Kalpraj Dharamshi, the veteran value investor, is a textbook example of modesty and humility. When Ramesh Damani asked him the secret of his phenomenal success in the stock market, he unreservedly credited Rakesh Jhunjhunwala and Radhakishan Damani, the living legends of the stock market, for providing him guidance and tutoring him on the fine art of finding multibagger stocks.
Kalpraj also confidently asserted that there are “at least 100 Ten-Baggers And Ten 100-Baggers stocks waiting to be discovered” by investors if they are prepared to roll up their sleeves and do hard work.
Since then, inspired by Kalpraj Dharamshi’s words of wisdom, we have been on the quest for such multibagger stocks.
SQS India BFSI is one such stock. As of 31st December 2015, Kalpraj Dharamshi held 200,000 shares while Hemang Raichand Dharamshi held 150,000 shares. Ravindra Dharamshi held 1,00,000 shares as of 31st March 2015 which probably continues unchanged to date. This means that the total holding of the Dharamshi family in SQS India BFSI is 4,50,000 shares, worth Rs. 41 crore at the CMP of Rs. 923.
SQS India BFSI was discovered by Daljeet Kohli in April 2014. At that time, SQS India was known as Thinksoft Global Services. Daljeet had the clairvoyance to realize that the takeover of Thinksoft by SQS, the European software behemoth, would result in a “game changer” and catapult Thinksoft’s fortunes to great heights.
Daljeet was right because immediately after the takeover, SQS has spurted from Rs. 370 to about Rs. 900, resulting in spectacular gains of about 150%.
Aashish Tater of FortuneWizard.com has now taken over the mantle and recommended a buy of SQS India BFSI on the ground that it has “huge potential” and is a “potential 10-bagger” stock even from the present levels: This is what he says:
“SQS India BFSI is a part of SQS BFSI Germany. People have taken a myopic view on this particular sort of business, but we regard it as one of the 10-baggers in our report when we first initiated this particular stock. We feel this has got huge potential. If you see the entire business, they are into software rating and also software testing. If you see SQS BFSI Germany and the analyst report, they sound extremely bullish on the parent itself.
When I chalked down the major reasons, this can be a huge beneficiary of software rating getting mandatory because you cannot ask an IT company to test its products and rate it over its competitors. If you have an independent player who can do that, the business is infinite and cannot be put into excel because if I was going through that Nascom thing, it was somewhere around USD 15 billion opportunity and where only 3-4 major players are there of which the parent and the kid SQS BFSI India, even if they are able to garner 10-15 percent, that will be a huge opportunity going forward.
On valuation front, there will be a 40-45 percent jump in terms of topline and bottomline for the SQS India parent. Similar numbers are expected even from SQS BFSI India. If that happens, the stock on the forward basis trades at somewhere around 25-24 odd mark. They have been paying consistent dividend. Once they took over from Thinksoft Global because it was Thinksoft Global before and it had become a multi bagger, but we still feel that it has got huge potential to go up.
Our target of over next three years can be a potential multi-bagger, where we have a conviction target of almost 5x even from current level. But I would be, say from this year perspective over next 6-8 months have a target of Rs 1,500 on the stock.”
Aashish Tater’s logic makes sense. SQS India is still a micro-cap with a market capitalisation of only Rs. 981 crore and so it does have a long way to go with the benign backing of its German behemoth parent.
However, we must also note that Daljeet Kohli has got somewhat jittery at the steep rise in the stock price. SQS India reported “soft” Q3FY16 results and so Daljeet has recommended a “hold” to enable the valuations to catch up with the price of the stock.
The bottom line is that we have to keep an eagle eye on SQS India and wait for a green signal from Daljeet before we make our move!