylog has now merged Brainhunter with its other Canadian
operations under the subsidiary Zylog Systems (Canada) Ltd.

Synergies from Brainhunter acquisition
The acquisition gave Zylog entry into the Canadian markets along with access to 400
clients. Additionally, it gave Zylog inroad into the Canadian government business since
Brainhunter derived ~35% of its revenue from the federal government
Zylog added staffing services to its portfolio of offerings
Opportunity to cross-sell its products to Brainhunters clients
Cost benefit which would arrive from offshoring services to India

The company has acqui red
ei ght compani es i ncl udi ng a
strategi c stake i n the past three
years
Brai nhunter turned profi tabl e in
the first year of acqui si ti on



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Brainhunter has now turned profitable
Zylog has successfully been able to integrate and turn around Brainhunters operations
despite cultural challenges and a completely different business line, in ~1.5 years. The
company has retained the majority of the middle management at Brainhunter. However, it has
been able to achieve cost savings of only C$ 80,000 vs. C$ 6 mn as expected earlier.

For the first year, Zylog concentrated on Brainhunters existing clients and services. Zylog has
recently introduced the products and services of the parent company in Canada and are
cross-selling them to existing clients. Also, Zylog has exited, and not renewed, the low margin
contracts to improve profitability. The company has also taken some cost saving measures
like inducting a pre-sales team in Chennai to generate leads and is in the process of putting
together an offshore execution team in Hyderabad. According to the company, verticals like
healthcare, engineering, oil and gas have good growth potential in Canada.

Over the past two years, Zylog has not been able to offshore significantly as there are
concerns in Canada with respect to consumer privacy. Also, the federal government is not pro
offshore. According to the company, all incremental business coming from the private sector
in Canada can be offshored.

Zylog to benefit from growth in domestic IT services exports
CRISIL Research expects IT services exports to grow at a 16% CAGR to US$ 71 bn by FY16.
This industry bounced back in FY11 with a 23% growth up from a muted growth of 5% in
FY10. The growth over FY11-FY16 is expected to be driven by the following factors:

Shift in service mix to high value service-lines and consulting which are expected to drive
up billing rates
Introduction of new technologies like cloud, mobility services and other non-linear
business models
Increase in offshoring

Fi gure 9: Indi a s IT exports to grow at 16% CAGR i n FY11-16
Source: CRISIL Research
13.3
17.9
22.2
25.8
27.3
33.5
40
71
0
10
20
30
40
50
60
70
80
F
Y
0
6
F
Y
0
7
F
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0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
6
(US$ bn)
Indian IT exports revenue
16% CAGR
Zyl og pl ans to offshore
i ncremental busi ness coming
from private sector i n Canada
Indian IT exports to grow at 16%
CAGR over FY11-16



CRISIL IERIndependent Equity Research
8

BFSI, telecom and manufacturing verticals are expected to continue to account for ~75% of
Indian IT services exports.

Zylog, which is predominantly an IT services exporter, is expected to see good traction driven
by this growth in the industry. Additionally, according to NASSCOM (National Association of
Software and Services Companies), IT service providers are looking at diversified delivery
locations to meet the client requirements and mitigate risks associated with labour markets
and currency movements. They are also increasing efforts to scale up their presence in the
onshore geographies to be able to serve the public sector and healthcare providers. This also
acts as a mitigation strategy against the rising anti-offshoring sentiments in the developed
nations. Zylog already follows a global delivery model and has execution teams in the US, the
UK, Middle East and Asia Pacific and is expected to benefit from this strategy.

Update on e-governance and wi-fi business
E-governance good opportunity, slow traction
Zylog ventured into the e-governance business in FY10 with projects related to the road
transport (RTO), agriculture and below poverty line (BPL). A common feature across all these
initiatives was collection of grassroot level information, creation of a database and issue of
smart cards with relevant information about individuals. Zylog is now the implementation
partner for smart card driving licenses for Karnataka and Gujarat. Also, the company has a
good global presence in this space in departments like home affairs, police and immigration,
healthcare, tourism and road transport sectors due to acquisition of Matrix Primus Partners in
the US and a strategic stake in Nova Berhad in Malaysia which are both e-governance service
providers.

This segment contributed Rs 500 mn to total revenues in FY11 vs. target of Rs 1 bn since
revenue from the Karnataka RTO project was not as high as expected. Going forward, the
company plans to use the projects executed in Karnataka and Gujarat as reference to
approach other state governments. Also, it has bagged projects in the healthcare segment
from the governments of Karnataka, Bihar and Haryana. While this business segment has
good growth potential, it comes with high debtor days and lower margins. Also, it requires high
upfront payment to hardware vendors. Hence, its impact on Zylogs overall profitability
remains a monitorable.

