Accelya Kale Solutions-Niche & Sticky Business

I got access to that valuation report by writing to JM Financial (manager to the offer). It calculates value through 2 ways and then takes the average of 2.
The report is faulty and it does not provide any data supporting their valuation numbers.
First, For example, for value calculated using comparable companies method, it just says that there are no actual comparable companies and therefore, they are considering companies of “similar size” as proxy and they found 12 such IT service companies. The average PE multiple of these 12 companies is 11.32x.
This is multiplied with the EPS of 82.73 for year ending June 30, 2019 to calculate value of Rs 937.
There is no mention of:

  1. What are the names of these 12 companies?
  2. What is the PE multiple of each?
  3. Why have they used this logic of “similar size”?
    They should use only companies of similar Quality (margins, ROCE, ROE, payout) and Growth characteristics.
    Accelya’s margins and ROE/ROCE are the best in the entire IT pack, and therefore a comparable could be the second best company in the IT pack which is TCS. PE multiple for TCS is in the range 25x-30x.
    Therefore, the PE of 11.32x used here is unjustified and too low.

In second approach, Profit Capitalization, it uses constant growth DDM and considers growth as the past 5 year cagr of PBT.
No data is given on actual numbers used.
It just mentions that the value under this method comes to Rs 1123.

Finally, it just applies equal weights to the two values, and comes to value of Rs 1030.
This is faulty because the first value itself is wrong because the “comparables set” used to arrive at the first value itself is wrong and the set they used will grossly underestimate value.

Now, the question is : Can we as long term investors approach SEBI questioning this valuation report citing above, and also asking for the supporting data used ?


Too late. The SEBI has appointed Varma & Varma CA to come up with the valuation. I think they have done the same thing by taking average PE of comparable firms (which are not comparable given the margins and ROE)

What are you doing then? Tendering your shares ?

Not Invested. I was just tracking this company.

Disclosure: I am invested in this company and I was revisiting my investment thesis.

I am not worried about the dip in last year’s results, which in all likelihood will continue into 2021. Debtors days have also gone up obviously since entire sector has taken a hit and the management will want to extend favorable terms to clients of good standing. The business is sticky though competition is high. Many airlines might go out of business over the coming years, but a business offering like Accelya’s will always be in vogue because of the flexibility it provides to it’s clients. I also did observe that the company is actively recruiting development talent for it’s offices worldwide and in Mumbai which means added support for existing product lines or for creating new product lines. I am a believer that the airline travel volume should see a recovery (though it will take time) and Accelya’s results should get back on track as a result. It has also recently acquired a product that provides new growth areas into airline retailing, which also augurs well for when the sector rebounds.

Going through the AR, I observed that the shareholding of directors and key managerial personnel is very low. I also wasn’t able to find evidence of a healthy ESOP benefit for employees. This contradicts my thesis of promoter ownership. In my assessment the executive team’s incentive must be linked to a stock component which makes them true part owners of the business. Can anyone shed light as to why promoter holding is as high as 89% and the executive team have very low ownership?

Can someone who has also analyzed Accelya’s competitors also shed light if there is strategy shift in their thinking? Accelya being a neutral provider across the airline industry is more focused on it’s core portfolio of products. I expect few competitors to drop out entirely because of the current scenario and their need to focus on their core focus area of running an airline business.

It is surprising that the stock has found support at these levels given what the COVID impact has been. I don’t plan on increasing my allocation but I am not selling yet. When the airline travel volume bounces back, Accelya should prove to be one of those companies selling pickaxes to the big players as they mine for gold.

Appreciate wiser heads chiming in on my observations.


I had a decent holding but exited to lock in my gains after Kale got acquired by Accelya. This turned out to be a bad move which I regretted. Therefore end of calendar 2020, I again entered the stock on the premise that by June/July 21 Airlines would be back to normal business. So far I feel that it was a correct guess. And if the airlines are back to flying, Accelya should do well.

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Company seems comfortably ensconced in its niche space, with little appetite to venture beyond their comfort zone. Their employee strength is almost the same as what it was 10 years ago, which you don’t want to see in a mid-cap I.T. company. Sales have grown at around 10% p.a. while profit growth is higher. High dividend payouts keeps the existing shareholders happy but provide little incentive to new investors to enter. The hunger for growth seems missing. While there is nothing wrong with this approach per se, there are many better opportunities elsewhere IMHO.

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Recently in November Promoter ‘Aurora UK Bidco Ltd’ bought 14.62% shares from open market, now the promoters holding is 89.27%.
Can they buy 0.73% share from open market and make their holding 90% to delist the company?

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What will be the effect of delisting on retail investor ? Does it benefit him or he should quietly exit ?

When a company gets delisted and its shares stops trading on exchanges, it becomes really very very difficult to sell our holdings, that is a big problem for minority shareholders like us.

My view is that, if one have holding amounting few lacs then its not worth of spending time on it, but if holding is amounting in crores then he/she should directly contact with company and ask for clarification on their plans.

