A summary of the above discussion is mentioned below:-
Based on management’s clarification, this seems to be a case of bad news hitting a good company. This has brought the stock to reasonable valuations now. However, Further analysis is required here and I might be wrong here.
Views invited from others
Disc:- Not invested.
The Board has approved issue of 7,54,437 (Seven Lakhs Fifty Four Thousand Four Hundred
and Thirty Seven) equity shares of the Company having a face value of INR 10/- per such
equity share (“Equity Shares”) to Amazon.com NV Investment Holdings LLC, a category Ill
Foreign Portfolio Investor (“Investor”), for an ag·gregate amount of Rs. 50,99,99,412 (Rupees
Fifty Crores Ninety Nine Lakhs Ninety Nine Thousand Four Hundred and Twelve only) at an issue price of INR 676 (Indian Rupees Six Hundred and Seventy Six) by way of a preferential
allotment (“Issue”) in accordance with applicable law, and subject to such regulatory/statutory
approval as may be required, including approval of the shareholders of the Company.
Post allotment, the Investor will hold [0.51%] of the equity share capital of the Company.
Earnings update: Q1 FY 20
How does Quess benefit from stake being bought by Amazon in long and short term.
Disclosure Invested
Amazon is investing in Quess subsidiary Qdigi services (which Quess bought from HCL infosystems). Essentially, they do after sales and back-end services for mobile phones and electronic items. They have extensive service network across the country including walk-in-centres and authorised service providers.
I think this is more about Amazon looking to improve their customer service for the product sales and having a means to tap into the service market.
Is Thomas Cook India part of Thomas Cook UK ? and any idea on impact of bankruptcy of Thomas Cook UK on Quess ?
There is no impact to Thomas Cook India . Only the name remains the same which they are planning to change.
What will be the role of companies like Quess after this labour “reform” is implemented? Companies can hire for short term duration as and when needed which will reduce the need for Quess services greatly. Can somebody with expertise throw some light on how the staffing solution companies fare in advanced countries where these reforms are already present like US & Europian countries?
Disc: Invested via Thomas cook
Quess Corp Q3 Results!
Q3 FY20 IP:
Q3 FY20 CC:
First, we crossed revenues of about Rs.2,950 Crores, a growth of 36% year-on-year with our EBITDA reaching Rs.179 Crores, which was an increase of 52%. We achieved a net profit of Rs.75 Crores, which was a growth of 12% and without Ind AS accounting adjustment, the net profit was actually Rs.79 Crores, which was a 22% year-on-year increase. Importantly, cash flow from operations stood at Rs.191 Crores for the 9 months of the FY2020 against Rs.124 Crores in the previous year, an increase of 54%, much driven by our focus on collections and our operating efficiencies. EBITDA to OCF conversion has reached a milestone 51%, up from 45% in the previous quarter, thus placing us in a comfortable position to achieve our target of 50% for this year.
Significant debt reduction of Rs.431 Crores was also achieved in the last 6 months of this year. Our gross debt at the end of this quarter stood at Rs.830 Crores, while net debt stood at Rs.313 Crores. Additionally, we have reduced our interest by 15% quarter-on-quarter to Rs.35 Crores.
In the Ahmedabad Smart City Project, out of the total project cost of Rs.230 Crores, Rs.92 Crores was collected in during the year and additional Rs.40 Crores is expected by Q4 of 2020.
The demerger of TCIL was completed during the quarter. Post the demerger, we are directly held by Fairfax Holdings, which is about 33% and through this process, we have forayed into the B2C segment in travel & hospitality and education space. In line with our strategy to simplify our overall group structure, 4 Indian substitutes: Aravon, CenterQ, CoAchieve and Master Staffing Solutions were merged into the parent during the quarter. Additionally, MFX Chile was wound up.
