R Systems International


I am a newbie here and i couldnt find a thread for this stock i have been owning for 1-2 years. Would love inputs from more experienced gurus here.



The valuations are cheap. pe < 10 and dividend yield > 3.5%. The profits have increased recently and so has dividend I see that shareholder friendly company. its in the payments industry they say its their niche, Not sure if they have anything more then that like a moat.

The stock has enough room to grow and has fallen in recent months even though market is all time high.

At this valuation you are not paying much for growth and it has been growing decently in last two years so i think it will continue to grow


Competition from larger players

Is very volatile as a small cap (in case I buy more it definately falls)

The promotor family sold some shares recently

as its hitting new highs


Discloser: I am long and wish was longer :slight_smile:

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Hi Mukul,

While you have tried to put up pros and cons in your own way, there is no data about the business, its products or its customers, competitive standing - in short something about the quality of the business.

This is considered insufficient to start a discussion. Please make the required efforts for the same.

I don’t think R Systems has any niche in the payments industry. May be you have heard that about RS Software.


R Systems International is small to medium size Software development company with 500 crores+ market cap.

It mainly operates in two segments: software development and BPO services.

They have presence in health care related software and medical billing apart from usual software development services in Telecom, banking and finance.

The company has grown in past few years by acquisition of other small companies like Indus software, Computaris UK, ECnet, Sento Europe.

Its debt free company with good dividend yield and sales and profit are growing slowly but steadily.

Promoter family holds just under 51% share and Bhavook Tripathi holds a large chunk of 37% shares in this company… there is some kind of hostile take over is going on in this company.

There is good article about Bhavook Tripathi and

his entry into R Systems. may be he knows something that we dont…



Hope this helps.

The business of the company can broadly be divided into 3 categories: 1. Outsourced product development (OPD), 2. Developing own software products 3. BPO services

The company serves five verticals 1. telecom and digital media 2. BFSI 3. manufacturing and logistics, 4. healthcare 5. government services.

Telecom vertical is the largest contributor to revenue (~35% share), BFSI contributes 14.5%.

I’ll briefly give an overview of the entire business…

The OPD business is categorized as Integrated Product Lifecycle Management (iPLM) by the company and the services are provided via the propreitary pSuite framework developed by R Systems. The value proposition for the clients / independent software vendors (ISV’s) is that they are able to reduce time required to market newer products, functionalities and features. The company collaborates with clients across the entire product development lifecycle (idea generation, testing, commercialization, etc.) and this has the benefit of lower post production defects, as well as the ability to re-use the knowledge acquired in developing further products.

In outsourced product development, the switching costs tend to be high when compared to application development. The company (R Systems) develops a high level of competency with the client’s product and this helps in developing the next version at a faster time. The opportunity is there to grow along with the growth in clients product market share.

R Systems also has its own **software products **(~8% revenue contribution) catering to the banking (Indus solutions) and supply chain management industry (ECNet solutions). The Indus product is primarily focused on retail lending but the product can also be customized to serve insurance and telecom companies with their collection process. ECNet provides supply chain management solutions that are offered as SaaS (Software as a service) to companies in the consumer electronics industry.

Under the BPO segment (~20% revenue contribution) you have the typical tech support and customer support services. With the recent acquisition of Computaris, they have BPO centres in France and Netherlands with most of their clients being European telecom companies. Computaris also offers niche solutions to telecom companies.

In addition to the above, there are a couple of subsidiaries in the U.S that provide high performance computing (HPC) services to the academic community as well as to the manufacturing sector. For the last few years this business was loss making but in the recent year they reported profits. I have to investigate the exact cause for the same, but I believe it is due to the high fixed costs nature of the HPC business that leads to a longer gestation period. If this business continues to do well then incremental margins will be a lot higher since the company has recovered the fixed costs.

The company has many subsidiaries abroad due to the acquisitions that it made in the past so going through the entire financials and business segments may be like walking in a maze but it provides the opportunity to discover some hidden value.

