We have been working on MPS Ltd (formerly known as Macmillan Ltd)and it looks to be an interesting turnaround story. MPS is a provider of publishing solutions a they handle everything from production of book, journal, or magazine right through to subscription management and BPO services. The company was sold to a new management a year back and the new management has done a superb job of delivering aquick turnaround. The interesting thing is that the company ispaying out very liberal dividends(MPS has declared an interim dividend of Rs 5/share in Q2FY12 results) and hence the story will be very interesting if they can grow from here.

Here is a look to their financials -

The new management had taken over the co at just Rs 36/share while they have paid out Rs 9 as dividends in an year.

The profile of the newmanagementis very strong and hence we feel its a stock to be kept on watch.

Do go through their FY 2012 annual report and website.

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I was just going through their website( history of the company ). There it was mentioned that the company is into publishing technology and services business. Is is not a similar business as REPRO india???

I was screening stocks on screener and came across MPS. I did not look very carefully but I think I gave it a pass because the parent adi media looked to be unlisted and operated a small BPO in Dehradun and also published 4 niche magazines that may not have a huge subscriber base .

The new owner Nishith Arora is a St Stephens n IIM Ahmedabad pass out having 15 year hardcore experience in the same field. As such was chosen by Macmillan to be sold. He is incidentally brother of Vandana Luthra of VLCC another first gen entrepreneur . So 2 siblings with FIB implies company is bound to grow at a faster pace.

The cost cutting measures are already showing results plus the fact that now MPS can cater to non Macmillan vendor as well now that it’s a neutral vendor.

We need to explore the size of opportunity n moat for the company.Valuations are OK at present.

Hi Ayush,

A very interesting pick. I had a fewqueries regarding the company:

What cost cutting measures have they taken which have resulted in such sharp jump in operating margins (the employee expenses has reduced to Rs.19.84 crore in Q2 FY13 as compared to Rs.21.98 crore in Q2 FY12 despite slight increase in sales)?

Why have they paid just Rs.7 lakh of tax in Q2 FY13?

I will also pose the above mentioned queries to the management and will update them as soon as I get answers from them.



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Does any one have any idea why the delivery volume in this stock has remained 100 per cent?

One possibility is that it could be in trade to trade segment.

Ya. Its is in trade to trade segment. Link:

Does that mean that promoters or punters are manipulating the stock prices? Hitesh bhai, what is your view on companies which come under trade to trade segment?

@ranvir - they are not in publishing of books in physical. They are into the digital part and servicing the complete life cycle of a book, journal etc.

@Akhil - yeah tax payout is lower in Q2 and hence one shouldn’t annualise Q2 nos. Shifting of scripts to T2T is normal by SEBI and they usually do it whenever a script rises quickly.

One thing which quite impressed me is the profile of the senior mgmt of this company. Do go through their FY12 annual report -

The company has arranged a concall tomorrow :

We are pleased to invite you for the Conference Call ofMPS Ltd. to be held onFriday â December 21st, 2012 at 1600 Hrs(IST).____

Dial In Numbers:____

+91 22 3065 0131____

+91 22 6629 0351____

The numbers listed above are universally accessible from all networks and all countries.____

Local Access Number :6000 1221____

(Delhi, Chennai, Hyderabad, Bangalore, Kolkata)____

(Accessible from all major carriers except BSNL/MTNL)____

Local Access Number: 3940 3977____

(Gurgaon (NCR), Bangalore, Kolkata, Cochin, Pune, Lucknow, Ahmadabad and Chandigarh)____

(Accessible from all carriers)

About MPS Ltd:______

With over the 42 years of experience, MPS Ltd (erstwhile part of Macmillan) continues to be amongst the top five companies in pre-press publishing services to publishers across the globe and has developed trusted relationships with the world’s largest publishing groups. The companyâs expertise spans digital and print publishing services, interactive learning and multimedia, and creative design. MPS has been able to turnaround operations under the new management (ADI BPO acquired controlling stake in FY12). It reported 21% y-o-y growth in top-line in FY12 and also turned profitable at operating and PAT level after a year of losses. For H1FY13 EBITDA was Rs 205.9mn (EBITDA margin â 25%) and net profit was Rs 149.3mn (PAT margin â 18.1%)

Hi Friends,

We have prepared a quick roughquestionnairefor today’s concall. Please add your queries and if one if participating in the con-call, plz try to cover the left queries.

