E2E Networks Ltd - Listed small Cloud computing player

E2E Networks is a microcap company functioning in the cloud computing space with a market cap of 114 cr on the NSE Emerge platform. The company had a good IPO with an offer price of 57 opening at 91.

Some financial parameters as on date are shared below:

Founded in 2009 and EBIDTA positive since inception, E2E Networks Limited is India’s #1 Pure SSD Cloud player.

E2E was the first company in India to launch contractless computing, way back in 2009. It has hourly billed pure SSD public cloud and private cloud. Its Cloud Infrastructure has been used by many well-known Indian Startups for their journey from Seed Level to Unicorn Stage and beyond.

Experience in implementing and managing infrastructure for the web, mobile or enterprise-centric workloads have built their (fully cloud agnostic) CloudOps platform, which supports 2,000+ public clouds across the world.

A short note on the financials, business, opportunity and queries is being shared below.

The Good – Financials¬

  • Profit making Tech Startup
    This sentence is perhaps an oxymoron. True however, the company has been profitable since its inception and building profits at a healthy rate.


Q. What is the determinant of its profitability?

  • A growing industry and the company’s differentiated business model focusing on the right target audience (value based products for SMB’s and startup’s). Gartner projected a rate of growth of 30% + from 2014 onwards. A similar rate of growth in cloud computing is projected in the next few years. The industry is in unison that growth lies in SMB’s.

Q. What was topline growth?


Q. Is this sustainable?

  • Yes and No. Though it is a small company with a promising product and proposition, operations are in a competitive, complex and disruptive market, thus forecasting would be tricky.

Q. What does the company do with its profits?

  •   Mainly invests in data centers and computing equipment’s.    (in Lacs)

Given the demands of an IAAS model, the company has built up storage by itself and hosts its data on vendor centers and in partnership with vendors. The Company has been spending on its capability to facilitate cloud transitions, offer Hybrid cloud services and build expertise in cloud based transitions and allied services.

Lower cost of service due to learning effects and reducing asset spends with increasing asset turnover has increased cash receipts of the company. The Company is either using this to pay of promoters or parking it in investments. Self-sustainable growth is a determinant which could give an insight into the future profit potential of the company. This is only whence the question of sustainability of the business model of the company is validated.


Though the company had a negative working capital a few years back, receivables have been growing at a high rate over the past 2-3 years


The Bad- Competitive Intensity - {Detailed Risk Analysis]

  1. Disruptive Nature of the Industry
    The company offers SSD based cloud storage. This may change with the upcoming storage technology of Flash, NAND, 3D Chips etc which are catching pace. This is where the industry is migrating. However, SSD should remain suitable to a small players looking for cheaper cloud technologies. Gauge uncertainty and risk and see where the company stands.

  2. Elementary Service Model
    The company functions on the premise that 80% of the required services can be provided at 20% of the cost. The other services can be paid for by the user on a need basis. Bigger players such as AWS and even Wipro etc provide great customized options and high responsibility of data but they wouldn’t bid or engage smaller clients which fall in E2E’s domain. The only USP the company possesses is price. Company offers significantly reduced prices for cloud services compared to competitors. Well, price is a decision maker, especially for bootstrapped low cash startups (which majority of tech companies are). The question really is whether larger companies would make inroads and compete for E2E’s clientele. I think not. The market is large enough and there are bigger and more funded players who are more apt target customers. How fragmented is the smaller market in that case?

  3. Regulations and Compliance
    Cloud is getting controversial with governments mandating norms for data storage in country of origin. The Indian Governments has expectedly followed suit of EU’s policy and introduced GDPR. While this is prima facie good for Indian service providers with localized data centers, it also faces the issue of high penalties and compliance costs mandated in the Act. Foreign companies are in no mood to desert the Indian market and a host of these players are transmissioning to Indian centers. Would this lead to high costs and advantage Indian players. Maybe temporarily.

E2E is a niche player with a cost based business model growing and sustaining and an impressive pace. A first gen entrepreneur who built the company from scratch through tough phases. With a price to Sales of 2.9 and an average sales growth of 68%, zero debt, sufficient funding to fuel growth post the successful IPO, the company is well poised for growth (Closed listed affiliate is the infamous 8K miles with a dodgy management but impressive financials).

However, the following questions come to mind

  1. Are TCS, AWS, Microsoft, Persistent, Wipro, etc direct comeptitors of E2E. If yes, would the company be able to differentiate its product/service from these large pocket players based on target audience/services/costs/size, etc. If no, how intense is the competition in the companies domain and why should it do well than the others?

  2. Given the changing landscape in cloud computing (technology and compliance), what is the susceptibility of the company losing market share to larger, more innovative and resourceful players.

  3. While the management has performed and should be incentivized, promoter salary has been on the higher side. (in lacs)


Note:- Salaries for 2018 are not released yet, but employee expenses have doubled.
Though it was tax efficient for the promoters to draw out money through salaries rather than dividends (made sense before the IPO)and the company was cash rich, should such high salaries be a red flag or a common feature when companies begin to get funded?

  1. Though the industry is bound to grow, what determinants tilt scales of growth in favor of a cloud company in the industry? What determinants would make it fail? Basically your investment thesis in a cloud company. ¬¬

Disclosure - No Holding

Would love to hear your thoughts.


Looks like a worth while investment . With entire industry growing , it worth the bet.

Any thoughts on recent results ? Looks like 6 months to 6 months comparison is not great … revenue jas hardly grown and profits have reduced.

E2E has two divisions - Cloud Platform Provider and Cloudops Services.

Cloud Platform Provider - This is a concern area as AWS, Azure and Google have taken over entire market share. Even IBM, Oracle are in distant places. E2E trying to offer cloud platform is like trying to write a search engine now to compete against Google. As AWS, Azure and Google has taken huge leaps in providing cloud platform services, there is no hope for E2E to compete against these giants. E2E doesn’t even offer 1% of the services that these biggies offer. Only thing that E2E offers is the cheap prices. May be good for small startups in India but eventually the customers will be forced to move out as they grow and they need other services.

CloudOps Services - This is a strong growth area. But with every service company offering these services, there is no differentiating factor here.

1 Like

Thanks your for views.

Industry growth is a major lever for improvement in company financials.
In India, it is forecast to grow at 37.5% in 2018 to a total of $2.5 Bn. (Source:Company Prospectus)

With regards to revenue growth in the past 6 months, the company has a high client concentration of 50% revenue being generated from top 5 clients only. An increasing number of SME’s and startups provides is a potential opportunity for company to grow its client base.

I share your concerns in doubting the value addition of the products offered by the company.
While i am not technically sound in the field, various web articles and the company prospectus seemed to indicate that the companies provides complimentary services to the larger cloud providers such as hybrid cloud rather than a substitute.

“Company believes in a multi-cloud approach where cloud services from multiple companies can be found under one umbrella. They claims to support more than 2,000 public clouds across the world”.

“Company can also deploy a Hybrid Cloud Infrastructure where the client can use Private Cloud (or Public Cloud) provided by the company and Public Cloud provided by other companies like AWS (Amazon Web Services), Google Cloud, Microsoft Azure and others.”

On Low Costs - It would be worthwhile to ascertain how significant are low costs to an SME when implementing cloud services. The Company prospectus elaborates on this being a competitive advantage for the company.

“A significant competitive advantage for our company is in our lower cost structure for the Infrastructure offering. Our Company uses Low Density Deployment of highly power efficient computer servers in the racks given the higher ambient temperature and high-power cost in India. Most of the larger players prefer to use High Density Deployment in India. This leads to lower operating cost of power for our servers vis-à-vis those of many Global players in Indian datacenters where their global designs mostly based on cold climates are replicated. Our Company offers limited and most critical software along with our compute infrastructure offering as against host of offerings by other peers. Our goal is to build 10% of the compute features required for 90% of use cases and allow our customers to use the multi-cloud paradigm to fulfill their remaining needs using other public clouds. Thus, enjoying the best priced compute and top of line features that helps in both speedier execution of projects while delivering significant bottom-line value.
Given our technical capabilities built over the years of servicing fast moving startups, use of open-source software stacks and lower overheads, we are able to develop our compute products at a very competitive priced offering. As we have scaled and improved our workflows to be optimized for building a sustainable cost advantage in our Infrastructure offering.”

“It offers only 10% of the cloud infrastructure services that typically constitute a company’s 80% cloud bill. And they offer these serviced at 30% of the cost. He says about 90% of the customers need these services”. (Web Article)

The promoters repeatedly speaks about open source platforms being the ethos on which the company is built.

While competition is a key concern, thinking whether the company can act as a facilitator to large private clouds co-existing in the entire chain? Someone with technical know can better ascertain the effectiveness of the business model of the company and where it fits in the scheme of things


About us starts with -
Founded in 2009 and EBIDTA positive since inception, E2E Networks Limited is India’s #1 Pure SSD Cloud player. E2E has lived on the leading edge of technical innovation.

Very hard to believe on EBIDTA, Cloud / DC Hosting business is very capital intensive and its not different than an airline business.

which supports 2,000+ public clouds across the world. Many of India’s best-known start-ups have been using our CloudOps platform to boost measurable performance (up to 15% gains), while at the same time reducing their cloud spend (up to 60% savings).

I dont think there are 2000 public cloud provider and it would be insane to support them.

I did not spend anytime looking at financial but the above statements itself tell me they are not worthy to look at.


2018 Annual report is out https://www.linkintime.co.in/website/GoGreen/2018/AGM/E2E_Networks_Ltd/Annual_Report.pdf

i am a frequent visitor at teambhp. Found this:

and latest status :

Ref : Team-BHP moving to E2E Networks. EDIT: Done! - Team-BHP


results are bad

Financial-Results-September-30-2018.pdf (554.4 KB)

Anyone know why revenue is not increasing ?

E2e network uses infrastucture from NetMagic India https://www.netmagicsolutions.com/
thats why positive EBITA from begining

see this

I have a few further questions on understanding E2E business model:

  • Can AWS and the like offer private + public cloud to their customers
  • When would a customer prefer a hybrid cloud over public cloud
  • What would be the estimated revenue breakup of E2E wrt Cloud Infra and Cloud Ops
  • When a customer become big wouldn’t they want to shift for a more reliable soultion , cost would not act as a driver then
  • Why should their top clients should have such huge concentration, ideally they should be attracting lot of small clients. any explanation for this
  • Did anyone had an interaction with a customer of E2E : Why would they prefer E2E over others

Would be glad to hear the views of the forum members

  • Can AWS and the like offer private + public cloud to their customers

Yes, all cloud providers provide this. Very basic feature. Customers can easily customize on what services/server instances they want to expose to public vs private. In fact, customers can keep their entire cloud infrastructure private and also can link it to their corporate network via VPN or direct link.

  • When would a customer prefer a hybrid cloud over public cloud

Hybrid cloud - when you have websites or services to be exposed to the internet, then you need have to your load balancers or other necessary servers on public (subnet). Rest of the servers like application servers, database etc. can be on private cloud (subnet) which can be accessed only via VPN etc.

  • What would be the estimated revenue breakup of E2E wrt Cloud Infra and Cloud Ops

Revenue - Not sure whether they have shared it.

  • When a customer become big wouldn’t they want to shift for a more reliable soultion , cost would not act as a driver then

When customers grow big, they need many more services (security, analytics, big data, blockchain, API management, machine learning, different databases(nosql, inmemory, sql etc.). AWS has a big ocean of services…so it is way way ahead of competitors like Google and Azure. Micro players like E2E etc… won’t event come into picture. As far as I know, even small startups in India straightway gets into AWS as AWS gives so much of freebies. Only when you cross certain volume, you have to start paying.

  • Why should their top clients should have such huge concentration, ideally they should be attracting lot of small clients. any explanation for this

May be compared to new clients, their existing clients add many services as they grow to medium enterprise. This is where E2E will start loosing customers as companies with little success will try to add many services and will eventually need AWS / Azure etc.


As per coversation with the MD, currently its 95%:5%. Over longer term they plan to do 75%:25%.
Cloudops is not a sticky business, as client grows, he may shift. Also, margins are slightly higher

AWS targets startups aggressively as well. They don’t let any startup go anywhere else by giving free credits. I interacted with few startups and they mentioned there is no reason for them to move from AWS because of some softwares/libraries which E2E cannot give.

Can you explain a bit on what do you mean by cloud software stack, what E2E can build which other larger public cloud players can’t provide.

In my analysis I couldn’t find anything apart from the running bill which customers of E2E may have less than AWS, is this a big advantage? Is this a winner takes all market where 3 big whales are competing with each other and will swallow everyone else.

Unable to find reasons apart from the cloudops which is cloud management (largely a service business) what play does E2E have.

1 Like

if they have specialized even in providing professional services for cloud application/analytics ecosystem, it can be a very promising space. Not sure if E2E is into specialized professional services on public cloud. Getting cloud is much easier than building and running it securely and efficiently.

Does anybody have insights on the credibility/ capability of these hires?

Does anybody track this stock anymore? Results were pretty bad. Financialresults1819.pdf (1.3 MB)

Revenues down 16% YoY in H2FY19. Net loss of Rs 1.2 cr. Only positive thing was a strong balance sheet with Rs 21 cr cash. It appears performance may remain under pressure in H1FY20 too given that it has lost a key customer (who contributed 22% of revenues in Mar 19 as per co.) while costs will remain elevated as the company has been hiring people.
Views welcome.