Thought I will also respond to your point on receivables. Its important to again look at the company in two parts
Standalone/legacy LGS Global business - 218 Cr receivables of the 776 Cr at consolidated level. this works out to be about 170 DSO. I agree it is high, when you compare with typical IT services companies which clock about 65-75 days, maybe something to probe further with the mgmt. on the confidence level in collecting this since they are providing for only 12 Cr as per their AR.
Brightcom/Digital Marketing - balance receivables is about 558 Cr which works out to be ~ 102 days. Not sure if you want to call it so high that we start suspecting fraud, but if you see the trends over past 4 yrs its been coming down every year, from 144 days in Mar 2014 to 102 days in Mar 2017. As per the AR, the mgmt hasnât provided for any of this so assuming this is collectible given the improving trends in collecting.
I sent two mails to the IR requesting attention of Mr. Suresh Reddy. I am quoting from these mails:
"It gives us investors great pain to see that every one of your assurances and statements turn out to be untrue. Can you please issue an immediate clarificatory statement on the following issues, with necessary documents so that what you say in clarification is backed by some evidence of truth?
As of October 18, 2017, what is the status of the âdisputeâ with Daum? Please provide your investors and the exchanges copies of the latest filings by Parties and interveners so that all stakeholders are aware of the status.
Has White Oak issued any communications recently, whether to the Company or to any other person / agency concerning the proposed financing? Have they refused financing? Have they claimed that the Company and / or its subsidiaries were / are not cooperating?
What is the status of the audits by E&Y?
What is the plan to bring a closure to the âdisputeâ with Daum?
Are the current assets on the books of Lycos (consolidated) real or are they cooked as is the popular belief?
How is the ownership of Brightcom structured? How does the Company claim ownership of Brightcom and its revenues / profits? Please provide a graphic chart that shows ownership of Brightcom.
Why are the Concall transcripts not being placed on the Companyâs website? There is not a single transcript in all of CY 2017. Are you seeking to avoid any liabilities by refusing to post these transcripts?
Do you feel any shame when people abuse your city, your caste, you relatives because of lack of transparency (or is it deliberate opacity?) and the way your assurances and promises are broken? Do you realize that the conduct of a few has a major impact on many? Are you even aware of what people say about âHyderabad Companiesâ and how your conduct is reinforcing these popular perceptions?
Why doesnât the Company proactively engage with investors and stakeholders? Donât you feel duty bound to âclearly and emphaticallyâ inform the stakeholders and the exchanges as and when material developments occur?
I feel terribly disappointed with you. The image that you create through your talks and TV interviews is completely different from the way you conduct business in Lycos and the way you treat your minority investors. Either you are an âintelligent fanaticâ (see https://intelligentfanatics.com/ ) or an âintelligent fraudâ like your mate Mr. A Kejriwal. Please SHOW to the world, without any further loss of time, that you are the former and not the latter.
It is better to die honourably than to live dishonourably.
Make your choices."
"These are risk factors that the management should have disclosed and discussed in the AR, at least of 2017. It is, therefore, requested that these may kindly be elaborated at least now for the benefit of ALL the shareholders.
What will be the consequences on the Company (Lycos Internet Limited) of losing the Lycosâ brand and the patents?
What will be the impact on Brightcom of our losing the Lycosâ brand and the patents?
Is our control / ownership of Brightcom contingent on our holding rights over the Lycosâ patents?
The dial-in numbers for the conference call are not yet out, though the notice to the exchanges said they would be put out on the companyâs site. Please notify the numbers immediately."
While I am planning to join the con-call, since it would be impossible for one person to pose all these questions, request others also to chip in. Hopefully, some of these will be addressed in the introductory remarks.
Intent of the call is to clarify the position with regard to the filings in the Courts that indicated that White Oak financing is off the table. Mr. Reddy gave a brief rundown of the evolution of the dispute.
White Oak financing is off the table because of the way Daum browbeat them with a subpoena issued to them.
Lycos is already working with others willing to finance. The arrangement is likely to be in place in 2-3 monthsâ time. [In all of this, there was no clarity on by when the dispute with Daum would come to an end. It appears that the financing would enable settlement of dispute with Daum.] An option to reach a settlement using internal financial resources is also in consideration.
There has no negative impact of the Daum dispute on the business, except a demand on the management band-width.
The loss of control over Lycos (US - YMA) would at most have an impact of 10% on the business. It wonât disrupt the business.
Brightcom is 100% owned by the Company and is ring-fenced for risk of loss of Lycos and there would be no impact on Brightcom.
The Quality of Earnings Audit by E&Y is in progress. WO wanted (in June, 2017) 4 of the subsidiaries to be audited intensely and that took time.
Callers made it clear to Mr. Reddy that this matter has been a drag on the Company and the sentiment. He readily agreed with this assessment and is working to bring a closure to it.
