Dynacons Systems & Solutions Ltd – A growing IT company

Got this query on another thread on small companies.
Thought i’d share my response to the same here as well, as many visitors and participants might have the same queries on DSSL.

Here it is :

While Dynacons operates in an interesting sector and the topline and PAT growth have been impressive, I had the following concerns:
Low margin business
Receivables makes up 75% of assets on the balance sheet
Cash from operations has been consistently poor

Hence didn’t invest.

My response :

Yes, those are indeed the stand out points when looking at the company.
But that all broadly makes sense when you consider 2 major points :

1. Small Company.
   Almost all names are bigger, Im guessing at least double in size of this name.
2. Legacy Business but Private Clients + projects are long term.

Now, what made sense to me what how the company is winning deals. You can check the frequency of deal wins, and its a good flow for a small company, and the clients a huge.
I have no idea what the management does to win these deals, but they do win them.
And don’t you think they’d want to keep winning them ?

So, as long as they keep winning and improving on their client interactions ?
It is good. The company can grow.
Receivables, for them to be good, the company’s position in the value chain matters, small companies do suffer this way. Big inventory, Big Receivables, Big deal win timings etc.
“You need me, more than I need you” mentality is anyways prevalent in the Indian business environment (I have other businesses, hence speaking from experience). This also impacts the margins, but they have been growing. It was ~3% and now its ~5%.

The more it grows, the more it has a say in terms of pricing power, receivables and more.

For me its about the management. I keep seeing those “Deal Win’ updates ? its nice.

I AM INVESTED.