Recently the company has shown improved performance mostly due to turnaround in the U.S subsidiaries as well as profitability of the Computaris acquisition which was previously loss making.

To develop a better understanding of the overseas business and profitability drivers, one needs to study the HPC industry as well as the telecom industry served by Computaris cause that is the main focus area of the company. In a recent concall, the managment also indicated captive auto finance as an area of focus for them.

I’ll elaborate more on the HPC industry and Computaris in my next post…


In this post, I’ll briefly explain about the high performance computing industry as well as R Systems positioning in this segment.

Intro to HPC
High Performance Computing (HPC) most generally refers to the practice of aggregating computing power in a way that delivers much higher performance than one could get out of a typical desktop computer or workstation in order to solve large problems in science, engineering, or business. (Source: http://insidehpc.com/hpc-basic-training/what-is-hpc)

Nowadays even small and medium enterprises (SMEs) are resorting to using supercomputers to conduct research and development to introduce new products. Supercomputers are used because there is a lot of data analysis and simulation studies involved which cannot be performed by a single desktop computer. The product developed may not necessarily be of a highly sophisticated nature but the data analysis requires high computing power as well as specialized software. Some of the products developed using supercomputers range from the simple stuff such as bicycle wheels and potato chips to complex products such as formula1 cars or new drug discovery in the pharma sector.

Rather than spend on their own supercomputer infrastructure, SMEs tend to approach an HPC service provider to carry out their R&D. The HPC service provider will assist the SME with the ideal configuration for the required task.

The benefits for SMEs of using HPC technology within their design and development processes can be huge, such as: enormous cost savings e.g. by reducing product failure early during design, development, and production; more simulations lead to higher quality products; and more computing power enable shorter time to market. Potentially, all this can lead to increased competitiveness and more innovation. (Source: http://www.theubercloud.com/cost).

In a nutshell, the fixed overheads are converted to variable costs and the SME does not have to worry about the low utilization of the HPC infrastructure.

Industry size
The total size of the the HPC industry (year 2012 data) is ~ $30 bn. The industry is divided into five basic segments 1. Servers 2. Storage 3. Services 4. Software 5. Networks.

Servers is the largest segment (~$10.3 bn). The major players in this segment are IBM, HP, DELL and Cray. Lenovo has also entered the business recently. Software is the second largest segment (~$6.6 bn). Some companies develop software specifically to run on HPC infrastructure. The list of some of these companies is provided on R Systems HPC website. (http://www.r-hpc.com/about-us/technology-partners/)

Services (~$3.3 bn) and Storage (~4.8 bn) are the other segments. R Systems is positioned mostly in the HPC Services segment where services such as dedicated hosting, shared systems, virtual private clusters and off site / remote facilities are offered.

Recently with the advances in telecommunications, HPC servcies are being offered via cloud computing, thus making supercomputing similar to a utility whereby the fees are according to usage.

According to Intersect360 research, the industry is forecasted to reach ~ $40 bn by 2017.

About R Systems HPC business
R Systems provides HPC services to the academic community as well as commercial organizations. The markets that it can serve are Bio-Tech Sciences, Electronic Design Automation, Entertainment, Financial Services, Health Care, Insurance, Motorsports, Oil & Gas, Wind Energy and Weather Forecasting.

The company owns two data centres in the U.S. that provide the HPC services. The data centre is located within the campus of University of Illinois. This allows the company to have a ready market as far as academic research is concerned.

The company has developed partnerships with various players in the industry. It partnered with Dell to offer HPC servcies over the cloud. It also has clients such as Trek and Cervelo (bicycle manufacturers) which use HPC to design bicycles. More details can be found at the following link (http://www.r-hpc.com/about-us/technology-partners)

The potential to create a moat in this business stems from:
1). Developing expertise on the clients R&D requirements and being able to configure the exact hardware and software setup which saves time and cost. Once a client is comfortable with a particular HPC provider, he will be faced with switching costs while migrating to another provider.

