8k Miles Software Ltd, Cloud Computing


(Mute Spectator.) #249

Industry is projected to grow that doesn’t mean every tom dick and harry will grow … They bought 5 companies in last 3-4 years to show that kind of growth , The guy is saying to reach $1 billion target they will acquire $500 Million company and easily reach there … Thats the kind of thinking i would like to avoid .
These guys are not tech savvy they are just bunch of MBAs think they are smart enough to make Money from Money rather than Innovation .

The products they are talking about , do you know how many companies have built that already ? do you know they are not the only boys in town ? if your answer is yes then i would give 100 PE to stock but the fact its trading at 11 PE is because its not something unique they are doing.

I would still say its a value buy , but seeing management i would not like to buy it at any bargain. They already played so much with books by acquiring companies after companeis and showing false growth.


(Mute Spectator.) #250

Wonderful … If you could give breakup of revenue for all four bullets will help everybody. How much is one time and how much recurring ?
This is something i never researched because i never thought about investing due to certain qualitative things i never liked about the company.


(rvetri) #251

Cool Dhruva…
Markets are all about contrarion opinions. You can have an opinion against
this company and many will have their opinion against the companies you
own. Your opinions should be based on facts…When you say their books are
cooked, you need to give facts and data…They have now appointed a big 4
as auditors…What do you want the company to do to prove to you, an
individual, that their books are not cooked. I guess the best answer from
the Co was by appointing a big 4 as their auditor…


(Naz) #252

Here you go. Since their FY-2017 reporting has improved a lot over the last year, below is the segment-wise Revenue break-up, share in overall revenue and % growth in each revenue stream from their AR-2017.

Over a period of time, clients which are undergoing “Cloud Transformation” will move into the “Managed Services” and “Security Solutions” bucket (which is basically recurring in nature).


(Mute Spectator.) #253

PWC was the auditor of Satyam, enron had a big four Auditor too and as many other chor’s in the history… Point is that it doesn’t prove anything.
Secondly i am not saying something illegal going on as in Accounting there is huge scope to bloat up P&L legally , specially things get tricky when you are acquiring like nuts.


(Naz) #254

@Dhruva1705: Can you please help us with the source of your understanding that "these are bunch of MBAs. As per my understanding, MD Suresh has been a hard-core technology guy for most part of his career before turning entrepreneurial. Below is his back-ground:

"For Suresh, a 1988 graduate in electronics and instrumentation engineering from Annamalai University in Tamil Nadu, an academic background and work experience in technology proved instrumental in spotting the potential of the cloud. Suresh started his career as a software engineer with Systime Software in Chennai, before shifting to Singapore in 1990 to work as a software project manager for Singapore Airlines. In November the following year, he began a five-year stint with Deutsche Bank in Singapore, developing the German bank’s electronic banking software (a precursor to today’s internet banking).
"
Source: http://www.forbesindia.com/article/8th-anniversary-special/blue-sky-thinking-8k-miles-is-riding-the-cloud/46925/1


(Mute Spectator.) #255

He holds a Bachelor’s degree in Engineering and an honorary Doctorate in Business.
https://www.bloomberg.com/research/stocks/private/person.asp?personId=13692050&privcapId=20963387


#256

I always try to read what employees think of the company and management on Glassdoor. Employee reviews can sometimes be biased or even fake, so please apply caution when drawing any interpretations. I try to look for patterns and one thing emerging in this case is salaries are not always paid on time.

Here is the link for 8K Miles:

Disc: Not invested in 8K Miles


(Naz) #257

Hi @Dhruva1705 ,
This is an “Honorary Doctorate” degree and does not render them as a bunch of MBAs by any means. Honorary Doctorate degrees are awarded to highly accomplished individuals without them actually undergoing any sort of coursework required for PhD etc.
Honestly, this gives far more substance to his profile/credentials (actually, thanks for highlighting this). You should actually google who all have gotten honorary degrees historically.

I am not sure if the phrase “These guys are not tech savvy they are just bunch of MBAs” is the right one for an Ex-Head of Electronic Banking of Deutsche Bank Singapore with an Honorary Doctorate.


