MPS Ltd


(Mahesh Shah) #466

@piy_sharma

When we read such articles, especially from an industry veteran, we need to cut out the hyperbole and instead look at the direction, especially the intensity of the direction. Also, while reading such articles, another important notable aspect is its ‘comments’ section. When we have senior executives who are or who have worked with prominent companies like :

Pearson (VP - Product Management)

Princeton University (Associate Director)

EMC Publishing (VP Sales & Marketing)

Codemantra (Director Business Development)

Cengage (Senior Product. Manager)

in addition to :

Mr. Amit Shah (an industry veteran who enjoys a very respectable name in the publishing industry)

as also :

ex-MD & CEO (till it was acquired by Mr. Arora) of our own MPS Ltd. – the company we are discussing…

When we have all these guys not opposing and infact concurring with the said article views, we can’t put a blind eye to the intensity of direction mapped in the article.

Here we are ignoring the 34 years long career the author of this article has had in the publishing industry by serving at very senior positions in companies like Innodata, Scientific Publishing Services (SPS) India, Deanta Global, Firstsource, etc.



I also completely agree with you that it is actually such bad phases that actually bring out real winners, but, as you must have noted from my previous posts, what I am concerned about is MPS so far underperforming its formidable Indian peers and now performing inline with its peers. We have seen muted organic growth trend as well as severe haircut on acquired entities.

The IT outsourcing companies that you are talking about, which turned out winners post bad phase, just check the growth trend, such companies outperformed peers in the bad phase and they were not just competing on pricing or inorganic moves as otherwise they would have not survived. Their landscape was broad and therefore addresable market size was broad and so they were able to compensate one bad offering for other.

In contrast, for MPS we need to focus on only publishing outsourcing space and therefore start of organic growth is critical. I have great respect for Mr. Nishith Arora and therefore I want MPS to start performing and, frankly speaking, I am just searching for initial cues of such performance and sustenance of such performance. So far, it hasn’t come and I have great hopes for Q4 as Mr. Rahul Arora looked very confident in q3 concall for Q4 and this Q4 will be on back of two back-to-back bad Q3s – company’s seasonally best quarter.

Also, on delay in acquisitions too, we get a new angle to ponder from the comment section of the said article where it is said “The other global issue that I see is that many providers are for sale, and apparently few if any buyers. So, that tells me that providers who are for sale have not built a business that others perceive as having value. That is troublesome. It will be interesting to see who is standing by the end of the first quarter of 2017. My gut instinct is that there will be many providers that will go by the way side.”

Rgds.

Discl. - Not Invested


(Furkan Alam) #467

I must say this is one of the best analysis i have seen for any company anywhere… The knowledge and information captured here is truly remarkable

The presentations by senior members on the management and business qualities in October was quite unique and offering a great perspective to think and dig deeper into MPS…

Having read quite a lot on this thread…my thoughts are as below…

The slowdown/very small growth in the clients they service…For an outsourcing company this can be a boon as slowdown usually results in more outsourcing…as clients tend to offshore their IT needs to cut on costs…

However the size of the whole opportunity pie, which is roughly around a billion dollar is not quite what you would want for a company you would expect to compound for 5-10 years… this opportunity size is key and we need to track how it changes…

Regarding the acquisitions…its a tricky way of doing business and involves a lot of risk. The risk increases with the size and complexity of the acquisition… With the cash on hand they are looking for a very big acquisition… this is another area which does not comfort…

WIll keep tracking this and see how they report next few quarters…

Disclosure :- Not Invested


(Sreekanth) #468

I would agree with Mahesh in the sense that the publishing industry is going through a very rough phase, but however i feel it would also prove to be a blessing in disguise as i believe MPS will differentiate in terms of content offerings (aka functionalities) …

Sharing excerpts from an article read somewhere recently…

1.How it all started: E-Books in academic publishing – and in academia

2. Digitality will dramatically change book publishing – yet another time

  • While E-Books have already changed academic publishing quite a bit, the most significant changes are still ahead; E-Books in the past and those in the future will be very different things.

3. The next stage: Commercialization of the publishing process

E-book aggregators: new services in electronic publishing

What is an Ebook Aggregator?

