Kellton Tech - Smallcap in SMAC, ERP-BPM and IoT space

Kellton Technologies - Company offers end-to-end IT solutions, tech. consulting, product development in web, SMAC, ERP-BPM and IoT.

CMP: 114/-

Recently announced Q2 numbers... My Observations ....
1) Sales up 37% YoY and 7.8% QoQ
2) EBIDTA Margin improved to 14% from 13.8%
3) PAT up 38.5% YoY and 8.8% QoQ
4) Reserves and surplus has shot up from 65.5 crores in 31 Dec15 to 129.11 crores as of 30 Sep 16
5) Debt (Long term borrowings Short term borrowings) at 77.6 Crores
6) Current D/E at 0.5

Overall decent performance !!!!

Q2 Progress::
1) Acquired 10 new clients.
2) Achieved a major branding milestone by unifying all brands under Kellton Tech.
3) Enabled the digital transformation of one of the largest online payment processing company in the MENA region.
4) Designed and implemented enterprise solution to largest independently owned precast concrete company in the United States.
5) Powered the digital business transformation and consolidation for leading provider of pallet and container pooling services.
6) Lead the digital connected enterprise consolidation for a leader in consumer goods offering innovative products and services.

Management Commentary:::
Kellton Tech looking to raise USD 3-4 million;
Qualified Institutional Placement (QIP) work in progress FY17 revenue seen at Rs 625-630 crore, says Niranjan Chintam, Founder & Chairman of Kellton Tech Solutions.
Kellton Tech is in discussions with various companies for acquisitions, said Chintam.


What I like ::
Management is conservative which makes good sense. Also Management is not looking to add too much debt to grow inorganically. Strategic acquisition is what they are looking for.

Fund raising will happen through a combination of debt raising and QIP.
4 Million Dollars or 25 Cr of debt they could be raising this year taking the total debt to 100Cr for FY17.
D/E then would then be in the range of 0.6-0.65 from the present 0.5 and assuming further equity dilution through QIP. D/E 1 is manageable.

With 650 Crores Topline for FY17, we can expect PAT to be around 55 crores.If an acquisiton happens, they expect a revenue of 225Cr/Quarter going forward.

Note:- BSE IT Index 52-week high is 11775.50 (June 02nd 2016) and today's (03rd Nov. 2016) closing 9725.66 which is 21.07% fall (2049.19 points) from the peak !!!
Even if we assume, another 5-10% fall, I do feel IT sector will rebound in this downtrend sooner or later !!!!!

Kellton Tech - Market Cap: 536 crores, EPS 10.25, PE: 11.1 & Industry PE: 17.55 !!

Conservative target would be around 150-160 ... with future growth and strong management, Kellton tech should grow in leaps and bounds in the coming 2-3 years ahead !!!

Keep an eye on this stock !!!!!

Lets hope for the best...

 

Clutch comes up with interesting companies in various categories. Kellton Tech finds a place here.

https://clutch.co/it-services/india

 

These numbers are excellent esp. considering the current state of affairs in the IT space. I have considered this stock few times in last few months, but could never develop enough conviction. Has someone researched on promoter background and corporate governance?

 

Over the last 15 years, my experience with small cap IT stocks has always been bad. Prithvi, Cranes, Aftek, Subex to name a few. They will shine for a year or two and then get in all sort of trouble and fade away. I think IT requires very different skills to start and serve a few clients as compared to scaling up into a truly growth company.

 

https://www.newindianexpress.com/ci...a-Bumpy-Ride-for-Chintam-Brothers-795444.html

“The idea is to create value and move on if we get a right price. We will not hesitate to exit if the timing is right,” Niranjan said.

Acquisitions
2010: Acquired Tekriti Software, a software services company focusing on web/open service

2011: Acquired MCS global, Inc. US-based IT consulting company

2012: Acquired DbyDX software, a mobility solutions company

2013: Acquired Supremesoft Global Inc, Inc.US based IT consulting company

2014: Acquired Vivos Professional Services, LLC, USA focusing in the life sciences and healthcare service

2014: Acquired eVantage Technologies Inc., US-based IT consulting company

2015: Acquired US-based Prosoft Technology Group.

ProSoft acquisition has strengthened Kellton's ERP, EAI & BPM space. And Vivos professional services got them expansion in verticals of Healthcare & life-sciences.
Expanded global foothold. Opened and acquired new offices.