The reason why con-call transcripts are not being posted and regular inputs on developments in the Daum case not being given is that these formal filings will be used by Daum.
The E&Y Reports canât be made public because they contain business sensitive information and can only be revealed on the signing of an NDA when necessary.
All we can do now is to trust Mr. Reddy (one more time!) and hope for the best.
I attended the call as well and wanted to ask a couple of questions myself regarding the worst case scenario, but the call ended abruptly. Did you get the feeling that either option B (some other financier) or option C (internal accruals) is realistically possible?
I am a little pessimistic about their chances given this has been going on for a long time and if they had access to the cash themselves, they would not have defaulted on their debt in their standalone entity and avoided being labelled NPAâs as mentioned in their 2017 AR.
The only outside chance is that with the EY report, it might cut short the lead time required to arrange the financing. But then, even after almost a year (I could be wrong here, but I think he said they had first approached WO in Oct 2016), the WO deal could not be concluded, so not sure how long some of these things take.
Personally I am bracing for the day when he turns up and says we tried every possible option but in the end had to give up and they lose the Lycos brand to Daum. I have always believed what he confirmed today that Lycos brand itself adds literally nothing to the business. So donât think its the end of the world apart from an embarrassment to Suresh Reddy himself and them having to change their name back to Ybrant Digital. At least it helps focus the business back to where its strength frankly lies and then we all move on from there.
What else could go wrong here? The market may treat such news as the end of the world and tank the stock but in truth it canât be all that bad right? From there on the story is that of Brightcom and how it plays the digital marketing game. Any thoughts?
Lycos was in discussion with White Oak for securing a loan of $150 million. Lycos and White Oak had a discussion on June end 2017 to get the audit reports of 4 subsidiaries to process the loan further. Lycos hired E&Y (the big 4 auditors) to get the audit reports. In the meantime, (in few months) Daum filed a Subpoena case on White Oak. When there is a legal notice like Subpoena case filed on a funding company, it will not be taken lightly because the funding company is interested in Funding a company and not fighting a legal case. Hence, they canceled the loan deal. This Cancellation of loan deal detail was informed to Lycos only on 19th October and hence they also came to know about this information at the same time as the investors when Daum submitted the document to the Court.
Lycos amounts for 10% of the total company valuations.
E&Y audit reports are only for financing purposes. The report contains very sensitive information about the company. The receiver of this document should sign a non-disclosure agreement. This report can t be released to the investors.
There is a plan B. There is another Investment company with whom the loan discussion is going on. And, the company is looking at options to fund from internal sources. More details are not released about plan B because Daum has already jeopardized the White Oak deal by filing a Subpoena case on the funder and hence they want to be more cautious with the other options to avoid Daum s involvement.
My assessment is that the worse is already in the price. I once made the mistake of giving a long rope to management in the case of Inox Wind. Here too, I am willing to wait a quarter or two only because Mr. SKR has a lot riding on how this goes. The reputation he built all this while is at stake. I am hoping he wonât disappoint me like the immature Devansh Jain did.
What are the companyâs plans for the next 1 year to monetise or llicense the patents held by Lycos?
Why no marketing is being done for Lycos Life products such as the wrist band? Or the focus is going to remain only on digital advertising?
How many number of shares are currently held by
RAJESH GOENKA,
NAKUL GOENKA and
KRISHNI DEVI GOENKA ?
What are the promoters doing to unpledge the shares currently pledged?
What is the company profile of
Fingrowth Co Limited, Mundi Enterprise Limited, Probus Capital Limited and
REDMOND INVESTMENTS who are listed as promoters in the shareholding pattern?
Value investor when 90% of the business is in brightcom which is seperate from Lycos completely and a completely different entity, even if they lose lycos thats a 10% hit, and you are getting a compnay that does earn over Rs 150 crore cashflow for Rs 300 crore, im a buyer at this price its worth the risk. Long term things can get settled and the stock can get rerated.
Very lively discussion on Lycos. This stock has raised my interest. Kauban your replies are convincing but still somethings cant be ignored.
Question is, if the company is making 428 cr profit every year what is the need to pledge 43% promoter holding for loan of 40-50 cr.
Second is even after making such a huge profit, company didnt pay interest of 12 cr and loan became NPA.
company is dodging investorsâ queries that also raise suspicion. Does anybody know anyone working in the company or any customer of company personally.
I searched for employees review on glassdoor and customer review on facebook page. Didnt find them encouraging.
Even if value is locked. Question is when it will be unlocked.
There is a tendency for retail investors to focus only on the negatives of a company when there are challenges. This stock has a book value of Rs 50 per share, the management holds regular conference calls, they are trying their best on all fronts. The price earnings ratio is 1. It deserves to trade at Rs 50 per share at the minimum.
