Tulip cracks expansion code

May raise money as it spreads VPN net, takes up telecom

MUMBAI: Tulip IT Services, India’s largest IP-VPN (internet protocol — virtual private network) player, would look at raising additional capital.

The company is exploring business opportunities overseas and readying a blueprint to become a unified telecom player.

Within two years of entering the VPN space, the Delhi-based company has become the largest player, cornering 28% market share, ahead of Sify (22%), according to research house Frost & Sullivan. Tulip aims to increase its VPN coverage to every nook and corner of the country in two years.

H S Bedi, Tulip’s chairman and managing director, said, “We are in 110 cities now and by end of next year, our network should reach the 600,000 odd villages of our country. To expand network to this kind of reach, we will have to raise money, though we haven’t firmed up a plan yet.”

From being a hardware and software reseller just a decade back, the company has come a long way indeed. It moved to network integration, where it is currently the fourth-largest player, behind Wipro, HCL Comnet, and Datacraft.

The contribution of VPN business to the company’s revenues is on the rise. In FY07, network integration, with single-digit margins, accounted for 63% of the pie. For the quarter ending December 31, though, its contribution has fallen to 45% even as VPN margins have climbed to the thirties.

Bedi’s vision of reaching 6,00,000 villages seems very achievable when viewed in the light of the company’s next big game plan — telecom. Tulip has bid for six telecom circles under the unified access service license.

“All future telecom networks would be on next generation network (NGN) and our network is already NGN. Our belief is, voice can ride on NGN and hence we can roll out voice network on our network,” Bedi said.

“We could provide voice service or even make our network available to other telcos to roll out their service,” he said. For this venture, too, additional funds would need to be raised. “Our next target is to take on total outsourcing deals.

Currently, with NI and VPN, we have about a quarter of the IT spend and our target is to aim for the rest also. Hence, we are looking at managed services and remote infrastructure management in a big way,” Bedi said.

The company is looking at entering the remote infrastructure management space with a buy, possibly in the US or Europe. About $40 million of the $150 million proceeds from its recent foreign currency convertible bonds issue is earmarked for acquisition.

A domestic player so far, Tulip is now setting its sight on foreign shores.

“We are looking at setting up VPN network in emerging economies like South East Asia, West Asia, and Africa. It would make sense to go along with a local partner there. By next fiscal, we should have a strategy in place,” he said.

g_rabin@dnaindia.net