Serving clients from startups to Fortune 500 companies.
Kellton Tech powers 30% of the 21 billion dollar eCommerce market in India through its clients.

FY17 revenue seen at Rs 625-630 crore as per Chintam and targettign towards Rs 2000 crore annual revenues in the next 3 years ...

Kellton Overview:
The Company offers information technology (IT) solutions, strategic technology consulting and product development services in Web; social, mobile, analytics, cloud (SMAC); enterprise resource planning (ERP) - business process management (BPM), and Internet of things (IoT) space.

Its product includes KLGAME, which is a gamification, analytics and messaging engine that provides backend system. It offers services, such as offshore product development, research and development, IT consulting services, analytics and information management, resourcing, Internet marketing services and managed services.

The Company serves clients across a range of verticals, including retail; travel; e - commerce; education; hospitality; advertising; m arket research; manufacturing; consumer goods; logistics; supply chain management (SCM); banking, financial services and insurance (BFSI); lifestyle, and non - profits.

Kellton Tech is steadily expanding its offerings portfolio through organic growth and synergistic acquisitions. It has strengthened its foothold in technology and through its expanded workforce it is capable of offering a diverse range of IT services and solutions.

Today, its offerings include I-SMAC (Internet of Things, Social, Mobile, Analytics, Cloud), Enterprise Resource Planning, and Enterprise Application Integration apart from the its other traditional offerings.

INDUSTRY OVERVIEW:
India gave a decisive mandate for a strong government last year and the new government has since been actively working to inspire global confidence in India’s growth story and IT industry has been accorded special focus in the new scheme of affairs.

The recently launched Digital India Campaign would open up a plethora of opportunities for IT companies.

The vision of smart cities is a challenge that Indian IT industry is well - equipped to tackle and this is a golden opportunity to demonstrate its technological prowess while contributing to the nation - building.
Now,Indian IT companies can look forward to serve European customers too.

India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on - shore and off - shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India.

Social, mobility, analytics and cloud ( SMAC) are collectively expected to offer a US$ 1 trillion opportunity. Cloud represents the largest opportunity under SMAC, increasing at ~30% CAGR to around US$ 650 - 700 billion by 2020. The social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market by 2020. The Indian e-commerce segment is US$ 12 billion in size and is witnessing strong growth and there by offers another attractive avenue for IT companies to develop products and services to cater high growth consumer segment

Kellton Tech’s R&D efforts (whose latest brainchild is KLGAME™) have been handsomely rewarded even as it prepares itself for the long haul.

Yes, one has to view 2-3 years down the line to realize Kellton's potential.

 

Niranjan Chintam, founder and chairman of Kellton Tech Solutions, told NDTV Profit that their digital business is now 49 per cent of the revenues. They are looking to improve their position in the APAC region, he added

https://www.ndtv.com/video/business...egion-kellton-tech-solutions-437334?site=full

 

Kellton Tech ranks 19th on Deloitte Technology Fast 50 India !!!!

Kellton Tech Solutions announced that Kellton Tech, a global leader in digital transformation and enterprise solutions, has been ranked 19th on the Deloitte Technology Fast 50 India 2016, a ranking of 50 fastest growing technology companies in India.

The rankings were based on the percentage of growth in fiscal year revenues over three years.

https://www.business-standard.com/a...-technology-fast-50-india-116111500464_1.html

 

Kellton Tech is the ONLY public listed IT Services Company to be ranked as fastest growing technology company in the Deloitte Fast 50 for the year 2016.

 

Kellton Tech. latest Corporate video is out. Watch It !

 

MCS Global, Inc., an information technology (IT) consulting company, provides IT and staff augmentation solutions to various organizations in the United States. The company offers enterprise integration,
enterprise data management, enterprise workflow, Business intelligence, ebusiness, and CRM solutions; and mobile enablement solutions in the areas of wireless portals, commerce, workflow, and entertainment.

It also provides outsourced product development solutions in Web 2.0, consumer Internet applications, mobile applications (iPhone, iPad, Android, and BlackBerry), social network technology, and custom software development solutions. In addition, the company offers consulting, systems integration, system outsourcing, resources, support, and training services; and undertakes fixed fee projects, as well as
provides a team of developers, QA, project managers, system administration, and designers on a monthly retainer basis. The company is based in New Brunswick, New Jersey with additional offices in offices in New York; New Jersey; Washington, D.C.; and India.

