In India I think this is the only listed company providing IaaS cloud solutions, not really sure.
But as a side not Digital Ocean is a listed company in US
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Just had a thought based on yesterdayâs fillings. For context, co. has passed board resolution (to be passed in September by shareholders) to raise equity and debt.
Equity : Equity will be raised from Rs. 16.5 cr (1.65 cr. shares of 10 Rs. each) to 25 cr. (2.5 cr. shares of 10 Rs. each). Therefore, 8.5 cr. shares @ CMP 363 = 8.5 X 363 = Rs. 3085 cr. could be raised.
Debt : Resolution passed to raise up to Rs. 1000 cr.
My thought is this:
The company is about raise money to expand infrastructure and team quite aggressively. It might also be thinking of doing more marketing to quickly capture larger market share. Two important notices in this context:
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Changing the life of computer hardware from 3 years to 6 years: If large capex in infra was done in small time frame(within 1 FY), the hit because of the depreciation at the end of the first year would be have been quite large doing opposite of what happened this quarter with the sudden jump. So, 6 years instead of 3 will ease it out for the P&L. The bigger infra would obviously bring in larger income but utilization on the infra would be lagging behind the capex as marketing would slowly be ramped up.
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Discussion with Param Capital (Mukul Agarwal): Possibility of equity being raised from him. The company is right up his lane.
Need more profit => Need more sales => Need more infra => Need more capital => Change depreciation to accommodate larger capex => Raise capital from equity/debt => Talking with investors including Mukul Agarwal.
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Hello,
Did the management disclose their GPU/CPU cloud utilization % anywhere?
On the website, itâs showing Claim your spot on the waitlist for NVIDIA H100 GPUs. Join waitlist? Does it mean that they donât have enough infra with NVIDIA H100 for now. If not, I donât think they can get H100 anytime soon considering the huge demand pipeline with Nvidia and pricing power($40K)
Thanks for detailed coverage and insightsâŚ
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Great. Itâs already 7 bagger for you. Wish you 70 bagger if not 100,
Hi vnandan
Isnt the total potential equity raise is ~ 300 cr instead of ~ 3000 cr ? The increase in equity base is 85 lakh shares (2.5 cr - 1.65 cr).
Extrapolating 1Q PAT of 7crs for FY24 implies Rs28 crs PAT. Stock at current market cap of Rs 535 crs trades at 19.0x FY24 which is quite cheap
They recently changed their depreciation policy, hence profit is looking quite high. So look for Cash flow based valuation as well.
Yes the depreciation earlier was super aggressive. The new depreciation rate is the correct rate assets should be depreciated at. Hence the logic of looking at P/E. Alternative look at it P/CFO where CFO = Cash Flow from Operations. According to screener CFO was Rs36 crs last year. Stock is super cheap on that metric tooâŚ
Donât you think itâs operator driven too many upper circuit and now too many lower circuit. Are we missing something
From recent concall we get to know that
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80% use self-service public cloud
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20% use private cloud
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Private cloud is more static in nature, which means that any changes to their cloud configuration would take days rather than minutes or seconds, but broadly, itâs very, very similar to the public cloud except that your scale ups and scale down happens in days and weeks rather than happening in a few seconds via an API call.
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Company is not into contract modelling
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There is not a massive difference between public and private except that the public is technically slightly ahead in terms of the time taken to do things on the public cloud is obviously shorter.
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There is no relearning required to kind of migrate from one cloud platform to another
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Migration : There are business constraints in terms of the proper project planning being required to migrate from the on-premises to a cloud or from one cloud to another
In the below article - most of ecommerce use E2E because of low cost and for managed services such as to tackle âupswings or downswings in traffic easily and cost-effectively". they use Google or AWS.
If you see E2E offering here :
There is a cost associated to each, why it makes more sense to ecommerce because of hype scaling as when they need, load balancing & CDN.
So far E2E is the only company in India that I know of provides such decent good oriented services.
Now when it comes to the data these are relevant :
Data Theft
Data Leakage
Cloud Data Security
Cross-Border Data Transfer
Phishing and Social Engineering
Insider Threats
Data Encryption
Regular Backups
Incident Response Plan
Compliance and Regulations
Employee Training
Security Patching and Updates
Network Security
Mobile Device Security
Third-Party Risk Management
Data Retention Policies
Regular Audits and Penetration Testing
Whatâs more important is that : Government is very vigilant on CROSS BORDER DATA TRANSFER AND THIRD PART RISK - because the medium to store data out of the country is one big risk that country cannot afford.
