Allied Digital Services was battered in the markets, especially over the past 3-4 months, due to a combination of external factors and sluggish business growth.

In February this year, there was an income tax survey on the company, which was mistaken as a raid, resulting in a freefall in the stock's price.

In FY11, the company's revenues grew by 11.2 per cent to Rs 747.7 crore, while net profits fell by 6.8 per cent to Rs 90 crore. The results for the last three quarters have come in below expectations.

One of its large clients in the US was acquired by another company, and there is huge uncertainty on whether Allied Digital's outsourcing relation would continue with the new entity. Allied Digital had invested heavily in the project and has incurred an expense of $2.8 million relating to this.

This apart, there is also unpredictability in a government telecom project where it was L1 (lowest bidder), as it has gone for re-tendering. Because of the ongoing investigations in the telecom segment, there is uncertainty surrounding the deal. Allied Digital has also given a tepid guidance of just a high single digit growth in revenues for 2011-12. This has further dampened the sentiment around the stock.

The company's order book appears reasonable, with Rs 370 crore worth of projects to be executed over the next four quarters in the services segment and deals potentially worth Rs 110 crore to be executed in its solutions segment.

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