2). Sometimes research and development carried out by commercial enterprises involves proprietary data which requires secrecy and confidentiality to be maintained. One needs to earn the trust of the HPC provider before using it’s infrastructure for R&D activity. Building up such a relationship takes time.

For the last few years the HPC business of R Systems was loss making. It swung to a profit last year. In 2012 the company made a loss of Rs. 23 cr on revenues of Rs. 92 cr from its two U.S subsidiaries that provide HPC servcies. In 2013, the HPC business reported profits of Rs. 6.3 cr on revenues of Rs. 138 cr. This implies that a Rs. 46 cr increase in revenues led to nearly Rs. 29 cr improvement in profits indicating very high incremental margins. As I mentioned in my previous post, we need to dig deeper to understand the exact cost structure of the HPC business. Previously the loss making HPC business was depressing overall profitability. If the costs are predominantly fixed in nature, additional growth of the HPC business will lead to higher incremental margins. If anyone has expertise in this area, please feel free to share your views.

Tomorrow, I will post more on another subsidiary i.e. Computaris that R Systems recently acquired. Other senior members can put forward their own views and suggestions on how to analyze the company.


I’d like to make a correction to my previous post. The software products contribute 16% to total revenues. The services business contributes 65% and BPO contributes the remaining **19%.**EBITDA margins are higher in the services business at 14%. The products and bpo business margins are at 10% to 11%. Margins are higher in the recent quarters.

I will now focus on Computaris and the services offered by the company.

In 2011, R Systems acquired UK based telecom software company Computaris to strengthen their domain expertise in the telecom vertical. Computaris provides niche solutions such as real-time telecom software and associated services to telecom companies. It’s clients are based in Europe, Middle East, Africa and Southeast Asia. It has significant presence in Eastern Europe.

Some of the services provided by Computaris are:

Churn management: According to a book called Loyalty Effect authored by Fred Reichheld, even a 5% reduction in customer defection rate can increase profits by 25% to 85%, depending on industry. For a telecom company some of the key considerations are to improve customer loyalty, manage customer churn as well as reduce the cost to acquire a new subscriber. A telecom company also needs to analyze the customer behavior to predict the effect of a marketing campaign and target the campaign to only those subscribers who can be positively persuaded. All this requires predictive analytical software to better manage customer lifecycle. Telcos need data-driven churn models to save and generate revenue. The churn management software helps in segmenting customers, mining customer records for determining the right offer for the right customer and ultimately obtaining a better understanding of the customer base.

Policy management: Due to the increase in 3G and 4G mobile internet, cellular service providers (CSPs) are facing the problem of network congestion. This requires investments in either increasing network capacity or deploying new networks, that are expensive and time consuming. Sometimes CSPs resort to arbitrary bandwidth capping and throttling which does not go down too well with subscribers. To introduce rationalization in the use of scarce bandwidth, a CSP usually requires a policy management solution. There are various sub-segments to the overall Policy management suite. Subscribers using heavy data will be warned about potential ‘bill shocks’. Sometimes during peak hours, the pricing may be different. CSPs will also be able to know the type of content that the subscriber usually downloads and may provide a plan best suited to the the subscriber. All this requires the use of software provided by Computaris and other companies specializing in telecom software. The policy management market size is estimated at $1.0 bn and is estimated to reach $2.5 bn in 2018. Huawei and Ericsson are the two leading players in this segment.(Source:http://www.infonetics.com/pr/2014/Policy-Management-Software-Market-Highlights.asp)

Diameter signaling: Telecom traffic is usually handled via two protocols. Session Initiation Protocol (SIP) is the industry standard for message signaling in real-time communications such as Voice over IP (VoIP) and videoconferencing sessions. Diameter is the industry standard for data signaling from mobile devices such as smartphones and tablets. As CSPs begin to deploy more 4G/LTE networks to meet the mobile broadband demand of smartphones and tablets, the number of Diameter signaling messages in service provider networks will grow exponentially. Smartphones, for example, generate a lot of Diameter signaling messages in the core network: when theyâre accessing an application, when theyâre downloading data, when theyâre roaming, even when theyâre simply being turned on and off.

