TAKE SOLUTIONS LTD- will you take it?


(alterego) #308

@shreyas1705 It is surprising that you talk about corporate governance issues. The company has received excellence in Corporate governance for 2 years in succession.


(deepmindnc) #309

There is a difference between Corporate governance and transparency. There is absolutely nothing even after the Moneylife articles (where Debashish Basu who is being roundly discredited in the comments to Part 2 is himself saying we are not saying there is any fraud) which proves fraud or routing of money or any kind of silver plating. So there is no reason for them not to win this award.
What needs to improve is investor communication, the first signs of which are emerging after the response to Part 1 of the Moneylife article
As an aside, you have to wonder about Basu and Moneylife & Co.'s motives for writing this series when there are 1001 operator run, cooked up nos companies on the bourses. Are they being compensated to do this by someone who wants to stock beaten down, who knows?

One other reason Take’s balance sheet numbers look bloated is the large swing in INRUSD. Let me explain

If Take did $100m in revenues in 1HFY19, it probably expects to get paid to do the work sometime in 4QFY19. So that is 640cr of revs booked at the earlier spot rate. Now that INR is at 74, the earlier $100m receivable is booked as 740cr on the balance sheet while the revenues booked in 1QFY19 and 2QFY19 are translated at daily average FX rates of 64,65,66 etc. So while Take will make a large translation gain when it collects the money, the optical balance sheet working capital looks bloated relative to revenues booked. The right way to analyse this company is to probably look at all billing, P&L, BS in USD terms


(esoteric) #310

The US subsidiary is audited by a CPA as per rules governing audit of companies in US.Therefore to say US auditors are afraid of going to jail compared to Indian auditors is not relevant.The subsidiary books are consolidated by the Indian auditor.I am sure the company will respond as to who the US auditor is.
By the way since you mentioned Enron see the top 5 who audited companies like Lehman, Wachovia,Merrill Lynch,Bear Sterns, Washington Mutual, Freddie Mac,Fannie Mae …None could foresee how fragile the finances were.
Just they have completed selling off their logistics business which was a drag and instead concentrate on Life sciences.Pursuant to that they have decided to focus on Europe and make more acquisitions in US.


(shreyas1705) #311

@alterego So did Satyam in 2008 and the rest is history!

Please don’t get me wrong. I have just started investing and I find it a bit hard to trust businesses that I don’t encounter in my everyday life.


(alterego) #312

TAKE has issued a comprehensive note to their shareholders which details their complete journey since inception and addresses all queries. This is a welcome move by the organisation. I see the communication live on the exchanges, please check out the link below:


(Shivram) #313

Looks like Moneylife has kept its best for the last. Nice analysis. Highly unlikely these evidences can be explained away. Looks like pre and post ipo significant shares were bought and sold by parties with a history of price manipulation.

The most telling conclusion of all…


(esoteric) #314

Read the Final instalment.The report is more about Atlanta than Take.Also there was no reply to the release that the company made after the second part.
The first part spoke about earnings and lack of disclosures,comparison with international companies which made sense.

The second and third part have only speculated about some investor trading or having invested and insinuating that he might have manipulated the price.
My inference is that Debasish feels there is no comparable company and hence valuation is difficult, has no large institutional investors and hence may not be a good company to invest in. Couldn’t find anything substantial for or against the company.


(sachit) #315

Is it just me or is this latest installment of Moneylife article quite weak in its merits?

Disc: No investments in Take, considering a small investment


(alterego) #316

Should this title be curious case of Debashis Basu targeting TAKE Solutions?
Still trying to figure out what the article has been about and its objective. While it definitely has helped the organisation explain its business and now all uncertainties have been resolved.


(deepmindnc) #317

In a way, this half baked series of articles could lead to a greater good, if it means the hitherto not very transparent management team gets its act together and puts out more operating information about their company, the working capital and other asset growth going forward required to grow revs. The two disclosures are a good idea. What would help further would be a conference call with Q&A and a commitment from them to either get Apte to consolidate the audit of subs or get a Big-3 auditor in by FY20 (this can only be done at their next AGM). They could do a concurrent audit in the meantime but I don’t see what this accomplishes except the fact that a lot of FIIs who understand this business well probably want the comfort of a Big-3 before they enter


(alterego) #318

Promoters of TAKE have continuously reiterated their confidence and commitment including the latest investments, without having ever sold or encashed their investments


(shreyas1705) #319

On the contrary, I am not able to turn-down a few observations made by Moneylife.

  1. No marquee institutional investors even at the current valuations.
  2. A couple of reputed investors exiting their positions completely.

While the second criticism could be for numerous reasons, I can’t turn a blind eye towards the first especially when the Market Cap. is at c.2,000Cr. This is on top of the fact that the management has been doing presentations, concalls, appearances on business shows, etc.


(deepmindnc) #320
  1. Kindly take a look at shareholding before making uninformed comments. Schroder, First State and Taiyo are marquee funds which any Indian mutual fund analyst would die to move to. The sad fact is that this whole hungama could scare their ICs into exiting the company given the overall perceived risks with governance at Indian midcap companies. Analysts abroad understand this business and the business model, given the large number of comparable players in the industry, unlike analysts in mutual funds in India who generally won’t buy names, especially complicated names without sell side coverage. This company has no listed peer and no IT sell side analyst is going to understand it or bother covering a company with 2-3cr daily liquidity. It should actually be covered by a pharma analyst but the same catch-22 applies to pharma analysts as well.

  2. Why the Dhawans and Kacholia moved in or out is their decision. The stock moved up from the 30s levels to 120-130 levels in the Modi rally after which it became quite expensive purely on multiples. So a decent reason to move out


(esoteric) #321

I remember Dhawan made more than 3x but Ashish entered around Rs24-26 and exited around ,Rs40.He had a better opportunity at that point of time and exited this.


(deepmindnc) #322

Mr Kacholia is an outstanding trader


(ASPN) #323

Two fresh acquisitions for which TAKE will shell out USD 72 Million.

(1) KAI Research (USD 27 MN) is a Clinical Research Organization (CRO) based in the US. With this acquisition, TAKE acquires Phase II and Ill capabilities in North America.
(2) DataCeutics (USD 45 MN) is a Clinical data management company which provides services to pharma companies in the US.

@crazymama, are you still tracking this company?


(Vishnu Ch) #324

Have not been tracking the company for more than a year now.

My basic observations are the following:

  1. As it is a cash transaction, it should be considered as a positive.
  2. Both companies are being acquired at EV/Sales multiple of 2.5 which seems to be around the median for CRO’s globally.

Reference:
http://www.brocair.com/pdfs/CRO_Market_Analysis_September_2016.pdf
http://www.brocair.com/pdfs/CRO_Market_Analysis_June_2017.pdf

Like I had mentioned earlier, the rationale continues to be “narrative” driven (with large reliance on mgmt commentary) rather than numbers.

Being the only listed pure-play Pharma/IT company it becomes a double edged sword. While it may have a premium it will also be shunned for being too esoteric (b/s and multiple subsidiaries) and being in the “too-hard” pile.

As long as one does not have more granular numbers to probe and compare with global peers or at least some sort of unit economics variance YoY, it will continue to be narrative driven.


(shreyas1705) #325

The two acquisitions amount to USD 72m (INR c.500 Cr). However, the Cash and Cash Equivalents on the BS as on Q2 2019 is roughly USD 47m (INR c.330 Cr). With the assumption that the company will resort to debt funding for the balance USD 25m (INR c.175 Cr), one can assume an additional annual interest expense of INR c.10 Cr.

Now, both the targets together are generating USD 30m (INR c.210 Cr) of revenues. Assuming a PAT margin of 6% (as they are small players), the sum total of PATs from both come out to be USD c.2.4m (INR c.17 Cr). While the total interest expense is USD 4.2m (INR c.30 Cr) i.e., a net-net deduction of USD 1.8m (INR c.13 Cr) from the P&L.

Srinivasan has maintained that he’s waiting with Cash for a transaction which is EPS accretive. I don’t think that has happened with KAI and Dataceutics. The situation is going to worsen a little more with the impending rate hikes in 2019 by the Fed. I feel he’s trying to arrive at his target of reaching half-a-billion revenue for 2020 through inorganic route. Another 2-3 years of muted PAT growth due to higher interest expenses?

The saving grace is that the company is growing at c.25% organically. This should compensate for the softening EPS.

Could someone who has more understanding of Life Science and Clinical Trial business please clarify whether the acquisitions are going to bring in any synergies or it was solely done with the intention of having bigger pie in the industry?

Note: Excuse any mistakes, all the calculations are back-of-the-envelope


(esoteric) #326

I haven’t seen the finer details of acquisition made.But two of your assumptions are based on wrong premise.
The borrowings will be in US $ as the major revenue and profits of the co.is from it’s US subsidiary and the rate of interest will be 3-4 %.

Secondly the parent was looking at about 5 cos.for acquisition.They have announced two.Most likely there will be one or two more over the next 8- 16 months.
The acquisitions are being done to strategically fill the gaps in the life sciences business.These are being done to enhance net profit margin and hence to assume that NP margin of the acquiree cos. will be 6% is incorrect.
The NP Of the acquiree cos will be greater than the present NP margin of the parent as the purpose of acquisition is to increase margins.
They have a 100 odd bed facility hospital in various locations for clinical trials.This gives them flexibility to conduct trials in their own hospitals and very often speed up the clinical trials.So if they made x amount as fees for a clinical trial to be done over 12 months in outside hospitals, by carrying out trials in their hospitals they complete it in 9 months and get 1.2x ( these are examples and not exact figs)as fees as the client gets a chance for early launch and higher profits which he is willing to share.
The new acquisitions are being made to fill strategic gaps in trials and enhancing margins.
Subject to write off of legal/ travel/ consultant fees for acquisitions in the first year the margins will definitely be higher than what it is at present.


(alterego) #327

@Shreyas1705: TAKE has advised earlier in their Earnings Release about the intent of US acquisitions to address strategic gaps in their offerings. The latest announcement also mentions expanding CRO offerings to US, and something about DataSciences. As synergies, the company mentions strengthening of customer relationships and team strength. I believe we can expect to hear more details as the deals get closed.