RPSG Ventures - A proxy IT play and an emerging FMCG company

There are a few things causing hindrance in the stock appreciation.

  1. The debt to equity has risen above 1. Many investors avoid this situation so lack of buying happened in the recent carnage.
  2. They had a small equity dilution by issue of preference share for the acquisition purpose.
  3. Sales growth will not be substantial as the BPO business will remain the highest selling item among the businesses.

Coming on to the positives.

  1. The net worth will increase substantially as the IPL team will be worth 1billion dollars (7200cr) and increase with time.
  2. They have hinted at demerger or IPO to unlock value of the team. CSK is getting good traction in unlisted space.
  3. The profit of the sports division will increase and margins of the company as a whole will improve.
  4. Other business like the mall, restaurant and FMCG will generate profits after the end of corona period.

I am optimistic about the future for a 5 to 10 year horizon.

4 Likes

Few things I would like to highlight:

  1. @Investor_No_1 as you mention 1500Cr cash will get in 5 years but also need to payout some amount (Dont find exact amount) every year. Hence It will generate revenue not cash and may be company will report loss due to this.
  2. @akash_das Ashish Dhawan and Porinju Veliyath are not reducing their stack. If you check the number of share they held in this March and Dec quarter are same. Only percentage of their holding is reduced due to equity dilution.
  3. I am expecting more equity dilution moving forward to reduce debt. But the problem here is CMP is cheap and difficult to raise fund at higher price.
2 Likes

You are right. I didn’t check the number of shares, only the percentage.
I have corrected my previous post.

1 Like

Does anyone know the payout number to BBCI for first year and next 5 years? I am not able to get the exact data. The only risk I can see here is debt of 2,807Cr. And dont see any debt reduction plan in presentation. Also note that the holding company FSL has debt of 1700Cr.

Disclosure: invested

According to my estimates, the new IPL media-rights price should be very bullish for RPSG Ventures and mean that much of the cost of the buying the team and operations should be paid for by the media-rights given the ~500cr annual payout from BCCI plus additional sponsorship revenue. Thus the company would have bought the team at a fraction of the 7k crore headline price and much below where peer CSK trades on the private market

The revenues and costs from the IPL team should be consolidated into RPSG Ventures given the 51% stake in the venture so I expect EPS to go up due to IPL, which could be a trigger for the stock given the deep discount to NAV it currently trades at

Disclaimer: This is the work of an investment adviser affiliated with the author. The report is the result of the adviser executing its investment strategy. The adviser holds a position in the security, however there is no assurance that the adviser will continue to hold the investment, or make additional investments and will not update the information to reflect future changes in the adviser’s assessment of the investment.

1 Like

Yes, we will see in revenue jump but not sure on profitability. Probability may impacted due to IPL team payout for first year.
Also, I agree that the 7K cr is not very high valuation because CSK is trading at 6300Cr market-cap and after 5 years value get doubled. Same thing management was explaining earlier.

Reference: Chennai Super King’s unlisted shares trade up 25% at Rs 200-205 each

Invested

1 Like

I have found an article for IPL revenue and profit.
In 2021 average team revenue was 268CR and average profit was 69Cr.
Reference: IPL 2022: Mumbai Indians most valuable IPL franchise, as per Forbes report - Firstcricket News, Firstpost

If this will include to this quarter result then RPSG booooom.

3 Likes