that’s great. but if you don’t mind my asking, why did you invest in take?
@jstocks, suggest you to go thru the complete thread. The company is discussed completely for its pros and cons. Take your pick.
Hi,
I was reading Pat Dorsey’s “5 rules” and it says
If net income is growing quickly while cash flow is flat or declining, there’s a good chance of trouble lurking.
It also says
Companies that make numerous acquisitions are more likely to have aggressive accounting and if accounts receivable is growing faster than sales, the company may be having trouble collecting cash from its customers
I noticed that Take solutions’ net cash flow has declined for the past 2 years while net profit has remained flat. Also Take has made a few acquisitions in a very short span and trade receivables have grown faster compared to sales. Is this something to be wary of.
My questions may appear stupid to you guys, but I am just a newbie and still in the learning phase. So please go easy on me. Thanks
Please go through the whole thread. Almost all your questions will be answered.
Honestly going through the whole thread to find answers to my questions would be like trying to find a needle in a haystack. Anyway, I will try my best to look for them but I would appreciate it if you could also answer them briefly. Thanks
An article in The Financial Express, though most of the things are known.
Regards,
Raj
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A good summarized take on TAKE, maybe the reason behind today’s rally.
Regards,
Sachin
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My quick notes from Q2 FY18 concall -
Revenue -
371 cr (13% increase yoy in INR terms, in dollar terms, 17.8% increase in dollar terms yoy)
22% rise in Life sciences revenue, 16% drop in SCM revenue
Order book position -
153.3 million USD (~1000 cr)
12% of above is SCM
SCM -
We will know when the sale happens (if at all). It seems to me that they will have to write it off (may be in part may be in full) as it looks like despite their best efforts they are not finding any buyers. Part of this business is in Joint Venture. So shutting down/sale is not that simple and straightforward.
Tax Rate -
15% will be maintained going forward.
Capex -
150 cr done last year, 150 cr for this year. Expanding 4 facilities (2 in India, 2 abroad).
Receivables -
trying to contains within 100 days. Some are above that. But pharma companies are not very good payors (in terms of days). Whole industry is like that.
IDMP -
Two modules are live, 2 under progress.
Guidance -
20% revenue growth of next 3 years
Margins should start inching up from q4 FY18 due to economics of scale.
Miscellaneous -
Striving to get repeat business or enhance repeat business from existing customers.
On Pharma companies… there is increased competition, there is cost pressure, there is regulatory pressure. So these are the drivers pushing pharma companies to look for improving efficiency and optimization as well as ensuring that they put systems and processes in place that enhance quality and driver compliance. Take Solutions is helping them vastly in this whole process.
85 clinical trials underway on Take platform.
Approach is not necessarily to license our platform to the clients, but to get very sticky annuity- driven long-term service contracts.
Value chain isn’t yet complete. They want to build (currently building, i think) predictive skills in the platform by mining clinical data to provide actionable-intelligence to the pharma companies on their investments (molecules, etc). This would be a real moat!
Limited geographical presence is an issue with multi country clinical studies.
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There has been a lot of investor meetings over the last one month. Are companies supposed to release minutes of these meetings?
Excellent Q3 FY18 concall. My quick notes-
Revenue -
408 cr (19% increase yoy in INR terms, 23% increase in dollar terms yoy)
30.6% rise in Life sciences revenue
41 cr PAT
EBITDA - 19.6%
Order book position -
163.1 million USD
12 million is for SCM vertical
Life sciences order book split of $151 million, we’re looking at Asia at about $27 million, US is about $91 million and EU is about $27 million. Bullish on Asia!
Preferential Allotment -
In order to prepare for M&A, have announced preferential allotment of approx. US $40 million of equity to the promoters.
Life Sciences -
We are conducting 7% of the biosimilar studies that are being conducted in India. That’s a pretty good number and we would like to grow that.
Have also seen a lot of traction in business development in the mid-size pharma segment, and geographically, we’ve actually seen a very strong uptick in Asia and in India.
Commissioned a 80-bedded new facility for bio-availability and bio-equivalents studies in Chennai. Will be commissioned soon.
Expanded our facility in Bogota (Colombia).
SCM -
Status Quo maintained. They are not making any new investments here. Forms small portion of the revenue.
Tax Rate -
15% will be maintained going forward.
Receivables -
103 days. But pharma companies are not very good payors (in terms of days). Whole industry is like that.
Guidance, Investments, Cash Flows, Depreciation -
The opportunity we are pursuing is very large. And we have called out that we want to be at least 0.5 billion by 2021, which means that we have chosen a path of aggressive growth. So choosing a path of aggressive growth also means that there will be commensurate investments that will go into making this happen, whether they are capex, whether they are acquisitions, whether they are hiring; so the call out here is that we want to be evaluated on what we’re doing in the industry and our growth, and it is not a stable state business where there is going to be no further investment and there is going to be only cash flow, that’s not the business model we are responsible.
