E2E Networks Ltd – Listed small Cloud computing player

Heard the latest concal for the quarterly result. Number are per expectations. But I’ve said it before and I’ll reiterate. The communication of the management does not instill any confidence at all. Not really happy with them on this.

There are no commitments, no transparency in numbers. I got in queue to ask a couple of questions but someone else asked before me so I dropped out. But the answers were far from satisfactory.

Very obvious questions like:

• As we are focused on AI/ML what part of our capex present and future will for it? – No clear answer. On being pressed, a couple of hundred crores. 100/200/300/500 crores? Over what time frame?

• The partnership with NVIDIA. Is it exclusive? Does it give us expedited access to hardware? Better pricing? – No clear answers. Kudos to the person who really drilled into this.

• What is our infrastructure capacity utilization like? What is the projection for expansion and usage in mid-long term? No clear answers.

• What’s their USP against hyperscalers? Lots of words, little meaning. – I actually think E2E doesn’t even compete with hyperscalers. Hyperscalers target EVERYONE from 5$/month spenders as well as 500million/month enterprise clients. E2E, as has been stated by the CEO himself, targets mid-spenders. So, they are more in line with Linode and DigitalOcean in competition who target small to mid size clients rather than AWS, G-Cloud or Azure.

The management says the growth can be lumpy (in the call) but stake all their performance on the Recurring Revenue numbers. So, what will it be? lumpy or stable, progressive recurring revenue?

I couldn’t believe when they said there aren’t clear guidelines for what constitutes churn within the clients and they don’t track that or the reason for the churn as well. They don’t track the usage of hardware for AI/ML as it’s not straightforward. That doesn’t make sense. All communication, PR and new features are geared towards AI/ML workflows and we don’t track usage, revenues, churn for that? On what basis are these decisions made then? They also go on to say the products are build on feedback (as part of their USP answer). If you don’t know why clients leave your platform (churn), how to do you build stuff via feedback?

I still hold the stock and have made good returns for far. But this isn’t a garage startup just winging it as they go. I think reaching a 500 crore m-cap, the company should lay out quantitatively where they plan to reach. Not just in revenues but in capex, opex, margins, etc. Layout the plan for the next 3-5 years and investors should be able to hold the management to that.

This would brand the management as transparent.

EDIT: If the management is reading this, I am a developer as well and I am very happy with the features being rolled out. if mapped 1:1 with Linode and DigitalOcean, I think we are at par or exceed their features. But please treat investors are stakeholders and not liabilities.