The results are pretty bad considering that there is year on year decline in revenues in terms of dollar. Also, the operating margins have come down to 13.4 per cent in this quarter as compared to 16.5 per cent in Q3 FY12 and 17.4 per cent in Q2 FY13 primarily on account of increase in employee cost. Also, the increase in PAT year on year is on account of increase in other income (primarily interest income). Even I have sold my holding in the company. However, there is one thing I have learnt from this investment that one should not invest in companies where one doesn’t understand the business well (how can I forget this basic funda of Peter Lynch, Mohnish Pabria, Munger and Buffett). I was basically betting on increase in cashless transactions leading to increase in income for Visa and in turn increase in sales for RS. Anyways, I will still follow up with them for the update onquestionnaire.
Dolly Khanna entered RS Software with about 2 lakh shares as per latest shareholding. She is an HNI investor, who holds greater than 1% stake in companies like Amara Raja Batteries, Cera Sanitaryware, Heritage Foods, Paper Products, and Hawkins Cookers.
Barclays wealth is another new entrant in RS Software.
Finally got a reply from the company which seems very short and am not convinced by their response:
Dear
Mr. Gupta,
Thank
you for your e-mail to us. Our replies are embedded in blue below with your
queries:
What differentiates
the company from other large and mid tier Indian IT companies (company's USP
vis-a-vis other IT companies)? Is there any other niche player in India which
competes directly with our company in payment space?
Being
a domain focused company. There is no other company focused on payments domain
to the best of our knowledge.
How is the business environment for the company in the
current year (since lot of other IT companies are seeing serious pressure
on sales and margins)? What kind of growth are we expecting in next 2-3
years?
Good.
We expect to maintain better than industry average in terms of growth rate.
How is the pricing decided for the company? Do we work on fixed prices or
variable ones (depending on foreign exchange)?
Pricing
is a mix demand driven and market driven equations.
What is the margin expectation for current year and next
year?
We
would certainly like to maintain the margins of past.
Contractually
we cannot comment on any of our clients.?
Is the company planning/working on expanding to other
domains egmanufacturingor retail or payment seems to be the
focus?
Not
currently.
What is the current employee strength of the company? What
is the number of net employee additions for the current year?
Whatkind of employee addition are we looking for next year?
900+
current addition of around 100 .
What percentage of your total costs is in foreign exchange?
What is our foreign exchange management strategy? Do we hedge our foreign
exchange receivables?
60%
of expenses are in foreign currency giving natural hedge. Company has hedging
limits which can be utilized as and when needed.
Despite good profits & cash balance & minimal need
of capital expenditure, why was dividend not paid after H2 FY 13
results?How is themanagement planning to utilize cash?
Company
has already paid dividend interim @15%
Hope
we have been able to clarify all your queries.
With
Regards,
Anindya Sen
Finance & Secretarial
R S
Software (India) Ltd. âFMC Fortunaâ, 1st Floor, A-2,
234/3A, AJC Bose Road, Kolkata 20, India
Thanks Ankit for sharing. You are right that nothing much comes out here.Me thinks there are better oppurtunities in the IT space now specially looking at how the other IT guys have done.
[quote="ankitgupta, post:64, topic:452479565"]
> Finally got a reply from the company which seems very short and am not convinced by their response:
>
> Dear Mr. Gupta,
>
> Thank you for your e-mail to us. Our replies are embedded in blue below with your queries:
>
> What differentiates the company from other large and mid tier Indian IT companies (company's USP vis-a-vis other IT companies)? Is there any other niche player in India which competes directly with our company in payment space?
>
> Being a domain focused company. There is no other company focused on payments domain to the best of our knowledge.
>
> * How is the business environment for the company in the current year (since lot of other IT companies are seeing serious pressure on sales and margins)? What kind of growth are we expecting in next 2-3 years?
>
> Good. We expect to maintain better than industry average in terms of growth rate.
>
> * How is the pricing decided for the company? Do we work on fixed prices or variable ones (depending on foreign exchange)?
>
> Pricing is a mix demand driven and market driven equations.
>
> * What is the margin expectation for current year and next year?
>
> We would certainly like to maintain the margins of past.
>
> Contractually we cannot comment on any of our clients.?
>
> * Is the company planning/working on expanding to other domains retail or payment seems to be the focus?
>
> Not currently.
>
> * What is the current employee strength of the company? What is the number of net employee additions for the current year? of employee addition are we looking for next year?
>
> 900+ current addition of around 100 .
>
> * What percentage of your total costs is in foreign exchange? What is our foreign exchange management strategy? Do we hedge our foreign exchange receivables?
>
> 60% of expenses are in foreign currency giving natural hedge. Company has hedging limits which can be utilized as and when needed.
>
> * Despite good profits & cash balance & minimal need of capital expenditure, why was dividend not paid after H2 FY 13 planning to utilize cash?
>
> Company has already paid dividend interim @15%
>
> Hope we have been able to clarify all your queries.