Wi-fi good traction but yet to break even; threat of competition remains
Zylog entered the wi-fi business in December 2009 and is currently present in seven states
and one union territory (Andhra Pradesh, Gujarat, Haryana, Karnataka, Punjab, Rajasthan,
Tamil Nadu and Pondicherry) covering 174 locations. At the end of Q3FY12, the company has
~40,000 active subscribers including 382 corporate connections. Since inception of this
business, Zylog has followed the strategy of focussing on the under-penetrated tier-II towns
and cities due to which it has been able to increase its subscriber base and achieve healthy
retail ARPUs of Rs 670. Zylog has invested ~Rs 800 mn in this business till date in setting up
infrastructure and plans to invest another Rs 1.2 bn over the next two years and ramp up the
Wi -fi busi ness i s yet to break
even at the net l evel
E-governance revenue stood at
Rs 500 mn i n FY11



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subscriber base to 60,000 active clients by FY13. However, the business is yet to break even
at the net profit level and the management expects it to turn profitable by FY13.

While Zylog provides wi-fi services, it directly competes with service providers which provide
internet services through cables and data cards. Also, there are a number of local operators
which provide wi-fi services in the towns and cities where Zylog operates. Since the internet
services market is a highly price sensitive market without any significant switching cost, the
market is expected to get more competitive and Zylogs ARPUs are expected to be under
pressure. Considering the high investments that the company will be making in this business,
the ability to turn the business profitable remains a key monitorable.



CRISIL IERIndependent Equity Research
10

Key risks
Volatility in global economic environment could impact
revenues
The majority of Zylogs clients are based abroad. Consequently, in the event of any economic
slowdown in these countries, Zylogs clients could reduce or postpone their IT spends, which
would have a cascading impact on Zylogs revenues. Moreover, since the company derives its
revenues from export of products and services, it remains vulnerable to currency fluctuations.
However, the currency impact would be lesser as compared to the other players in the IT
industry as Zylog has higher global/onsite presence, which provides a natural hedge. Hence,
the company does not hedge its open position.

Promoters have increased shareholding through pledge of
shares
Zylogs promoters currently hold 41.22% stake in the company, up from 36.68% in Q1FY12.
The additional shares were acquired from the open market and were financed through
pledging of promoter shares. The current pledging is 53.33% of promoters stake (21.98% of
total share capital). While this amount is quite significant, we believe there is sufficient cushion
since the pledging is in the ratio of 2:1 as per the management. However, the level of pledging
remains a key monitorable since any unfavourable market condition will significantly impact
the stock price.



Zyl og wil l be adversel y
impacted i n case of another
round of gl obal slowdown si nce
maj ority of i ts revenue comes
from overseas



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Financial Outlook
Revenues to grow at two-year CAGR of 9.6% in US$
Consolidated revenues are expected to increase at a two-year CAGR of 9.6% in US dollar
terms to US$ 501 mn by FY13. In rupee terms, the consolidated revenue is expected to grow
at a CAGR of 12% to Rs 24 bn. IT services is expected to grow at a two-year CAGR of ~8% to
US$ 314 mn. Revenue from products and solutions (including e-governance and wi-fi
businesses) is expected to grow at a two-year CAGR of ~13% to US$ 187 mn. The EBITDA
margin is expected to decline by 80 bps to 15.7% in FY13. While revenue from the high-
margin products and solutions are expected to increase, and the company is expected to
increase offshoring, we believe that the increase in employee cost will keep the margins under
pressure. Also, while Zylogs top line will get boosted due to exchange rate depreciation,
there will be no significant impact on the PAT as majority of the costs are in US$.

Fi gure 10: Revenue i n rupee terms to grow at 12% Fi gure 11: IT servi ces - the l argest contri butor
Source: Company, CRISIL Research Source: Company, CRISIL Research

Adjusted PAT to grow at 2-year CAGR of ~15%, EPS to increase
to Rs 116.6 in FY13 from Rs 88 in FY11
Zylogs adjusted PAT is expected to grow at a two-year CAGR of ~15% to Rs 1.9 bn. Adjusted
PAT margin is expected to increase by 40 bps to 8% in FY13 despite the decline in EBITDA
margin mainly due to lower interest cost.

