it will reflect from q1 onwards.
iam very bullish for FY26 as company said they will double US revenue from 800CR to 1600CR. so even if UK revenue grows @15% for next 2 years and adding up TEVA’s revenue target of 1000CR for FY26 then company may acheive upwards of 4000CR for FY26.
Posts tagged Value Pickr
Marksans Pharma- Can it be the next Pharma Biggie? (06-07-2024)
Five Star Business Finance – Financing Bharat! (06-07-2024)
Fedfina has a Mortgage AUM of roughly 6200 crores, ticket size of INR 22 lakh and yields of ~14%.
Five-star has an AUM of 9600 crores and almost 90% of the loans are sub INR 5 lakh with yields of 24%.
I presume the huge difference in yields is largely due to the nature of loans, wherein Five-star gives loans to small business owners.
However, my thought was that given the secured nature of the loans, their yields should have been much lower. At 24% yields, they are on par with microfinance companies, whose book is completely unsecured.
Infollion Research Services Ltd – Moated Microcap with Differentiated business? (06-07-2024)
I was recently working on Infollion and found their business model quite niche with good unit economics and 40-50% CAGR growth.
Their margin structure has been stable. Their biggest cost item is consultancy (or expert calls), where they pay experts 50-55% of their revenues. They spend 20-25% on their employees and have been maintained 17-20% EBITDA margins over the past 4 years.
Additionally, there was an insightful note from Deltainvest explaining Infollion’s business model in detail. You can read the full note at the link below.
Writeup from Delta
- Incorporated in September 2009 by Gaurav Munjal (B.tech & M.tech IIT Mumbai)
- Marketplace in premium section of the gig economy, 100+ employees, 60,000 experts
- Does 400 projects/month
- IPO came at market cap of 80 cr. (IPO size ~21.45 cr., fresh issue ~18.2 cr., OFS ~3.2 cr. OFS was by Blume Ventures
- IPO done to expand business in USA & Western Europe
- Top 5 clients contribute ~80% of FY23 revenues (68% in FY22). 80-85% of their clients have been using their services for 5+ years
- Pre-Empaneled to Custom-Empaneled experts ratio: higher would imply higher gross margins
They have been scaling up their team as they keep growing, you can see how the number of employees have increased with time (scalup started happening from 2019).
- March 2017: 7
- March 2018: 6
- March 2019: 7
- March 2020: 11
- March 2021: 14
- March 2022: 35
- March 2023: 69
- March 2024: 90
They are now pivoting to the US, first to get more experts from USA and then to get customers from USA. Management has been sharing their scaleup plans at multiple avenues, I have captured these in my notes below.
AGM23
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Adding 1000-1200 experts monthly, one-third experts are from outside India (primarily US)
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Have a dedicated team for US
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Most clients are Indian requesting experts from US, want to build a larger clientele in US
FY24Q2
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Largest and oldest company in this segment in India
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Majority business comes from consultancy businesses, targeting private equity and tier II consulting
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Focus on engagements which are small, frequent and cross domain. Don’t engage experts with clients for longer term projects
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Expanding into US
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Competitors: Insights Alpha, Thirdbridge, GLG
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Not keen on increasing gross margins but on increasing volumes
FY24Q4
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6th or 7th year where sales growth was 40±10%
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Added 50 employees which should benefit in FY25
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Visual mapping tools of different industry value chains are becoming their USP now
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Redesigned the entire tech backend which will help them expand globally
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Expansion in US – 3 independent teams based in India (total 25-30 employees). Have been increasing expert base in US. However, most of their clients are still in India who are taking a call with an expert in US. Have not yet managed to get clients from USA
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Trying to get into longer term engagements (Pex-panel): 2-3 months stints for existing clients offering private panels to senior executives, cohort-based/individual courses and L&D programs. Looking towards reselling expert-led courses online
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FY24 calls: 12,000
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Number of experts: 80,000 (adding 1,500 experts per month)
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Client concentration: top 10 is 80-85% of revenues
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Market size from Indian clients will be few 100 crores
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90%+ of business comes from clients older than 2-3 years
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Ticket size per call has not increased in last 2-3 years, don’t want to increase it, rather focus on increasing volumes
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70-80% of their business comes from consulting industries, trying to penetrate deeper into private and public market investors
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End-user industries: IT, Healthcare, consumer retail, BFSI
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How they recruit experts: monitor annual reports for exits, monitor senior guys who are moving roles and get them onboard when they become independent
Disclosure: Invested (bought shares in last-30 days; <1% position size)
H.G. Infra Engineering Ltd : Paving the Path to Success (06-07-2024)
Did you hear back anything?