Questionnaire forMPS

1.It has been an amazing turnaround forMPSLtd. Infact its one of the fastest turnaround we have seen. Kindly take us through the journey

Macmillan used to be a very profitable company but slowly its margins kept dropping. What were the problems in the existing business and how were they solved?

2.Please give us an idea about % contributions from the different business segments mentioned in the presentation. Also which segments are more profitable and focus areas going forward?

What is the breakup between Pre-press, Digital content management, Mobile app development? How is the contribution mix expected to change over time?

3.Company has talked about some of the part of its businesses becoming commoditised a like typesetting, proofreading etc. What part are these of the current turnover?

"Traditional pre-press services are fast becoming commoditized. The low barriers to entry have resulted in large number of competitors capable of providing pre-press services.

To remain competitive, company has developed comprehensive

osolution portfolios

oand packages for commoditized services with value adds**".

What exactly are these solution portfolios and value adds, andhow useful are these to the clients? What is the contribution from forward looking and more profitable segments?

4.We see that the sales are usually very volatile with quarterly sales fluctuating between a 35Cr to 45Cr mark. What are the major drivers for sales?

5.The major portion of the expenditure is on employees cost (56% i.e. 107Cr on 192 Cr), which we take as a fixed cost. Yet it has been volatile too. In Dec’11 quarter it was 23Cr, in Mar’12 quarter it was 17Cr. (26% down), in Jun’12 quarter it was 20Cr (18% increase). Is it based on the sales percentage or some other reason?

6.If we see the 10 years record of the company 2004 was the golden period for it. The top-line was 130Cr and the bottom line was 43Cr. How do you compare that phase of the company with current phase? Will it be possible forMPSto attain profitability like before?

Also, what is the long term vision of the company from here?

7.If we look at the long term track record of the company, it has been a slow grower. 10 Yr CAGR growth of 10%, 5 yr CAGR growth of 5%. Is this business tough to scale up? What kind of growth rates can we expect going forward and why?

8.There had been a dis-allowance of input credit of service tax of Rs.7Cr. Which is the current status of the litigation?

9.Since the company gets most of its revenue from exports, what are the implied income tax rates on the company?

In the recent quarters, the company has been paying heavy taxes: 31% in September 11 quarter, 55% in March 12 quarter, 30% in June 12 quarter, yet 0.5% in September 12 quarter.

10.What has been the recent quantum of transactions between the company and the MacMillan (promoter’s) group? Are there any effects of Transfer Pricing provisions?

11.Content is getting digitalized very quickly…slowly the preference for physical book is converting to ebooks. Is this negative for the company?

Does the company face any risk from giant company’s like Amazon or even Google and Apple? Recently, the all three have been very involved in the ebooks space and can any backward integration at their end pose a threat toMPS? In this sense, isn’t the biggest risk the competition risk?

Considering the fact that the above company’s might have a better edge in metadata and search library.(Metadata seems to have been a one of the reasons forMPS’s preference over others)

12.It has been repeatedly said in the annual report that “we are increasingly sought out by clients interested in high-end services like content management and application development.”

What type of applications are the most sought for?

Are the applications concentrated on web apps, desktops or mobiles?

What percentage of revenue is attributable to application development?

13.Company had 2143 employees as of March 12. What is the recent count?(Considering the new facility in Dehradun)

14.In theinterviewwith Publisher’s Weekly, Nishit Sir gives an excellent insight about the technicality and the specialization of the work. He also mentions about the importance of automation and that 80% of the work is automated. Can it lead to substantial retrenchments in future (and corresponding reduction in employee costs)?