The tax rate for FY12 is expected to be ~39% which is higher compared to previous years
mainly as the Software Technology Park of India (STPI) benefits expired post March 31, 2011.
Also, historically, Zylog claimed tax credit in India for direct taxes paid in the US under the
Double Taxation Avoidance Agreement between the two countries. However, now the tax
credit is based on Indian tax rates (33.9%), which are lower than that in the US (at least 35%),
resulting in more tax outgo for Zylog. Tax rate is expected to be lower in FY13 as the
company starts operating from its SEZ facility in Chennai.

7,511 9,802 19,183 21,871 24,048
9.9%
21.1%
16.5% 16.5%
15.7%
0%
5%
10%
15%
20%
25%
-
5,000
10,000
15,000
20,000
25,000
30,000
FY09 FY10 FY11 FY12E FY13E
(Rs mn)
Revenue EBITDA margin (RHS)
62.8% 62.5% 63.1%
37.2% 37.5% 36.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY11 FY12E FY13E
IT services Products and solutions
Revenues li kel y to grow at a two-
year CAGR of 9.6% to US$ 501 mn
i n FY13 dri ven by growth across IT
services and sol utions



CRISIL IERIndependent Equity Research
12
Fi gure 12: PAT and PAT margin trend
Source: Company, CRISIL Research

Fi gure 13: EPS trend
Source: Company, CRISIL Research


849 1,028 1,453 1,692 1,918
11.3%
10.5%
7.6%
7.7% 8.0%
0%
2%
4%
6%
8%
10%
12%
-
500
1,000
1,500
2,000
2,500
FY09 FY10 FY11 FY12E FY13E
(Rs mn)
Adj. PAT Adj. PAT margin (RHS)
52
63
88
103
117
0
20
40
60
80
100
120
140
FY09 FY10 FY11 FY12E FY13E
(Rs)
Adj. EPS
PAT margin to i ncrease to 8%
i n FY13 from 7.6% i n FY11



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Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.

Business spearheaded by promoters
Mr Sudarshan Venkatraman, chairman, and Mr Ramanujan Sesharathnam, managing
director, are first-generation entrepreneurs and have close to two decades of experience in
the IT industry. Their insight has enabled the company to diversify its product and service
portfolio. The promoters have been instrumental for the strong growth achieved by the
company through organic and inorganic expansions. We believe they have a fair degree of
risk appetite given the acquisition of Brainhunter, which is larger than Zylog and was loss-
making at the time of acquisition. We gain comfort from the fact that the management has
successfully integrated all its acquisitions.

Strong second line of management
Operationally, each region and function has a head managing the overall delivery and
business development of the unit. As far as its new businesses wi-fi and e-governance are
concerned, individuals heading the businesses have relevant experience. Based on our
interactions, we believe the second line of management is equipped with domain expertise
and has been given fair degree of autonomy in decision making. In each of its acquired
companies, Zylog has allowed the existing management to run the operations.

Management has been proactive
Zylogs management has always been proactive in identifying business opportunities. They
have been able to grow Zylogs service lines and geographical footprint through organic as
well as inorganic routes. Additionally, they have diversified into new businesses like e-
governance and wi-fi.

Experienced promoters
supported by strong second
l i ne



CRISIL IERIndependent Equity Research
14
Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate
governance and management quality, apart from other key factors such as industry and
business prospects, and financial performance. In this context, CRISIL Research analyses the
shareholding structure, board composition, typical board processes, disclosure standards and
related-party transactions. Any qualifications by regulators or auditors also serve as useful
inputs while assessing a companys corporate governance.

Overall, corporate governance at Zylog meets the minimum levels supported by reasonably
good board practices and an independent board.

Board composition
Zylogs board comprises seven members, including three independent directors and one
nominee director from UTI Ventures which currently holds a 7% stake in Zylog. This meets the
requirement under Clause 49 of SEBIs listing guidelines. Given the background of directors,
we believe the board is fairly diversified.

Boards processes
The companys quality of disclosure can be considered good judged by the level of
information and details furnished in the annual report, websites and other publicly available
data. The company has all the necessary committees audit, remuneration and investor
grievance - in place to support corporate governance practices. The audit committee is
chaired by an independent director, Mr S. Rajagopal.

Corporate governance
practi ces are good



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Valuation Grade: 4/5
We have used the discounted cash flow (DCF) method to value Zylog and maintain the fair
value of Rs 656 per share. This fair value implies P/E multiples of 6.4x FY12E and 5.6x
FY13E earnings. The stock is currently trading at Rs 530 per share. Consequently, we revise
the valuation grade to 4/5 from 5/5 earlier, indicating that the current market price has upside
from current levels.

