I have the following questions about this company. Please let me know your answers
Who are the key clients for RSS and what is their contribution percentage to the revenues of RSS?
Which is the major driver of revenue growth - additional projects from existing clients (key account management) or new clients?
Who are their prospective new clients and what is the scope for revenue addition from them over the next 5 years?
PS: I have not invested in RSS shares.
I have the following questions about this company. Please let me know your answers
Who are the key clients for RSS and what is their contribution percentage to the revenues of RSS?
Which is the major driver of revenue growth - additional projects from existing clients (key account management) or new clients?
Who are their prospective new clients and what is the scope for revenue addition from them over the next 5 years?
PS: I have not invested in RSS shares.
Seems Rs Software is on a strong wiicket due to
Big opp size due to increase in ecommerce world wide
excellent ROCE of 65%
Very low valuation
Any caveats.Views invited
Hi Hitesh Sir and other fellow Valuepickrs,
I just want to get my thought process validated about the company âRS Softwareâ. Some of my observations, mostly based on past five years performance.
Quantitative
The company has delivered exceptional growth in the last five years by increasing its revenues from Rs 150 crores to Rs 382 crores and Net profit after everything from Rs 5 crores to Rs 51 crores (Although I would have liked if the revenue growth would have been somewhat higher). The Diluted EPS has grown from Rs 6 to Rs 43.
The ROE and ROCE have always been in excess of 30%-35%, Debt is Zero, Dividend is almost 14% of Net Profits (Should have been ideally more), Tax paid is 30%
Technicals (no knowledge)
But in the past five years the share price has increased almost 30 times, In the past five year in any two years the share price has not delivered negative returns, but at present along with pharma companies it is a little bit of weak stock and while other mid-cap stocks are hitting upper circuits, this stock is not doing much.
Opportunity size
I am personally witnessing a big change in my office and my friendsâ offices, that people are now ordering multiple times in a week from various e-commerce websites, shopping portals, food sites, movie sites etc. Also since itâs a products based company, these types of companies have huge valuations in U.S. but somehow in India they are never in limelight. Some reports are suggestion that the online shopping market place in India will grow at a very healthy rate -Well all reports say this about all the industries!!! 
Some points which I am not able to understand
This is quite an Old company. While other companies which started alongside have become big global companies, this company has somehow never lived to its potential. This company openly mentions that it is interested in making acquisitions and indeed has a lot of cash on its balance sheet but nothing ever materializes.
Also one things seems to be very strange to me, that in an era when even small unlisted companies take Pride in mentioning the names of their clients on their websites, this company even after being a Public Listed company never mentions its clients even in its own Annual Reports. I must admit that I have only read its 2012-2013 annual report.
Why I bought it? After going through all the above points I purchased it at around 180 odd levels as I have already posted around that time on this thread. I am hoping for a PE re rating and an acceleration of companyâs growth if Indiaâs economy recovers. But still cannot get that âanonymous clientsâ point out of my head.
Hoping this will contribute positively to the discussion and analysis in this thread.
Regards
Amit Goyal
Amit,
Mgt pedigree is not the best in class.
They have ambitious plan for acquisition but that doesnât mean it should happen soon. Diworsification will destroy shareholderâs money so better excessive cash lies for the moment.
Fundamentally company is good and performance is above expectation. Tgt price is 265.
Disc : Medium position around 170
Dear All,
I have started liking RS Software since last 3 to 4 quarters. On fundamental basis everything looks good like RoE, RoCE, Sales and PAT growth, No Debt, Industry future etc. but only thing which makes me worry is the client concentration risk where Visa is their biggest client.
Even when i observed Q4 FY14 result of Tata Sponge, Atul Ltd, Aarti Drug etc, their share price is increasing as expected after Q4 result but RS Software is not factoring in double jump in bottom line. When result was announced RS Software increased to 232 with heavy volumes but now gradually it has started to come down to the level of 210.
Is there any promoter or corporate governance issue with the company ?
Dolly Khanna has bought large chunk of shares in the company. In Q4 FY14 her stake is 4,20,787 shares (3.3%), in Q3 FY14 stake was at 3,52,787 (2.77%), in Q2 FY14 stake was at 2,93,257 (2.31%). So She has continuously increased her stake in the company and her track record is phenomenal in giving higher return (Hawkins Cooker and Cera Sanitaryware). However my investment argument is not based on the same.