Every government in countries has a regulatory framework to define the data movement
India has its own data center example E2E small listed, TATA COMMUNICATION.
Google, Microsoft is investing heavily in India for Data Center. This ticks one thing for sure that the Data Center will be good opportunity, players are establishing now but leaders will be decided in future
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What is missing in your study is the information on free float available in the market. Just check that and you will know why price movements are so wild (upper circuits and lower circuits). Hope this helps.
Based on the voting results for AGM I have calculated the share holding pattern. Promoter: 59.70 % Institutions holding: 7.67 % Remaining : 32.72
The latest update on E2E
Important thing to notice is
GPUs currently owned by E2E are from NVIDIA, Dua does not write off the possibility of acquiring GPUs.
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E2E : I think this business has stickiness due to the fact that once a client is onboarded then changing back to any new private players becomes difficult reason being
- Platform Cost - Private ones are expensive
- Migration Cost - To move from E2E to Azure, Google, AWS - there is a cost associated to lift and shift - also they would need to pay engineers additional cost on doing so.
- Uncertainties in business/data risk, if client proposes for shift.
- Reskilling - In cloud the major issue is engineer cost - we can expect the structure of the cloud to be same however implementation/execution, platform skill are very different.
- Time Factor
Other notices :
- Company is planning for capex to scale
- They donât have long term contracts their clients pay them month on month basis
These are collective points from my end.
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I am invested in this scrip. But I have a few observations/queries. Any thoughts on them would be helpful !
a) In recent times from the week of 17th July 2023 onwards the stock has witnessed an almost non stop vertical rise. Few days in between it did see corrections. But again turned around and started the vertical rise.
Interesting thing is prior to the week of 17th July 2023 and for quite an elongated period the price movement was almost flat.
Wonder what could have prompted this vertical rise when there were no triggers, atleast in public domain. Q1FY 24 results too werent declared ( atleast publicly) and were several days away.
b) The change in depreciation policy which coincided with the Q1FY24 results which all of a sudded made the PE look very attractive. Not sure again what was the trigger or the need to do it then. Could it not have been done earlier ? Or later ?
c) In the last couple of months or so, two of their Company Secretary & Compliance Officer left the company. Company Secretary is a senior resource and a KMP. Is this an usual development in micro sized companies like these ?
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a) If a stock is undervalued, its price may rise before results. At that time, the PE was around 25. Particuarly in microcaps, it is a sad state of affairs that insiders almost always have more information about the actual value of the company.
Also, one of the long-term PE investors exited at this time and new investors took their place. The next quarter shareholding pattern will reveal more on this.
Correction was when the stock went into the ESM, similar to several other microcaps. Several microcaps have similarly recovered by now.
b) No idea. My guess is that older hardware was fully retired by this time.
c) Yes, this is a valid concern.
The corporate governance of the company does not seem to be the best. Earlier, they seem to have revealed to Valorem Advisors a lot of information that was not in the public domain. Hope they get their acts together soon.
Disclosure: Invested
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Thanks for sharing your detailed views. I agree with you. Not all bits of investor related information are available out there formally and accessible to investors at large. Thats a challenge if one were to consider taking a long term view on this company,
- Since public cloud what E2E has no complications in terms of scaling, there is little hiccup in the private cloud i.e. any changes to their cloud configuration would take days rather than minutes or seconds, but broadly, itâs very, very similar to the public cloud except that your scale ups and scale down happens in days and weeks rather than happening in a few seconds via an API call.
- Secondly to move from one cloud to another i.e. lift and shift from AWS to E2E - this has a friction on engineer : which might takes again days, week to happen.
So private cloud is having no ease of use for now, they will improve this however one should note that large corporations use private server which in itself is secular and certain in nature for revenue.
There is also a cost factor when it comes to lift and shift
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Even at current market cap of Rs702 crs the stock looks not too expensive trading at 25.0x conservatively extrapolated profits of Rs28crs on FY24. Surely there will be QoQ growth in profitsâŚ