Government of India Enterprise entering into Security and surveillance SectorIndian Telephone Industry Launching Wholly Owned New Brand ” REIT ”Today the Market size of security and surveillance industry is whooping 75000 crores in 2016 with the growth of 28% CAGR and catering only 4% of the Population & expected to grow exponentially after Entering Government enterprise Brand.This is first Time any Government PSU is Entering into High Growth Rated Industry of security and Surveillance. Indian Telephone Industries Limited – A Government of India enterprise with Enriched experience of 68 Years in Manufacturing Excellence will launch a wholly Owned New Brand ” REIT” with state of the art Security and surveillance Products. With the expectation of Being a Government PSU Brand , We are assuming them to acquire 40% of the Market Stake in Government Sales and Open Market sales.With Government PSU Brand we are assuming that industry will Re organise and Structured in better way.* ITI LTD has bidded for Smart Metering tender from Energy Efficiency Services Ltd(EESL). EESL is the joint venture company`s of NTPC, PFC,REC, and powergrid under ministry of Power. We are L1. The approximate value of the order is about Rs 800 crore to be supplied in two to three years.Points to be discussed in respect of ITI Ltd :1. Freehold land in Balance Sheet is approx 2200 cr.what is the market value.2. Data Centre :a)Investment in 1st phase is 200 cr. what is the total investment in this.b) Benefits to accrue to the company3. Order book as on date and expected orders for GPON project under Bharat Net phase 24. MOU with HAL Have any orders trickled to the Company.5. ISRO tie up.Further development. Any more orders to come for future .6. Contract Manufacturing from Bharat Electronics Ltd.a)Defence productsb)POS machinesc)EVM for 2019 Electionsd)Set top boxes7. Office building on Magrath Road:-Value of premises and ongoing rent for the same.8. FPOa) when expectedb) how many shares to be offloadedc) money to be used for expansion or other purposes like debt repayment or return of grants to the Govt.9. Status of IOT10. Status and commencement of GST upgradation contract to the company as well as tie up with INFOR11. Setting up of Wi Fi hotspots in the country12. Total expansion and sources of funds13. 30% of procurement orders from BSNL and MTNL valued at what amount for the coming year.14. Development stage of 30 acres of land in Benguluru to be jointly developed with NBCC, value of the project and completion,status of the same etc.The old days of glory seems to be returning to PSU stock which once was the market leader in telephone equipments. Now it is working in various verticals. Recently the Govt is trying to revive ITI by giving it more orders which ITI is either doing by manufacturing or sourcing it through various vendors in India or abroad. This PSU has started seeing changes from March ’17 quarter where it posted record numbers. The loss making company posted profit of 305 crs. It also has order book of 1600 crs from various govt PSUs like Mtnl, Bsnl, Bbnl, Drdo, ISRO , Dot etc. The revenues are more than double in the past three years. 2014-15-650cr , 2015-16-1150 cr2016-17-1621cr and expected revenue for 2017-18 is 2700 crs. From a loss of 297 crs in 2014-15 they have done a profit of 305 crs in 2016-17 but with the help of GOI grant. Actual loss was around 56 crs. Thus year the company is poised to make actual profits by standing on it’s own feet without any grants.Going ahead ITI has support from the govt giving it grants to the tune of 4156crs to revive it’s financial health and manufacturing units too. ITI, which targets to make its first profit in 14 years this fiscal, will opt for contract-based hiring as it aims to reduce the workforce from its current 3,900 to 2,500 over the next three years.ITI was officially declared sick in November 2004 after it came under the purview of the Board for Industrial and Financial Reconstruction. At its peak, it employed 35,000 people.The ideals of the company have changed since it was set up in 1948, earlier, it was meant for employing as many people as it could in different regions. Now, with advancements in technology, fewer people have become the norm.The average age of employees is now 55 years. “With new technology, you need young blood and we have opted for a five-year tenure-based hiring. The company is aiming to bring down the average age within 2-3 years to about 34 years.”The state-owned firm, with the Government holding 94.86%, sees opportunities in the Centre’s initiatives such as