Key DCF assumptions
We have considered the discounted value of the firms estimated free cash flow from
FY12 to FY22.
We have assumed a terminal growth rate of 4% beyond the explicit forecast period until
FY22.
We have used cost of equity of 16.4%.

One-year forward P/E band One-year forward EV/EBITDA band
Source: NSE, CRISIL Research Source: NSE, CRISIL Research

P/E premi um / di scount to NIFTY P/E movement
Source: NSE, CRISIL Research Source: NSE, CRISIL Research

0
100
200
300
400
500
600
700
800
900
1,000
A
u
g
-
0
7
N
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7
M
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8
J
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8
O
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8
J
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A
p
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A
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N
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1
F
e
b
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1
2
(Rs)
Zylog 2x 4x 6x 8x
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
A
u
g
-
0
7
N
o
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-
0
7
M
a
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-
0
8
J
u
n
-
0
8
O
c
t
-
0
8
J
a
n
-
0
9
A
p
r
-
0
9
A
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0
9
N
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9
M
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1
0
J
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1
0
S
e
p
-
1
0
J
a
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1
1
A
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1
J
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-
1
1
N
o
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-
1
1
F
e
b
-
1
2
(Rs mn)
Zylog 2x 3x 4x
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
A
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-
0
7
N
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0
7
M
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8
J
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O
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J
a
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A
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M
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J
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1
0
S
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p
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1
0
J
a
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1
A
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1
1
J
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1
1
N
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1
F
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-
1
2
Premium/Discount to NIFTY Median
0
2
4
6
8
10
12
14
16
A
u
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-
0
7
N
o
v
-
0
7
M
a
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-
0
8
J
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-
0
8
O
c
t
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0
8
J
a
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-
0
9
A
p
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-
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9
A
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9
N
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M
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J
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N
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1
1
F
e
b
-
1
2
(Ti mes)
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
We maintain the fair value of
Rs 656 per share for Zyl og



CRISIL IERIndependent Equity Research
16

Peer comparison

M.cap
(Rs mn)
EPS (Rs) P/E (x) P/B(x) RoE (%)
FY11 FY12E FY13E FY11 FY12E FY13E FY11 FY12E FY13E FY11 FY12E FY13E
Mid cap compani es
Zylog * 8,711 88.3 102.9 116.6 6.0 5.1 4.5 1.2 1.0 0.8 22.6 21.1 19.5
Mindtree Ltd 18,511 25.5 47.8 50.9 17.8 9.5 8.9 2.3 2.0 1.6 14.0 23.2 20.1
Mphasis Ltd 87,232 39.1 38.3 37.8 10.6 10.8 11.0 2.2 1.9 1.7 22.8 18.8 17.2
Hcl Infosystems Ltd 9,627 7.7 5.2 6.0 5.6 8.4 7.2 0.5 0.5 0.5 8.9 5.6 6.8
Patni Computer Systems Ltd 64,503 30.1 33.2 36.2 15.8 14.3 13.1 1.7 1.4 0.9 11.5 11.5 7.4
Polaris Financial Technologies 15,315 20.4 22.2 24.9 7.5 7.0 6.2 1.5 1.3 1.1 21.3 19.1 18.4
KPIT Cummins Infosystems Ltd 14,066 11.8 15.7 18.8 13.5 10.1 8.4 2.3 2.0 1.6 19.1 20.0 19.9
Hexaware Technologies Ltd 31,464 9.1 10.0 11.0 11.7 10.7 9.8 3.1 2.6 2.2 26.9 26.3 25.6
Median 11.2 9.8 8.7 2.0 1.6 1.4 20.2 19.5 18.9
Large cap companies
Infosys Ltd 1,655,675 119.7 146.2 168.1 24.1 19.7 17.2 6.4 5.1 4.2 27.9 28.0 27.0
Tata Consultancy Services Ltd 2,450,539 46.3 54.6 64.1 27.1 22.9 19.5 10.0 7.8 6.1 42.4 37.1 35.0
Wipro Ltd 1,044,325 21.7 23.3 27.0 19.6 18.2 15.7 4.6 3.7 3.2 26.0 21.7 21.6
Hcl Technologies Ltd 335,331 24.1 32.4 37.8 20.1 15.0 12.8 4.4 3.3 2.8 23.6 24.1 23.0
Cognizant (US$) 21,807 2.9 3.6 4.2 24.8 20.0 17.0 5.5 4.3 3.5 23.4 23.1 21.7
Median
24.1 19.7 17.0 5.5 4.3 3.5 26.0 24.1 23.0
* CRISIL Research estimates
Source: CRISIL Research, Industry sources

