Thanks for the excellent in depth analysis @Chins. I think your comments on the subsidaries as well as the thesis sum up the picture. I also went through the Annual report, and would just like to add a few points (which I am not fully certain about considering how many entities are there, but still bringing them up)
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Agree with your table on the sum of parts value including 1x sales multiples for the newer businesses considering initial stages. I just have one query - the standalone entity with the revenue of 114 Cr has actually grown from 63 Cr last year and seems to be an IT business. Considering it is also profitable, a 1x sales multiple here might be conservative considering how IT companies are selling at higher sales multiples in the market?
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I think your comments on the individual ventures sum up the details perfectly. Just some additional views on the same are:-
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It is fascinating to see that Guiltfree’s other expenses (which would primarily be advertising?) are more than their sales for both years. This looks like front ended investments for the future so the story to be played out looks long. For my personal thesis, I am though still positive about this business - but we will need to closely track hirings/sales and distribution efforts/growth in coming years to understand if the focus continue. Additionally, Too Yumm/Potato Chips are a pretty out of home consumption sort of product, and hence I suspect should be very dependant on General Trade and Modern Trade distribution and footfalls, and would not really be compensated by E-Commerce buying. This is obviously severely impacted last year. So I would probably not look into the GIL degrowth in business with too much critique for this year. Additionally, I like the new launches in the Potato Chips category mentioned in the AR - large addressable market there.
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I liked what I saw of Herbolabs in the report. Interestingly the company owns over 100 Ayurvedic formulations and also AYUSH accredited facilities with export licenses - which should be a big positive versus building this from scratch.
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I think I read that Bowlopedia was reduced from 24 to 2 restaurants considering COVID and got into Frozen Snacks. Quest has also seen an impact. But looking forward, continue to look like good businesses especially Quest.
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I am not that sure about APA and Mohun Bagan. Seems like an emotional bet. I am a football fan but the Domestic League and the ISL have far to go before they can be a healthily commercial part of the football ecosystem in India. I personally did not ascribe any value for this in my head.
Overall though, just adding some nuggets to the mainline overall thesis:-
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I think the first post to start this topic still sums up the opportunity perfectly. There seems to be a few parts to this:-
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In the short term, FSL being the major part, we could expect movement in line with FSL except for when the Holding company discount comes into play. What FSL does from here on is critical, it has really run up in valuations, but the market is viewing growth and the coming year will be interesting.
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In the long term, there is a large investment opportunity if the holding company discount narrows. Again taking from the 1st post, if this discount narrows to a 30-40% or even a 60%, in the long term there should be a large value creation opportunity sometime in the long term. When this happens is anyones guess, the market is still giving it a 75-80% discount despite a massive bull run ongoing. I would think it could be very much linked to how GIL and the other businesses play out. In the long term, if the GIL business starts performing well and growing, there could be value unlocking from this opportunity incremental to what happens in FSL. I view it like this - being invested in FSL, but foregoing the dividends to be early investors in these other businesses that RPSG has, with a view that a few might create value in the long term
That said, expansion here on as well as growth needs structuring and involvement. It will be critical to understand if and when that is happening over time.
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RPSG seems to have taken up a lot of businesses and buying aggressively in spaces I like including D2C, but at some point they will really need to structure these to grow individually. I see substantial investments that would be needed on distribution expansion/employees - to really make them meet the potential they have. The good part is they have the brands to support it - be it hiring good talent or expanding distribution. I do hope the management is driving this with the same vision, taking on companies to make them succeed, and not only owning them
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Considering how FSL is now valued I am prepared for some short term pain if it stops delivering growth (I have no reason to think so, but I am prepared for it in case it happens). If I view this with a 5-10 year timeframe, I don’t think that should be a consideration for me as it is.
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I hope in case RPSG does acquisitions now - it is more in the D2C space - and not unrelated businesses like APA. They already do have a really large pool of other businesses.
Disclosure : Invested. These are only my personal views and not meant as any investment advice. I am not a SEBI advisor/valuation expert - and these are just my best interpretations.