Hope this acquisition turns out to be a profitable one for Kellton Tech. in the coming days.

 

Kellton to focus on digital technologies

Developing fitbit-like device for public health sector; plans acquisitions.
The company is looking at acquisitions in the areas of artificial intelligence and machine learning space.

https://telanganatoday.news/kellton-focus-digital-technologies

 

Technical chart ::

 

PayTM merchant app developed by kellton tech. and also Upay dealing is done by Kellton.

MARKET CAP - Now @ (RS CR) - 616

 

Artificial Intelligence, IoT, B2P, BOT2P, P2BOT, Social, Mobile Analytics & Cloud are the key IT investment areas for 2017...

Why 2017 Is the Year to Invest in Artificial Intelligence Stocks
AI is reaching an inflection point -- and investors should take notice now.

Artificial intelligence (AI) is one such opportunity where companies are making big bets on it and where the research backs up its potential. And if AI pans out the way many are thinking, then 2017 may be a very good year to get on board with this technological shift.
In 2016, the AI market was worth just $644 million, according to Tractica. This year, that amount will nearly double and then grow exponentially from there. Take a look:




Clearly, we're still at the beginning of AI's revenue possibilities, and its opportunity will accelerate over the coming the years until it reaches $37.8 billion less than 10 years from now.

Growth in the AI market will be spurred on by many large tech companies that implement AI into their current businesses. For example, Facebook (NASDAQ:FB) uses its own internally developed AI programs to read the posts we put on Facebook and understand the context they're written in. The company's DeepText program reads thousands of posts in just seconds and does so across 20 different languages. Facebook also uses deep learning to tag our friends in photos, and is even using AI to identify people (and their voices!) in videos.


But AI is expanding its reach outside of the technology sector as well. There's plenty of talk about self-driving cars these days (I've done my fair share) and that's because the number of vehicles worldwide with some level of autonomy will hit 76 million by 2035 -- and be worth $77 billion by that year.

That growth is being fueled, at least in part, by AI. NVIDIA Corporation (NASDAQ:NVDA) is using its graphics processors (GPUs) to create some of the most sophisticated image processing supercomputers, like the company's Drive PX 2. The computer is being used by 80 automakers and auto suppliers already, and Tesla (NASDAQ:TSLA) recently said that it would use some of NVIDIA's technology in its next version of its semi-autonomous Autopilot driving feature.

Tesla is itself becoming a leader in AI technologies, and back in October, the company posted a video of its self-driving AI driving a person around in one of its vehicles -- completely hands-free -- as it navigated stop signs, bicyclists, and foggy roads.


OK, so technology companies are obviously betting on AI's future, and NVIDIA is proving that the automotive sector will bank on AI as well, but it's important to note that governments are betting on AI's growth as well.

China announced last year that its government will invest in new AI technologies over the next three years, as it tries to create its own $15 billion AI market. And even the U.S. government has taken notice of China's recent focus on artificial intelligence. In a report released back in October, the White House said that Chinese scientists are publishing far more AI research than American scientists and that their work is being cited more often. The U.S. then urged more AI research and development spending in order to catch up and improve economic growth.

The South Korean government recently turned its attention to AI as well. After Google's DeepMind AI beat a South Korean grandmaster Go player in an exhibition match in Seoul, the country pledged $863 million to develop more AI technology and called on private companies to invest even more.

There's no turning back now
With so many companies (and leading world powers) focusing their attention on AI, there's no stopping the momentum now. Investors waiting around to see how AI plays out could be left in the dust, as this technological shift begins to speed up even faster this year. Of course, there's no guarantee that 2017 will be the best year to invest in AI. But if all of the AI focus from 2016 spills into this year, then it certainly looks like a good bet.

https://www.fool.com/investing/2017/01/16/why-2017-is-the-year-to-invest-in-artificial-intel.aspx

 

FII - Grandeur Peak Fund added 15,78,726 shares 3.35% latest december'16 shareholding data...



