Virinchi... A bet not to be missed


(Irshaan) #216

Q2 2019 Concall:
Hospital Vertical:
Utilization at Flagship Banjara Hills was 30%
Expect this to increase to 35% for FY 19 and 45% guidance for FY 20
Doubled Doctor association from 70 to 200. Out of which, 40 are on part time model. Expect this to transition on fixed fee model.
Company is not focusing on attracting star doctors and their ability to bring customers. Instead, it will depend on its own marketing team to increase footfalls.
100 beds on economic model are being commissioned now.
Will try to be PBT positive for this FY
ARPOB at Banjara Hills - 25000, 60 bed - 15000 and 140 economic beds - 8000
Received credit line from Edelweiss for 35 crore of which 15 crore have been drawn for expansion purpose
IT products:
Advance America contract of 20 crore is for 4-5 years. Executed orders worth 9 crore in 1H 2019.
Expect the same growth in IT products for next 3 years
IT services:
Will focus on maintaining margins
Have let go clients which were lower margin business, higher receivables type
Receivables days have reduced from 84 to 61 days, Payable days from 158 to 28 days

*** Any mistake in the above will be due to my understanding of the concall and must be rectified by the fellow member***


#217

Thanks Irshaan. Few other points of note from the con call:

• Internally generated cash plus Edelweiss facility has been utilized for fixed assets investment of ~47 cr.
• Edelweiss facility is @13.5%. Have drawn ~20 cr, will draw balance over time.
• Internal accruals plus current level of debt is enough for current expansion plan.
• Last 4-month interest + repayment on time. Liquidity improving, will be able to service debt on time going forward also.
• No major development on V Card.
• Non-cash component of hospitals is 25%.


(Amit Mehta) #218

Their cost of debt is on the higher side considering their cashflow generation… any reason why?


(achal) #219

I believe it’s quite reasonable considering the kind of risk they carry in the business and their size.


(ap1990) #220

(NamantS) #221

I love how transparent and clear these guys are. They won’t beat around the bush and give good background for understanding the business.
The hospital business is starting to improve and these guys are being able to deliver what they say.
Market has probably not been valuing this company cause of hospital business risks, now with that slowly fading away we should probably see some PE expansion in next 1-2years.


(ap1990) #222

I agree the management has been very forthcoming in their answers to almost all the investors question…i also feel that market is not valuing the company coz of the inherent risks in a hospital business…what do you think @vivek_mashrani ?


(Bheeshma Sanghani, PhD) #223

My 2 cents. The co is growing its earnings at a rapid pace however the multiple is progressively getting derated over time and is in single digits now… This is not a good sign and should make one wary rather than bullish. Low multiples are as risky if not riskier than high ones. The chart also indicates a persistent downtrend.


(Vivek Mashrani, CFA) #224

I have exited the position as utilisation levels were not picking up as expected. Also was not comfortable with microcap position.


(ap1990) #225

https://www.moneycontrol.com/stocks/reports/virinchi-board-meeting-intimation-for-considering-unaudited-consolidatedstandalone-financial-results-forquarter-ended-31st-december2018-13910041.html


(ap1990) #226

Decent set of numbers


#227

Wonderful result. As expected though, market has barely taken notice. Wonder what I am missing.

Good to see that KMP are looking to increase their stake further through warrants but company has not disclosed exercise price or other details of warrants yet.

Last agenda item hints at possible restructuring / spin off of healthcare vertical. This was a future strategy remarked upon by Vishal Ranjan in previous earnings calls. Hope for more clarity in tomorrow’s investor call.


(naruto) #228

They are looking to spin off healthcare as a separate company in the long term?


#229

In April 2018 Vishal had said that he saw the IT and Healthcare businesses together for the time being but they could demerge in future. Don’t know what item 4 in the board agenda could mean except starting work on this. They have not previously disclosed to exchanges the appointment of any consultants as far as I can remember.


(phreak) #230

Hydrabad based, phenomenal numbers on paper, no FCF and dividends, continuous dilution via warrants & pref allotment, continuous capex, pledged shares, decreasing promoter holding and so on.


(naruto) #231

Thanks for the note.

They mentioned sometime back about raising capital from PE to fund the future hospital sector growth. That will work clearly if Healthcare works as a demerged entity.


(NamantS) #232

Promoter holding is decreasing cause of dilution, they aren’t selling. Also if I’m not mistaken they currently do not have any pledged shares.
Regarding cash flow I remember them saying their receivables cycle for the hospital business has come down but for some payments which come from through government insurance schemes take time which is as per industry.


(Sujay Ghosh) #233

They still have ~ 11% pledge.


#234

My key takeaways from the con call yesterday:

  1. Warrants to KMP will be issued at price derived from SEBI formula ~ Rs. 70 - 80 indicatively
  2. vCard is now live and undergoing customer trials. www.vcard.ai . They plan to do a separate presentation on vCard in Q4
  3. Restructuring plan for hospital business is to move 200 odd beds which are under Virinchi Limited to its 100% subsidiary Virinchi Healthcare to consolidate the healthcare business completely for reporting & strategic purposes --> Near term demerger of healthcare is not in the works.
  4. They are discussing issuing a dividend and may announce a policy next quarter, No firm commitment as they are focused on growth.
  5. Intent is for Promoter to convert outstanding warrants. Assuming full conversion of existing warrants, this should see Promoter stake increase from 43.58% to 47.68%. Warrants are valid till 20 May 2019.

I could not take notes so please add any points I have missed. Good to see active participation and pertinent questions from individual investors.


(manan1379) #235

hav u seen the comments for virinchi hospital on their facebook page? If not den go thru tht n i guess it cud b 1 of d reason y dey r not able to increase occupancy