TAKE SOLUTIONS LTD- will you take it?


(sagararya) #174

All growth is useless if this company fails to generate free cash after acquisitions and software expenses…that is the major overhang in this company…

One will have to wait and watch how EA progresses as the managemenr had to dilute 4% equity to reduce debt that they took to acquire it…cash has been and is a problem for this company…

Good thing to note is that the MD didn’t take any pay in 2016 due to cash crunch…I remember he had done the same thing in 2009…

Also any update on sale of the scm division in the concall ?


(Whipsaw) #175

Few things that I noted in conference call

Take - 22.4% margin. 23% range by end of year. FY18 target is 24%
EA - 17% by end of Mar 2017


Debt - Indian debt 100 Cr. Will be closed using QIP
Term loan in US$ which is cheap. Can be paid by internal accruals. 8 mn long term. 20m short term.


Will maintain 20% payout dividend ratio.


QIP buyers:
Apex partners
Sundaram MF
Max life
Jupiter
NT asset mgmt
Schroeder


Take not a typical technology company. It needs domain expertise - Doctors, Bio technicians etc.


On the industry trend
Life sciences R&D spend is going up in US and Asia. Europe not bullish.


On why EA is cyclical?why first half of the year is soft?

Nov to March more clinical filings. So q3-q4 gathers momentum

Disclosure: Invested. This is not an investment recommendation.


(Raj) #176

I will be attending the AGM tomorrow. Let me know anybody else will be at the venue. I would be happy to meet.
Regards,
Raj


(8sarveshg) #177

Hi Raj,

Did you attend the AGM. Can you post the key observations pls. Thanks in advance.


(Raj) #178

Hi @8sarveshg,

I will post my notes by today. Just started compiling it in a structured manner.

Sorry for the delay.

Regards,
Raj


(Raj) #179

My AGM Notes:

  • There were hardly 20-25 members inside the hall during the AGM and less than five who asked questions.
  • AGM started at 10.00AM sharp and concluded at 11.10AM
  • The board seemed to quite experienced and mature. Mr. Srinivasan was very patient in hearing everybody and responded to all the queries.

Resources

  • Take’s total strength is 1500. 600 in India and 900 Overseas. ·
  • Lot of local hiring (based on project location) happen on the projects.

Attrition:
Attrition rate is 2% overseas and 11% in India

Measures to control attrition:

  • Stock option
  • Fast track career for deserving candidates
  • Trainings
  • Cross-border assignments

Ercon Aquinova:

  • It doesn’t have a direct competitor in India although Europe has a few. Their focus is biosimilars and regenerative medicine. There are CROs like Quintas and Paraxil who are general purpose not specialised.

  • They are much closer to the client than Take Solutions

Sales team:

Sales team always have domain experts. For example if it is a cardiology project is being pitched then cardio experts will accompany the team.

  • Take works with drug innovator companies. Hence it works mostly with multinationals not Indian generic companies. However, biosimilars are opening up new frontiers.

  • Cricket foray is by the parent. Take Solutions has nothing to do with it.
    ·
    QIP:

  • It was done to liquidate the short term borrowing for the acquisition of Ercon Aquinova. Promoter provided short term loan @7% for acquisition which was paid back after QIP.

  • QIP brings in marquee investors/PE funds like Apax Partners, NT asset management, Schroder, Sundaram MF and Max NY Life etc. It’s always good to bring in such investors.

  • Capital raising through equity dilution was done after 9 years. Last one was done in 2007.

  • D/E ratio is 0.2 now which is quite comfortable.

  • Long term debt/working capital is managed by $ debt which is much cheaper.

  • Goodwill: There is no legal need to write-off the goodwill. The practice is in line with Global IT/similar companies.

  • Payout Ratio: Currently it is around 20%. This may be increased to 25% in future.

  • SCM Business: It’s challenging right now. There is intent to sell this business and deploy the cash in life sciences. An investment banker is already appointed for the same.

  • Payment Cycle: It’s 90-120 days for global pharma majors. We always fall within that. We didn’t face any collection issue with them at any point of time.