An ebook aggregator deals with ebook authors directly and interfaces between them and ebook retailers such as Apple and Sony. The ebook aggregator may offer other services besides distribution, for example ebook design and formatting services.

Why Use an Ebook Aggregator?
Some of the valid reasons to use an ebook aggregator include:

  • You are non-resident and haven’t yet acquired the various requirements (e.g. B&N requires you to have a U.S. bank account and U.S. Tax ID).

  • You don’t have the hardware or software required to publish your ebook directly (e.g. Apple requires a Mac).

  • You don’t know how to technically format the manuscript (e.g. to ensure your epub file passes validation checks).

Current trends in Ebook publishing industry: (Source wischenbart)

“Overall, the eBook market makes up about $14.5 billion in sales globally and is expected to reach more than $22 billion by 2017.”

So based on the overall findings my sense is that MPS is on the right stage to evolve its product offerings which will determine its growth path ahead…

@Mahesh: Your views as always would be grateful on the above :slight_smile:; secondly assuming a no-growth scenario what would be the kind of valuations you would be looking into? My sense is that on a forward earnings basis the stock is very attractively valued with a ethical management in place.

Regards
Sreekanth
Disclosures: Holding ~15% of my holdings in MPS, no trade activity in past 30 days…


(Mahesh Shah) #469

@srnarayan

Will try to explain you phases that I feel the industry of our concern, ‘Publishing Outsourcing’ went through…

When a client industry begins facing tough times – volume squeeze as well as severe pricing reduction,-- you see an immediate boom in outsourcing – first the non-critical work then critical work if tough times remain – this is the phase ‘Publishing Outsourcing’ industry went through till FY06…In this phase you find numerous players settingup shops to take advantage of the situation.

When a client industry’s tough times continue for a long time with end-product volume growth itself in low single digits, you see numerous players who set up shop in boom phase competing for a shrinking pie – so then consolidation phase begins – where good players who foresight end-customers’ needs, are financially sound and are seriously into the business for the long term start offering differentiated services and eat up good opportunities…In this phase you find many M&As happening as also many players shutting shop. This is the phase where good players will markedly outperform sub-par players…This was the phase industry went through from FY06 till FY14.

Consolidation phase is either followed by a mature revival (maturity) phase or a shake-out phase. Unfortunately the industry of our concern met with shake-out phase starting FY15. In the shake-out phase even good players find it tough to grow whereas most of the sub-par players face near extinction – the trend we are witnessing right now.

Post shake-out phase we usually see emergence of a mature phase where reasonable growth comes back for good players who have sustained all phases, however, superlative margins become a thing of the past and the more realistic margin scenario emerges.



Now, let’s check status of MPS in all the above-mentioned phases ---- MPS was one of the strongest and amongst the Top 5 players in boom phase…Consolidation phase can be divided into two phases for MPS – A & B – A being under Macmillan and B under Mr. Arora ---- MPS lost completely in Consolidation-A phase and underperformed most of the good players of the industry in Consolidation-B phase…Now, in the ongoing shake-out phase, MPS is performing inline with most of the good players of the industry.

Key Questions to ponder are —

– Do we see scope for significant revival in end-client-industry volumes ??? — seems a clear NO.

– Do we see scope for significant revival in end-client-industry product pricing, so that muted volumes come at higher prices ??? — again a clear NO.

– So, if the volumes of end-clients and therefore addressable size of our concerned industry is not going to expand aggressively alongwith muted (if not declining) end-client product pricing, what could happen in current shake-out phase ??? — clients will start squeezing you in every way possible…they are not concerned whether you are driving better margins because of superior productivity or otherwise — they will just demand passing of all benefits whatsoever you have ----

if shake-out phase remains for some more time and volumes are difficult to come-by, we might see strongest players of the industry willing to forego margins for volumes — and this will be triggered by one of the strong player’s initiation – most probably Aptara or Innodata ---- and it is post this phase that a mature revival phase might begin.

