Fourth Dimension Solutions Ltd

FOURTH DIMENSION SOLUTIONS LIMITED (FDS) came out with a PUBLIC ISSUE OF 28,92,000 EQUITY SHARES OF FACE VALUE OF Rs. 10/- EACH A PRICE OF Rs. 30/- PER EQUITY SHARE AGGREGATING Rs. 867.60 LAKHS on 7th January 2016 and was listed on 22nd January 2016 on the EMERGE platform (meant for SME segment) of NSE.
Link to the Prospectus is:
http://www.nseindia.com/emerge/corporates/content/FDS_PROSP.pdf

FDS is CMMI level 5 company managed by experienced IT, Marketing and Administration Professionals. FDS assignments are mostly tender based contracts awarded by Local/State/Central Government bodies. In certain cases, they bid the tender in consortium with another party which primarily includes RICOH India Limited. FDS also does merchant trading of IT and electronic products like tablets, LED TV, Mobile Phone etc.
The Financials are as follows:

Some of the projects being implemented by FDS:
AADHAAR:
FDS is one of the Enrolment Agency appointed by UIDAI as consortium partner with RICOH India Limited. FDS is taking up the enrolment work in Madhya Pradesh, Uttarakhand, Uttar Pradesh, Chhatisgarh, Rajasthan, Haryana and Bihar. FDS has also executed an agreement with NSDL for enrolment of residents of India on all over India basis as consortium partner with RICOH India Limited.

The National Population Register (NPR):
FDS has done project Management and Front end operations in Chhattisgarh, UP and Bihar for NPR Project along with RICOH.

Pradhan Mantri Jan DhanYojana (PMJDY)
FDS has been appointed as partner with Bank of Baroda for Himachal Pradesh and Rajasthan, UCO bank for Rajasthan and Baroda Rajasthan Kshetriya Gramin Bank for Rajasthan for managing the PMJDY scheme.

ICT in Schools
FDS has been appointed as Service provider by Telecommunication Consultant India Limited (TCIL) for Supply, Installation and Commissioning of Computer Hardware, Peripherals, Software, e-Content, Connected Accessories, 99 Lab Infrastructures, Maintenance of Equipment and Provision of Computer Education Services in 1110 Government aided schools of Delhi. The Company is also doing the project for supply, installation & Commissioning of Hardware, Software, Operation and Maintenance of Computer Aided Learning Centres (CAL-C) project in 200 EDMC primary Schools.

Scanning and Digitization:
Scanning of Maharashtra and Bengal Land records.

MOU with RICOH India Limited
FDS has entered into MoU dated May 08, 2013 with RICOH India Ltd. wherein they together will constitute RICOHFDS consortium for bidding e-Governance projects.
For the year ended 31st March 2015 following is the revenue from RICOH:
Supply of Goods: 373.25 Crs
Services 58.28 Crs
Total 431.53 Crs
% of Total 66.22%

FDS has 695 full time employees as on 31st October of which 637 are in operations.
Rationale for investment:

  1. FDS receives substantial advances from its customer for rendering services and supply of goods as is evident from the advance from customer figure of Rs. 61.73 crs and Rs 109.87 crs outstanding as on 30th June and 31st March 2015.
  2. It works on negative working capital and is virtually debt free as the only debt outstanding is vehicle loans.
    3.Bids for major projects in consortium with Ricoh India and Ricoh constituted roughly 66% of its turnover.
  3. With Governments focus on Digitising India there is a huge scope of scalability and revenue visibility.
  4. At current market price of Rs 83/- its available at a PE of 7 times its EPS of 11.9 for March 2015 and not taking into account the EPS of 5.53 for 3 months ended 30th June 2015. FDS has not disclosed its earnings for Sept and Dec qrts as Cos in SME segments need to disclose earnings only 6 monthly and since the Co came out with IPO in Jan 16, it will give now full year earnings for March 2016. Market Cap is also very reasonable at Rs 90 Crs and if the 12 months earning FOR March 16 pans out as per 3 months figure of June 15 then we can see PE rerating and jump in MC.
  5. Promoterā€™s stake is 73.43%
  6. FDS is CMMI Level 5 company. CMM is an abbreviation for Capability Maturity Model (CMM). The CMM was originally intended as a tool for objectively assessing the ability of government contractorsā€™ processes to perform a contracted software project. CMM (Capability Maturity Model) Level 5 represents the top level of certified software development process: managed, repeatable, documented, self-optimizing. It is certified by Software Engineering Institute, USA. The company will be evaluated in all aspects of Quality, Customer report, document management, HR Management etc
  7. Documentation and record management and cloud services are going to be the next big driver for business.

Red Flags:

  1. FDS has lost Rs. 215 lacs and Rs. 70 lacs in share security trading for March and June period respectively.
  2. FDS allotted bonus shares in the ratio 3:1 on 7th September 2015 to the promoters just before the issue.
    3.As supplies are to Govt and semi govt organisations delay in payments can increase the financing costs and also chances of bad debts which may wipe off or erode the net worth and profits substantially.
  3. Major part of turnover i.e. nearly 83-85% of the turnover comes from goods supplied where the margins are very thin. But while going through the results of Ricoh I noticed that Ricoh also derives 83% from goods and 17% from services for the year ended 31st March 2015.
  4. Some of the related parties of FDS has supplied goods and services to it though not very large.
  5. First generation entrepreneur and the Company is only 4-5 years old and major turnover has only come from the year 2015 onwards.