(Naz) #258

Also, just to summarize brief profile of MD Suresh Venkatachari:

  1. Engineering from Anna University (one of the top notch engineering institutes in India)
  2. He rose to become Head-Electronic Banking at Deutsche Bank Singapore
  3. Started his first entrepreneurial venture with his previous employer Deutsche Bank being his first customer (says a lot about him)
  4. Opened India operations with equal partnership with HDFC bank (I wonder how many companies have actually been able to get into a partnership with HDFC bank historically)
  5. Four ventures listed, sold or exited historically
  6. Gets a Honorary Doctorate degree (most probably for his distinguished contribution in Entrepreneurship and Business)

In summary, the guy seems to be with a good pedigree.


(Mute Spectator.) #259

All the best … What they are doing seems more like playing with money to me rather than innovation . You may see it differently .


(Mute Spectator.) #260

Haha … this is not surprising to me. When cash flows are unreal from where they will pay salary .


(Sachin) #261

and how are the able to pay the real dividends from unreal cash flows… can you please elaborate on that as well


(Mute Spectator.) #263

Didn’t they revised the dividend from Rs 7 to Rs 1 earlier ? Anyways MBL infra was paying dividends too …
You should study how easy its to pay dividends with negative cash flow as long as you can raise money through diluting Equity or Debt.


(Gaurav Agarwal) #264

True they have acquired 5 companies since May 2013. Below find details

Fugen
Date of acquisition - May 2013
Cost of acquisition - $7.5 million
Revenue addition to 8K Miles = $468k = 3.25 crores

Serj Solutions
Date of acquisition - Nov 2014
Cost of acquisition - 16cr or $2.4 million
Revenue additions to 8k Miles - 45 crores

Mindprint
Date of acquisition - Apr 2015
Cost of acquisition - Cash $1.5 thousand + $2.5 thousand stock
Revenue addition to 8K Miles < $500k = 3 crores

Cintel
Date of acquisition - 2015-16
Cost of acquisition - $3.75m cash & stocks
Revenue addition to 8K = $7m or 45.5 crores

NexAge Tech
Date of acquisition - Sep 2015
Cost of acquisition - $3m (cash & stocks)
Estimated revenue in 2008 = $6.8m
Source - https://www.thelayoff.com/nexage-technologies-usa

Cornerstone advisors
Date of acquisition - 30 May 2017
Cost of acquisition - $9.25 million cash + $1 million stocks

You will notice that revenue of Cornerstone Advisors will have effected 8k for only one month.

Total cost of acquisitions = $27.3 million @65 inr/dollar = 177.45cr

Does this data point towards something? Can we interpret it in some way?


(naruto) #265

As a consultant who has worked on recent cloud migration (AWS) for a big client, I would like to add 2 cents.

  1. Cloud migration is not a straightforward - create the Virtual Machines/spin the services and blip the switch - process.
  2. One needs an experienced team which can support the transition, troubleshoot and give suggestions on how to plan automatic scaling.
  3. While AWS, Azure, Google offer the support, they don’t do the migration for clients. Clients would still need someone to do the migration.

Coming to 8K Miles, the company is working on converting its one time engagements to recurring revenues by providing bots and services. Integration of acquisitions in IT helps in cross-selling and building a strong base in health care vertical where they want to position themselves strongly.

Disclosure: Invested


(Mute Spectator.) #266

This shows mentality of management and this business model is not sustainable in long run.


(Naz) #267

Hi @Gaurav_Agarwal:
This is terrific data. Is it your proprietary data compilation by going through historical reports ? If not, can you please help with the source.

Also, one way to look at past acquisitions is that these have been value accretive (other than Fugen Solutions which was mainly acquired for Identity Access Management technology/patent and was not expected to directly contribute to revenue). Also, “EBITDA addition to 8k” would have been probably a better metric to compare value accretion by previous acquisitions instead of Revenue - not sure if that is available some where.


(phreak) #268

This is more a generic question about auditing of subsidiaries. For a company like 8k miles whose standalone revenue is just 7% of total turnover, the auditor GHG Associates and now Deloitte Haskins are auditing only the small part of the company and the rest is either unaudited or audited by other nameless entities. Isn’t this a big gap in general of how foreign subsidiaries are currently handled?

30 AM


(Gaurav Agarwal) #269

The statement clearly mentions that financial statements has been audited by other auditors whose reports have been furnished to us.

It means

  1. Foreign subsidiaries have been audited.
  2. Audit report has been furnished to auditors of Indian company.

I think this is standard practice and I have seen this kind of statements for many companies. I can did that out, if you would like to know the source.

I have complied this from the sources on the web. The data is freely available, I think Ebida will be difficult to come by but we can try.