Their spree of opening subsidiaries isn’t ending. What are they cooking?
Smallcap momentum portfolio (06-07-2024)
That’s is very correct. There can be thousands of successful investment strategies, we just need to choose what suits us.
I have never been a fan of mutual funds. My whole investment in mutual funds was only ELSS, to save taxes. Lately I have taken some interests in mutual funds for specific reasons.
I took interest in Quant Momentum Fund, just to see momentum strategy in action. I am yet to see it in bear markets, though in market corrections I didn’t find anything alarming. I also subscribed to Motilal Oswal Defence Index Fund as I am not finding any defence stocks which a value investor in me can buy.
In general I am not finding any good bet in present market’s valuation. Thus looking at MF space a bit closely for some investment opportunities.
Five Star Business Finance – Financing Bharat! (06-07-2024)
A few points here.
SBFC Finance does 98% secured lending, yet their NIM’s are ~10%. Fedfina does 85% secured lending with NIM’s at 8%. Cost of funds for microfinance companies are in the range of 11-12%, whereas for Five-star Finance, it is 9.7%, so the disproportionately higher NIM’s are not due to lower cost of funds.
Kalpesh’s Portfolio (06-07-2024)
Hello Kalpesh!
An interesting read. Can you throw some light on recent promoter holding reduction by 5%. Is this due to equity dilution? My guess is for some personal reason promoter is selling to someone Kapil Mahesh Kumar Jhaveri.
Spectrum Talent Management (06-07-2024)
A few thoughts
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My gut likes the promoters
- the company was fully bootstrapped, the promoters started fresh out of college and funded 2L each
- Profitable since inception
- just look at the scaleup, within 8yrs of incorporation did 200cr in 2019, and now doing 600cr+, in such a commoditised industry thats a significant achievement i believe
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Few pieces from the concall
- ‘‘Chanishji, we are holding an earnings call, facing the music and giving you all the justifications. Regarding the stock price, the drop that you said that sir, our significant wealth is in this organization only for both of us, and we are we are collectively holding over 70%. So, trust me, it bothers me a lot more compared to what it would bother you. But then we are confident on the business. And we are here --we are in it for the long run.’’
- there were a lot of questions on stock price and biz performance, above replies seem prompt and genuine
- A question on ipo funds- ‘‘we were very clear that we don’t want to – instead of reporting it, we voluntarily chose a monitoring agency. So that we can put in better corporate governance and build the right amount of trust.’’
- ‘‘Chanishji, we are holding an earnings call, facing the music and giving you all the justifications. Regarding the stock price, the drop that you said that sir, our significant wealth is in this organization only for both of us, and we are we are collectively holding over 70%. So, trust me, it bothers me a lot more compared to what it would bother you. But then we are confident on the business. And we are here --we are in it for the long run.’’
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One needs to understand the fund flow in this industry, without working capital one would need significant debt, look at the other players in the industry
- Considering this is a new guy with a lot of wc funds acquired through the ipo, it shouldnt face any debt issues in the medium term, causing the ebitda to flow down directly, adding to it the tax benefit
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Global hr biz has a huge potential as and when the foreign markets turn
- The US staffing business was started in the year 2020. It has grown over 100% last year in FY23. Such growth in such a short time is commendable however small the actual amount be, and now again they have started seeing mandates coming in proofing their demand.
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Cannot find the names of customer, and not that it matters as much considering the quantum they have, but back around 2013-16, they have been appreciated from very senior KMPs of companies, primarily MNC pharma names
- This is especially important because the year of their incorporation was 2012, within such a short period penetrating into such MNC customers, especially serving niche and quality driven requirements of pharma sector, says something atleast
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Electronics business is soon to be sold out, this would thus not dilute the margins going ahead
Nothing is fully clean/great always
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There are some doubts on few datapoints, looking closely they have lost of per employee realization, basically they have been needing a higher amt of emps to do the same rev
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Also the NATS/NAPS scheme is a bucket with a hole, since after their cycles the employees mostly will not join in with spectrum
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Previously the CFO to EBITDA conversion was high, but since the last 2-3 years it has been dropping, even negative
- The receivables have spiked up a bit, which can somewhat be expected due to the industry downturn
- in this industry i have seen debtors cycle inc and then slowly but surely damaging the bs and thus the bottomline, so this needs to be watched very closely.