Digital India, Make in India, Preferential Market Access and smart infrastructure coupled with technologies such as 5G, Internet of Things and sensor drivers. ITI has identified potential partners for the initiatives.ITI plans to even out its revenues from the three sectors which it focuses on. “30% of revenues will come from the telecommunications market, 30% from the services sector and another 30% from new technologies such as smart city and IoT. The rest will come from small services.”Some business verticals which the company is planning to start are as follows:According to the company, they are home to a huge telecom manufacturing facilities setup which startups in the country can make excellent use of. As of today, ITI is closely working with 22 startups including famous names like Cardiac Design Labs, Citrus Platform Solutions, Hanbit Automation Ltd, Yuktix Technologies Ltd etc. Most of the startups belong in the smart city technologies and IoT space. ITI helps the startups in manufacturing prototypes and even provide them a helping hand into getting in the market. The company is currently tying up with these startups on a revenue sharing model rather than going for a stake in the equity as the company believes the previous model helps them in pushing themselves in helping the startups to succeed.In addition to this, under the Indian government’s Swachh Bharath Mission, ITI is associated with the Ministry of Urban Development (MoUD) to install feedback devices at the public and private toilets so as to regularly monitor and maintain their cleanliness. In order to manufacture these devices, ITI is partnering with several startups and the volume of this business can help ITI in significantly turning around its fortunes.Online implementation Feedback devices for toilets under Swachh Bharat Scheme(Revenue st 945 ₹ per month per device) be installed at all toilets.can be a money making machine for the Co.Plans to invest 200cr to start data centre business which will be their second one.Co.can be a contract manufacturer for POS machines, Set top boxes, EVM s to BEL, etcManufacturing units at 6 prime areas in the country with the largest land bank among PSU’s.30% of the procurement orders from BSNL , MTNL and BBNL under Reservation Quota Policy.Chooses INFOR for speedier GST compliance and speedier decision support system.The telecom will be soon launching its very own Centre of Excellence for Internet of Things (IoT) so that it can easily engage with startups working in the area and together they can cater to the growing business opportunities in the Indian subcontinent. The 20,000 sq feet CoE will help the company in exhibiting its product under MoU with partners and startups.The company targets 7000cr army project to be implemented in next 10-13years. It may just be the start into this sector for the company.ITI Ltd., has floated a tender for appointing a Technology Provider who shall be ready to meet the BSNL tender conditions with respect to all activities like Supply, Installation, Commissioning, Operation and Maintenance of 25000 Public Wi-fi hotspots at BSNL‘s rural Telephone Exchanges on turnkey basis.The company holds 380 acres of land in Banglore on both hsides of the OlD Madras road.The company now plans to monetise it by giving it as short term lease to govt and private players. The value of this land parcel is around 6000-8000crs.ITI’s MOU with HAL for manyfacture of defence equipment has helped its foray into defence.ITI Limited Palakkad Contributes for ISRO GSLV MkIII Launch by tying up with ISROREIT India is also another initiative by ITI providing security and surveillance to the common man under Digital IndiaITI facilities also manufacture solar panels, li-ion batteries, HDPE pipes,etc.Looking at all these positive developments happening we assume that the company will regain it’s lost glory and should be among GOI s leading PSU. Although we have set a short term & mid term Target of 205-265, the company can achieve higher targets for the patient long term investor.Last but not the least the company also will be coming up with an FPO to reduce it’s stake from 94.86% to sub 75 %.Technically also there is a rounding bottom breakout which suggests there can be a smart upmove. Short-term target Rs 205. Mid term 265. Ultimate target is Rs 400 ++ – 450.Kotak Securities _ Technical pick ITI LTD Diwali Samvat 2074DISCLOSURE: The stock views expressed may be biased and for learning purposes, please do your own research before Investing or one may always consult his Financial Advisor Before Investing if any.