CRISIL IER reports rel eased on Zyl og Systems Ltd
Date Nature of report
Fundamental
grade Fair value
Valuati on
grade
CMP
(on t he dat e of report)
07-May-10 Initiating coverage* 3/5 Rs 530 4/5 Rs 456
14-J un-10 Q4FY10 result update 3/5 Rs 530 4/5 Rs 463
09-Aug-10 Q1FY11 result update 3/5 Rs 530 3/5 Rs 534
27-Sep-10 Management meeting update 3/5 Rs 656 4/5 Rs 577
09-Nov-10 Q2FY11 result update 3/5 Rs 656 4/5 Rs 582
03-Mar-11 Q3FY11 result update 3/5 Rs 656 5/5 Rs 410
09-J un-11 Q4FY11 result update 3/5 Rs 656 5/5 Rs 406
31-Aug-11 Q1FY12 result update 3/5 Rs 656 5/5 Rs 405
28-Nov-11 Q2FY12 result update 3/5 Rs 656 5/5 Rs 415
10-Feb-12 Q3FY12 result update 3/5 Rs 656 5/5 Rs 500
28-Feb-12 Detai led report 3/5 Rs 656 4/5 Rs 530
* For detailed initiating coverage report please visit: www.i er.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.




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Company Overview
Chennai-based Zylog is an IT services and products company catering mainly to the US and
Canadian markets. It was incorporated in 1995 and has since then grown its offerings portfolio
and geographical presence through both organic and inorganic routes. The company services
clients through a blend of onsite, offsite and offshore efforts and derives ~83% of its revenues
from global/onsite locations. In a bid to diversify its business, Zylog entered the e-governance
and internet services space (wi-fi) in J anuary 2010.

Zylog has clients across various verticals including BFSI, telecom, retail, manufacturing,
pharma and healthcare. BFSI is the main revenue contributor and accounts for ~23% of the
total revenue followed by telecom which accounts for ~22%. The government vertical has
become significant from FY11 onwards due to acquisition of Brainhunter, Canada which gets
~30% of its revenue from the Canadian government.

Verti cal -wise revenue contri buti on
Source: Company, CRISIL Research

The company has been concentrating on the overseas markets with specific focus on the US,
which contributed ~97% of total revenue till FY09. However, over the past two years, Zylog
has reduced its dependence on the US markets mainly by entering Canada through the
acquisition of Brainhunter in February 2010. In FY11, the US contributed ~54% of revenue
while contribution from Canada was ~37%. Zylog entered the Middle East through the
acquisition of Ducont in Dubai in FY09. It has also strengthened its position in the Middle
East, Asia Pacific and Europe where it operates through subsidiaries.

34.1
32.6
28.9
31.2
24.3 23.3
22.0 24.9
27.1
24.9
21.6 22.5
8.2
9.7
8.8 9.9
14.2 14.5
7.3
6.5
9.1 7.2
11.3 9.7
7.8
7.9
10.2
8.9
8.4
9.2
0.9
1.6
13.1 14.8
20.5
18.4
15.0 16.3
7.1 6.1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY07 FY08 FY09 FY10 FY11 9MFY12
BFSI Telecom Retail Manufacturing Pharma/Healthcare Government Others



CRISIL IERIndependent Equity Research
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Geography-wi se revenue contri buti on
Note: Data prior to FY09 was not available
Source: Company, CRISIL Research

Services and product offerings
Key product offerings
Products
Verti cal /end
users
Bri ef descri ption
Power Migrator NA Enables customers to migrate legacy systems to newer technologies like .net, J 2EE and J ava using tool centric
approach
FieldPower NA Enables scheduling of people, processes and materials thereby enabling customers to efficiently manage their costs
effectively
Bank
Companion
BFSI Mobile banking solution offering a complete suite of mobile banking solution across retail and corporate banking
customers with access to banking services through SMS, J 2ME, USSD, GPRS, WAP, BREW, iPhone, ipad, Android
and Blackberry supports leveraging a single common platform
Phoenix Insurance Customisable solution to electronically manage all key processes and information related to underwriting, broking,
claims, reinsurance and accounting. Ability to support TPA services, which is a complementary offering
Silvanus 360 NA A web-based software to manage internal operations, warehouse management, fleet and dispatch, contacts, orders,
shipments and forms. Available across recycler, collector and material handler versions
Source: Company, CRISIL Research

