I have invested a small part of portfolio.
As already mentioned understand the key here is the TCAS.
However the main risk i see is what is the probability that railways will accept the TCAS developed by Kernex. As per last 2 AR’s some Italian agency is supposed to test and approve it and the date of approval keeps shifting. latest one was for Sept 2017.
The company was qualified to develop TCAS in june 2013
TCAS seems to be the only hope for company survival.
The past record is not impressive.
The Company investments in ACDs did not yield results due to railways moving to another system TCAS. Also the company lost the cash flow due to cancellation of maintenance contract for ACDs by the Konkan railway.
Their EGYPT business apparently was not doing well due to geo-political issues lack of timely payments by the Egypt govt.
They have not been able to sell Lx systems and other products to other clients other than ENR inspite of making efforts in other countries.
So basically they haven’t been to find a market for their products in all these years.
Multi-section digital axle counters - the company developed same in collaboration with another company, tested in Fy 12, finally approval was not given. No success at this front also inspite of company claiming it to be 600 cr market.
Overs the years company has not been able to find new clients for its products except for some coal terminal in South Africa. ( a small order)
The Company used to mention their intention of foraying in the defence sector but no success achieved in procuring any orders.
They also mentioned of trying to enter into some Joint venture for TCAS but so far have no announcement has been made. This seems strange, if TCAS is a huge opportunity and only 3 players then finding a partner shouldn’t be so difficult.
The disclosures in Annual reports seems to be good for a micro-cap company.
Also selling of non-core assets is a positive , hopefully will keep the company afloat for few years.
there are so many suppliers to Railways, it seems strange that only 3 companies are qualified to develop TCAS.
Till 2017 the company has not received any orders for TCAS except for 6 cr for the purpose of trials.
Basically, this seems to a single client , single product company , hence high risk high reward kind of bet IMHO.