Tulip management has left investors blindfolded so were are u heading

Key Points of Tulip Telecom new Data center:

Tulips new data center is spread over 900,000 sq ft. The server built-up area is close to  45,000 sq ft. Every floor plate has a capacity of around 20,000 sq ft or up to 600 racks in 6 kV per rack.

Tulip Telecom is expecting to generate around 1,000 crore of annual revenue in 3 years and has already bagged 3 deals worth '600 crore on annual basis from HP, NTT, and IBM.

Tulip already has  5 data centers in the country located in Mumbai (2), Delhi (1), Bengaluru (1), and Kolkata (1).

Company has partnered with EMC to offer storage as a service .

Company could also provide disaster recovery and managed services in near  future.

Data center is based on TIA 942 standards.(TIA 942 is the first standard to address data center infrastructure. It covers the various aspects like space/layout, cabling infrastructure, redundancy, environment conditions, energy, etc.)

Co has meticulously designed this center on 3 major criteria-power, cooling, and space.

Data center has received government sanction for receiving up to 40 MW power, and it has up to 7.5 MW power available, while the usage is around 4 MW only.

TDC implemented closed containment cooling system, here the entire rack space is in a glass enclosure that maintains the temperature of the confinement.

There are very early separate ad (VESDA) pipelines to detect any change in chemical composition in air and alert beforehand, and second line of pipelines carrying inert gas that can automatically decompose into natural gas.

It has 4 towers, with NOC in the first floor, warehouse and staging area available on the ground floor. It has 1,500 seated space available as DR center for the client

Key points on FCCB mess:

• In August2012 company wnated to issue a five-year CB to fund a redemption later osf the same month. Investors were baffled by including potentially misleading terms and by revising its offering to give a rare conversion discount. Even with the prospect of an instant gain for investors, the deal was still not covered after a week of bookbuilding.
• When it launched on August 7, with a base deal size of US$75m and an option to increase to US$100m, the conversion price was indicated at Rs110 (US$1.98), a 9.1% premium to the shares’ August 6 closing price on the NSE. This was, however, only a 4.7% premium to the closing share price on August 7, after the stock rallied while lead manager Elara Capital was building the book. There are annual resets to the conversion price available, with the floor price for conversion set at Rs101.8.
• the term sheet said that the 5.875% CB had investor puts on the third and fourth anniversaries of issuance. Indian regulations do not allow puts before the fifth year, but the term sheet said the company planned to apply for an exemption from the Reserve Bank of India.
• The credit spread assumption was given as 1,000bp, implied vol was 30% and stock borrow cost was 3% – although given that stock borrow was almost impossible to obtain, most investors were using 5% as the theoretical cost. No asset swaps were available. After failure to attract investors on first attempt.
• On August 8, the deal was relaunched , PUTs were dropped from the new term sheet. This time the conversion price was given at Rs101.08, 3.8% below the new reference price of Rs105.1, the August 7 close, leaving the bonds already in the money at the time of launch.
• The CB was still not covered at the base size at the end of last week of August, but a source close to the deal was hopeful it would close early same week. Existing holders of Tulip’s outstanding CB were said to be the main bidders, which led some to question why the deal had not been structured as an exchange offer in the first place, rather than risking alienating bondholders.
• Tulip Telecom completed its new five-year convertible bond after bookbuilding for more than a week on 20th Aug 2012, but the deal closed smaller than originally expected. Tulip had targeted a US$75m fundraising with an option to increase to US$100m, but, in the end, it settled for a US$50m print.
• On other hand due to consistent drop in Stock price it's fallen badly to near to it's IPO levels. It gives good buy opportunity who would like to take risky bets.

My Thoughts:
Company has lost it's market value due to poor management of Capex expenditure.
Also FCCB issued 5years before when it came to conversion Rupee had lost 15% in just one year.
Now such simulation would have not been done by Investment bankers who have guided the management of Tulip during Capex funding.
However Infrastructure that company has build will have significant demand in next 5years and therefore it's worth a investment bet.

• I personally invested at average price of Rs 50/-... with hope that if all turns well after the dark clouds pass over we can see a returns similar to Hawkins Cooker in next 5years. It's perfect lottery ticket.
• Management stake will be around 23% due to constant pledging and lidquidation by the Financers.
• STCI has been converting into it's stake than offloading in market.