IT Services
Service off eri ng Bri ef descri ption
Application Development Legacy Modernization, Application Migration, Web Application Development, Mobile & Wireless Application Development,
Desktop Application
Enterprise Solutions Enterprise 2.0 Smartprise SOA, Enterprise Web 2.0 Services, Business Intelligence, Data Warehousing, Reporting &
Analysis Services
Managed Services Server & Database Management, Security Mangement, Network Monitoring, Managed Hosting, Desktop Computing
Services
Professional Services Contract & Permanent Services. Hiresafe Payroll and Consultant
Q & A and Testing Functionality Testing, Performance Testing, Compatibility Testing, White Box Testing, Product Testing, User Acceptance
Testing
Source: Company, CRISIL Research


97.2 78.3 51.1 53.9
10.3
39.9
37
2.3
4.1 2.7
2.6
4.8 3.1 3
0.2 1.2
1.7
0.3 1.1 1.5
3.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY09 FY10 FY11 9MFY12
USA Canada Europe Middle East India Asia Pacific



19
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Mil estones
1995 Incorporation of the company
1996 First offshore contract obtained from Rand Software Corporation, Vermont in mobile and wireless space to provide data synchronisation
between server and hand -held device
Opened the first offshore development centre (ODC) in Chennai
1998 Started SI / VAR partnership practice.
1999 Certified as ISO 9001:2000 for software development process by Det Norske Veritas (DNV)
2000 Launched products Z*Connect and Z*PRISM in the mobile and wireless space in Las Vegas International Convention of VAR Partnerships
2002 Acquired three businesses - Silver Spring Technologies (MD), Schumacher Consulting (MA) and Schmidt Systems (VA), primarily expanding
the business intelligence, data warehousing and application integration solutions
Incorporated a 100% wholly owned subsidiary Zylog Systems (UK) Ltd
2003 Strategic partnership with BCSIS (subsidiary of OCBC, Singapore) to market and implement their banking products in India
2004 Two more businesses acquired - Impeksoft, Inc and J DAN Systems, Inc
2005 Incorporated a 100% wholly owned subsidiary, Zylog Systems (India) Ltd to cater to domestic business
2006 Incorporated a 100% wholly owned subsidiary in Singapore to cater to APAC region
2007 Preferential allotment to Unit Trust of India Investment Advisory Services Ltd A/c Ascent India Fund and Argonaut Ventures
The company listed on the BSE and the NSE with an IPO of Rs 1.26 bn
2008 Inaugurated its own development centre in Sholinganallur, Chennai
Acquired UK-based Anodas Software and Chennai-based Ewak Creative Compusoft
2009 Pilot projects executed in the e-governance space and rollout of internet services in Tamil Nadu through wi-fi technology
Acquired Dubai-based Ducont FZ LLC (mobile wireless space), US-based FairFax (Content processing) and Malaysia-based
Nova Berhad, a healthcare content management company
2010 Acquired Canada-based consulting and engineering services firm Brainhunter
Source: Company, CRISIL Research




CRISIL IERIndependent Equity Research
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Annexure: Details of acquisitions
Year Name of target Geography Considerati on Nature of business Benefits to Zylog
FY08 Anodas Software UK US$ 2.3 mn Insurance software solutions and third party
administration services
Added end-to-end core insurance
solution to Zylog's offerings
FY09 Fairfax Consulting
Inc
US US$ 7.5 mn Content management services firm with focus
on healthcare and pharmaceutical vertical
Strengthened Zylog's position in pharma
vertical. Strengthened presence in the
US and Europe
FY09 Ducont FZ LLC Dubai US$ 12 mn Application provider in wireless application
space. Its clients included a number of banks,
telecom operators and government bodies
Strengthened Zylog's position in the
Middle East. It also gave Zylog a mobile
banking solution
FY10 Brainhunter Inc. Canada US$ 37 mn Staffing (90% of revenues), consulting and
engineering services provider with the
government of Canada as the key client
Strengthened Zylog's position in
Canada and gave access to orders from
the Canadian government
FY10 Matrix Primus
Partners
US US$ 15.82 mn E-governance services Strengthened Zylog's e-governance
vertical
FY10 Algorithm
Solutions Pvt Ltd
India Rs 17.5 mn NA NA
FY10 Strategic stake of
10.64% in Nova
Berhad
Malaysia Rs 59.5 mn Specialist in healthcare and e-governance
products and solutions
Enhanced Zylog's healthcare offerings
including an integrated hospital
management offering and helped in
entry into e-governance vertical
FY11 Mindwire Inc. Canada C$ 1 mn Professional IT services and staffing company
with the government of Canada as the key
client
Increased business from the Canadian
government
Source: Company