Grandeur FII - From Utah To China: Meet The $2.6 Billion Fund ....



https://www.forbes.com/sites/liyanc...-that-invests-like-missionaries/#51261de63942

 

Kellton Tech: Q3 Results... YoY
Income: 158.2 cr vs 116.5 cr, Up 36%
Net Profit: 13.96 cr vs 10.12 cr, Up 38%
EBITDA: 22.1 cr vs 16.46, Up 34.2%
EPS: 2.94 vs 2.33, Up 26%

Kellton Tech: Q3 Results... QoQ
Income: 158.2 cr vs 151.2 cr, Up 4.7%
Net Profit: 13.96 cr vs 13.28 cr, Up 5.2%
EBITDA: 22.1 cr vs 21.2, Up 4.2%
EPS: 2.94 vs 2.8, Up 5%

Kellton Tech: 9M FY17
Revenue: 449.9 cr vs 331.2 cr, Up 35.8%
EBITDA: 62.7 cr vs 46.0 cr, Up 36.2%
Net Profit: 39.4 cr vs 28.2 cr, Up 39.5%



https://corporates.bseindia.com/xml...0AC740_DA79_4753_B7B6_2CF5210649E3_173145.pdf

EPS.. 10.86 at CMP 117 stock is trading at 11 Forward PE which is more comforting...
With QIP ++ any NEW acquisition news.. will help the stock price to move up ... but Management have to start delivering the promises ...625-650 cr in FY17-18 but yes Demonetization effect also .. I feel one should give more time and space for company to perform.

 

Kellton Tech looking at Rs 2000 cr of revenue by FY20-21

We are targeting Rs 625-650 crore of revenue in FY17, says Niranjan Chintam, Founder & Chairma of Kellton Tech Solutions.

Speaking to CNBC-TV18, he said that they target EBITDA margin at 16 percent, profit after tax (PAT) margins at 10-11 percent in three years.

https://www.moneycontrol.com/news/r...-at-rs-2000-crrevenue-by-fy20-21_8501801.html

 

Kellton Tech::: Q4FY17 Conference call Notes:

· Added 9 new clients in the quarter.

· Orderbook: 6 Months visibility. Average deal size has gone up by $100k. Managed to reduce the number of customers by a only a handful. Hope to reduce the number of customers in FY18 by a more significant number, while increasing the revenue.

· Lenmar acquisition done for customer base (BNP Paribas, Deutsche Bank) to increase the revenue share from the BFSI segment (BFSI segment adopts newer technologies faster than others). Lenmar has $11M Revenue, 10% EBITDA.

· Total Headcount: 1400. Increase in Headcount in the quarter: 130 - out of which 100 from Lenmar (20% on H1B Visa), 30 hired in India (People hired from traditional IT will take about a year to be productive in digital technologies, & hence the hit on standalone margins this quarter).

· Technology excellence Group in Gurgaon is always on the lookout for new and emerging technologies. If we invest in 2-3 emerging technologies, hope is that one of them will pay off. Forayed into Artificial Intelligence, Block chain & Deep Learning which already have paying clients.

· Competition: 1. With regards to Indian IT Biggies: A Bank in Ireland has Indian IT Biggies working on their traditional IT, but has asked Kellton to come up with their digital transformation/strategy. 2. Smaller companies have deeply specialized niches, but they can't do a holistic big picture digital transformation like Kellton.

· Forex Pressure: Majority of loans in dollars, hence a natural hedge

· QIP/Fund raising will be done only when the market sentiment towards the IT Industry improves. Acquisitions, if any, will be done from internal accruals and debt (Debt is easily serviceable as of now, but don't want to keep on taking debt to make acquisitions). D/E at 0.6 is same as last year although the debt in absolute terms has gone up.

· Increase in promoter Pledge to raise debt for Lenmar acquisition. No other tangible assets for an IT Company to raise debt from a bank.

· UP Govt still finding its feet, but they are positive about the mSehat platform & may increase it to beyond just 5 UP districts. They also want to use the platform for other services. No specific timeline on when this might happen. Talking to other states to implement mSehat. There are other platforms which have been built for other states which can be leveraged and replicated in any other state. Marketing will done this year.

· FY18 Guidance: 15-18% organic revenue growth, no guidance for inorganic growth.

· As of today still maintaining the 2000 Cr revenue, 16% EBIDTDA, 9-10% PAT margin guidance for 2021.

 

Kelton looks like good stock with high risk reward ratio.