If anyone still holding the company. Any updates ?
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I am still holding, I dont try to follow it long term. I kind of followed guru investors on it and seems to have worked out reasonably well and has nice dividend also.
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R Systems AR Notes!!
Good Progress in FY 2020! Enhancement of EBITDA% is the biggest highlight of the year. Hoping to see better results in coming quarters!
Disclaimer: Invested
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Rsystems announce buyback at Rs. 225 per share. They also announced good Q1FY22 results yesterday
Sales: 273.56 cr (Q1FY22) vs 210.38cr (Q1FY21) | 247.65cr (Q4FY21)
OPM: 13%(Q1FY22) vs 11%(Q1FY21) | 12% (Q4FY21)
PAT: 46.16cr (Q1FY22) vs 15.97cr (Q1FY21) | 24.88 cr (Q4FY21)
EPS: 3.86 (Q1FY22) vs 1.35 (Q1FY21) | 2.08 (Q4FY21)
CMP: 193 TTM P/E: 18
Disc: Invested
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There is an âother incomeâ of 25cr in this Q1FY22. I have checked the quarterly result report but didnât found more details on this other income. Can anybody share some light on the same?
R System and itâs subsidiaries in US had obtained forgivable loan of Rs. 22.259 cr under Paycheck Protection Program(PPP) by SBA, USA. They have received forgiveness of the entire loan amount upon satisfaction of the underlying conditions. This has majorly contributed to other income of 25 cr.
This is present in Notes section point number 4.
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The most comprehensive and up to date thread on Rsystems by @coolfundoo on Twitter
Presenting my study for educational purpose 
Will keep adding points to this #thread so you may bookmark & re-visit as you like ! 1 https://t.co/i66yddYFFMâ / TwitterDisc: Invested
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You can check # 49, 56 & 57 on my R Systems #Thread
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PPP loan is Rs 3.1cr approx. of Rs 25 cr other income. My guess is they might have sold some portion of their business or some asset revaluation gain ⌠https://twitter.com/Coolfundoo/status/1424262142799253505?s=19
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Loan of Rs 3.1cr is for standalone business. Other income for standalone business is Rs 6.4cr. Refer to page 7, note 4 of the q1 result pdf.
My guess is that you have mixed P&L of consolidated business with notes and cashflow of standalone business. Do correct me if I am wrong.
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Blackstone bought promoter stake which is 11.83cr shares (51.67%) at 2904cr. It comes out to Rs. 245/share.
Now blackstone has announced a open offer to acquire all of the public shareholding which is 48.33% of company for Rs. 246/share and delist the company.
Updated 17-Nov-22 1730 IST
The investment banker has issued a updated Open offer. Please find it at the below link
detailed_delisting_offer.pdf (1.2 MB)
As per my understanding blackstone has mentioned some conditions in the offer document (correct me if I am wrong)
If the offered shares in open offer are less than 38.33% then blackstone may not accept any share and cancel the deal altogether.
Blackstone may at itâs discretion acquire 26% of shares and go ahead with the deal.
Now Mr. Bhavook Tripathi hold 36.93% of company so remaining shareholding is 11.4% Therefore either of the conditions of blackstone are contingent on Mr. Tripathi tendering his shares in open offer.
Disclaimer - Taken some position today looking at delisting gains. Old experince of Hexaware says that delisting prices are 50% higher than offer price.
Updated 18 Nov 2022 1107 IST
An interesting news article from Hindu Business line confirming my analysis of detailed open offer document.
Detailed open offer interpretation by Hindu Business Line.
Updated 18 Nov 22 1944 IST
There is a meeting of board of directors on 25 Nov 22 to approve delisting proposal and incidental matters. Is this a formality or something important will conspire in this meeting?
Link to notification on stock exchange about board meeting on 25 Nov 22
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do they not have to go through the price discovery process? Not very good for long term holders.
I think price discovery will happen but a lot depends on Mr. Bhavook Tripathi. At what price he is ready to give away his shares?
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An important caveat is it is not mandatory to participate in the Open Offer if the Delisting is not successful. You can tender your shares in the delisting but chose to not participate in the open offer which will happen at the base price
i.e Rs 245.
Just some updates which might be important.
- delisting failed ⌠I think thats positive in long term.
- Stock jumped and bhavook tripathi reduced stake 3% (https://www.bseindia.com/xml-data/corpfiling/AttachLive/00151DA9_9B21_46CF_B1A4_659071F4D754_192304.pdf)
- R systems announced acquisition of Velotio for cash. INR 2,788 Million the revenues of Velotio are disclosed. It doesnt look cheap but also not super expensive
a. FY 2020-2021: INR 440 Million;
b. FY 2021-2022: INR 828 Million; and
c. FY 2022-2023: INR 1,274 Million.
I agree that the delisting failing is positive, but donât you think that there is too much reliance on Mr. Bhavook here? Blackstone is renowned for undercutting retail shareholders (already tried it with the low delisting offer)⌠in case Blackstone cuts a deal with Mr. Bhavook and again makes a low ball offer, is this something we investors need to worry about?
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Is R System worth to consider at current valuation?
I was looking at R Systems International this week, and decided to put some thoughts togetherâŚ
⢠The price to sales and price to earnings multiples seem fair, and there is the potential for a re-rating
⢠What will drive this re-rating will be a sustained increase in revenue growth, EBITDA margin improvement, more of a shift to ER&D versus traditional IT services, and consistently showcasing client wins in emerging technologies (cloud, data, automation, and AI/GenAI)
⢠Regarding the AI bit, the collaboration with IIT Delhi, announced in Feb 2024, is a promising sign of things to come
⢠Management is trying hard to convince investors that the company is more of an ER&D or digital product engineering company
⢠Itâs good to note that the company does not pursue very low-level IT services work like infrastructure support, basic IT support or ERP implementations
⢠Management keeps emphasizing how the company wants to focus primarily on handling client products, enhancing them, building/rebuilding them, developing and releasing new features, etc., as opposed to low level IT services
⢠Cost will continue to remain a focus for the company, and it will focus on cost-led value propositions. A clear indicator that the company is operating in a crowded space
⢠In my view, this company is still more of at IT services company, versus an ER&D player
⢠Itâs good to see how the company has appointed a chief customer officer, who will be responsible for developing deeper ties with existing customers, and also growing channel sales and partnerships
⢠I like how the company manages its investor relations related communications. For example, in their Q4CY2023 investor presentation, the q-o-q EBITDA bridge and the 8-quarter revenue and EBITDA margin snapshots are helpful
⢠Additionally, I noticed a slow and steady upward trend in their utilization numbers from around 75% to 79% over the last two years
⢠This company being a Blackstone portfolio company can really open doors when the sales team tries to pitch to other Blackstone portfolio companies. Would be interesting to see how the company takes advantage of this opportunity
⢠I wonder whether Blackstone (or another entity) will try to take this company private again. If this company is already vetted by Blackstone, other institutional investors or even an HNI would be ready to pounce.
⢠If the company consistently demonstrates big client wins in emerging technologies (cloud, data, automation, and AI/GenAI), along with a lowering interest rate environment, the number of interested investors could really increase
⢠A customer testimonial would be a nice to have to get a better sense of whether/how R Systems stands out from the crowd in the fairly crowded IT services space
Disclosure: Not invested, but tracking. I personally like to invest in companies that have unique capabilities, with limited competition. At this point, in my view, R Systems International is caught in the crowded IT services space
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