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Peers are not seeing any revival in demand in the short term
Conclusion
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even commodity biz at certain valuations become desirable, everything is based on demand and supply, and mind it in comparison to peers it is vastly undervalued, also now that the low value trading biz is to be cut out, the coal should burn brighter (purposely chose the coal analogy, because it is nowhere near a dimaond)
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They have been doing a lot of hiring, across mid and senior levels. Previously they werent able to attract talent due to their size, but now post the IPO the company has seen recognition. Also because of the industry downturn the peers are somewhat reducing their force and with the rest they are trying to control the salaries (reduced salaries), during this scenario Spectrum is trying to be the outlier and getting in as much talent as they can, which i find extremely interesting
- Sales team is up from 11 to 23- new sales head for RPO and a team of 10 under him were just brought in, last yr it was only 3
- Operating leverage potential is significant, keeping in mind the sheer quantum and the quality of hires
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There are too many new hires from all MNC competitors, like- Adecco, Quess corp, Terrier security, Teamlease, Randstad, IBM, several other names
- There are many names, which can be individually looked for on linkedin
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the recruitment and the professional staffing or the IT staffing businesses are highly dependent on the internal manpower that they have. These are higher margins segments, and like i shared above as soon as the industry turns, there should be significant opt lvg
this industry has never been valued to its potential considering the commoditised structure ensuring there to be no entry barrier. No point in being delusional of there being any moat or structure in this industry. Hence no one in this industry is ever valued highly or even decently, few players are even languishing in the mud.
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Although I find it hard to understand such undervaluation considering the industry’s simplicity in terms of factors to be tracked, cash flows, such roce, simple cycles where once the cycle turns the earnings explode (mann, this is what happened post covid and hence the ipo post growth)
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I feel the margins have bottomed more or less, and if not today then tomorrow the demand will come back, and like indicated by the promoter whenever cycle turns it turns for the extreme bull case.
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It should be a simple play on dirt cheap valuations and earnings growth, dont expect significant rerating
- I got in here when it valued the lowest among the whole industry (still is, but here the margin of safety reduced a bit for me), almost as if the business wouldnt survive. I wouldnt add much until i start seeing some earnings turnaround
- Already margins have slightly started increasing, doesnt mean cycle has turned ofcourse
- I got in here when it valued the lowest among the whole industry (still is, but here the margin of safety reduced a bit for me), almost as if the business wouldnt survive. I wouldnt add much until i start seeing some earnings turnaround
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Also keep in mind other players with worse economics were trading higher
Have created a small position at lower levels, hence biased
Indian Railways 10 Trillion Mega Capex Plan – Railway Stocks to Ride (06-07-2024)
(post deleted by author)
Focus Lighting & Fixtures Limited (SME) (06-07-2024)
Total Infra sale for year was 15.28cr. Receivables increased from 32cr to 86cr…When question was asked about icrease :-
Q) So, my last question is, this significant jump in receivables this year, any comment on the same?
Amit Sheth: See, infra projects are increasing. We started two years back and it’s actually becoming bigger than home, maybe it will be parallel to retail. Now we all know that government money is secured. Infra is mainly with government or large contractors like L&T, Shapoorji Pallonji or Tatas. The problem is that till the time the project is not executed; the payment is not cleared and that’s where it is a little bit stretched out. But what I understand from our CFO, maybe Tarun, if you can come in and explain what you had during our annual sales meet how the payment has improved.
Payment in regards to retail, home and other sectors, we have controlled over it and as sir rightly said only in infra wherein there are government formalities are involved. In that, it is taking time. Otherwise, if you see in retail and home and in railways, we do not have substantial outstanding at all, I mean every outstanding has been controlling below 180 days. So, it doesn’t go above 90 days in short, to be very honest. But it is well in control in those three verticals.
Q)But if we see the fourth quarter, the main contribution was coming from retail and home. But still our receivables jumped to 81 crores, while the turnover was just 60 crores.
It’s an accumulated receivable. It’s not of that quarter. You are looking at the turnover of the quarter, but the receivables are accumulated of the whole year, no. See, as a company, what we see is whether it is 30 days outstanding, 60 days outstanding, 90 days or 180 days. So, it has got nothing to do with the turnover of that quarter, but it is not possible technically that if you have 60 crores turnover, you will run outstanding of 80 crores, right? So that is an accumulated over a period of time.
Q)More than six months, what is the receivable we have?
I think what we can do is you can ask these questions on e-mail also because there are a lot of people waiting, they’re almost 19 messages here so that it can just move a little faster and those questions can be answered in between also. Tarun, just remember this and answer it once you see it.
Neither invested nor tracking the company.