Thats a nice observation. First thought as I look at the charts and the parellel lines is, if a stock has been in a constant upward trajectory, you can always draw two parallel lines. Unless, there is some indication on how long that channel will last (which I think as investors, everyone wants to know), these charts are unactionable as almost all rising stocks will have this pattern. I am a newbie to technicals, and willing to be wrong here

@avneesh can you comment? Would really appreciate your perspective.

ITIL last reported net was 20Cr.

Assuming they do a 25Cr no ans you give a 20x earnings 500Cr / 475Cr should be fair value as on today.

Lets the merger details come in on there special meeting so ratios would be out
, unsure that has happened .

It looked good at current valuation but after the annual report, there is some traction and promotion going on in social media platforms, so be a little skeptical about it.

I went through RHP and AR today and concluded that if executed as per targets, the company is indeed cheap on valuation front. On receiving 33 cr order from railways 2 weeks ago, the company mentioned 477 cr orders to be completed within 15 months.

The management is decent, customer concentration is bad as 60-70% dependent on Vindhya Telelinks under Jal Jeevan Mission.

The business has also changed a bit in FY 24 vs FY 23. FY 23 had higher margins and 36 cr from services while margins cooled down to industry levels and sale from services fell to only 11 cr. As per concall PAT would be between 10-13% which is in line with FY 24 margins.

The company follows IND AS and is aggresively providing for credit loss allowance which is strange for a small SME company as there is no tax deduction available. In 2 years they have provided 6.5 cr worth of allowance. They are deducting it from trade receivables, so any moment on opposite side cannot be determined. Meanwhile they are also providing for bad debts and not adjusting it against Bad debt reserve.

One strange is this:

The company is providing loss allowance on unbilled revenue. This makes no sense to me. Why to book revenue and anticipate loss when it is not yet billed?

As mentioned earlier, company is at a good price if execution is done with stable margins. If that is to happen the movement of trade receivables will be the only concern atleast for H1 & H2 FY 25.

Disc: Under watchlist

The Securities Premium Reserve (also known as the Share Premium Account) is an account that represents the amount received by a company over and above the face value of its shares when it issues them. This premium is recorded in the balance sheet under the shareholders’ equity section.

Significance of Securities Premium Reserve:

1. Capital Cushion: It acts as a financial buffer or cushion for the company. Since it’s a part of shareholders’ equity, it can be used to absorb losses or support the company during financial stress.

2. Reflects Investor Confidence: A high securities premium reserve indicates that investors are willing to pay more than the nominal value of the shares, reflecting their confidence in the company’s prospects.

3. Non-Dilutive Capital: The premium is a source of funds without diluting the ownership stake of existing shareholders, as it doesn’t involve issuing new shares but rather a premium on the existing ones.

Uses of Securities Premium Reserve:

The Companies Act, 2013 in India, specifies that the securities premium reserve can only be used for specific purposes:

1. Issuance of Fully Paid Bonus Shares: The securities premium can be used to issue fully paid-up bonus shares to the shareholders. This increases the share capital of the company without requiring additional investment from the shareholders.

2. Writing Off Preliminary Expenses: Preliminary expenses incurred during the formation of the company, such as legal fees, registration fees, and promotional costs, can be written off against the securities premium reserve.

3. Writing Off Debentures or Preference Shares Issue Expenses: The securities premium reserve can be used to write off expenses, discounts, or commissions incurred during the issue of debentures or preference shares.

4. Redemption of Redeemable Preference Shares or Debentures: The securities premium reserve can be utilized to pay off premium amounts payable on the redemption of redeemable preference shares or debentures.

5. Buy-Back of Own Shares: The reserve can be used to finance the buy-back of the company’s own shares, subject to compliance with the relevant regulations.

Restrictions on Use:

• Dividend Payments: The securities premium reserve cannot be used for paying dividends to shareholders.

• General Purposes: It cannot be used for general corporate expenses or to cover losses, except under specific conditions such as writing off capital expenses.

Accounting Treatment:

The securities premium reserve is recorded under the “Reserves and Surplus” section of the shareholders’ equity in the balance sheet. It is not considered part of the free reserves and hence, cannot be freely distributed as dividends.

Conclusion:

The Securities Premium Reserve is a crucial part of a company’s financial structure, providing flexibility for specific strategic financial activities. Its restricted uses ensure that the funds are preserved for enhancing shareholder value or strengthening the company’s financial position rather than being utilized for operational or non-strategic purposes.