Even for becoming an acquisition target …SS need to have large customer base…there is another possibility which can happen with SS is …what happened with Snapdeal…Competitor may ultimately through their high discounts…bleed SS to almost slow death type situation…
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@sahil_vi @aga.ayush11 @sujay85
When we check shareholding pattern on bse- names of rhoto pharma and mitsubishi are missing. It means no. of shares are way more than 3.18 crore as shown in bse or screener. What are the total no. of shares after dilution. plz enlighten
Rohto & Mitsubishi invested at the Subsidiary level (Sastasundar), not at the Venture level. So, I guess that cannot be found in the Venture’s AR.
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Here are some of my thoughts relating to sastasundar ventures - https://cashcows.substack.com/p/sastasundar-ventures-underpriced
Major points are
- Growth in E-pharmacy website hits has more than doubled for most players including Sasta Sundar. Pharmeasy + Medlife website hits grew by 185 percent in the last 6 months. Sasta Sundar grew by 127 percent, Netmeds grew by 101percent and 1 MG grew by 61 percent. Covid has definitely accelerated the e-pharmacy.
- Foray and Growth in e-diagnostics space via Genu Path Labs. Health data from medicine sales integrated with the lab’s data has tremendous potential and personalized health-tech is the future of healthcare.
- Raising of 100 million over next 2 years which will help the company go nationwide. In some news sources, the company is expected to raise 25 million in a few months of which there is also an allocation to genu path labs.
- Since sastasundar ventures is more of a core-investment company holding around 72 percent share, holding company discount may affect the listed company’s valuations unless there is a reverse merger.
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I’m trying to better understand the financials. Can someone educate me what their gross margins, GMV, admin and marketing expenses are? I tried going through results and AR, but couldn’t find the details. From screener.in it looks like their gross margins are negative?
I agree with you. I feel there is little value outside of being #1 or #2. Competing with little capital is like bringing a knife to a gun fight. I’m trying to better understand their gross margins and cost structures. That should give a better idea of what exactly is going on IMO. With so much VC/PE capital in this space, I have a feeling it could erode gross margins.
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It is showing daily UC, fair value comes in between 250-300 , above than this further journey will depend on profitability, 22nd June results coming, probably profits will be coming in BS.
I do not think people will buy medicines online. When you go to hospital you tend to buy in the hospital premises. Your need for medicine is immediate most of the time.
This whole thing of online medicine is hyped.
I disagree. My parents run a nursing home/small hospital and for personal use they use online pharmacies. Patients are free to choose what they like. For immediate need, they use offline, but with Covid many didn’t have a choice. Online offers cheaper medicine and less hassle.
In India healthcare is very fragmented. No reason why online pharmacies with significantly better cost structure can’t partner with hospitals or expand organically.
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Actually it should be other way round given the retailer margins in medicines as compared to other categories in e-commerce. There are other nuances to online medicine selling but this category seems ripe for disruption going by cost reduction potential for customers (especially people on long term medication). There were issues on clarity of regulations for online selling of medicines which seem to have been addressed (or partially atleast).
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Chronic illness people need to buy for month, in case of lock down scenario they stock up for months .
That’s where business is
India is a land of people with diabetes, hypertension, etc etc
These people need to take medicine till the day they die .
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Yes true. But lock down and all was once in a century phenomenon. Once this lock down things ends then people will buy from nearby stores.
Latest Investor presentation has some details on margins, GMV:
https://web.stockedge.com/share/sastasundar-ventures/4972?section=investor-presentation
Please consider going through my post too which summarizes some of these trends:
Most of the business happens through step down subsidiary SSHB so the detailed financials are in SSHB annual report:
Lock down or no lock down why anyone wants to buy from nearby stores when the goods can be delivered at doorstep? For groceries and vegetables consumers desire touch and feel experience when buying hence may prefer visiting physical stores but in case of medicines its the same medicines you take everyday for lifelong illness like diabetes, asthma -etc. E-commerce is the future and it is here to stay.
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Thanks for the help. The investor presentation is very useful.
Their revenue recognition is interesting. Real gross profit here is razor thin as employee expense should be deducted from gross profits(other than R&D), atleast as per GAAP standards, which they aren’t doing. Marketing expense is surprisingly low. Looks super efficient.
As per how most marketplaces recognise revenue(Fiverr, Etsy), I would re-write the 9M FY21 income statement as following:
GMV: 595 cr
Take rate: 6.2%
Revenue: 37 cr
Employee expense:21.2 cr
Gross profit: 15.8 cr
Admin & marketing expenses: 29.5 cr
EBITDA: -13.7 cr
Assuming they do same revenue in last quarter of the year, full year revenue should be ~50 cr. At EV/S of 19x, doesn’t look cheap. Looks expensive. However improving take rate is a positive. Shows leverage over suppliers.
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Why should an indian listed company follow GAAP standards?
Have a look at their unlisted Indian peers too. Have a look at industry growth rates too. Have a look at industry potential too. One cannot simply see 1 number in isolation and make up their mind about an investment, otherwise a shopify or a wuxi biologics would never make for a sound investment.
How did you arrive at that take-rate?
Also do note that SS is not a marketplace model (so the comparison is incorrect). They maintain inventory of all the medicine they buy from the distributors then selling to the consumers. It might help you to read the rest of the thread, if you haven’t done so already.
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You’re right about revenue recognition. However, whichever way you slice it, the gross profit should remain the same(~28 cr for FY21), which is 34 EV/GP.
Without accounting standards, you can make the numbers do anything you like. I have never heard of anyone not deducting employee expenses(or other costs) needed to make a sale from gross profit numbers. That should tell you a lot about the company.
Did I comment on how it should trade? Shopify is a leader w/ high gross profit margin, high optionality and pricing power. SS is a 3rd or 4th place pharmacy chain w/ low gross profit.
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The implication was that they would use indian account standards like IND-AS. As far as I know all indian companies do so.
Sorry i don’t understand what you mean by this. They do deduct the employee expenses, check the subsidiary results I have linked in my previous post. Maybe I’m missing something. Please let me know what you mean by “they don’t deduct the employee expenses”
Yes, you did. That it looks expensive, and doesn’t look cheap.
Gross profits will only increase, specially as the industry wide discounts go away in K years. Investing is all about understanding and discounting the future. In investing, the rear view mirror is always cleaner than the windshield.
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The financials look good to me. Gross profits are obtained by subtracting cost of goods sold from revenues.
What to include in cost of goods sold is subjective. I’ve seen people do it many ways. Many other Indian companies don’t subtract employees expenses from revenu while computing gross profits.
Websites like tikr.com subtract only raw material costs and manufacturing costs while calculating gross profits.
I respect if it is expensive to you, but not to me. The context matters. The number alone is neither expensive not cheap. Industry growth rate, companies competitive advantages, companies growth rate all of them matter.
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