Our exercise of reducing intercompany loans and advances continues. What was Rs.442 Crores in the beginning of this year has now been reduced to about Rs.270 Crores and this process continues as we progress further. As many of you would have observed, we have also launched a new branding exercise in the company. The new brand promise of Winning Together comes from our continued focus on customers, people and investors along with our move to our platform structure.
In the workforce management, we remain the undisputed leader in staffing and continued to gain market share and surge ahead of our competition. This is driven clearly by exceptional execution and the leadership quality in our team.
In Monster, which has taken significant management attention, the search module is in the beta test with positive early reviews. We have a road map in place for the remaining module, and this is expected to be completed by early part of the next financial year. Sequentially, we have been able to reduce our EBITDA losses by about Rs.3 Crores. Our job views and organic traffic is up 102% and 83%, respectively, on a year-on-year basis, significant numbers for an improving website.
In DigiCare, our service network now covers 12,500 pincodes. I am also happy to say that our Xiaomi Delhi service center was awarded the best All India Service Partner from over 2,000 centers. We have also strengthened the management team with the addition of Suraj, who joins us with over 2 decades of experience at McKinsey and he will lead the initiative in driving the digital transformation journey at Quess. All the above summarizes the slew of positive outcomes that we have achieved in the quarter. This has been a significant quarter for us in terms of continuing our corporate actions and driving our operational metrics across platforms.
Future: Let us understand what steps we are taking. We are trying to widen our customer base so, this year, I think last quarter itself, we have signed almost 80-plus clients in WFM and we have been trying to penetrate in the Tier 2 and Tier 3 markets also, so that the concentration of few clients in the telecom and retail is evened out and I think every quarter, normally, we win a large contract. I think, in December-January, we started another large contract, not as large as what we started in Q1, but it was a reasonably large contract, and that will have an impact, which we will see in Q4 and going forward, I do not see any major impact in the headcount. The headcount growth will be there. However, very quarter, you cannot expect the 20,000, 30,000 number. One quarter it will be up. One quarter, it will be little bit of down, that kind of seasonality comes. But we are on that job, and we are trying to, as I said, widen our customer base and these customers will slowly go up, actually, that is what we have seen in the last 10 years.
Relationship with Amazon: Yes, we have almost, 7,000 to 8,000 people we provide there as just the manpower, that is our responsibility with the manpower with Amazon Transportation Services and they do the delivery. We have Dependo, where we have almost, 1200 bikers and 300 four-wheelers, I think, around 40 or 45, DC, where we take the consignment, and we do average 80,000 deliveries and sometimes during peak, I think, 150,000, which was in October so that is the delivery where we take the consignment and deliver it by ourselves, so that is another relationship and the third relationship, is that Amazon has actually invested in Quess, as you all know, that is for the DigiCare services so whatever white-goods Amazon sells from their portal, we actually install and service those, say, TV, fridge, air conditioner through the DigiCare and you see that is why our DigiCare footprint has increased post Amazon. Today, we have almost 12,500 pincodes, covering 600 cities.
Management Interviews:
(Disclaimer: Invested)
Those who are tracking Quess may like to see an interview of Quess CMD conducted last year which covers their strategy, capital allocation policy, long term plan, targets etc. As investors, it is always pertinent to check whether the management delivers the numbers, especially in the long term.
Disclosure: Holding consequent to TCIL-Quess demerger
A relevant article on Quess Corp
Annual Analyst Meet Presentation:
Some pertinent questions raised …
(a) Need to see debt being reduced in actuality
(b) Interest payout last 4 quarters ( about 160 Cr ) seems to be higher at 835/885 Cr debt than at 1165 Cr debt end of March 2018 ?( not able to figure this out ) - were they capitalizing interest
© Cant seem to find quarterly balance sheet as part of statement …
(d) Asset heavy and debt heavy ( probably due to acquisitions ) compared to Team lease and so ROE/ ROA numbers for Teamlease are way superior … am I missing something on why they cannot be more asset light ?
I am not able to access this article, Can you post a summary of the same or if you can share the pdf over here.