15.How are the ADI BPO’s services integrated with the company? How is its expertise leveraged? What are the other businesses of the promoters?

16.We read about the new facility in Dehradun with 1600-2000 seating capacity. Can we expect corresponding increase in the number of employees?

17.The company has been paying out very liberal dividends. A way to look at things is that the company was acquired for Rs 36/share while already Rs 9/share has been paid out as dividend. So what is the dividend policy of the company? Business doesnat need much cash to grow?

18). Can the co double its turnover over next 4-5 yrs.


With kindle services provided by amazon(for books) and MPS Ltd being a major
digital publishing player, how is the company trying to leverage this opportunity, if so how?(Tie ups, partnering etc)

Also what are the opportunities that they see in this segment? Over a period of time almost all the books/journals will have digital version for download.

Do they have a percentage wise revenues for books, journals etc and are they heavily dependent on particular publishing house etc?

What is the sector wise revenue i.e. technical books, magazines. entertainment, novels, comics etc.

Are they into more sophisticated/seasonal publishing like annual stock reports, wedding cards,banners etc

my rough notes of today’s call. I was not able to grasp the details about thecompetitors that speaker talked about. If someone could add and many other points that I missed as I joined from office.

current assets: 21 cr.

15 cr in mutual funds and 6 cr in cash and cash equivalents.

Revenue share by top 3 clients: 42%

there are 7 major publishers in the market,

Nishit mentioned that there competitors are growing around 20%, overall it sound like they also expect themselves to grow at the same level.

There is no formal dividend policy in place for the company, but it felt like company will continue with similar liberal dividends if they dont make anyacquisition in near future.

amalgamation of Promoter company (ADI) assets with MPS will happen at book value, transaction value will not be more than appro. 1cr. I think this is good.

company pays around 26%-27% in tax.

Employee cost varied with respect to previous few quarters due to retrenchment etc provided to senior executives who left, going fwd it is expected to be constant.

Total employeestrengtharound 2600-2650

slowly the preference for physical book is converting to ebooks. Is this negative for the company? key takeway from the call- its good for the company

Also, looks like company have few office places at premium locations in Bangalore, this needs to be digged more.


It is very clear that the management thought cost cutting has been able to improve the bottom line significantly. This is a positive. However I do not see the increase in top line to be significant. This for me remains a concern. Do you have an idea about how the company is going to increase their sales and maintain an healthy margin along with this?

Sorry, in case my questions do not make much sense. I have just started learning about stock market.

@Soumya: Good to see your queries and they are good. Don’t worry, keep raising the questions you have…it helps us in re-checking our hypothesis and seeking answers.

Thanks for the notes @stableboy

Overall the concall was good and it seemed the mgmt is very confident on sustaining the recent profitability and they also talked about a lot of new things being done in the co by which they should be able to show growth.

As of now I don’t see the company as a long term growth story but more as an interesting company where we may see positive surprises.


Hi Ayush,

Can you please share with us the recorded audio of the con call (was not able to attend the con call due to professional commitments). Also, it would be great if you can provide us a summary of the con call.



Thanks Ayush, coming from u it’s very inspirational. :slight_smile: .

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CEO speaking about the company.

MPS CEO speaking about the future of the sector in general.

Found out that Nishith Aroraâssister Vandana Luthra has setup the enormously successful VLCC. Seems the family has an entrepreneurship running in its blood.

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@Vivek: The co seemsinterestingas I haven’t seen such a quick turnaround. Plus its a niche area and if the co is able to maintain OPMs at 25%, then its commendable. Also the kind of liberal div pay-out the co is making, will give it a higher PE multiple.

I’m still unclear if its a long term bet caus there is not much clarity on growth and scalability. Its been hardly 1 yr under the new mgmt.

There are several long term picks which we havediscussedat valuepickr - like - Astral, Mayur, GRP, BKT, Poly Medicure etc. These are businesses which have done very well and have higher probability of repeating the past performance in future.



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