Barclays and Reliance Capital are also having the stake in the company. So, I think they must have done their due diligence of management before investing in it, but still we cant rely upon the same with 100% confidence.
Even if strong government forms at the center than there are chances of rupee appreciation. In that case what can be the impact on margins of the company where 99.9% revenue is coming from export.
Kindly share your views on Client concentration risk and quality of the management.
Disclosure :- I bought at around 185,197 and 203
Thanks and Regards,
Vishal Kothari
The Company seems to be in the sweet spot right now having good expertise in growing electronic payment industry and that reflects quite well in the performance of the company in last few yearsâŚWhile the market has its own doubts, the stock has been multibagger with clean balance sheet.
The Management is quite upbeat about the future prospects and seems to be doing the right things. They are very much aware of client concentration risk and thatâs why they have invested in building sales engine, brought in few globally experienced sales professional on board. Management is also looking for inorganic growth and indicated in one of the interviews that itâs not easy to find a good target. Itâs only good that they donât do any foolish thing on this.
If they can manage to grab few more big clients in near future, It can propel the company to higher growth trajectory with possible re-rating.
Disc: Iâve taken a small position
As windows XP is being.Replaced by windows 8 world over as mandated by Microsoft how beneficial it could be for RS Software?
Seems a big opportunity for RS Software. Views invited.
Hi Hitesh,
Do you think RS Software has violated the cup and handle pattern by closing below 200? and does this change your view as this was a techno funda bet?
Thanks!
Regards,
Niranjan
Hi Vivek, could you please elaborate on how windows XP to windows 8 creates an opportunity for RS Software? Thanks-Mahesh
niranjan,
Coming to technicals, the breakout levels of cup and handle pattern on monthly chart are close to 195 odd levels. Plus 195 is 61.8% retracement of the recent uptrend. I would keep a keen eye on the level and see how it goes.
RS has breached 195 and is at 193 as I write. The volumes are not very high though. What would be your call now?
Discl: Took a trading position at 210
Currently momentum is negative. As hitesh mentioned 195 was important level which was broken hence stock is taken on downward.
Nonetheless stock is trading at 4.47 PE TTM.
If it can resist 170 level then strong uptrend is due.
RS has come out with itâs annual report a couple days back. The first 60 pages read like a white paper trying to make you understand what the payments industry is, how RS is positioned and why you should buy the stock asap 
Theyâve also announced that theyâre meeting on jul17 to consider results and dividend. This is one company that is trying hard for rerating !
I guess great results and increased quarterly dividends can be expected.
http://www.rssoftware.com/financial_reports/61/rs_software_annual_report_2013-14.pdf
Discl : had sold off but bought after seeing the AR
Hi Sood,
Agree with you that they are very trying hard for re-rating.Their numbers are great but some points are not quite clear to me.
1)According to 2013 A.R they had 1030 employees,attrition rate is 11.64% and they added 219 new members this year.Still total employees at 31st March 2014 is 1010.Am i missing something?
2)Agreed there is a lot of details on Payment Industry (similar like 2013 A.R) but no details of revenue break down,new clients added etc.All these importantinformationare missing from A.R and a lot ofunnecessarydetails that could be avoided.
Being in IT industry itâs difficult for me to believe they have a significant competitive advantage over other companies, however as long as numbers are goodthis looks like a good stock to hold.
Disc-I am a new investor and this is my first post in VP,I might have missed a lot of obvious points.I have invested in RS Software and currently holding this stock.
Thanks
Anindya
Even tough RS is doing well, Mgt integrity is a big question. There are better opportunity available in Small / Mid IT space - Zensar, Persistent, AccelyaâŚ
Disc : Exited in recent run up.
[ Comment too short ]
sorry am new to valuepickr, reposted kunals by mistake
I recently entered RSS for long term, somehow e-payment industry seems good, going forward.Have been watching this one for the last 1 qtr when dolly khanna increased her stake in RSS. The mngt seems ok, balance sheet is clean, increase in dividends, bonus could be in the offing,canât ask for more.
The company has acquired a new processor in europe so the next quarters could be better for shareholders, if q1 are good i am expecting the share price to be 400+ a rerating is definitely due,being a niche player in e-services. I would give it a pe of 10 for now.who knows this could be the next oracale corp(software) of india?
Anyone attending the agm in kolkatta on 18th july? please keep us updated