>
> With Regards,
>
> S Software (India) Floor, A-2, 234/3A, AJC Bose Road, Kolkata 20, India
>
> (P) +91 33 2287 5746 || (F) +91 33 2287 6256 || (M) 919830403542
Mail: Leader in Providing Technology Solutions to the Electronic Payments Industry
[/quote]
All I ca say is they are short in competence of communication, I know its public domain, and they can't be very specific, but it doesn't stop them by explaining the situation in more general terms and build some confidence in investors. If i remember right their employee costs were down last quarter(QOQ), I thought they laid off some, but surprised to see that they have added about 100 engineers. Little disappointing with their responses overall.
egmanufacturingor Whatkind results?How is themanagement
The above answers from the company management are ok … I dont feel any negativity in the scrip to come down. The company is doing well. However if you go by Q TO Q performances , it may not meet investors expectation … But at the same time we need to understand that q3 was not ok , becasue of lesser number of working days in US … Also this time operations of the company might have been effected becsaue of Presidential elections and natural calamity in US in the q3. However these issues are temporay and may not be reflected in q4. RS has been consistently growing from last six years
RSS is now talking to MasterCard international to rope in it as a client. Visa is already its largest customer. A breakthru with MasterCard will be a big endoresement for its capabilities and a major growth driver. Company recruited 100 resources last quarter in the hope of new business.
This is from my interaction with a senior company employee. We should keep track of development here from all possible sources. Will keep updated if & when i get any dope on this.
Just sharing views expressed by Vijendra Surana CFO and company secretary of RS in this forum to my questions raised today. Although his answers are short , but it says a lot…
QUESTION : 1) The Quarter to Quarter sequential growth has been negative by 5 percent in terms of turnover
ANSWER: .Q3 business is generally less than other quarters.
QUESTION 2 : ) Has there been any client deletions during the quarter
ANSWER No , our client base remains same
QUESTION 3: 3) Under other income , there is 200 Lacs , what is this . Is it related to business or its profit from
currency conversion
ANSSWER: Interest and divident income
QUESTION NO 4: 4) Why domestic income has reduced substantially.
ANSWER: OUR FOCUS IS MAINLY EUROPE PRESENTLY
QUESTION 5: 5) Anything on future guidance
ANSWERS: Company continues to grow
Many milestones are not cleared in December by the client even though development is over because the client side managers are absent and most of them are holidaying.Once the sign off is received then the payment is done.In these cases the revenue gets spilled into the next quarter…hence 1 quarter’s loss is another quarter’s gain…Also projects which are billed according to time and money suffer because of the maximum no of holidays in this quarter …I remember in 2007 they were recruiting from NIT Durgapur…Even though it is a small organization I hear some good things about RS…They have cash…They haven’t tried to be aggressive and have not leveraged…
YES , they have lot cash in their balance sheet , they are waiting for theappropriateopportunity… to grab somelucrativedeal for the acquisationoerseas…
The company have been sitting on cash for quite some time. The best course is to pay off cash as either dividend or buyback to shareholders. If and when an acquisition opportunity comes, it can be financed using bridge financing and then replaced with equity funds raised via rights/pref issue. When a company is upfront and generous in sharing surplus cash with shareholders, they will be very willing to invest more when rights/pref issue comes and that too at a much higher price. Market will immediately rerate comapnies which do not horde cash fearing they will miss out on opportunities or they may not be able to raise equity.
Results to be declared on 12th…Very good possibility of dividend declaration if results are good and they have already announced the same…Management having good track record and they are having surplus cash …It has come down from 200-120 levels in the last 4 months…Stock up 11% today because of the news of a dividend possibility…It has potential to go to 180 levels if results are good…They have a very good record of dividend payout…The last quarter has been a good one for them…expecting dividends as they did not pay in last qtr…
Total Income up 8.2% to 76.22 Cr from 70.46 Cr.
EBIDTA up 25.2% to 13.5 Cr from 10.78 Cr.
Net Profit DOWN 6.6% to 8.48 Cr from 9.08 Cr.
EBIDTA margin is 17.7% v/s 13.4% (Q3-13) and 15.3% (Q4-12)
NET Profit margin is 11.1% v/s 11% (Q3-13) and 12.9% (Q4-12)
Employee costs to Income is 70.3% v/s 74.6% (Q3-13) and 71.7% (Q4-12)
Other expenses to Income is 12% v/s 12.1% (Q3-13) and 13% (Q4-12)
Tax Rate 27.5% v/s 17.5% (Q3-13) and 5% (Q4-12)
Steep increase in Tax of 3.57 Cr v/s 1.99 Cr (Q3-13) and 0.51 Cr (Q4-12) and
Higher share of profit of associates affected net profits.
Fy-13 v/s Fy-12:
Total Income up 20.5% to 318.18 Cr from 264.03 Cr
EBIDTA up 28.2% to 49.7 Cr from 38.76 Cr
Net Profit up 29.2% to 35.44 Cr from 27.43 Cr
Reported Full-Year EPS 31.13 v/s 25.71
On 12/04/2013, stock on BSE Closed at Rs. 139/- Down 4.4%
(Results declared after market hours)
Any hope? I believe Rajiv had told The arrears from December quarter will be reflected here. But they have not. Also why is the tax higher in this quarter?