This market has been growing exponentially. Infonetics forecasts global Diameter signaling controller revenue to grow at a 54% compound annual growth rate (CAGR) through 2018. (Source: http://www.infonetics.com/pr/2014/Diameter-Signaling-Control-Market-Highlights.asp)

All the above services are offered by Computaris as part of an overall platform. At the moment, Computaris is a smaller player in the global telecom software space compared to bigger rivals such as Huawei, Ericsson and Oracle via its acquisition of Tekelec. The opportunity in untapped Southeast Asian markets as well as India in huge.


Hello Karl,

Many Thanks for providing such a wonderful business analysis on R Systems… All I did was quick google and whatever I could find I posted here but your analysis is very helpful.

Thanks Karl, it was a great insight much more information then I expected. I guess this forumis really a gem. I just followed tripathi into this one :slight_smile:

Thanks Karl, it was a great insight much more information then I expected. I guess this forumis really a gem. I just followed tripathi into this one :slight_smile:

Amazing insights in the business Karl. My two cents about the telecom products mentioned:

Churn management:

Something that most mature/maturing market CSPs - Communications Services Providers would want to have. How effective the solution is needs to be understood. Didnt find any case study on Computaris’ page.

Policy management:

Amazing product that helps implement prioritized charging - this means that Youtube will stream faster than Netflix if Youtube has such a deal with the carrier. Net Neutrality laws have been finalized in the EU and this might help order uptake for PCRF - Policy Control and Rating Function aka Policy Mgmt players.

Diameter Signaling:

Earlier version of the signaling software was RADIUS and now Diameter is the defacto standard. This change from RADIUS to Diameter could help revenues for Computaris.

Some observations about companies like Computaris/R Systems:

)- The products(Telecom only) are pretty decent, not distinctive. Lots of other companies offer such products to this category of CSPs. CSPs are limited though as the number of large telecom players in each country is usually between 4-5 and wont increase much as they depend on spectrum.

)- The current spread of clients though is restricted to EU, North America and some South East Asian clients. Would have loved to see some Latam and Africa clients as these are the future telecom growth markets. Also current clients aren’t the typical big names - hence the lesser EBIDTA margins. Also increased competition from other telecom product companies will result in lesser margins. http://www.computaris.com/about-us/customers/

Linking the Tech Mahindra thread here as both companies are in the Telecom domain - to an extent, and the expected increase of demand in the Telecom sector could help both grow very fast. -http://www.valuepickr.com/forum/down-in-the-dumps/205311276

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Thanks Mukul, Mukund and Janit. I’ve learnt a lot from this forum so just giving back some of my knowledge. I don’t have an IT background so it was a bit difficult and time consuming for me to understand the entire company.

Janit, thanks for your insights on the Telecom domain. Regarding churn management solution, Computaris has provided some info about one client in Hong Kong. They delivered an MVNO (Mobile Virtual Network Operator) stack to the Hong Kong subsidiary of Philippine Long Distance Telephone Company (PLDT). The case study is provided in the link below whereby the loyalty and churn management solution was part of the overall package.

Delivery of MVNO stack (Source: http://www.computaris.com/download/8263)

Loyalty and Churn Management Flyer (Source: http://www.computaris.com/download/8344)

Coming to the overall business, I do believe that the HPC business and rest of iPLM business is the key because this is where R Systems has domain experience and a competitive edge. If you want to find out how R Systems’ HPC services are positioned vis-a-vis their bigger rivals such as Amazon and Google, have a look at the following video where Ramesh Joginpalli, Director of Dell Computing speaks favorably about R Systems’ HPC services and compares it with other providers like Amazon and Google. All these companies have somewhat different offerings with their own strengths and weaknesses.

