Buy Nelco: Equity99

Sumit Bilgaiyan

Nelco has one major business line, which is VSAT service. Nelco is one of the major VSAT service providers in India and is amongst the top three players in the country.

Nelco focuses on providing highly reliable data connectivity solutions across remote parts of the country for the B2B sector using its VSAT services. The company is leveraging the increasing focus of some of the important industry segments in expanding to the remote locations, e.g. the Banking & Financial Services, Renewable Energy, Mining, offshore Oil & gas exploration etc., where the deployment of VSATs is likely to further increase in the years to come.

The company is also evaluating the various government initiatives which are based around expansion to the remote villages across the country which require reliable VSAT connectivity, and will participate in these selectively.

The VSAT industry is fast expanding globally due to advancement in technology, which has opened up many new growth sectors like mobility services, mainly for aero and maritime communication. The advancement in antenna technology is further revolutionizing this industry.

With smaller foot print flat panel antenna, many new applications are evolving for VSATs like connected cars. While the aero and maritime communication services are fast growing sectors for the VSAT industry globally, these services are not yet offered in India due to regulatory restrictions.

The company has made its applications to the government for the necessary regulatory clearances for offering these services in the country and plans to launch these services once the necessary clearances are obtained.

The VSAT industry in India will more than double in two to three years’ time once the licence for offering maritime and aero communication services are given. Looking at this macro change, we are recommending a buy.