8k Miles Software Ltd, Cloud Computing


(phreak) #766

@Gaurav_Agarwal - You will need Adobe Reader to open the document as it has some proprietary elements.

I validated the digital signatures and they are genuine. You can see the signature on the left pane by Mr. Haresh and then from Mr Ponraj on MCA side.

I have validated these signatures as well (see left pane). It shows that the reason for resignation field was indeed filled by the auditor himself.

You can also view the version the auditor first submitted as well which has the reason field.

You can view the attachments which are part of the pdf as well here.

23%20PM

When I clicked Open, it opens to the same file posted here earlier.


(ragha1982s) #767

From their communication i always believe they had right intent but poor execution team in certain corporate functions if you closely watch them. First an article of Nitin dharmawat came on 2014 highlighting 8KMiles corporate governance issues. They fixed most of them and improved. It was good sign. Next the ambit report came highlighting certain other corporate governance issues 2015/16. They could have brushed aside this with strong PR , but they atleast had right intent to accept and improve by bringing Deloitte for auditing. Surely transparency had increased after deloitte if you compare their BSE notifications, AR etc. It was a again good sign beacuse they had intent and wanted to improve. In the current episode, Iam actually surprised at last statement in the clarification given by the company. How can 8K miles software services ltd ensure that board of 8k miles media is looking into this matter. I think their governance is very incompetent to issue statements like this. It is so stupid.

In this chaos I also did an analysis last week on their capabilities further deep. Please look at consulting partners section in each of this link. 8K miles is listed in top 10 in all below. Very less competition.



https://aws.amazon.com/devops/partner-solutions/

Lifesciences and Healthcare is a multi Billion dollar opportunity worldwide and AWS certifies only 10 partners globally who are capable of doing work on cloud in these industries. This essentially means their Technical, Competency, Enterprise delivery, Sales capabilities are top notch to break into top 10 league. They have also proved this by opening and executing large deals with Novartis, Roche, Actelion, Shire pharma, Lupin, Life cell, GE healthcare etc. Name in this list also means AWS will refer 8K miles to the potential enterprise opportunities in these industries. They are sitting and executing projects on gold mine in short and very less competition. On the contrary from the above incedents we can clearly observe their finance, corporate governance is big let down. If the company is fully bogus it is acceptable they go down the drain, but such a talent, competency exhibited and going down beacuse of their finance and corporate governance let down is very pathetic. Boarder should ask strong questions this AGM, at least i hope they will correct their path one last time.

Pros : Competency, Technology, Enterprise Delivery, Sales , Vision
Cons : Finance, Corporate governance


(Silmaril) #769

Looks like I have to eat my words…

Destroying an 800cr business for 47cr is just stupid and unfortunate. Does anyone have any idea about the legal implications. How does the process/prodecure unfold in such cases. Its been almost 5 months post the accusation and no investigation initiated against Suresh Venkatachari.

I remember this quote from buffet “Better to invest in a bad business run by good people than a good business run by bad people” looks like this is the latter case.


(Krishnaraj) #770

@phreakv6 you are killing us with such details :)))

@udayp thank you for sharing the letter. It is amusing to see the letter typed by Mr Venkatachari in his personal capacity, but on the the company letter head! A company, being a legal person, is thus speaking the voice of a natural person. Looks like ventriloquism.

Besides, looking at some other filings, the letterhead is different. Further, all the recent filings and transactions in 8K Miles Media shows huge funds flow that sings another story.

And until atleast 24/05/2017, Mr Venkatachari was a 50% shareholder in 8KMiles Media Pvt Ltd.


(phreak) #771

Ramani sells stake at elevated valuations (after false dividend announcement and false claim by Mr.Venkatachari that they will consider increasing stake etc.) and loans the money (unsecured) back to the company of 37.5 Cr. Loans are given to 8K Miles Media and then subsequently siphoned off. Follow the money and the story is clear as day.

We keep thinking of 2000 Cr company or whatever but these promoters are only thinking of a 5-10% stake that they can sell at as elevated a valuation as possible. The same story has played out in slightly different fashion - on a grand scale in Vakrangee/PC Jeweler, smaller scales in Fiberweb, Ujaas (same story of promoter selling about 10% stake for loaning it back to the company!) and so on.

History keeps repeating itself. Always be wary of stocks where story seems too good to be true along with promoter/PAC/benami stake coming down, along with the price. This is the general framework but the intricacies are very different in each case.


(Gaurav Agarwal) #772

@phreakv6 Thanks for details on resignation letter.

Ramani sold his stake on 20-May-17. The price were most elevated in Dec/Jan-18 and not May-17.

1 2

I will say we still do not know that loans given to 8K Miles Media are siphoned off. Remember the same auditor was signing the company’s books for many years. This could very well be an act of vengeance. We need to dig more to know the full story here.

As @ragha1982s put it the company has pros & cons. I think the CEO is pure technology guy and a good one and does not know much about corporate governance, finance & investor relations. The company need a professional CEO.

I am not still ready to rule out the company. Nor do I think that all revenues numbers are botched-up.


(bharat19) #773

I have a very simple query :slight_smile:
Why there is no dividends declared by the company in past except only in 2017 (which was too low)
Why company do not announce Buyback to instill confidence and prove that the money is real.
Note: Vakrangee , PCJ and DCM Shriram announced Buyback when prices were falling but then Vakrangee and PCJ backed off (As they too does not seem to have real cash) and DCM Shriram went ahead with the buybacks. See today’s price of all these businesses.
Why company gave loans to Related party at just 7% rate of interest. Is it that company is happy with 7% returns on its capital. Is it like growing the Private company with cheaper loans at the expense of Public Company.
Why too much frequent equity dilution by the company and Sudden increase in debt by 80 Cr in last 2 Year.
Company paid 11 Cr interest on borrowings of 80 Cr which corresponds to 12% Interest Rate last financial year .


(phreak) #774

He also sold in Jan '18 for about 50 Cr. In all, the promoters cashed out about 120 Cr.

All this time the justification was that Suresh Venkatachari was not selling and he was appearing on TV often and talking up the stock.

There were similar arguments in Lasa when one single entity was split in two and when both sold stakes the justification was that the father was selling in son’s company and son was selling in father’s company and that’s ok. Similar arguments were made in Fiberweb when the promoter claimed that he didn’t not know the related entity which was selling stake. This related entity in fact had his own wife as a director in it. I see this case as something very similar to the above two. 120 Cr is not a small amount, especially if the actual profits the company was making was, say a third of this amount and not as reported. Why would I make such an allegation? Put yourself in the shoes of the promoter and ask why they would be selling stake at such cheap valuations (expensive as of current market cap) for a company that was making money hand over fist.


(Funda_Buffett) #775

He has already clarified this numerous time as to the reason for Ramani’s stake sale ! People have already understood it and moved on to other things long back.


(Gaurav Agarwal) #776

I think they needed money for Cornerstone Advisors acquisition, that is why they sold the shares and loaned the money to company. I still believe so.

In case of 8K Media, shouldn’t we wait to know the source of fund repatriated from India? To me it looks like the poor guy Suresh did not even knew about the resignation of auditor, till it came out in open.

I agree it is grey.


(phreak) #777

In that case, the promoters are implying that the cost of debt is more than the cost of equity. Bit strange for a company with a RoE of 42%.


(Gaurav Agarwal) #778

I agree with your point. No denying. But you will agree real life decision are not always based on strict return/mathematical basis.

Do you believe all the revenues are fake? All the customers mentioned in all previous post on thread does not exist.


(phreak) #779

I believe that this company has real employees, clients, projects and does work in the cloud migration field and pertaining to that field, has rudimentary automation tools (but has nothing to do with AI/ML/Blockchain etc.). There is a big difference in terms of competency between the former and the latter although to the general populace, they are all buzzwords to look out for and the company likes feeding it to them (8k miles is not alone in this aspect).

With that said, I think the company might at most make real profits of about 30 Cr or less - This is purely based on subjective, speculative guesstimate based on my exposure to other companies in this field. I reserve the right to be wrong. I do not think the numbers reported by the company are true because I do not think such growth is plausible in this field.


(Altruist) #780

Both the directors (until yesterday) of the media co. are promoters of the software co. with one being the CEO of both entities. It is difficult to appreciate that the director/ceo may have been unaware of the auditor’s resignation and the reasons for it, as you suggest.
The clarification provided yesterday is sketchy - not sure why they chose to mention that the issues at 8K Media are being looked into, when the purpose of the note itself was to delink the director of 8K Soft from 8K Media.
Selling equity of a booming business to fund an acquisition or extend a loan is hardly the best route that a promoter can take. Pledging shares for cash is a better route even if interest costs are high.