Consolidation phase ended with a shake-out phase rather than a revival phase because of two reasons — first, end-industry was undergoing suffering-transition because of disruptive technology and second, majority players were operating at very high margins so evenif topline growth didn’t come they were happy to continue their work and sustain. A 35-40-50 % EBITDA margins in a commoditised-type outsourcing services is unbelievable…such margins are normally enjoyed by those who are extremely important for their clients or who have non-linear revenue streams like products/platforms…



Now, after this backgrounder, coming to your last query regarding valuation — as I have said many times before, I am a strong believer of the fact “beauty lies in the eyes of the beholder”. So, asking for discussing valuation aspect to a person who has exited his holding in a company should be immaterial to you or any other person who holds position in the said company. I must be having some strong basis because of which I took my decision to exit and you must be having some strong basis based on which you hold 15 % of your funds in the company. Also, here I need to point out that I took a call of revival/mature phase post consolidation phase when I invested in MPS and I got it completely wrong and shake-out phase started and I have no hesitation in admitting this as we must be equally prepared for any adversities as we are prepared to ride our successes.

Still, since you have asked, touching upon the valuation aspect from my angle…

MPS @680 CMP is trading at

~12x FY16e EV/EBITDA,

~19xFY16e EPS and

~4.5xFY16e BV…

This is after :
FY12’s constant currency (cc) growth of 1.25 %,

FY13’s cc degrowth of -(7.09) %,

FY14’s cc growth of 3.32 %,

FY15’s cc growth of 6.75 % and

9MFY16 cc growth of 2.37 %…

Also, this is after FY12’s EBITDA margins of 10.31 %, FY13’s 26.17 %, FY14’s 36.06 %, FY15’s 37.34 % and 9MFY16’s 40.40 %…

To add, this is also after it has ~65 % of its FY16e topline as cash in its books.


In comparison, Infosys @1200 CMP is trading at

13.8xFY16 EV/EBITDA,

20.3xFY16 EPS and

4.4xFY16 BV…

This is after :
FY12’s constant currency (cc) growth of 15.7 %,

FY13’s cc growth of 5.7 %,

FY14’s cc growth of 11.5 %,

FY15’s cc growth of 5.6 % and

FY16 cc growth of 9.1 %…

Also, this is after FY12’s EBITDA margins of 31.78 %, FY13’s 28.58 %, FY14’s 26.69 %, FY15’s 27.89 % and FY16’s 27.40 %…

To add, this is also after it has ~55 % of its FY16 topline as cash in its books.


Although many might not agree with this comparison of Infosys with MPS, but, in absence of organic growth and growth likely to come via only acquisitions with declining margins, a company like Infosys which is 250 times bigger than MPS’s FY16e consolidated topline (not standalone) and is still growing in cc terms higher than MPS and is having similar 50 % + topline as cash in its books, is trading at almost the same valuations as MPS.

MPS to ride significantly from here in terms of valuation multiples, ‘visibility’ is the key factor…Yes…tomorrow, if Mr. Arora clinches an acquisition like Macmillan, via which it can increase its topline by 100 % with only 500 basis points reduction in consolidated margins, then there might be sudden and significant rise in valuations. But, today the opportunities which are there are already facing significant haircut in topline and margins…so, if there is a company with say 100 cr. topline today which gets acquired for say 30 cr., it is because it is already having clear visibility of a declining topline of 70 cr. next year and 50 cr. the year after…now, to acquire such company and arrest its declining topline while at the same time bringing its margins to even say 25 % is a great task which will command superior multiples when fulfilled…It is actually this visibility of fulfilling such task that is still not visible in any opportunity because of which we have not seen acquisition even after one long year of raising funds…and for this I have highest regards for Mr. Arora as he has not came under any sort of pressure atall…

my reservation on the way funds were raised ahead of time is a different matter but after raising funds, Mr. Arora has not burned it that is good and I respect him for that…however, I am not able to arrive at any sort of future visibility for the time being and so I am playing a waiting game in this company…Q4 is critical as if MPS fails in Q4, it will be miserable…

I have assumed only a 6 % cc organic growth in Q4 (v/s 7.7 mn. USD of Q4FY15) and MPS North America in double digits INR revenue with double digit EBITDA margin. Let’s keep our fingers crossed and hope for the best.

Rgds.

Discl. - Not Invested


(Vimal Dixit) #470

Superb understanding as usual.