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Annexure: Financials

Source: CRISIL Research

Income statement Balance Sheet
(Rs mn) FY09 FY10 FY11 FY12E FY13E (Rs mn) FY09 FY10 FY11 FY12E FY13E
Oper ating i ncome 7,511 9,802 19,183 21,871 24,048 Li abil iti es
EBITDA 744 2,070 3,170 3,616 3,780 Equity share capital 164 164 164 164 164
EBITDA mar gin 9.9% 21.1% 16.5% 16.5% 15.7% Reserves 4,728 5,623 6,924 8,820 10,555
Depreciation 211 337 515 641 749 Minorities - - - - -
EBIT 533 1,733 2,655 2,975 3,031 Net wor th 4,892 5,788 7,088 8,985 10,720
Interest (390) 463 619 390 403 Convertible debt - - - - -
Oper ating PBT 923 1,270 2,036 2,585 2,628 Other debt 1,569 4,152 5,503 6,839 6,589
Other income 47 44 24 90 93 Tot al debt 1,569 4,152 5,503 6,839 6,589
Exceptional inc/(exp) (4) (0) (4) 378 0 Deferred tax liability (net) 6 23 22 22 6
PBT 965 1,314 2,057 3,053 2,721 Tot al l iabil it ies 6,467 9,962 12,613 15,845 17,314
Tax provision 120 286 608 983 803 Assets
Minority interest - - (2) - - Net fixed assets 620 1,008 1,690 2,063 2,563
PAT (Repor t ed) 846 1,028 1,452 2,070 1,918 Capital WIP 102 277 537 229 229
Less: Exceptionals (4) (0) (4) 378 0 Tot al f ixed assets 722 1,285 2,227 2,292 2,792
Adjusted PAT 849 1,028 1,455 1,692 1,918 Invest ments 1 57 60 60 60
Cur r ent assets
Ratios Inventory - - 9 - -
FY09 FY10 FY11 FY12E FY13E Sundry debtors 2,795 3,909 5,455 6,591 6,588
Gr owth Loans and advances 719 1,262 2,048 2,898 3,275
Operating income (%) 23.3 30.5 95.7 14.0 10.0 Cash & bank balance 2,095 2,715 2,996 4,155 4,984
EBITDA (%) (34.9) 178.4 53.1 14.1 4.5 Marketable securities 0 0 0 0 0
Adj PAT (%) 2.7 21.0 41.3 16.5 13.4 Tot al cur r ent assets 5,610 7,885 10,509 13,644 14,848
Adj EPS (%) 2.7 21.0 41.3 16.5 13.4 Tot al cur r ent liabi lit ies 685 1,214 1,853 1,822 2,056
Net cur r ent asset s 4,925 6,671 8,656 11,823 12,792
Pr ofi tabil ity Intangibles/Misc. expendi tur e 820 1,950 1,671 1,671 1,671
EBITDA margin (%) 9.9 21.1 16.5 16.5 15.7 Tot al assets 6,467 9,962 12,613 15,845 17,314
Adj PAT Margin (%) 11.3 10.5 7.6 7.7 8.0
RoE (%) 18.9 19.3 22.6 21.1 19.5 Cash flow
RoCE (%) 9.6 21.1 23.6 20.9 18.3 (Rs mn) FY09 FY10 FY11 FY12E FY13E
RoIC (%) 12.9 26.6 25.1 20.5 20.2 Pre-tax profit 969 1,314 2,060 2,675 2,721
Total tax paid (120) (269) (608) (983) (819)
Valuati ons Depreciation 211 337 515 641 749
Price-earnings (x) 10.3 8.5 6.0 5.1 4.5 Working capital changes (515) (1,127) (1,703) (2,009) (140)
Price-book (x) 1.8 1.5 1.2 1.0 0.8 Net cash fr om oper ations 544 254 264 325 2,512
EV/EBITDA (x) 11.0 4.9 3.5 3.2 2.7 Cash fr om invest ment s
EV/Sales (x) 0.1 0.9 0.6 0.5 0.4 Capital expenditure (882) (2,030) (1,178) (706) (1,250)
Dividend payout ratio (%) 6.8 11.2 10.6 7.2 8.1 Investments and others 335 (56) (4) 0 -
Dividend yield (%) 3.8 1.5 1.8 1.7 1.8 Net cash fr om i nvestments (547) (2,086) (1,182) (706) (1,250)
Cash fr om fi nancing
B/S r ati os Equity raised/(repaid) - 0 - - -
Inventory days - - 0.2 - - Debt raised/(repaid) 1,001 2,583 1,351 1,335 (250)
Creditors days 33 51 35 34 35 Dividend (incl. tax) (58) (115) (153) (173) (183)
Debtor days 136 146 104 110 100 Others (incl extraordinaries) 12 (17) 1 378 0
Working capital days 125 126 91 111 117 Net cash fr om f inancing 955 2,451 1,199 1,540 (433)
Gross asset turnover (x) 7.6 7.1 8.7 6.5 5.2 Change in cash position 952 619 282 1,158 829
Net asset turnover (x) 12.5 12.0 14.2 11.7 10.4 Closing cash 2,095 2,715 2,996 4,155 4,984
Sales/operating assets (x) 11.5 9.8 10.9 9.7 9.5
Current ratio (x) 8.2 6.5 5.7 7.5 7.2
Debt-equity (x) 0.3 0.7 0.8 0.8 0.6 (Rs mn) Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
Net debt/equity (x) (0.1) 0.2 0.4 0.3 0.1 Net Sales 4,766 5,012 5,136 5,004 5,828
Interest coverage (1.4) 3.7 4.3 7.6 7.5 Change (q-o-q) 0% 5% 2% -3% 16%
EBITDA 889 819 876 843 939
Per share Change (q-o-q) 64% -8% 7% -4% 11%
FY09 FY10 FY11 FY12E FY13E EBITDA mar gi n 18.7% 16.3% 17.1% 16.8% 16.1%
Adj EPS (Rs) 51.6 62.5 88.3 102.9 116.6 PAT 266 338 450 491 545
CEPS 64.5 83.0 119.7 141.9 162.2 Adj PAT 384 340 364 373 371
Book value 297.5 351.9 431.0 546.3 651.8 Change (q-o-q) 2% -12% 7% 2% 0%
Dividend (Rs) 3.5 7.0 9.3 9.0 9.5 Adj PAT mar gi n 8.1% 6.8% 7.1% 7.4% 6.4%
Actual o/s shares (mn) 16.4 16.4 16.4 16.4 16.4 Adj EPS 23.3 20.6 23.3 22.7 22.6
Consolidated quarterly financials



