TAAL AGM FY23 updates from Sept 26th 11am. This was compiled by a fellow shareholder (Yash), posting on their behalf. Thank him for sharing the notes in such a detailed manner.
Chairman speech:
Engineering design capabilities: company is on a robust growth path.
Merger of the subsidiary: there will be no dilution since it’s a wholly owned subsidiary. The rationale is to simplify the structure. The merger should be completed by Q3FY24.
Registered office has shifted to Bangalore.
Q&A speakers – Rohit Balakrishnan, Ashwin Dsouza, Rupesh Tatiya, Swechha Jain, Keshav Garg, Aayush Agarwal
Questions answered by MD:
3 areas: product design, construction, and infrastructure (architectural) and plant design (work for EPC companies).
60+ customers today. Number of customers have grown and business with each customer has grown.
Largely exports business. 70% US & Canada, 21% EU. Trying to make entry in Japan and Middle East.
No work for the defence sector in TTIPL.
Expect to retain the growth rates of the past.
Margins: built the business in that way. Have been very selective with customers. Margins are fluctuating because on site business has grown faster than offshore business. Over the longer-term margins will smoothen out.
Invested in sales and marketing team. Will pay dividends in future.
See good growth in all segments going forward.
Unlike KPIT are not automotive focussed.
Hired senior management particularly in the sales side.
Both the office are operating at full capacity.
Roughly 690 employees.
Have master service agreements and then get PO which are short term. Don’t have LT order book.
Top 1-5-10 customers: 13%-43%-60%.
Half to 1 million dollar is average ticket size.
In the EPC space don’t work for end customers. For other segments work with end customers.
Don’t have any aircraft. Entire business rests within the subsidiary and hence the merger.
Competetiors: many in Germany and France. Cyient, Axiscades, KPIT to some extents are competitors.
Recruit people based on orders don’t keep a bench of people.
106crs of financials assets: FDs, Investments, Bank Balances are major.
Any opinion about the current MD (Salil Taneja)? He led ISMT Ltd. as CEO in the period 2010 to 2015 (exited mid way to lead TAAL). During that phase, business’s operating performance was under immense gravitational pull.
Post GC years have been difficult for most business. No opinions on the ISMT CEO performance at that time.
Difficult to compare, since they are two different sector companies, ISMT was more commodotized compared to Taal business which is somewhat niche in IT Services.
Taal Enterprises was demerged around 2015 from Taneja Aero, when Salil took over. Taal Tech the main subsidiary (now 100% owned) was run by another person/co-owner, who left 3-4 years back, and since then Salil has been managing it also.
From AGM, my experience is, he does not over commit, never gives futuristic guidance, does listen to suggestions politely without committing. He sounds very boring in a good way. He understands that talking too much might be revealing certain things to competition, so refrains. I think he is doing well at Taal, and some directions taken by company have been inline with suggestions given in AGM. Thanks.
I sense an opposite personality in the letters to the shareholders during the ISMT stint. .Agreed that sector and industry dynamics are better in case of TAAL.
Can you share your findings about the ISMT promoters? I did a brief reading, and see below:
Kirloskar Ferrous Industries Limited (KFIL) acquired majority stake in the Share Capital of ISMT, making ISMT a subsidiary of KFIL w.e.f March 10, 2022.
ISMT Board at its meeting held on November 4, 2022 which was adjourned to November 5, 2022 has approved a draft Scheme of Arrangement and Merger between the Company (Transferor Company) and Kirloskar Ferrous Industries Limited (KFIL/ Transferee Company). Pursuant to the said Scheme and upon receipt of all the requisite approvals, 17 fully paid up equity shares of face value of Rs. 5/- each of KFIL will be allotted for every 100 fully paid up equity shares of face value of Rs. 5/- each of the Company. Not yet completed.
Anything else on the erstwhile promoter of ISMT can you weigh on would be helpful?
A lot of positives have been captured already in this thread, so I do not want to repeat them here.
But I am skeptical of the promoter quality. Performance of both Taneja Aerospace and ISMT has been poor. There was this aircraft accident in 2020 after which they shut down the business, and there was a bird hit earlier in FY17. This reflects poorly on the management. Accounting quality also needs to be scrutinized closely. When the aircraft accident took place in FY20, the losses were shown as Exceptional Item in the P & L, but when insurance claim was received, it was accounted as Other Income:
This inflates the PBT for FY21. More importantly this amount has not been deducted from PBT while calculating the CFO and so the CFO also stands inflated to that extent. Meanwhile, the aircraft continues to appear in the Gross Block under Right of Use Asset even today. I am not fully sure how this accounting works; but something doesn’t seem right here.
Salil Taneja has maxed out his remuneration at 10 % of PAT already which seems too high too early. I am also curious why a software company (Taal Tech) with a Gross Block of Rs.8 crores has Rs.1.42 crore of vehicles in it.
Have been holding Taneja Aero for the past 10 years. What I don’t understand is that when TAAL was their subsidiary, Taneja Aero was not reporting much revenues and profits from them - when it demerged suddenly the TAAL market cap is substantial relative to its origins
In detail, Taal Ent had two business, air flight charter (not so good due to multiple factors, and having only 1 Cessna plane), and a Technology Engg Service subsidiary. The Air flight charter business was closed after accident to the plane, and now the Engg Service subsidiary is being merged with Taal Ent. This Engg Service Tech business has grown quite well, and is the main reason. Earlier this was very small (hardly 12 Cr/qtr) and now over the years it had grown to nearly 45Cr/qtr. Employee strength has grown from 100 odd to 690 in FY’23.
The Company has had a presence in the Air Charter segment of the Aviation Industry.
The company was operating one leased Cessna Citation CJ2+ type of aircraft with a seating capacity of seven passengers. The aircraft was based at Pune airport and the Company had a loyal set of Charter customers centered around Maharashtra. The aircraft was maintained at the MRO facility of TAAL at Hosur in Tamil Nadu.
During the FY2019-20, the CJ2+ aircraft operated by the company veered off the runway during a landing, resulting in extensive damage to the aircraft rendering it inoperable and beyond repair. The insurance company has also accepted the aircraft as a total loss and accordingly paid the full insurance claim.
Now, the subsidiary, Taal Tech is the only revenue generating company, Taal Enterprise has zero business, that’s why both of these will be merged and made single entity.
