Saurabh Mukherjea has added 3 stocks to the Marcellus Rising Giants PMS portfolio

Changes to the Rising Giants PMS portfolio (as of July 31, 2024)

Addition of CMS Info Systems Limited:
CMS is a business services company with leadership in cash management market, a growing presence in ATM managed services market, and now expanding into tech solutions (remote monitoring and software). On back of its scale and a strong balance sheet (net cash company with healthy return ratios), it is well placed to benefit from healthy ATM rollouts (capex heavy), increased outsourcing activity of support functions by banks and tightening regulatory compliance. Stronger growth in RMS segment and diversification into bullion-logistics and loan collections will drive revenue growth & diversification of revenues. The biggest risk is acceleration in replacement of cash by digital payment modes and hence material reduction in cash in circulation.

Addition of Coforge Limited:
Coforge is one of the largest Tier-2 IT services company with revenues of $1.1Bn in FY24. It provides services in application development, maintenance, cloud, and infrastructure management. Key verticals include Banking & Financial Services (BFS), Insurance, and Travel & Transportation, with BFSI accounting for 55% of revenue. Geographically, 48% of revenue comes from the US, while 39% is from EMEA.

The key strengths of Coforge include:
a. Strong large deals sales culture brought upon by the new CEO. As a result, both the average deal TCV and the number of large deals won increased. Coforge now boasts a meritocratic culture with incentives aligned to achieve desired large deal outcomes.

b. Stable delivery organization: Coforge now offers 16 service lines and close to being an end-to-end service provider. To foster a performance-based culture, increment range for the delivery organization were tripled. Resultantly, Coforge had an industry-leading average attrition rate of just 13% between FY18 and FY24.
The company has grown PAT at 21%/15% CAGR over the last 3/5 years (incl. inorganic growth).

Addition of Escorts Kubota:
With Kubota now controlling majority of the stake, we believe Escorts is at a cusp of gaining market share in the tractor industry because of the following reasons:

A. From FY20 to FY23, Escorts underwent a massive attrition (due to variety of reasons) and now the leadership team has stabilised.
B. After improving product quality, Kubota’s next target is to launch relevant products for the Indian market which helps to gain market share
C. Escorts is forming its own captive financing arm which is expected to be a market share booster.

Apart from the domestic market, Kubota intends to make India an export hub and export tractors to Africa, US and Europe markets. Driven by market share gains and consequent operating leverage driven margin improvement, we expect the company to deliver healthy earnings growth over the next 5 years.
Exit from Tata Elxsi largely due to better IRR expectations from the new entrant discussed above.