The company was a textile company and has undergone restructuring after acquisition by the current promoters. The promoters want to enter into the data center business. The company has acquired Natural Environment Solutions Private Limited (‘NES’) via share swap for the said purpose. Their plan is to establish a capacity of 100MW over a period of time. They’re starting with 5 MW.
There aren’t a lot of listed players in the data center space right now. One of them is Anant Raj Ltd. As per their concall from April 2024, it earns about 75 lakh INR EBITDA per MW per month.
Thus, trying to value TCC in the future: the EBITDA run rate can be 900 crore in 4-5 years (if everything is perfectly executed) (75,00,000 p.m./MW * 100 MW * 12 months) The business is valued at 1900 crore right now.
Another thing you can understand about the promoter, who is also a promoter at another listed company called EFC Ltd. He understands cost much better than his peers. For the co-working space business also, he could backward integrate and start furniture manufacturing to reduce rental costs and he is trying to get the same mentality in place for TCC Concept, wherein he has indicated that he cost of setting up a MW of the data center capacity will be around 15-20 crore. As per Anant Raj’s concall, they estimated it to be around 26 crore, which they claimed to be ‘cheaper’ than other competitors who are doing it at twice that price also.
Source about these forward looking comments: https://www.youtube.com/watch?v=NvcWqvhA8dU [Can skip to the TCC part, also thank you Kushal for the podcast]
The frugal nature + big ambition + experience in an IT business (at the start of his career) make him a really good leader, in my opinion, to be at the helm and that gives any investor confidence to back it up. He has already made a successful business at EFC. The return ratios will likely turn out to be higher than its peers, similar to that of EFC, probably giving a higher valuation to the company.
Sageone – Flagship Growth 2 Fund, managed by the marquee investor Mr. Samit Vartak, also has a 3.5% stake in the company.
Bull case: The company gets a higher multiple because of its efficiency, the multiple accorded is 20x EV/EBITDA and the EBITDA is actually 900 crore, the EV can be 18,000 crore.
Bear case: The company faces intense competition, rentals reduce to half and they’re able to execute only half of their capacity. The multiple thus accorded remains at a low 6-7x, putting the EV of the company at 225* 6 = 1500 crore.
The actual outcome, in my opinion is likely to end up somewhere in the middle.
Disc: Invested, would love to know the community’s outlook and opinion.
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