Reco Price: Rs 48.50
BSE Code: 590020
BSE Volume: 72518
Date: 29/11/2011

We had recommended Tera Software to our investors in Issue No. 12 dated May 2-June 5, 2011, when the scrip was trading at Rs 48.50. Our recommendation was backed by factors such as the company’s strong order book (2.30x of FY11 revenues) from e-governance projects (UIDAI), expected additional e-governance orders that reflected good revenues and earnings visibility, a consistent dividend payment history and last, but not the least, good valuations. While in our analysis, we had mentioned that the company did not pay a dividend, after our recommendation it did pay a dividend of Rs 2, resulting in a dividend yield of more than 4% (ex-dividend since August 18, 2011) at the recommended price.


Following our recommendation, we had reviewed the counter in Issue No. 19 dated August 29-September 11, 2011, when the scrip was trading at Rs 53. We had then asked investors to book partial profits. Currently, the scrip is trading at Rs 74.50. The primary reason behind the strong upward movement is the good financial performance of the company. After putting in a strong performance in Q1 FY12, the momentum continued in Q2 FY12 too. This resulted in a better show for H1 FY12, when the topline stood at Rs 86.04 cr and the bottomline at Rs 10.11 cr, as against Rs 42.84 cr and Rs 4.57 cr respectively in H1 FY11. However, the profitability figures are  already priced in, with the CMP discounting the trailing four quarter earnings by 10x. As the target has been achieved, we recommend that investors book full profits at the current levels.