MPS Ltd

I have initiated a position in MPS after having done a bit of research for the past 1 month on the publishing industry and reading through this informative thread thrice over.

Firstly, congrats for the members for identifying this turnaround during initial stages itself. There are very high chances of this turnaround further fructifying into growth story coupled with high return ratios of the business.

My summary:

1. Nishith Arora has fantastic business acumen, going by his MPS buy out, turning it around, other small acquisitions. A la Piramal. At the current stage the company is in, his eye for making that inorganic growth happen is crucial.

2. I liked the new structure now, Nishith concentrates on strategic acquisitions (for inorganic revenue growth) while his son Rahul on day to day operations (for organic revenue growth). Rahul has even moved to US to be closer to clients which should enable his objective.

3. At the current price, the stock is lower than the price paid by Goldman Sachs, HDFC Bank at the beginning of the year (836 INR whereabouts) – super timing with the stake sale and still promoters hold 68% (I like it).

4. Fair amount of re-rating is YET to come given the very high ROCE, Free Cash Flow, dividend yield, opportunity to grow within a slow growing industry (things would change I believe once publishing becomes easier with digitisation). I do believe that publishing industry is at cross roads. DIGITISATION is the way to go and the vendors will immensely benefit due to this. MPS is on the right side of it.

5. The risk reward ratio at the current price seems skewed towards reward disproportionately and is one of the major reasons for me getting into this stock.

6. We are at initial stages of this story and if organic growth even if it comes to 10-15% secularly and inorganic growth comes through 1 or more high ROCE and 1.x times sales, we are headed for stars. When this thread was started the story was in its Infancy.

7. Ethical promoters, excellent education background, entrepreneur family (Vandana Luthra of VLCC is Nisihth’s sister).

8. Risk here – Improper utilisation of raised capital, key client risks.

9. MPS looks like “Hawkins characteristics PLUS growth oriented promoters PLUS mini Piramals“. An explosive combination to have.

As stated earlier, I’m invested, so my positive rant could be due to this bias. So, do your own due diligence before any action on this stock and this is not an investment advice.