FOURTH DIMENSION SOLUTIONS LIMITED (FDS) came out with a PUBLIC ISSUE OF 28,92,000 EQUITY SHARES OF FACE VALUE OF Rs. 10/- EACH A PRICE OF Rs. 30/- PER EQUITY SHARE AGGREGATING Rs. 867.60 LAKHS on 7th January 2016 and was listed on 22nd January 2016 on the EMERGE platform (meant for SME segment) of NSE.
Link to the Prospectus is:
http://www.nseindia.com/emerge/corporates/content/FDS_PROSP.pdf
FDS is CMMI level 5 company managed by experienced IT, Marketing and Administration Professionals. FDS assignments are mostly tender based contracts awarded by Local/State/Central Government bodies. In certain cases, they bid the tender in consortium with another party which primarily includes RICOH India Limited. FDS also does merchant trading of IT and electronic products like tablets, LED TV, Mobile Phone etc.
The Financials are as follows:
Some of the projects being implemented by FDS:
AADHAAR:
FDS is one of the Enrolment Agency appointed by UIDAI as consortium partner with RICOH India Limited. FDS is taking up the enrolment work in Madhya Pradesh, Uttarakhand, Uttar Pradesh, Chhatisgarh, Rajasthan, Haryana and Bihar. FDS has also executed an agreement with NSDL for enrolment of residents of India on all over India basis as consortium partner with RICOH India Limited.
The National Population Register (NPR):
FDS has done project Management and Front end operations in Chhattisgarh, UP and Bihar for NPR Project along with RICOH.
Pradhan Mantri Jan DhanYojana (PMJDY)
FDS has been appointed as partner with Bank of Baroda for Himachal Pradesh and Rajasthan, UCO bank for Rajasthan and Baroda Rajasthan Kshetriya Gramin Bank for Rajasthan for managing the PMJDY scheme.
ICT in Schools
FDS has been appointed as Service provider by Telecommunication Consultant India Limited (TCIL) for Supply, Installation and Commissioning of Computer Hardware, Peripherals, Software, e-Content, Connected Accessories, 99 Lab Infrastructures, Maintenance of Equipment and Provision of Computer Education Services in 1110 Government aided schools of Delhi. The Company is also doing the project for supply, installation & Commissioning of Hardware, Software, Operation and Maintenance of Computer Aided Learning Centres (CAL-C) project in 200 EDMC primary Schools.
Scanning and Digitization:
Scanning of Maharashtra and Bengal Land records.
MOU with RICOH India Limited
FDS has entered into MoU dated May 08, 2013 with RICOH India Ltd. wherein they together will constitute RICOHFDS consortium for bidding e-Governance projects.
For the year ended 31st March 2015 following is the revenue from RICOH:
Supply of Goods: 373.25 Crs
Services 58.28 Crs
Total 431.53 Crs
% of Total 66.22%
FDS has 695 full time employees as on 31st October of which 637 are in operations.
Rationale for investment:
- FDS receives substantial advances from its customer for rendering services and supply of goods as is evident from the advance from customer figure of Rs. 61.73 crs and Rs 109.87 crs outstanding as on 30th June and 31st March 2015.
- It works on negative working capital and is virtually debt free as the only debt outstanding is vehicle loans.
3.Bids for major projects in consortium with Ricoh India and Ricoh constituted roughly 66% of its turnover. - With Governments focus on Digitising India there is a huge scope of scalability and revenue visibility.
- At current market price of Rs 83/- its available at a PE of 7 times its EPS of 11.9 for March 2015 and not taking into account the EPS of 5.53 for 3 months ended 30th June 2015. FDS has not disclosed its earnings for Sept and Dec qrts as Cos in SME segments need to disclose earnings only 6 monthly and since the Co came out with IPO in Jan 16, it will give now full year earnings for March 2016. Market Cap is also very reasonable at Rs 90 Crs and if the 12 months earning FOR March 16 pans out as per 3 months figure of June 15 then we can see PE rerating and jump in MC.
- Promoterās stake is 73.43%
- FDS is CMMI Level 5 company. CMM is an abbreviation for Capability Maturity Model (CMM). The CMM was originally intended as a tool for objectively assessing the ability of government contractorsā processes to perform a contracted software project. CMM (Capability Maturity Model) Level 5 represents the top level of certified software development process: managed, repeatable, documented, self-optimizing. It is certified by Software Engineering Institute, USA. The company will be evaluated in all aspects of Quality, Customer report, document management, HR Management etc
- Documentation and record management and cloud services are going to be the next big driver for business.
Red Flags:
- FDS has lost Rs. 215 lacs and Rs. 70 lacs in share security trading for March and June period respectively.
- FDS allotted bonus shares in the ratio 3:1 on 7th September 2015 to the promoters just before the issue.
3.As supplies are to Govt and semi govt organisations delay in payments can increase the financing costs and also chances of bad debts which may wipe off or erode the net worth and profits substantially. - Major part of turnover i.e. nearly 83-85% of the turnover comes from goods supplied where the margins are very thin. But while going through the results of Ricoh I noticed that Ricoh also derives 83% from goods and 17% from services for the year ended 31st March 2015.
- Some of the related parties of FDS has supplied goods and services to it though not very large.
- First generation entrepreneur and the Company is only 4-5 years old and major turnover has only come from the year 2015 onwards.
FDS WEB SITE:
http://fdsindia.co.in/beta/index.php
On Facebook:
Nice videos and info like this video one can find in their Facebook account:
Tried talking to the management but couldnāt but hopefully should be able to do so shortly. Will keep all posted.
Disclosure:
Have invested in the IPO and also bought on listing and am looking to add more once clarity emerges on their sustainability of profit and growth.