(Varadharajan Ragunathan) #471

Fantastic comparison mahesh - learnt a new way to look at MPS. Good work


(Mahesh Shah) #472

Q4FY16 results of MPS will be declared on 17th May 2016…

Key datapoints to note :

Q4FY16 Average USD/INR rate @ 67.37 v/s Q4FY15’s = 62.19,

Q4FY15 Standalone USD revenue of MPS @ 7.7 mn. $ with standalone EBITDA margins @ 35.31 %

Q4FY15 MPS North America INR revenue @ Rs. 6.78 cr. or 1.1 mn. USD with EBITDA margins @ 21.82 %. Q4FY15 revenue included only Element & EPS whereas current Q4FY16 will include TSI also in addition to Element & EPS. TSI had a CY14 (Jan-Dec) revenues of USD 3.06 mn. or INR 18.70 cr. (USD/INR average CY14 = 61.14). In 1HFY16, TSi contributed revenues worth INR 2.87 cr…

Q4FY16 will see booking of Other Income worth ~7 cr. realised out of parking of QIP funds.

Rgds.


(Mahesh Shah) #473

MPS Concall today, 17 May 2016 at 3.30 p.m…Dial In Numbers:
+91 22 6746 5870
+91 22 3960 0670


(JKS) #474

Q4 Results are out…came out seconds ago
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/C1DF25F8_7D0A_4812_9EBB_43F70E4FA640_140508.pdf


(Mahesh Shah) #475

prima-facie, seems perfectly on expected lines…USD standalone revenue at 8.1 mn. USD – a YoY 5.7 % growth…MPS NA turning out 10.12 cr. INR revenue with ~19 % EBITDA margin…

Key notable thing seems to be, there is no apparent negative or shocker this time which in a way is positive…

Concall commentary and Acquisition profile will be key trigger to watch…

Rgds.


(Rohit Ojha) #476

I attended the concall but couldnt take notes… Posting what I remember

Nishit Arora said that they are happy about the decision to wait with the cash as they are getting better opportunities than what they were getting 6 months back.

Rahul Arora mentioned that this is a mature industry with 3-4 big players and a long tail. We have to see how long the tail would last. There are no credible studies on the size of market and growth rates. One study pegged market market size as 1.6bn USD and growing at 15% but they doubt this.

Publishers are under pressure to cut costs. One publisher had announced to layoff 10% workforce. But they said that they have deep relations with clients and they dont try to squeeze vendor margins.

They said that MPS is growing faster than the competitors, depeding on how we look at it.

On being asked about whether they are on track to achieve the 200mn USD revenue target by 2020, they said that they are committed to the aspiration. It sounded like "ya we will try but we are not sure" (just my interpretation)

No progress on selling Bangalore property. Option is always there.


My feeling is that the company will find it a bit difficult to grow more than 15%. Margins may not come under pressure as such but revenue growth itself will be slow as they continue to take volumes at lower prices. It remains a company with an excellent management but no tailwinds. As before, trigger remains acquisition.

As @Mahesh put it, this looks like a shake out phase for the industry.


(Mahesh Shah) #477

Some updated statistics post results…


Standalone USD Quarterly Revenue Growth trend post acquisition by Mr. Nishith Arora :

Consolidated USD Yearly Revenue & Per Employee Revenue trend pre- & post- acquisition by Mr. Nishith Arora :


“MPS North America” Revenue & EBITDA margin trend since its existence :

Rgds.


(Mahesh Shah) #478

@pikrohit has already summarised key takeaways from concall very well…just to add few minor takeaways :

– Company is likely to report “constant currency” numbers starting next FY (for better assessment) rather than plain converted USD numbers.
(Even we can carry out such approximate exercise via currency billing % but how this will be much different than USD converted cc growth numbers that I doubt as 69 % of company’s revenues are already billed in USD and its only other 31 % that are billed in other currencies.)

– Employee count as at Q4FY16 is 3001 v/s last year’s 2858.

– Company’s strategy for organic growth is –

(a) Identify new outsourcing areas, in close association with clients, where company is not present currently., and

(b) In traditional areas, enter into long term volume arrangements with clients.

– Company’s Acquisition preference is

(a) Acquired company should be a premier brand., and

(b) Acquisition should be blessed by existing customers.

