TAKE SOLUTIONS LTD- will you take it?


#214

No, my point is not about FY17 only. You are right that 12 cr accretion in the illiquid assets but try to understand their approach. I recall in one of the concalls they had mentioned that product development expenses will be roughly equal to D&A. When they go on shopping and buy EA they collect lots of goodwill as well. The so called capitalization of expenses as a product is not easily saleable but continue to sit on the balance sheet hitting RoE etc. I am very confident that their intangibles regarding SCM is nothing but junk. Prudent measure should have been adequate impairment to reflect true value. Happy to be contradicted on this. Will wait for the sale proceeds for the confirmation.


(sachit) #215

Again small divergence with you on the history. From FY9 to FY11 their Net block was in the 260 to 270 crore range

Then in FY12 there was a jump to 338 crores and from FY12 to FY15 Net block remained in the 340 to 370 crore range (also with stagnant profits but one may surmise that SCM was shrinking and Life sciences was growing). Then again EA came and FY16 onwards Net block jumped to 542 crores

I think the company is in a habit of making these bulky acquisitions once every 3-4 years. They may be held liable for not taking write offs for poor performing businesses and this in turn restricts the upside or even diminishes the ROE - but doesn’t really affect the quality of cash flows.

So the key monitorable will be how good the past acquisitions have been. I am no expert in this field but I would rely on the most basic metric which according to me will tell us about this efficacy - Cash flow from operations. One can also use cash from operations less depreciation and amortisation assuming that maintenance capex is equal to depreciation.

From FY9 to FY11 cash from operations was somewhere in the 50 crore range. Then after the company spent money on acquisition - about 190 crores or so - the cash flow jumped to 100 crore range (from FY12 to FY15).

FY16 cash from operations has been 148 crores. But the company spent about 145 on EA plus some other acquisitions. FY17 cash flow has been poor if you take into account the QIP they did. Until now EA has not performed upto expectations.

However one silver lining here is that the management indicated that EA has generated revenues of 50 crores in Q4 with 15-16% margins (if I remember correctly). This to me is a positive and I think how the company manages its revenues and WC in FY18 will be key.

PS - all numerical data is from Screener


(rkothuri) #216

Tax for FY16 is 13.85% and for FY17 is 12.51%. This has been the case over the years.

Any reason why they are paying very less tax?


#217

That’s because the parent is based in Singapore having some tax treaty benefits and will continue. Nothing to worry on that front


(Ashish) #218

Revised Financial Results caused 10% Stock jump today

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/015e3658-dac4-49e9-9c95-e13909ffd5af.pdf


(rkothuri) #219

Can you please let us know if there are changes in numbers? I thought they have revised results based on new format.


(Mridul) #220

http://www.moneycontrol.com/stocks/reports/take-solutions-updates-7624561.html

Another one on similar lines…Merging the capabilities to build synergy!


(ASPN) #221

@crazymama, Vishnu, would love to hear your views on this. How is it beneficial for Take to merge EA, Navitas & Intelent? Are you still holding on to the company?

Rgds.


(Raj) #222

I attended the AGM on 11th. My notes are attached.

Take_AGM Notes_2017.pdf (343.8 KB)

Regards,
Raj

Disc: Invested and no trading in last 6 months.


(kanvgarg123) #223

Thanka Raj for the notes. One of the reasons why market doesn’t give Take much valuations is because they don’t generate that much cash. They are also not able to dispose off their SCM biz and in every interaction management says that they are going to dispose it off next quarter etc. I am not able to get the fact that why can’t they retire debt since their profitability is so high? I was unable to comprehend the reason why management needed to dilute equity (I consider it to be the holy grail).
Anyway I have waited for quite a long time in this company and continuing to do so but this management is testing my patience. I don’t think that even a good quarterly show will result in stock performance since management is least concerned about the things people like in a company.

Kanv
Disc. Invested from last 2.5 yrs and no transaction since then. It used to be 10% of my PF but has come down to 3% now.


(Mridul) #224

I don;t mind a small dilution if it happens after 6-7 years.

Regarding SCM business, yes something is wrong as they have not been able to dispose it off as promised. Obviously there are no takers for the full thing, so probably they will sell one part and would eventually write off the remaining gradually. This is an overhang!

Regarding 500 million usd goal. obviously company mgmt is not shy of doing more acquisitions :wink: I would not like that to be honest, but this has been a norm here. Though in my opinion many of the recent acquisitions have been value accretive for the overall offerings of the company. They have been working on a portfolio of services and i am able to see where they want to go from here. This has been discussed in this thread above as well.

