@Mahesh @varadharajanr @mikaarun
I am doing a deep dive into the company after I read the comment that Prof Bakshi's fund is invested in the company.This is a business very much similar to MPS (great ROCE, high div. yield, ethical management, turnaround after change in ownership, long lasting customer relationships leading to stickiness i.e. the moat, complete end to end product solutions, global outsourcing opportunity, long past experience of 25 years resulting in expertise in niche area). One thing that is better in this case is that end market growth is expected to be 6-7% vs. 2% for publishing industry, and with more outsourcing, cross selling etc. the co. is expected to grow higher than the end market. Now the only issue is the slowdown in growth in FY15 because of loss of one big customer (which in my view is the biggest risk for the co. as I read somewhere that top 10 customers account for 60-70% of the revenues). I have few questions for the people who have a deeper understanding of the business:
1) Near term growth prospects (2-3 years): What are your views on the near term growth prospects i.e. in what range the co. can grow (is it 10% or 10-15% or 15%+) and what will be the growth drivers. Has the management indicated any growth outlook in the AGM or any interview?
2) Long term growth prospects (3+ years): What is the long term growth outlook for the co. and the industry as a whole?
3) Margins: This is clearly an OPEX story where once the growth resumes the margins will expand but are there any chances/drivers for margin to contract if the growth doesn't happen, resulting in profits degrowth?
4) Risk of big customer loss: I think this is the biggest risk. It can happen that a big customer decides to bring the system in-house and hence not renew the contract with AKS w/o any of their fault. Last year they lost a big customer. Were there instances in the past also where they lost any of the big customers or last year was a rare one-off?
5) Industry Consolidation: As mentioned in the thread above, there are around 11 players (big ones, some in-house) in the industry so are there any chances of consolidation? Has the co. shown interest in growing inorganically (like MPS)? Or any of the competitors has shown interest in consolidation?
I would request all seniors to take sometime out and reply to the above queries.