Video Link (Source: http://vimeo.com/93092790). The comparison starts at around the 1 minute 50 second mark in the video. You can have a view at the other videos as well to gain some understanding about the HPC business.

This is a slightly dated article highlighting the differences between Amazon and R Systems HPC offerings as well as challenges faced. (Source:http://arstechnica.com/business/2012/05/amazons-hpc-cloud-supercomputing-for-the-99)

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Two back to back announcement by co.One on 30th June;


& Now today,1st July;


R system Inc which is in HPC business may be completely different company than R-systems India.

Pls double check.

R Systems, Inc is a 100% owned subsidiary of R Systems International. Refer to the annual reports for full details. (http://www.rsystems.com/investors/Annual_reports.aspx)

Check page 131 and page 174 of 2013 annual report for financial details of R Systems, Inc.

This is really confusing. US company in HPC seems to beR systems NA, Inc. Both companies don’t make reference to each other on their websites.

R Systems, Inc (RSInc) - is subsidiary of Indian company, R Systems International (RSI). It is NOT in HPC business.

R Systems NA, Inc (RSNAInc) - is in HPC business, no relation with Indian company RSI. BUT, it’s website is rsystemsinc.com :).

True. Quite a few members being mislead by these similar names.

You are correct. Apologies to everyone for the confusion. I have emailed the company and have received their reply provided below.

Dear Sir,
This has reference to your email dated July 07, 2014 below.
Referring your query in the aforesaid email, we would like to provide point-wise reply as under :

1). R Systems International Limited has three 100% subsidiaries in USA i.e. R Systems Inc., USA; R Systems Solutions Inc., USA and Indus Software Inc., USA. You may please note that these subsidiaries do not have their own websites, rather they are represented globally through the website of the parent company i.e. www.rsystems.com

2). R Systems International Limited founded in 1993, is one of the leading provider of outsourced product development and customer support services. We help companies to accelerate the speed to market their products and services with a high degree of time and cost predictability by using our proprietary pSuite framework. Clients can choose services specific to their needs from R Systems iPLM suite of services. We help companies to build scalable, configurable and secure products and applications; and help our clients to support their customers worldwide for products and services using our global delivery model in 20 languages.

3). What is the nature of the business carried out by R Systems, Solutions, Inc., USA?âIt is the BPO company based in Salt lake City USA part of our PLM offering.

4). Alpha R Systems is not related to R Systems International Limited or any of its subsidiaries.

Trust you would find the above satisfactory to your query.

Thanking You,

R Systems International Limited

Investor Relation Department

From: karl [mailto:karlxxxx@xxxx.com]
Sent: Monday, July 07, 2014 7:56 AM
To: Investors
Subject: Investor query

Dear Sir / Madam,

I am an investor of R Systems International. My details are provided below for your reference -

DP ID: xxxxxx

Client ID: xxxx

I require clarification on two of R Systems International’s subsidiaries in the United States. Your 2013 annual report states that you have a 100% ownership of the following subsidiaries:

1). R Systems, Inc., USA
2). R Systems, Solutions, Inc., USA

I have come across the following websites for R Systems Inc. -

1). http://www.rsystemsinc.com

2). http://www.r-hpc.com

The company mentioned in the above two links is providing high performance computing services.

1). Could you please clarify whether the company mentioned in the above links is a part R Systems International and whether the financials of this company forms part of consolidated financials of R Systems International?

2). Does R Systems International provide high performance computing services only via R Systems, Inc. or are there other subsidiaries which also provide similar services?

3). What is the nature of the business carried out by R Systems, Solutions, Inc., USA?
Lastly, there is another company known as Alpha R Systems (website: http://alpha-rsystems.com). Is there any relationship between R Systems International and Alpha R Systems?

Good to know, Thanks Karl, I was thinking competing with google and amazon might look good from a technical perspective from an investor perspective doesnt make a lot of sense :slight_smile: