Excellent work as always…..Donald, Ayush, Rohit and others you all deserve a big round of applause for this…you guys are doing outstanding work out there.

All positives are more or less covered in Q&A, MQ, BQ…..having studied this company in quite detail myself and being significantly invested in it over last more than one year, some points deserve attention :

(1) It’s almost a one person story — of Mr. Nishith Arora — it is this person who has transformed this company, has put all the pieces together, has created an exceptional brand image amongst investors, has been keen and instrumental to see that nowhere company falters be it profitability strategy or handling distressed investors at AGM. Agreed there are capable senior managers to handle every unit as also now his son is CEO but without this man I see such determination in no other guy and that’s a fact I need to accept. Tomorrow if this man is for some reason out of the story, the entire story will be very difficult to fructify.

(2) MPS has lagged and is still lagging relative to its capable Indian peers be it SPS, Newgen or even TNQ. First it was because of transformation into a profitable entity but even after the transformation, MPS seems to be not able to get organic growth. In my previous posts in this thread have enlisted YoY growth and EBITDA margins of each of the said and other entities and MPS clearly seems to be lagging in top line growth. Even if we see FY15, it’s because of acquisitions that the growth seems good otherwise it is just a single digit growth. Agreed, SPS has the backing of a large client but other few players have also grown well and really well.

(3) MPS is not having macro triggers as our other stories like PI had nor it is having any competitive advantage. It’s the positioning of the company in the industry that is majorly working to its advantage as industry doesn’t have room for too many players. In addition to positioning, what MPS is doing is putting all pieces or capabilities together so inline with industry trend, a client will not have to go to any other player if it chooses MPS. However, 70 % of the industry players are finding it difficult to post topline growth and are sustaining because of niche margins or confirm specific amount of yearly work they get.

(4) QIP was a great step as manager of a company but from investor point of view it was not that great if there was nothing on drawing board. In industries like this where new business is not coming thick and fast, time lost is opportunity lost…..It’s not that only MPS is out there to grow and reach top, there are other players too….Agreed a late well thought out decision is much better than a cash burning decision, but there is a time limit to everything especially when you are raising money by promising something and six to nine months is ok but if this thing goes on and on it will surely have an effect on brand image of the company amongst investor community unless the late acquisition decision is like Macmillan which shuts every critics mouth.

Having said all these, it’s the current valuations which make MPS a no-brainer and risk seems to be very low as even without acquisitions it is trading at just 13 times FY16e EV/EBITDA which is mouth watering considering the past track record of Mr. Arora in acquisitions. If acquisitions are profitable without much debt then it could rerate the stock significantly from here on. Downsides seem to be capped unless company commits some sort of blunder that’s what I feel.

Rgds.

Discl. – invested in MPS

Pattabiraman

was trying the worksheet. got this error

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Srikalahasthi Pipes.pdf (306.9 KB)

Sorry for the delayed response.

Based on my assumption of 12-14% growth over the next 10 years the value may lie somewhere between 300 ~ 325. But I may completely off on my calculations since I haven’t tracked this in depth.

Good luck on your future investments.