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IMHO, There is a process to delisting as laid down by SEBI. An offer price has to made to all the share holders. who may then choose to accept the delisting price or reject the same. If rejected, the management can make another revised offer. The share holders can accept or reject. If accepted by majority of the shareholders, the management then move forward with the delisting process at the accepted price and shareholders get the money. Recent successful delisting was done by Hexaware (made decent returns in a short period) and failed delisting attempt was made by Vedanta. It would be instructive to read the delisting thread on the forum: Delisting Discussions - Hexaware, Vedanta & all of them

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Thank you. That is beautifully explained.

Can someone highlight why delisting is being discussed so much? Is there any announcement made by co.? I checked bse announcement section and didnt find any.

Is there any upcoming tendering, and if yes at what price.

Pls excuse me if I missed something obvious

Disc. Invested

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the bse shareholding does not show this
where is this information from

irrespective of the pain in the air line industry , they stand to Gain… More Pain , more gain
most airlines now ramping up, will require more support in the IT solutions

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We were discussing delisting as Promoter shareholding increased to 89% but now since last 2 quarters it has again gone back to 75%.

Business is gaining traction. Top management has been revamped…mostly from Amadeus.
Recent orders from Virgin Atlantic for cargo suite indicate things moving in right direction. With SaaS model should do good in coming years.


Just no growth
The business is still stuck in that 80-90 crores quarterly run rate and 30 odd crores of EBITDA. Wonder whether this is becoming a value trap?

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Accelya looks very interesting at this point. I have been tracking this company for over a decade. The first time I bought Accelya was way back in 2012 and exited completely in 2018. I started buying again in January this year and will continue to add.

Few points on why Accelya should do well:

  1. Valuations are cheap, be it historical or absolute.
  2. Recovery started in late 2021, and numbers have been decent since. My first target was matching 2019 numbers, which was done in this quarter.
  3. A new growth cycle is underway, I expect earnings growth to be around 20%, revenue growth around 15%. There are quite a few reasons for this -

(i) There’s a trend of new carriers emerging all over the world, so a lot of these incremental partnerships are higher margin in nature
(ii) There’s renewed energy in the airlines sector once again, which means there’s focus on getting a better price for their inventory and also reducing costs, meaning outsourcing of non core functions. This helps Accelya cross sell better. Recent examples are Frontier Air adding Accelya’s AirRM 2, and Thai Airways adding outsourced revenue accounting services 1 to their renewals.
(iii) The biggest driver of growth is this new distribution system launched by IATA, that is called NDC & ONE Order. Will expand more on this –

NDC (New Distribution Capability) is a travel industry-supported program (NDC Program) launched by IATA for the development and market adoption of a new, XML-based data transmission standard (NDC Standard). The NDC Standard enhances the capability of communications between airlines and travel agents and is open to any third party, intermediary, IT provider or non-IATA member, to implement and use.

NDC transition is underway, which means this will see more one time project spending on transition, which benefits Accelya and the other existing players. Accelya has already started working on NDC implementation, plus they’re getting more allied work. For example, one of their big customers, American Airlines engaged them on a different project to support sale of unused EDIFACT tickets exchangeable through NDC connections 3. For reference - EDIFACT is the old standard and NDC is the new standard.

Resources to understand NDC and ONE Order –

Interesting times for a monopoly player that has been sleeping for years!


Adding some more insights on the implication of NDC adoption -

  1. NDC decreases the value add of GDS companies like Sabre, Travelport. (How? Single integration with NDC APIs of airlines which gives out all offer and order related details. Infact ability to provide auxiliary offerings like luggage, seat, lounge, tour packages etc. is an add-on under NDC. In the existing pattern, GDS system maintain multiple integration with airlines (and other 3rd parties) to bring all these offerings under 1 roof. NDC will move this value add and move it inside airline servers.

  2. What does it mean for airlines?
    (a) Relatively lower service fees paid to GDS - Lower fees due to lesser value add compared to existing integration. This incentives airlines to move towards NDC. (This is an educated guess and yet to find a very specific evidence from airlines or GDS companies’ annual reports/concalls. A quick scan to Sabre stock price chart and financials does confirm this theory. Sabre’s latest qrtly revenue is yet to reach 2016’s qtrly runrate).
    (b) Shifting of traffic to airline websites - As and when airlines rolls out NDC alongwith removing Edifact based content, in the short term, all the OTAs and TMCs who do not have NDC integration with GDS, will not be able to provide NDC based content to customers. In the short term, until NDC integration gets built into OTAs and TMCs, customer traffic will shift to airline websites. This just played out with American Airlines who took a bold step of removing Edifact content, and still able to maintain their revenues. [1] [2]

Now what does all of the above mean to companies like Accelya?

  1. As already highlighted by @saurabhved above, airlines sees incentives to move towards NDCs, and Accelya gets one-time opportunity to build it for them.
    (Note that there are airlines like Delta who do not have any plans to move to NDC and favor staying with existing integration mainly to avoid any impact to corporate bookings which are through TMCs like cwt, which do not have NDC integrations with GDSes)
  2. On top of air traffic growth, there is an optionality for Accelya as traffic shifts to airline websites Remains to be seen whether the shift is permanent or temporary, which depends on the evolution of seller side (GDS, aggregators, TMCs, OTAs).

Related resources -