FDS WEB SITE:
http://fdsindia.co.in/beta/index.php

On Facebook:

Nice videos and info like this video one can find in their Facebook account:

Tried talking to the management but couldnā€™t but hopefully should be able to do so shortly. Will keep all posted.

Disclosure:
Have invested in the IPO and also bought on listing and am looking to add more once clarity emerges on their sustainability of profit and growth.

Went thru the interview given by Amalendu Mukherjee the MD of FDS which can be accessed here:

It seems that FDS is doing Defense contract also whereby it is handling potential large Telecom optical back haul for the Indian Army for deployment in the nation wide network.

Also FDS has set up a ambitious target of becoming a Billion Dollar enterprise in the next 5 years.

Could turn out to be an exciting company. Worth keeping on ones radar.

Disc: Taken a small position for monitoring purpose.

I was reading something and quickly applied the theory on numbers from FDS. But the results look crazy. 8.65 crs salary cost for 695 employees for a 12 month period seems grossly incorrect. Works out to Rs. 10,000 per month per employee in an IT company :open_mouth:

Even if I take Q1 numbers, its 19,500 a month.

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Aashish you have made a valid point. Actually the 695 employees that the Company has mentioned in the RHP is as on 31st October 2015. FDS is and was in a rapid expansion mode and increasing its employee count as you will see on reading the RHP that FDS has taken many premises across India on lease and rent from March 15 to Oct 15.
The salary costs were as under:
2012-13 Rs. 133 lac
2013-14 Rs 721 lac
2014-15 Rs 865 lac
3 months
ended 30th
June 2015 Rs 409 lac

So seeing salary cost of Rs 409 lac for 3 months ended June 2015 it does not look abnormal and that too when most likely the number of employees would be much lesser than 695 during that period.

Further I happened to have spoken to the Company Secretary of FDS Mr. Deepak Kaushal on Thursday about the likely impact of the ongoing Ricoh controversy and how it has or will impact FDS. He said that for FDS the business with Ricoh has not been impacted in any manner and they continue to do business as previously with them as they are the preferred partner for Ricoh due to their ability to deliver projects cost effectively and on time. Also the payments from Ricoh is being received on time without delay.
Asked about the likely turnover for year ending 2016 he refused to divulge anything but on my persisting about the momentum of business that was seen in quarter ended June 15 over the full year 2015 , he assured me that the momentum is intact and they are seeing good traction in business in future also.
He can be contacted on 011-4709 1502.
If anyone happens to speak with him do please share your observations and information.

Disc: am invested and holding my position.

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FDS on 13 th April has entered into a definitive agreement with Nokia OY to acquire 100% stake in its subsidiary Enpocket Services ( India ) Pvt Ltd.
Link here:
http://www.nseindia.com/sme/marketinfo/corporates/announcements/announcementDetails.jsp?seqId=204

This acquisition will help FDS to get into Mobile App related business and along along with its IT and ITES business will enable FDS to bag more e-govn businesses and enhance its profitability.

Disc: Invested and holding. Waiting for Annual results to add.

Can we compare to Tera software & ABM Knowledgeware Ltd

When are the Annual Results expected

Annual results are expected around 15th May, Companyā€™s web site would be the right place to look for as NSE Emerge is too lazy to update on time.

http://fdsindia.co.in/

FDS scope of work encompasses both that of Tera and ABM and much more. Visit their web site to get an idea.

Read that the Enforcement Directorate has an inquiry on their biggest client Ricoh and a few projects of the company are under lens and a SEBI notice might be on its way.

The source is Moneycontrol, so I am not sure, couldnā€™t find anything in Google.

Fourth Dimension Solutions Ltd has declared its audited results for the year ended 31st March 2016 as under:

The results can be accessed from their web site also as under:

http://fdsindia.co.in/Announcement/FOURTHDIM_RESULTS.pdf

From the reading of the P/L and B/S it is seen that FDS has turned cash positive to the tune of Rs 35.58 Crs which is a big positive.

FDS has reported a good set of numbers. The recent controversy plaguing Ricoh India has effected the share prices of FDS and as per my interaction with Mr Deepak Kaushal Company Secretary of FDS he indicated that all sort of rumors were circulated by vested parties to malign FDS but there are no truth to these rumors and FDS was and continues to do business with Ricoh as on date and payments are being received by them as per the terms of the contract.
Mr Deepak Kaushal can be contacted on 011- 47091502.
In fact the are also doing work with HCL and have added more clients.

Disc: Invested and added at lower levels.

Good set of numbers posted yet again with improved margins both operating and net.
Bonus 1:1 announcedā€¦Another booster
Posted EPS 13.25 for the half year ended 30/9/16

I feel this stock has a lot of potential upside

Disc: Invested at an average price of 122.60
@manojag What are your insights?

Does anyone has any idea why the share price of FDSL has dropped from around Rs.100 in Feb to Rs.60 in the past week? The promoter holds close to 74% of the shares, plus if you look at the share-holding pattern - out of the rest 26% of shares - 9.48% of shares are held by just 41 individuals holding nominal capital in excess of 2 lakhs and another 8.91% by just 249 shareholders, its hard to believe that the stock isnā€™t operated by the promoter, and hence the price has fallen with his consent. (the question is why?)
Plus the shares are traded in a lot of 2000 and the difference between bid and ask is Rs.62 and Rs.69 respectively.
PS - the Rs.100 price is post- bonus isuue, hence the reason isnā€™t bonus.

The stock is now available at 4 PE wonder if market found any major red flag. @aashish2137 do you see any other red flags apart from salary?

Disc: Not invested

FDS was involved in circuitous transactions with Ricoh India.

Ricoh India Fraud is connected with FDS