30 cr qtrly depreciation will be a norm going forward.
Acquisition -
There have been 3 major acquisitions so far in Life Sciences space. In 2006, they acquired OnSphere, which paved the way for PharmaReady, their flagship software. In 2011, acquired WCI Consulting, which was very prominent in safety, consulting, and a bit of regulatory consulting. So helped us move from technology end towards higher value add business of consulting. Then acquired EA, which opened up a completely different super large pie (which is much larger than the pie we were in) of clinical services.
Further acquisitions are targeted towards plugging the gaps in their value chain. Could be on services side (clinical) or on technology side (software). Primarily, they want to widen their clinical operations footprint in US. The next one is there are certain therapeutic area footprints, which are important from the point of view of either consolidation or gaining muscle in an evolving therapeutic area. And third, as we build the digital platform, there are different components to it and all of it can’t be built from scratch in-house because the effort takes too long. So if there is a piece that is available on the shelf or as a company with some traction and we feel that we are able to integrate that in the overall value proposition, then we will get to buy it. So the idea is digital transformation, idea is a stronger clinical presence, relevant therapeutic areas and high growth, all of which will involve investment.
Differentiated IP that we can use to scale up, or drive down our costs in some way, or presents a potential to add to our revenues. Acquisitions in CRO verticals are happening at 10-18x EBITDA. We will be somewhere in the middle.
So, more than one acquisition is a possibility.
Where Take is present -
If it’s a large pharma biotech companies, then we preferably look at Phase-IV post-marketed studies, observation studies, non-interventional. These all typically happen post clinical approval. But that doesn’t mean that we don’t get into any Phase-II, Phase-III opportunities there. But if you look at the small to medium sized pharma companies, I think it opens up a much wider opportunity for us. Their preference is not to spend a whole lot of licensing money towards maybe the large providers like the Mediserve or Oracles. Their preference is to work with a partner like us who would be their partner in running their entire study and if we bring a platform, which is quite optimized to the forefront, that seems to be catching their attention.
The lead therapeutic area for Take continues to be oncology. They’ve been doing a significant amount of work across a number of indications and there is a large amount of investment that’s actually going into this area. The second area is biosimilars. Have been doing biologics in Europe for a long time. We’ve been doing several Phase-III studies in Asia for multinational biotech companies. So experience in biosimilars and several of those products got approved to certainly kind of reflect on our success in working on some of these very complex projects. Pipeline buildup is tremendous in this vertical.
Moreover, many of the generic pharma companies now certainly are required by global regulators to abide by post-marketed safety, capturing of cases, enabling workflows and reporting, etc. So there is a mandatory requirement of not just handling PV kind of activities, but also need to abide by track & trace and serialization requirements of some of these export markets. As a company, we are well poised with our expertise in regulatory and PV domains along with the technology solutions.
OneClinical platform -
This is a clear differentiator. By leveraging this platform and on-boarding clinical studies, we are able to satisfy the clinical operations teams, the medical monitoring teams, as well as the data management teams. All of these different stakeholders of a given clinical study are able to come on to the same environment and have complete oversight of their clinical trial, and that’s a huge benefit to sponsors. It allows them to be proactive in decision making, it clearly gives them a guidance as to whether their trial is progressing in the right direction and allows them to force correctly if required along the way. The One Clinical platform is ideally suited to kind of enable compliance towards ICH E6 (R2) This platform is being improved as we talk to improve throughput.
Competitive edge being a mix of IT + CRO -
Pharma companies want to get better clinical outcomes, run their studies in tighter timelines, get to the market faster than their competitors. In order to retain their competitive edge, they’re always looking to remove business hurdles in the clinical trials process. As they look at some of these challenges, they also look at some of the potential drivers for growth as well as drivers that are causing them to invest from a need for compliance. We believe that as a company to be able to have that practical ground up experience of the clinical research background, the expertise to have run a number of trials on ground, that’s the distinction that we have from a pure-play tech kind of company. That allows us giving the perspective that’s very unique and different. And when you couple that with the kind of solutions and next gen platforms that we are building out, it gives us an edge.
While we have tackled one special aspect i.e. around data aggregation and integration through our One Clinical platform, we are looking at challenges/business bottlenecks, for ex. site identification/initiation, recruitment challenges for clinical trials. So any of these bottleneck that we experience on the ground, we have the core capability to build appropriate technology solutions. So that positions us much different than a pure-play technology company who are just probably interested in licensing the software.
Misc -
Push by regulators for enhanced compliance and quality, the inspections and the audits are far more frequent now and unannounced. So what it essentially tells us is use of systems and technology is a must. It’s no longer a nice to have, it’s a must have. So that’s pushing a lot of technology adoption.