Regarding cash and debt, well, debt to equity is very very low. And the debt has been reducing over the years. It is dollar denominated and isn’t much of a burden for the company. This isn’t much of a concern for me. They need cash as the working capital requirements are high for this business.

I find value in this business as this is niche and the management though isn’t very investor friendly but deemed honest. The domain they operate in will grow due to stringent norms. Also, good thing is that they are trying t build a talent pool, which is critical to their business. EA was all about acquiring that talent pool. The business is available at not very high multiples. 1800 cr market cap.

Disclaimer: Invested from last 1 year. Have traded this couple of times to bring down my cost. Will add more as and when i get an opportunity.


(JKS) #225

For similar reasons, I ran out of patience and exited last week, with peanuts as returns. The SCM sale topic and its lack of closure just baffled me


(JKS) #226

http://www.bseindia.com/xml-data/corpfiling/AttachLive/da34899f-b95b-412c-99fd-105cb6a6e88f.pdf

11.59% up on topline and 4% fall in EPS

PS- exited the stock, as disclosed before


(arvind) #227

Anyone attended con call? Please share some notes


(Mridul) #228

Raj bhai - As per your notes, mgmt said they debt has been reduced in last 5 years. Reduction happened but only in last 1 year. Moreover, interest costs have gone higher in last 5 years. So i do not understand what’s going on as far as debt is concerned. I understand that the debt is dollar denominated. Even then, their should be proportionate reduction in interest cost. What’s your opinion on that?

Year 2013 2014 2015 2016 2017
Debt 196.23 206.51 208.79 336.39 237.35
Interest 13.77 12.69 14.79 22.50 20.71

Also, has anyone covered the concall post q1? If so, please share the notes. Would be interesting to see the order boo k position.

One mroe thing. AS WC requirement is 30% of sale, that is why they don;t want to pay debt, as they need this debt along with the profits and cash/investments to meet WC requirements. Take for instance, 2017.
Topline - 1380 cr,
PAT - 135 cr,
Cash - 110 cr
Debt - 230 cr
WC (30% of sales) - 460 cr

So, Cash + Debt + Pat = WC…Right?


(Raj) #229

Hi Mridul,

He was talking about net debt. Reduction in debt during last one year was due to dilution. Also, the investment phase should be over in next 2-3 years time and then you will see more of free cash flow(as per the management team).

Regards,
Raj


(Mridul) #230

My notes from Q1 FY18 concall -

  • We are certainly looking at complementing our presence in Europe and Asia and entering into the North American geography with the full service offerings in North America. Clearly the focus is to become global service provider for clinical trial services and we do intent, of course, to be a differentiated company in this regard.

  • On the lines of such positive momentum right now that is being noticed in the industry and their own organic efforts clearly they do need to have that capacity expansion to ensure converting lot of order book into a revenue and of course start filling up more of that as they look ahead into the next several quarters. So, there has been a capacity expansion both in Chennai and Bengaluru in our delivery facilities to be able to that exact thing. Hopefully in 3Q or may be by middle of 3Q and certainly all of 4Q will have an accelerated revenue flowing in from the existing order book itself.

  • The recruitments will only happen only in end of 2Q or early 3Q.

  • This quarter, the order book was slightly soft looking at the momentum they have had over the last three quarters. Need to look at order book annually.

  • Life Sciences margins - 22-24%. SCM margins going down.

  • SCM sale - Don’t want to give a date. It is in advanced stage, though they have not been able to close the deal yet.

  • Certainly looking at organic growth in mid 20s on the topline and bottomline certainly we are trying to improve the EBITDA margins by at least 2% to 3% points. Though, 500 million topline guidance was based on both organic and inorganic component.

  • No new acquisition in sight as of now. Always open to new fitting opportunity.

  • SCM not contributing much to amortization as no new investments going in that segment. 7-8% EBIDTA margins from this segment.

  • 5 new clients were added during this qtr.

  • EA - 60cr revenue, 16.5% margins. Lots of cross sell happened.

  • Will normally try peg growth in dollar terms


(HG) #231

Any news on Take Solutions? Its on UC.

-HG


(jstocks) #232

Maybe they found buyer for scm division


(rkothuri) #233

Felt the same. Maybe market knows it before retail investors.

Nevertheless enjoyed the move, as it’s a first UC in my investing life :blush: