Fun update:
Going through the list of the new proposed investors and amounts invested:
- Ashish Ramesh Chandra Kacholia - 30 cr
- Gauri Khan Family Trust - 4 cr.
- Madhuri Shankar Dixit - 75 lakhs. Could not find link to verify it is her.
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I am invested from lower level. I donât think it is fair to say that E2E will be obsolete in 5 years. The software libraries they provide will be, and will have to be updated/upgraded. Hardware has high depreciation already.
Emergence of an entirely new generation of hardware, e.g., quantum computing at scale, is definitely a risk in the long term.
Yes, the valuation is starting to look expensive. However, I wonât sell if the market is willing to reward me for simply holding and doing nothing. Enormous addressable market (in India and beyond), fast growing market, AI hype and low liquidity are some of the factors pushing up the prices.
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So, would you say DCF is not applicable to any high growth business? Why? It is a business after all. It may be difficult to predict future cash flows given the high growth, but that doesnât mean DCF cannot be applied, IMHO!
For âlarge, stable, low capex companies with predictable earning outlookâ, DCF is easier, thatâs all 
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One example of obsolescence in this case - emergence of a chipmaker who can offer better (more efficient, cheaper, etc) chips for AI workloads. The whole E2E story is currently centered around NVIDIAâs unchallenged position in AI computation.
Remember how Apple ditched NVIDIA for their own AI?
Apple Says No to Nvidia GPUs. Is This the End for Nvidia? (msn.com)
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E2E_20082024234119_PressRelease.pdf (247.1 KB)
Press release about the fund raise and intended deployment.
"
With this strategic capital infusion, E2E Networks is poised to further solidify its position as the cloud
platform of choice for Indiaâs burgeoning tech ecosystem. The India-born company plans to invest in
expanding its accelerated cloud infrastructure, focusing on next-generation cloud GPUs and GPU clusters,
which are critical for AI and machine learning workloads. This will enable E2E Networks to support the
scaling needs of startups, enterprises, public sector and research institutions as they navigate the era of
generative AI and machine learning. This investment will also further strengthen E2E Networksâ cloud
platform, particularly through the enhancement of TIR, a cutting-edge low-code AI development platform.
The preferential allotment includes significant contributions from both the promoter group and public
investors, reflecting strong confidence in E2E Networksâ strategic direction and growth potential. Key
investors include prominent figures and institutional entities known for backing high-growth tech
venture"
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This is a race of multiple factors: software, hardware and price. All the industry playersâAlphabet, Amazon, Apple, Microsoft, Digital Ocean, and so onâare in the race. If E2E has slightly less efficient chip, it does not imply that their whole business would become obsolete. In many cases, they would have the time and money to play catch up.
E2E is depreciating computing assets assuming lifespan of around 5 years. They will have to transition to the better chip as it becomes available. There are two risks here: such chip may not be available to them, and such transition may not be feasible in their existing data centers. We will need to watch out.
Even if Apple Cloud becomes a dominant player in Cloud Computing (yet another hyper-scaler) using its own chips, the enormity of the market size will allow the likes of E2E to keep growing.
Lower price of E2E is an attraction. How well their software offerings of cater to particular industries compared to the other offerings? This question will influence the demand.
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Well put.
Just a slight correction here. Apple used Google TPUs (Google I think is the dark horse and suprisingly quiet till now on the AI front, but given their pioneering work i would look out for something big from them)
Umm not really , if youâre getting a high multiple for the company dilution through equity makes more sense, debt is risking the balance sheet of the company. Also the multiple has no bearing on the valuations. Thats a very rookie way at looking at it, its doing an EBITA of 65 cr , very high chances it will grow 40% cagr for the next 5 years. Money is made looking forward not in the rear view mirror , iv been invested since it was a 70odd cr market cap company 
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I was talking about valuations from a future earnings growth perspective, not past earnings. Perhaps you might have missed the part about the earnings growth expectations inherent in the price (using reverse DCF)
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@BuyRightSitTight
could you please enlighten us with your perspective.
all that we are deducing is your justification on your selling 50% of your holdings in E2E.
E2E has always been a little more than expensive and was backing itself with results ( may not be to the extent of the price but it was seeking a premium).
If you could go through the concalls, they were honest in telling about the fund raising in an ideal world would be 800cr.
Investors confused that it would be 800cr.
Mr.Tarun Dua clarified in the last concall that it is not 800cr and in the following months, after the calculations and board meetings we will announce the funds to be raised either by vendor financing, fund raising ,or a little bit of debt as they had 100cr of debt on the books.
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My question was basically about what members thought about the valuations from the perspective of the growth assumptions built into the price (see the reverse DCF shared). Sharing what I did was only from a perspective of being transparent about my holdings and has no other relevance. The market does not care about whether I sold or not, so why would I try justifying it? So letâs stick to discussing about valuations, shall we?
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I feel that markets are currently ignoring valuations which are based on DCF and related models . May be sales growth rates , margin profiles etc are expected to show a dramatic positive shift over next few years . It may also hint toward a complete shift in customer preferences . Who would have believed two years back that Zomato will suddenly start clicking GMVs equivalent to D-mart and look much more promising . Way AI based models are currently attracting customers , quite possible that we see acute shortage of Data Centres to support the back end and for long time it becomes a sellers market .
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Valuations are strictly individual perspective based.
Thatâs what makes investing difficult and interesting.
DCF is subjective and does have its limitations.
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Going through the AR, found this in the MD&A.
I think a few things are going to happen based on my observation:
- A stock split is highly likely in the short term due to the sheer absolute price of the stock
- More debt could by raised once the cash flow from the 420 cr. Capex starts flowing in and company is assured of its debt payoff
- Interest payment and D/E will rise leading to more debate/discussion on its justification for high valuation
- Further equity dilution with fund raising either via Preferential Allotment/FPO/Rights Issue is on the cards over next 12 months
- Sales will continue to hold with industry CAGR upto 2029 is expected to be ~25%.
Possible timeline this round of Capex:
September 11th - Vote for funding
October Mid - Funds received/ Order Placed
November End - New Hardware Received (based on 4-6 weeks wait time for new hardware as per concal)
December End - Installation complete, brought new H/W online
Jan-March - Revenue generation from new capex
Based on this we can expect no more actual funding happening (discussion/targets may be talked about/set) this year as the cash flow will happen Q4.
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read this on Twitter. thoughts?
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I agree with their hot take. DC, compute, IaaS have different use cases and business models and target customers. Anyone outside of the industry may not pick the subtelety in them. Hype is an engine which keeps chugging.
However, I donât think DC analysis is where E2E fits. In fact, E2E is not at all in the DC business. It is a DC customer. Dua is smart to realize thatâs not where the values creation lies. Heâs talked about this before. Further, heâs mentioned moving towards stronger margin products. That wonât happen by moving towards infra.
DC today is essentially a high capital commodity. The tech is available for anyone with deep pockets(think Relianceâs recent announcement)
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I assume Ameyaâs tweet would be more applicable on NETWEB . Pls correct if my views are misplaced
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E2E can be categorized as IaaS(Infrastructure as a Service) Provider who installs the compute/network/storage in the Datacenters and leases it to the companies like startups wherein they can start with small workloads, test their AI/ML algorithms and then expand on the production network when their requirement grows. This way these startups dont have to burn lot of cash at the beginning. Here E2E have created their own suite which can be utilized to consume that hardware where the customer can come any time on their website , spin up the compute and utilize the service. You can compare E2E with AWS.
Netweb on the other hand is providing the Servers/Storage/Networking for Private Cloud customers who would like to build their own cloud for their own consumption. Here these customers are ready to those investments upfront for this infra. Most of Netwebâs customers are PSU, Universities.
Disc: Invested in Netweb and E2E
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2 articles on the proposed 10k cr AI mission plan to procure 1000 GPU. As per the terms of tender ,lead firm in the consortium must have an annual turnover of 100 cr for last 3 FY.
Disc: Invested
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E2E just barely qualifies for being the secondary partner as it had 52 cr. turnover 3 years back. Next month concall will be quite interesting. Tying up with a service provider which has scale will be good as they can handle the legal, contractual, service delivery part which they are experts in and a secondary partner like E2E can focus on what they already do minimizing the risk of sudden expenditure on these non-core functionality.
I think the consortium approach is quite good and allow for a min-win (minimum risk, max reward) scenario.
Great news for the ecosystem as a whole!
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