On May 19, 2023, the company had approved the issuance of warrants convertible into equity shares. As per BSE’s shareholding pattern, upon conversion of the said warrants, the promoter holding would increase to 35.18% (current: 28.56%).
Seems like a positive step towards increasing their skin in the business.
Link: https://www.bseindia.com/xml-data/corpfiling/AttachHis/509c91de-2b15-4700-9fbb-7fb557721013.pdf
However, couple of pointers to keep in mind:
- In the 3 concalls that they have done, twice the promoters have promised higher growth figures than they have managed to achieve.
June 2023
November 2023
- As per the FY23 annual report, Frog Data currently contributes 20% to the topline, however, it contributes only 10% to the PAT, as it has lower margins (NPM of 5.8%). This will be a key monitorable.
- The company is not paying substantial tax as of now, and as per the management they have another 2 years of tax shelter left. Post that, the net profit will have an impact.
However, the company is currently at INR 300 cr market cap, with a P/E of 12-13x (vs median Industry P/E of ~40x) and they have guided 25-30% growth this year for IZMO Ltd.
Frog Data contributes to ~25% of sales (as of H1-FY24), and if they manage to raise private capital in Frog Data at INR 650-800 cr valuation ($80-120 million) as suggested by the promoter, the rest 75% of the business would effectively be available to the shareholders for free. (the deal is expected to be closed by March’24 as per the management).
Disc: Tracking
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