·
Raman Kapur appointed as independent director. He brings a lot to the table.

http://www.cxotoday.com/story/take-solutions-appoints-raman-kapur-as-independent-director/

Side Observations:

Mr. Srinivasan is a marathon runner and he is very fit.

More than 50% of those who came at AGM dispersed after collecting the sweet boxes which were being distributed post registration.Surprising most of people collecting multiple sweet boxes were old for whom sugar might be a restricted commodity.

Disc: No trading in last 3 months. Among top three holdings in my PF.


(YA) #180

Thanks a lot Raj! Did they comment on growth projections?

Regards,
Yagna


(Nityanand) #181

Did some research on Ecron Acunova. Company’s sales were 40Cr for 2014 as reported in the article below. I am not able to gauge whether it was for India or including Global sales. http://www.vccircle.com/news/health-care/2014/01/27/indian-clinical-trial-sector-would-see-significant-consolidation-da
The company was valued at 140cr as per the article. It was focussing on Clinical trials and degrowing in India and growing outside India and was shifting its operations from India to abroad. The interview says they were facing challenges in clinical trials
because of regulation. This was prior to 2015 amendments for clinical trials regulation in India.

If we calculte the contribution of Ecron to Take’s quarterly results then it will come to 10cr(10crX4=40Cr). I am not taking a growth into consideration at this moment. These are my assumptions and they may be wrong as well. If the Acron figures are available then please ppost them.

Observations
Take has already started the consolidation in Acron as it is closing its branch offices across Europe as per the latest concall.
The manipal hospitals were used for the clinical trials. After the acquisition of Ecron will Take be able to use those hospitals or not for its purpose. Will need to search for the same.

Other links
Ecron Acunova was rs.80cr in 2009 and raised rs.30 cr from Orbimed

Manipal Acunova journey of 10 years, shows some big names in Pharma industry as their clients

Disc: Not invested in Take Solutions, watching closely


(Raj) #182

No, I didn’ t ask that. They are already on records of 20-25% sales growth. This was reiterated by management in Q1 conf call 3 weeks back.
Regards,
Raj


(Chirag) #183

Why have the profit margins fallen drastically?


(sagararya) #184

Found this in a pharma journal and its a MUST for anyone who is interested to understand the business better.




One thing is clear- there is a huge scope for CRO especially in the Asian markets… We need to understand how Take can leverage on it and compete against formidable players like Paraxel,ICON etc. in this space…


(Raj) #185

Q2 Results


#186

Seems Fy17 will be no growth year from EPS perspective and Mr. Market is no mood read the fine print to differentiate from IT pack.

Disc: Holding


(Gaurav Agarwal) #187

What fineprint are you talking about?


#188

Press release suggests that they are targeting $500m sales by FY21 from current $160m (Q2 annualised life sciences). They will transform into pure life science player by exiting SCM with low volatility in sales. If current EBITDA margins of 23-25% are sustainable, it could generate $125-150m of EBITDA by then.I assume that debt will be negligible after selling SCM biz. One can not count it as another IT midcap.


(Gaurav Agarwal) #189

All companies are busy giving non-sense target for 2020. I can give you many example. Have you seen a credible plan from the company how they will reach there given the present state of their growth?


#190

Well, you are right that market is not giving credibility to these plans. But one has to go by the past record and their communication/delivery on their plan to build life sciences biz has been credible so far. Even short term sales growth numbers/margins are consistent with their promise.


(Rajesh_R) #191

A very good Q2 by Take solutions.

Disc: Invested.


([email protected]) #192

Really informative thread, should confess.

Had attended the analyst meet of take solution, and came back happy. There is no scope of degrowth in their life science business. The growth opportunities are plenty.
LS is currently around $120m (FY16) which they want to take it $500m. SCM will be out by this fiscal (hopefully)
so basically you talking about 33% CAGR for next 5 years. Not to forget legacy LS business has an EBITDA margin of 27-28% margin.
I the current quarter there was a dip in margin and it will continue for next 3 quarters, but if that is coming at an expense of next 4 years, why should one mind.


(arvind) #193

Can you please share more information on the AGM? questions asked etc and It will be very helpful for all of us. Thanks in advance. And one more question to you as well If you have recently started studying about Take then what prompt you to do it?