(Gaurav Agarwal) #781

Yes, you are right. That is where the problem lies. The CEO is a tech guy. He should speak plain truth to the market, instead of giving non-sense.

What is your estimate of revenue?


(Funda_Buffett) #782

Okay let’s clear some doubts here ! Ramani sold the stake as he wanted a build a trust (After the demise of his father). It was a spiritual reason for selling the stake ! On an average he must’ve received around INR 120 cr from the stake sale.

Out of that amount, if he gives 37.5 cr back to the company then I don’t consider it a red flag ! Why? 8K India business hardly has any net worth so borrowing money here is difficult and if they do they will have to borrow at a higher interest cost of 11.5% minimum. Last time they went out to borrow money, Suresh (CEO) had to pledge his shares ! So it is much better to borrow from promoter ! Issue would’ve have there if the loan was interest free (Like in the case of Jindal Stainless & Jindal Stainless Hisar). Here all the interest is getting paid and also the 8K India lending to 8K US is receiving interest ! Everything is crisp and clear in the Annual report. I suggest that one reading is not enough of the Annual Report. Try reading 3-4 times and if doubt persists, ask the management !

And the CEO is not someone who has tasted money for the first time and got greedy etc. Look at his background. He had past 4-5 highly successful ventures. Even he has listed few of his previous companies as well. Headed Electronic Banking division of Deutsche Bank Singapore. May not be a great communicator with all the stakeholders but he has great brain that we can’t deny nor ignore ! He is pure-pure techie not a finance wizard like us !
And look at 8K Miles performance viz a viz Cloudera or 2nd watch ! See how this guy is generating CF, investing money and improving margins as compared to its competitors who are lavishly spending on sales, marketing, advertisement and other expenses !
Are there issues ? Perhaps ! But is it a fraud and the entire book is cooked? I don’t think so ! Time will tell, i maybe right i maybe wrong… I ll lose my money or it will be a mega multibagger for me… Till then i’ll prefer staying with stated facts and not on opinions !


#783

Intersting discussion !! Why ppls here are supporting this company so much when so many negatives are in public domain now and stock is going LCs every day.

I read employees comment on Glassdoor and it seems they are not offering even salary on time and other issues related to HR:

https://www.glassdoor.co.in/Reviews/8KMiles-Software-Services-Reviews-E651296.htm?sort.sortType=RD&sort.ascending=false&filter.employmentStatus=REGULAR&filter.employmentStatus=PART_TIME&filter.employmentStatus=UNKNOWN

I am working in Tech domain and companies working in such niche technologies “Take care” their employees very well and pamper them, as " they are the real asset" of the company… Really surprised to see why ppls are so emotional about this company, I learned one things in stock investing in last decade and half, dont marry your stock and if you see any negatives get out and you can re-enter when things become clear… I also feel 8K miles is another Satyam Computers…


(Altruist) #784

Pledging listed co. shares with audited financial statements is not a difficult thing. It isnt clear what you mean when you say no net worth.

Fraud or not is an exercise left to individual analysis and judgement. A healthy debate around some of the nos. (specifically changes over time) and quality of mgmt is a good thing.


(Funda_Buffett) #785

Standalone business (Which is India business with reference to my comment) has a net worth of only INR 78 crs as on FY18 (Which was only INR 59 crs as on FY16) as compared to ~INR 500 crs net worth of the consolidated entity as on FY18.


(Krishnaraj) #786

How did you get to know this?

As we speak there is ~ 7% of the total outstanding public shares offering the lowest possible price for the day at NSE and ~ 4% offering the lowest possible price for the day at BSE. These are disclosed quantities. Less than 0.001% of the lowest price offered have been bought at NSE, equally bad at BSE.

This, even as there is an arbitrage opportunity between NSE and BSE prices of around 50bps, just buy in NSE and sell in BSE and make Rs 1.05. This can be done on 491,000 shares that are offered for sale at that price, in other words Rs 4.9 lakhs for free. Yet there is no one.

At NSE a while ago:
image

At BSE a while ago:

In other words there is an overwhelming rush to sell even though there are hardly any takers, not even for risk less arbitrage. This was true yesterday and today.

There are really no takers at all.