MPS Ltd

Hi Donald,

I think you have misunderstood my point….I am not saying that management is saying any lies or something…infact I have been on record in this thread saying that management led by Mr. Nishith Arora has been one of the best and most ethical management I have seen in mid-cap cos…….otherwise MPS would have not formed more than 20 % of my family portfolio……but, some facts are facts that we need to accept…..as I have said in my last post and I repeat that ‘severe’ pricing pressures (which lead to good volume growth but muted value growth) seem to be absent in reasonable peers….SPS, I told before also, could be beneficiary of its parent….

Rgdg., Newgen, my analysis makes me believe that it is in the similar area as MPS (If I remember correctly, even Mr. Arora has told this in the MPS’s initial concalls)…..
link that you seem to have provided www.newgensoft.com — is this the same co. or affiliated co. of Newgen Knowledgeworks ?? I have always referred Newgen Knowledgeworks in which PEs are invested and I believe its website is — www.newgen.co — If I am wrong then pardon me but in all the mca filings that I have same website is referred.

TNQ also seem to be a very close l-t-l peer. Its YoY data I have provided before also — its 9 %, 32 % and 35 % for FY12, 13 and 14 respectively with EBITDA margins of 30.4, 23.3 and 42.3 % respectively.

Also, what I have understood of this industry is that when you say l-t-l you have to see the clients and segments it serves…..for ex., you can’t compare a player like Impelsys which is largely a platform play with MPS but otherwise what every player including MPS is eventually attempting is to plug the gaps in its offerings and offer maximum it can offer….In that sense even what Mr. Arora tells of his vision to approach its largest peer Aptara’s scale — even Aptara is present in other segments (XBRL) and serves those end clients (BFSI) which I don’t think MPS serves.

To conclude, evenif I see the most closest l-t-l comparable Indian peers like SPS, Newgen or TNQ, I don’t find ‘severe’ pricing pressure that could amount to a single digit organic growth post stabilisation period. This is the only disconnect I can find in story or, specifically speaking, management commentry otherwise the story seems compelling to me personally.
The biggest advantage that I see for MPS in this industry is its positioning…..which is slipping every passing year as its reasonable peers are growing that much faster……I see no point in comparing MPS with small peers which have sub-80 or -50 cr. revenues (in my initial posts I have given all the data points wrt different scale cos. Revenue CAGR and EBITDA margins)…..MPS surely is well positioned and its credibility is very high but organic growth has to start somewhere for it to be great wealth creator for all of us…..company’s operating matrix is excellent with Mr. Rahul Arora also specifically pointing to his focus on improving margins further in recent concall…..Mr. Nishith Arora — the great man behind building and divesting ITC at premium rates and then turning around MPS in style has taken the sole responsibility for crucial acquisitions thats also reassuring from investor point-of-view…..but two things we need to understand :
(1) Without Organic Growth story will struggle in long run,
(2) EBITDA margins of 35 % + that we see might settle for 25 or max 30 % range as company scales up (even Newgen at consolidated level seems to be operating at 30-32 % margins).

Rgdg. contacts, I think Varadha has some very good contacts in the industry.

Rgds.

( You can refer my September’2014 post in this thread in which I have given all the data points scalewise of different cos.)