– Company stays committed to its aspiration of doubling revenues by FY18 (although timeline not stated clearly but recalling original statement of management given in Q4FY15). However, management doesn’t want to atpresent think of “USD 200 mn. revenue by FY20” aspirational guidance provided during QIP roadshows as its first goal is to double its revenues.




My Personal Positive/Negative Notes post Q4FY16 Results & Concall Commentary as well as Other Allied Events:

Positives :

– Company standing by its first aspiration of doubling revenues is the major positive takeaway for me and if it sticks by the given timeline too, then acquisition might not be too far away as already we are sitting at the end of Q1FY17.

– A 5 % + cc standalone revenue growth in Q4FY16 is the second positive that I see as atleast company has ended the year on a positive note.

Company’s strategy for achieving organic growth seems reasonable as now it seems to be reconciling with ground realities and looking at new allied outsourcing areas where company is not present currently. An acquisition could give a good headstart to this strategy as otherwise building an entire practice from scratch could be difficult.

If we do a ground check, company seems to be moving in right direction by building a strong front-end client-facing team

John Sollami – who was VP Operations North America under Macmillan-era comes back in same position now,

John Martel – who has a two decade career in Publishing industry comes as Director Business Development MPS North America

Jamie West – who again has an almost two decades career in publishing industry in organisations like McGraw-Hill & Houghton Mifflin comes as SVP Product Development

Marie McNamara – who again has more than two decades career in publishing industry now comes as VP New Business Development (this is because of the acquisition of TSI)

Raghavendra Pratap Singh – comes as AVP Product Development & Marketing from Aptara

Satya Pal – who was incharge of MPS Technologies since Macmillan-era and who left to join Woolters Kluwer, again rejoins as VP & Business Head of MPS Technologies.

– In addition, it was satisfying to see Yamini Arora (wife of CEO & daughter-in-law of Nishith Arora) leading MPS’s presence in recent IDPF Conference – I like those companies where promoter family members are not only recruited at senior management positions for namesake but also put-in efforts themselves to grow the business of the company.

– To add, company seems to be awakening to power of social media marketing as we see its twitter account getting recently reactivated with few posts. Although its nowhere near the likes of Aptara or even smaller player like Hurix in terms of both quality, quantity as well as followers gained but atleast some start is made.

– Rahul Arora seemed completely under control this time and answered most of the queries quite well (reminded of Nishith Arora’s initial concalls) without any fumbling.

– Besides this results and concall events, two positives can be picked up from industry developments :

Innodata, the third largest player of the industry, in its last week declared Mar’16 quarterly numbers, registered higher than guided revenues in its Content Services division (business comparable to MPS). In earnings call held post the results, management stated, “revenue in the Content Services segment was $13.6 million which was about $0.5 million higher from the top end of the guidance we provided in our last earnings release. By having exceeded guidance by this much, resulted from higher than forecasted requirements from several customers and highlights are difficult that can beat a forecast revenues from quarter to quarter in our content services business.”

In a similar development, Ienergizer, Apatara’s parent, last month said in a filing to exchanges, “iEnergizer is delighted to announce that the company expects to report a significant increase in EBITDA for the year ended 31 March 2016. This out turn is likely to be above the company’s original target and budget and has resulted from the combination of renewed business momentum, contract wins and the successful implementation of the transformation plan.” The said transformation plan included consolidation of its content services division (Aptara) into its operations centre in Noida, India, and rationalising selling, general and administrative costs.




Negatives :

Biggest negative for me remains my old reservation of the way funds were raised ahead of time. This time we are hearing a hilarious (if not ludicrous) statement from Mr. Nishith Arora who states “We continue to evaluate opportunities, we looked at many in the past, just when we felt we were getting close to something, more better comes along and then we say we take a closer look at something else…” (exact statement reproduced in quotes almost as it was said, still one can check concall transcript in case of any mistake on my part).

This is like, you are a prospective groom in the best age suitable for your marriage and are looking for prospective brides and you are close to finalising proposal with one girl which you felt is good, some other girl comes along exactly at that time which you feel is better and then you start going after her and its when you are close to finalising your marriage with that another better girl then some other more better girl comes your way and you go after her…If you are a “Salman Khan“ then one day you might find the best match as perceived by you (remember, even Salman Khan is unmarried till now) but if you are an above average or even a good common man type prospective groom, there is high probability of your suitable age of marriage passing away and finally you being compromising on a sub-standard (relative to previous proposals) prospective match or not marrying atall.

