Out of curiosity, Sanjeev would you mind sharing your thesis of investment in this company if you are invested? For me, I am more invested in the story of VFX outsourcing work to India and the industry itself growing at a fast pace which is why I am invested in both BSF and Phantom.
It would be good to hear thesis from others as well.
With all due respect, it is not about how good/bad the result is but the intentions of the promoters.
For me there are only 2 scenarios in this situation:
- The promoters are fraudulent and wanted to manipulate the price of the stock
- The promoters are incompetent
Either way I am no longer interested in the company.
Please note that the promoters took 2 days to revise the financial statements. That is a massive amount of time. What could possibly have taken that long? Did they just not carefully see the results earlier? Were they waiting for the stock to fall? I donât understand. I have hardly ever seen such a thing in the market before. And when integrity/ability of promoter is questioned specially in SME, it is a big red flag for me.
Disc: Exited
1 Like
I donât believe promoters are fraudulent based on whatever I have seen based on employee data, VFX summits, etc. I strongly believe promoters are not matured enough to handle all the stock market processes which will take some time, itâs the second result they have published. By all means, I could be wrong here, but if I am not, then VFX industry risk to reward ratio is very favorable.
Digicore has made an exchange filing on 02.05.2024, wherein they are talking about path breaking initiative by Govt for VFX industry by way of subsidy upto 300 million for foreign orders. Am not aware of any such initiative. If so, it must be beneficial to Basilic also. Any idea friends? Would love to know the details.
It seems like this is not something new and had been implemented few months back based on the articles I could see, although the articles talks about filming in the country and not about VFX.
1 Like
This covers pure animation post production and visual effects services undertaken by Indian units for foreign film production houses. So this is a great incentive by Govt. I request interested VPs to raise this issue on 8th and incentive, if any, received by the company under this initiative . This is a big positive for VFX companies, particularly Digicore, Phantom and Basilic.
Foreign productions availing pure animation post-production and visual effects services in India can
receive up to 30% of the Qualifying Expenses (equivalent to 75% of the Contract Value) along with an
additional 5% bonus for Significant Indian Content, with a maximum rebate capped at INR 300 million.
Trying to wrap my head around this, does this mean any foreign production studio availing Indian VFX services would receive cash value equivalent to 30% of contract value? If it is true, then this would be substantial win for Indian VFX companies. Surprisingly, I couldnât find this news anywhere else other than Digikore, does anyone know if we can verify it on Indian govt website?
Sharing the document here for everyoneDigikore exchange fillings reference.
1 Like
This is a big one . For eg Basilic has an employee expense of circa 30 cr and if they can avail this benefit it straight away adds 30 cr to their EBIT.
This was not discussed in last concall at all. Interesting to learn more and which companies may get benefit?
By the way following list point out treaty with India government. US is not included. Canada and UK is included.
D: Invested
How would the company get 30cr back? Isnât this benefit for the foreign production house and not the company? My understanding is foreign company availing this service can get the refund back from Indian govt to attract them to award contracts to Indian companies.
3 Likes
I interpreted that the Indian company will get the benefit . This is from the link shared by @Shikhar .
I might be wrong .
This benefit would be passed on to the foreign production houses. So, essentially vfx company donât get anything but foreign production houses would be incentivized to give contracts to Indian vfx companies. This is what I get out of it.
1 Like
For animation post production and visual effects services, the Indian Service Company is eligible for the incentive. Yes, it may so happen that foreign production houses may pay less taking the incentive into consideration. Non the less, it will help Indian companies to get more order, as they will become more cost competitive. And qualitative companies can very much withstand the pressure from foreign companies.
1 Like
I am mainly invested in Phantom and my thesis is as follows-
Company- Full-fledged creative VFX studio, based in India with offices operating in US and Canada. As a TPN (Trusted partner network) Certified studio, PhantomFX offers a wide range of VFX services
Strengths-
1- Excellent at bidding for projects, bad bidding has led many studios out of business in past
2- Phantom has complete team for all projects incl. Labor intensive as well as Complex CG projects. Digikore does mostly labor intensive work.
3- Learning from production of Ayalaan movie will help mgmt do execute future such projects better. Other Indian VFX players donât have such experience.
4- Bijoy as a CEO has good industry feedback. He focuses on helping Movie studios improve the quality while providing timely execution
Weaknesses-
1- >70% business comes from India which has bad payment cycle (receive money upto 6 months after movie release) compared to International business with much better payment cycle (10% at signing, 15% at 25% of work, 50% at 50% completion, and then everything else is delivered at 100% completion).But this can turn into opportunity as company is focusing on increasing its International business share to 70% of total business (like other Indian VFX players).
Triggers-
1- Success of Ayalaan movie, leading to payment of 17 crores and new contract from the KJR Studio worth 50 crores (to be executed by Decâ25)
Risks-
1- Next 2-4 quarters can be slow due to writersâ strike in US. Although it will be much slower for Basilic & Digikore as they have major business from US unlike Phantom.
2- Movie production can lead to huge inventory and bad debts
3- International studios setting shop in India instead of outsourcing to Indian VFX studios. 3 years down the line, business is expected to slow for Indian players
4- Medium term risk of AI taking away Roto/paint jobs from VFX players
Disclosue- Invested in Phantom, small position in Basilic. A lot of above mentioned points are based on feedback from VFX industry people and hence I canât provide you with specific references. But I can say that VFX as an industry is still evolving and hence you canât bet on any one name at the moment. That is why I am invested in both but Industry feedback is that Phantom is a much better business than Basilic/ Digikore.
10 Likes
Does anyone know when is the concall scheduled for BFS? Couldnât find it in NSE website.
Concall is on 8th may
1 Like
Concall Highlights H2 FY2024:
- Investors rightly challenged/accused management about fiasco of result to exchanges and re submitting them. Company gives their explanation. I hope management take it seriously and never do any such things in future.
- Order book executable by H1 FY2025 is 75 cr.
- Growth of less then 30% by sep 2024. After that sept to March 2025 growth of 50%.
- Can maintain similar EBIDTA Margins.
- Direct production vs service contracts is 35% and 65%. By March 2025 it will move to 45%.
- PAT Margin can be 30%.
- Bench expansion: June/ July recruitment to meet demand in august/September. Looking at strategic partnerships.
- In organic growth: Working with advisors, close to potential partnership.
- Government support: 30% incentive based on expenditure, max of 300 million INR. Looking for partnership to materialize on that. Clarity is required from government to understand incentives. Mostly fresh contracts will fall in it.
- One client have stress and agreed to instalments for 15cr. Temporary requirement due to market downside in North America. Steady state receivables will be 90 to 180 days.
- To maintain margin, going to global market. Netfix, Amazon cut cost to do that maintain high quality they have to come to India. US is 500 to 600 USD per day. India is 150 USD per day. There is opportunity.
- GST refund (5 cr.) has to come back is in other current access.
- Net working capital is 60 days including all.
Orderbook or media release:
Investor presentation: https://nsearchives.nseindia.com/corporate/BASILIC_08052024181821_Investor_presentation_.pdf
D: Invested.
4 Likes
Very positive management comments, guidance and order book. Industry is also doing very well . Added attraction is Govt incentive. Surprised that market is yet to give thumbs up, where as many stocks without any semblance of fundamentals are ruling at astronomical level.
This is market.
Invested and hence biased.
2 Likes