I was looking at annual metrics.
Look at the cash flows. Almost 20 cr of operating cash flows. 18.something paid out as dividend. About 50 lakh of Fixed assets purchased last year (from CFO), 45 lakh worth of laptops bought last year(presumably for employees; from AR):
So, i expect there to be laptops worth 70 lakhs or so to be added this year. Ex of this, the dividend distributed is 95% (18.4/19.3)
One question people always ask me about this one is why their ROE & ROCE & NFAT is so high. Well, that’s coz
- They don’t have a lot of PPE (fixed assets like buildings, furniture etc). They lease almost everything. To me this indicates a very pragmatic management rather than looking to deploy capital into areas which are non core for the company.
- When they do buy laptops, they depreciate these aggressively. See the same screenshot above for depreciation for laptops, The depreciation is over 3-4 years. So PPE is always kept in check.
- We know they work for cloud providers so it is reasonable to expect that they use cloud based coding environments & thus have no need for server racks etc.
- Since they do not retain profits as reserves but rather distribute it as profits, of course company will have very high ROE. Would you rather have company keep around 20cr on balance sheet & bloat up book value & thus have a ‘normal’ ROE & company give out profits as dividend & has a low book value & return actual cash to the shareholders?
- Cloud companies do not need too much capex or equity book value. Maybe just laptops. Everything else can be leased. THis is the reason for high ROE.
- From my understanding of talking to investors who attended an investor meet in Mumbai, company is least interested in inorganic acquisitions as long as they can grow organically at 30% or thereabouts.
Disclaimer: invested, biased
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