So these are the drivers pushing pharma companies to look for improving efficiency and optimization as well as ensuring that they put systems and processes in place that enhance quality and driver compliance. Take Solutions is helping them vastly in this whole process.
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Company has 459cr of receivable on topline fy18 estimate of 1452 crore, which is around 32%. This number is exceptionally high and is not seen frequently. It cannot be passed lightly.
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Gaurav - I agree. We should not take this lightly. But then one should delve into finding the reason. Is it rising? Is it improving? Is it constant (range-bound)? Either one has to take the management’s word on it or otherwise one has to sweat it out himself to get to the bottom. Also one should notice if they have been writing things off? I mean are they failing to collect the payments?
One has to see what is the usual number this industry operates at. May i know what you are comparing this with (company/industry)? They have repeatedly said that pharma companies are not quick payers and 100 days is the norm. Please let me know if you have any data for its international peers. May be that can prove handy.
This is not a typical IT play. This is more of a CRO + IT company which is making lots of investments in Clinical Trials space. We do not have any peers in India.
They are walking the talk in Life Sciences vertical and are enhancing their capabilities very smartly. This domain has front loaded costs, which they make clear in concall as well.
During last AGM I asked the MD about it. He says the payments take up to 6 months to come and this is a practice with all pharma companies. So you can safely assume 30% of their sales stuck in receivables any point of time.
Regards,
Raj
Disc: exited recently after the news of their plan to acquire another company.
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Receivables > 6 months over the past 3 years on a consol basis have been less than 1% of Consol Revenue. One can draw some comfort from there I think
Again, this is what the management has been saying repeatedly on receivable days, focus verticals, and stuff. They have a definite focus on clinical and it would be the torchbearer going forward.
One of the issues with this forum is that most of us who come to a particular stock page already have a slight positive bias towards it 
I actually want to hear more from the nay-sayers on this one
Take has been my largest/2nd largest investment all through the last 3-4 years of the bull market, and has had a huge opportunity cost. The story has actually been the same, but market has not acknowledged it.
Pros:
[Long term]
- Unique player. As a professional in data analytics space, i know that the Clinical trials/ Regulatory submissions space needs specialized knowledge, and as such, Take has an advantage.
- Opportunity space is huge. R&D/CT are huge expenses for US pharma companies, and they have no choice but to work with vendors who can provide them not just cost savings but also give value.
[Short term] - Long contracts and strong pipeline
- Owners are buying
- In the past quarter, management seems to have become more aggressive in trying to “sell the stock” to everyone around (i.e. more TV appearances + investor meetings with fund houses)
Cons:
- Sales growth driven by acquisitions has not been translating into profit growth. Worryingly, even more acquisitions are on the cards - even if one of them doesn’t work out, it will have a huge impact.
Is it just this one single con holding the stock back so strongly?
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Acquisitions are super value accretive. Look at how EA has been turned around and integrated in Navitas. Gives them a much larger presence in clinicals. In last 4 years, story has changed completely. It is much better placed as regulatory stuff is going to get smaller and clinicals is going to grow at much rapid pace.
Mgmt themselves said analysts do not understand the business. If u tuned in to last concall, impressive efforts were put in by mgmt to lay the business threadbare.
Pros and cons are there like any other business. Though what one has to analyze is whether one is comfortable holding the investment. I feel the company is doing all the right things as far as their clinical business is concerned. If one is averse to acquisitions, one should understand how long it takes for a small company to build such capabilities in-house.
In the last decade, Take made three big acquisitions, and all of those have contributed significantly towards building the current company and the current service portfolio. One cannot look at an acquisition in isolation, must be looked at Navitas as whole.
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Well, i agree with everything you’ve said and that’s the reason for me being invested. But i am trying to challenge myself - despite giving visibility into the unique business model, and opportunity space, why isn’t the stock price reflecting the story?
Markets are forward looking, so surely they aren’t waiting for acquisition to play out completely. Is there something the market knows and you and i don’t?
Also, may be this is a broader question, but should one be putting a “time stop loss” on these investments?
My other large investment was Thomas Cook, and similar story there (huge growth in revenue through acquisitions, but synergy not reflecting in bottom line… except Quess which is a whole diff play)
A lot has been said about the issues you are pointing. Most of the forum members, who once believed very much in Take Solutions story, have probably made an exit. Many feel that mgmt is not delivering (though i on the contrary believe they have made a formidable preposition in Navitas). Building capabilities in Clinicals space is capex intensive and takes time.
They have moved from pure play SCM, to Regulatory, to consulting, to Clinicals. The pie is getting larger, while valuations remaining almost same. I manage the boredom by trading here while keeping my investment basket separate. This ensures no opportunity costs as range-bound stocks are the best for trading.
My views are biased here as i like this story and the capabilities.
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