I really pity institutional investors who lent their support during QIP (HDFC & Goldman). After 14 months of their investment what they are getting is 2.63 % return (via dividends) on their investment and a notional loss of 20 % + on capital invested. They don’t have a choice but to stay with the company as its an illiquid share and no other institutional investor is going to come at current juncture into the company. Management’s statement that they have discussed with QIP investors and have full support of them doesn’t match as if they were in support of management’s unreasonable delay in deploying funds, they would have increased their exposure to the company by buying more at 22 % lesser price or atleast some other institutional guys would have come in.

Those who are in support of this fund raising ahead of time and then not deploying funds for this much time, just think if these funds were raised by the company via IPO and retail investors were involved where in “Objects of Offer” inorganic purpose was written…if such IPO company would have not deployed funds for 14 months even after raising funds from the public, i.e. us, what thought would have gone on the back of our mind ??

I am severely criticising this “raising of funds ahead of time and delay in deployment of funds” policy as be it be any management whatsoever, no one has right to take any form of investors for ride. If its money generated via internal accruals and you are keeping it as cash without deployment (like most of the IT guys like Infosys, TCS have), its completely fine, but, if you are raising funds by diluting equity because of some purpose, you need to have concrete proposals inplace as fund-raising from any form of investors brings with itself commitment and huge responsibility.

I sincerely hope that this delay in acquisition is perfectly justified by the management by doing a great acquisition and it silences critics like me completely. On my part I will be more than happy and I want that I get silenced as I am surprised by this one bad move by otherwise a great management led by Mr. Nishith Arora.

– Second key negative is only 3 % YoY standalone cc growth in FY16 v/s FY15. However, this is understandable and not a surprise and we need to look at what future brings, especially FY17.




Valuation :

@srnarayan asked before regarding my view on valuations. Just refer the table below :

in above table only Ienergizer valuation multiples are based on FY15 numbers.

– Based on the valuations commanded by major peers of MPS as also other Indian IT players, I personally feel 10-12x FY16 EV/EBITDA should be the bottom for MPS if EBITDA margins can be sustained at even 35 %. I am not considering here P/E as it will include effect of other income because of huge cash company has. Although at just 11.4xFY16 EV/EBITDA it is attractively valued right now as no positives seem to be priced in, but, its only acquisition profile that could provide trigger as in financial circle that I talk to, I clearly see brand image of MPS going down and frustration getting into even the most loyal MPS shareholders.

While saying all these, it is also equally important to state that Q4FY16 results are not that bad or cash available with the company is not burnt in anyway to warrant a massive 11 % correction post declaration of results.



Note – Despite my negligible holdings of less than 1 % of my pf, I have tried to be as unbiased as possible while stating positives and negatives above. However, these are my personal views and no conclusion should be derived out of that as I can be wrong.

Discl. - Negligible Holdings. Less than 1 % of pf., Bought in last three days post results. Planning to buy more next week if valuation permits.


(Sreekanth) #479

:smile: Very apt analogy @Mahesh and wonderful analysis as always

Somewhere in the concall Rahul Arora mentioned that they have very deep relationship with vendors and they do not want to squeeze out MPS’s margins… How would you evaluate this statement in today’s pricing scenario?

Apart from the whatever updates has been presented wanted to highlight management has been very keen on implementing the Digicore platform which is based on open-source module and runs on AWS cloud-services…(somehow i like this strategy as i believe it would be an early adapter to the huge potential that lays ahead for AWS platform)

Regards


(Mahesh Shah) #480

@srnarayan

Pricing pressures are there and there is no doubt regarding that and till increased volumes can compensate for reasonable pricing pressures, there might not be that much problem…If you closely observe the margin trend, it seems ex-India operations (MPS NA) carry a pathetic margin whereas company is able to improve India margins considerably which have in a way compensated for ex-India pathetic margins…

ex-India operations’ EBITDA margins were Loss in first year i.e. FY14 , 21.73 % in FY15 and 4.52 % in FY16…

v/s

India operations’ EBITDA margins which were at 36.06 % in FY14 , 37.34 % in FY15 and 39.95 % in FY16.

Now, we need to understand the business model for vetting the sustenance of EBITDA margins…its actually the strong overseas operations that bring increased business to Indian operations and till the mix is in favor, or in other words, till the company is able to shift more work offshore, margins might sustain and could infact improve from hereon as this time’s achievement of a 39.95 % EBITDA margins for India operations seems great. However, as the scale grows, proportion of ex-India operations might become greater and greater…have a look at historical trend :

ex-India operations contributed 4.55 % to consolidated revenues in FY14, 9.24 % in FY15 and 12.89 % in FY16…as the scale grows bigger, say doubles from here, goal of the management might be to cap ex-India at 30 % and India at 70 % ; so, in such a scenario, steadystate EBITDA margins could be 30 % and thats what I assume…

All really depends on acquisition, as if it brings with itself scope for better utilisation of Indian operations and therefore increase in its size, even a single digit EBITDA margin in ex-India operations could let the company post 28-30 % consolidated EBITDA margins on higher scale provided it is able to sustain 40 % EBITDA margin for Indian operations.

Case in point here could be Newgen Knowledgeworks, who since last 6 years has maintained 70:30 ratio and is posting losses in ex-India operations since last two years but is still maintaining a consolidated EBITDA margins of 22-23 % because of its India operations’ EBITDA margins at 33-37 %.

However, as I said before, considering the fact that end-clients themselves are facing volume and pricing pressures, to assume that company will work at 35-40 % consolidated EBITDA margins even at its desired double the current scale will be illogical as in long run this business has to settle at reasonable EBITDA margins of 25-28 % that’s what I believe.

As far as company’s platform business is concerned, it surely has a good potential but only if its able to find a way to find mass market for its platforms and such mass market is numerous small publishers…However, this can’t be achieved without significant investment into marketing and sales and that’s what company is lacking. If its able to achieve this in any way, say acquisition, profit growth could be significant than revenue growth.

All things are again tightly linked to inorganic move and let’s see when our publishing outsourcing industry’s Mr. Salman Khan makes such move :smiley:

Rgds.


(saurabh shankar) #481

Hi Mahesh,

I slightly disagree with point of raising money. If you read the book
Outsiders almost all CEO’s did this. Raise money when valuations are high
and utilize it later.

i could be wrong in my assessment but in capital markets you raise money
when you can and not when u need.

Regards,


(Mahesh Shah) #482

@constantseeker_

I have no problem in the way the funds were raised, but it’s the approach of the management post fund-raising on which I have strong reservations on, Raising money when valuations are high is perfectly fine but it has to be deployed for the purpose for which it is raised in the stipulated time-frame and if it’s not deployed, there has to be some strong reason for non-deployment. Either you need to be clear in your strategy while raising funds that what you need to do or you need to just say one thing at the time of raising fund that I am raising it as plain growth capital and I might deploy it within few years.

When you have made public your vision to double your revenue within two to three years and make such revenue 5 times within 5 years and you are already in second year post that and you give the reason that I have not deployed funds because every time I think of deploying it in one target some other seems appealing to me and so I am starting evaluating that target ; this is completely irresponsible behaviour as even as an investor we know that while evaluating investments we need to have our goals clear in mind and based on such goals only we need to choose our investments ; if we as an investor or for that matter if any businessman follows such approach he will not be able to crack a single deal and your peers will move far ahead of you. This is a dynamic world and each step you need to take with clear vision and strategy in mind and if one opportunity fits that strategy you can’t be greedy and go after another opportunity ; such mindset is only followed by those persons who don’t have a clear cut future growth strategy in mind and I don’t think the management we are talking about is such a management.

Anyway, this criticism might be a thing of the past as already Mr. Arora has stated that now they are at a stage where they “finally need to decide with whom to move on and when” and as I have said before, I hope and I sincerely want that I get silenced in the right way.

While stating this, I also need to admit that funds raised are not burnt in any way whatsoever so far.

Rgds.


(Raj) #483

MPS annual report is out.


(sudipsand) #484

Thank you Raj.

With Regards,

Sudip.


(paresh.sarjani1) #485

anyone planning to attend AGM?