CRISIL IERIndependent Equity Research
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Focus Charts
Revenue and revenue growth trend EBITDA and EBITDA margi n trend
Source: Company, CRISIL Research Source: Company, CRISIL Research

Quarterl y sal es and EBITDA margin trend PAT and PAT margi n trend
Source: Company, CRISIL Research Source: Company, CRISIL Research

Fai r val ue movement si nce i ni ti ati on Sharehol di ng pattern over the quarters
Source: Company, CRISIL Research Source: Company, CRISIL Research

7,511
9,802
19,183
21,871
24,048
23.3%
30.5%
95.7%
14.0%
10.0%
0%
20%
40%
60%
80%
100%
120%
-
5,000
10,000
15,000
20,000
25,000
30,000
FY09 FY10 FY11 FY12E FY13E
(Rs mn)
Revenue Y-o-Y change (RHS)
744 2,070 3,170 3,616 3,780
9.9%
21.1%
16.5% 16.5%
15.7%
0%
5%
10%
15%
20%
25%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY09 FY10 FY11 FY12E FY13E
(Rs mn)
EBITDA EBITDA margin (RHS)
2,118 4,634 4,745 4,766 5,012 5,136 5,004 5,828
20%
15%
11%
19%
16%
17% 17%
16%
0%
5%
10%
15%
20%
25%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
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(Rs mn)
Quarterly revenue EBITDA margin (RHS)
849 1,028 1,453 1,692 1,918
11.3%
10.5%
7.6%
7.7% 8.0%
0%
2%
4%
6%
8%
10%
12%
-
500
1,000
1,500
2,000
2,500
FY09 FY10 FY11 FY12E FY13E
(Rs mn)
Adj. PAT Adj. PAT margin (RHS)
0
200
400
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800
1,000
1,200
1,400
1,600
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('000) (Rs)
Total Traded Quantity(RHS) CRISIL Fair Value Zylog
36.7% 36.7%
41.2% 41.2%
0.7% 0.4%
0.4% 1.4%
3.2% 3.1%
3.8%
4.8%
59.5% 59.9%
54.6%
52.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-11 J un-11 Sep-11 Dec-11
Promoter FII DII Others




CRISIL Research Team


Senior Director
Mukesh Agarwal +91 (22) 3342 3035 magarwal@crisil.com


Analytical Contacts

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Vinaya Dongre Head, Industry & Customised Research +91 (22) 33428025 vdongre@crisil.com
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