Avantel

Stock Opportunities
43

125crores is a significant amount of order.

update: credit rating has been reaffirmed and withdrawn.
https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/AvantelLimited_March%2014,%202022_RR_279524.html

Plus the revenue of IMEDS global will also add in the current quarter.

huge plus IMHO.

8 Likes
44

Q4 results are good and they have announced a 3 for 1 bonus and 4 rupee dividend on each share.
FY22 EPS ~47; CMP 1347
The company is in a niche business area and doing great since 2016 but didn’t understand the timing of bonus issue.

I believe this stock is reasonably valued from a small-cap standpoint and am seeing limited upside here.

Holding it from 800 levels & will add more if there are any 20-25% corrections from these levels.

45

Apart from the timing of the Bonus, such a huge bonus ratio after so many years does raise some questions. Looks like there is some plan behind all this. I feel that it could be the first step before selling of a substantial stake to some strategic investor like Tata, Adani or some foreign player. Clearly savings on LTCG Tax on post bonus stake sale will save tens of crores for the promoters. Let’s wait for the movie to play out. I am invested from 450 and do not plan to sell till the business is delivering growth

2 Likes
46

Apart from Good performance in FY 22 and rewarding shareholders with the dividend and bonus shares.
There are few things in recently released AR- 2021-22 worth focussing upon–

  1. In core business, assured business for the next 2-3 years with L&T contract and huge Indian Navy contract.
  2. The diversification process has started which gives scope for re evaluation of company with its entry into Medical devices sector through incorporation of Imeds Global Private Ltd .
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    Although giving more information related to types of medical devices as the way forward could be appreciated.
    Disclosure-- Invested
5 Likes
47

The report mentions this:

In the medical segment, Imeds has developed Skin Staplers, Removers and Oxygen Concentrators.

48

Thanks for the information, but in my opinion, given the bare minimum revenue contribution from Imeds this Q4 I am not sure whether they will follow the same medical device basket going forward which Imeds used to before being incorporated in Avantel.

49

Yes. Info about Imeds is lacking. Also this company does not host concalls. We may get some answers through investor relations (though I have never done this).

50

I have seen Job vacancies in the company for persons involved in Manufacture of ventilators.
This is an atmanirbhar venture.
Also the Bonus and expansion of capital signifies possible NSE listing as well as improving liquidity.
Stock has been beaten up mercilessly even with 40% dividend and 3:1 bonus ans EPS 47.
Can be interesting from now on.
Disc - Have tracking qty at current price

3 Likes
51

It would be great if Avantel can plug into the drone eco system and integrate it’s expertise for customers like the defense forces and govt organization’s. Even being a supplier to biggies like Ambani, Adani or other players like Rattan India can be a game changer.

Just my two cents.

4 Likes
52

agm-proceedings-transcript-30-05-22.pdf (338.2 KB)
The replies of the Chairman to investor queries in the AGM show the path forward for this company. The management has clearly changed gears and the future looks very bright. All developments need to be tracked closely.

9 Likes
53

@JD67 Thank you. Could you share the source of this transcript? I could never come across AGM transcripts.

54

It is on the website of Avantel under the investor information section

1 Like
55

I looked at it before asking. But after your confirmation, I see it is under Other Statutory Information: Avantel Limited - Investor Info - Other Statutory Information

1 Like
56

Thank you for sharing the transcript. Pretty useful especially for a company which doesn’t host concalls. Hopefully they will start conducting concalls soon.

57

There is one key challenge this company has: Recruitment and retention of employees in their R&D. This company’s prospects entirely depends on its R&D division, in my understanding.

  • This division is situated at Vizag. Not being a metro city is a key handicap. Many potential candidates likely to give a pass to an opportunity at Avantel mainly due to this location. If it is a metro city like Hyderabad, the company would have access to more pools of talent. Vizag served well so far, but as the company grows this is going to be a bottleneck, in my view.
  • Remuneration may be another challenge. When a candidate compares the remuneration of this smaller company with a typical IT company, s/he is likely to perceive opportunity at the IT company as superior. They may not be in a position to understand that they’re more likely to build a rewarding technical career at Avantel.
  • Being a small company, students fresh out of college would constitute the majority of the new recruitments in this division. That means, the onus of training them is on the company. These recruits become really productive after a few years, say 2 to 3 years. That’s when there is yet another challenge: Time ripe for these recruits to jump the ship, attracted by salaries of bigger firms.
  • Even if the company manages to retain employees, the organizational ladder could be problematic. I’m assuming Avantel to have a conservative mindset in this regard. One big issue with this mindset is that the talented technically-savvy longer-servicing employees are promoted to managerial roles. Over the years, they don’t get involved in technical nitty-gritty on a day-to-day basis, slowly but surely losing their technological edge. This is often seen in IT companies. One has to work against the tide to stay rooted in technical work, dodging constant pressure to become a manager.

In short, if the management recognizes these issues early, and come up with out-of-the-box solutions to successfully acquire and retain talents, more importantly keep them rooted in technology, only then the lofty growth is sustainable.

Till then, this risk will have to be considered in the valuations. All of these are what I currently think about the risks involved. It is reasonable to assume biases in my thinking.

Disclosure: Invested

2 Likes
58

Most people would not want to work from small cities since there is better quality of life, that beside with WFH there are no longer any boundaries.

Employee retention can be done by a small company by awarding of ESOP’s. They are in defence which requires a different skill set, in my view not comparable to the IT industry, they would rather employ ex defence or retired defence personnel. This is a huge employee base who would be otherwise working in a different field where their skills and experience would not be of use.

Agree that there will be a challenge to retain talent but which small company does not have it , even large companies have it. If they can manage it then company can be huge. I would rather punt on the fact that it may get acquired by a bigger company sometime in future.

5 Likes
59

Neoworth Financial an investment firm of Vivek Sarawagi the owners of Balarampur Chini have bought 1.9 lakh shares in the quarter ending June’22. Another investment firm Vora Financial services has bought 2.24 lakh shares. One Mr. Jayesh Vora is a director in Neoworth so there can be a possibility that both investment firms are linked to Owners of Balarampur Chini…

2 Likes
60

receipt of new order.

61

This is the remuneration of KMP 2.69 Cr , against a profit of 19cr cr for Avantel . Isn’t this too high (13% of profit ).

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AVANTEL’s open but MOTHERSON’s discreet work