Tips Industries Limited - Ready to RACE ahead!

Piyush I think you need to take a step back and not come to conclusions in haste.
On your point of numbers not adding up, EBITDA never includes Other Income, if you will not consider that, then the numbers will add up.

2 Likes

Seems like it. Should have at least clarified when the analyst asked.

If EBITDA doesn’t include other income, it shouldn’t have been included in last year’s presentation too. The larger point I was making was around the lack of consistency in data presentation and inability of management to clarify during the concall. It’s a CFO’s bread and butter

Have been following both Tips and Saregama (Disc: invested in both) for a while now and the gulf in management quality is quite clear, which also partly reflects in the valuation gap, so I don’t believe it’s a judgement in haste. I want the company to do well as an investor but they frankly need to up their game in these aspects

3 Likes

After listening to the concall, I completely agree with the observations. The management is just not professional and gives the appearance of a “lala” company. They struggle to understand simple questions, there were at least 3-4 instances in the call where the question was completely different when compared with the response.

And some questions were answered absolutely randomly. I think @ankush12495 asked the question on the content acquisition strategy / budget for FY23 based on 25% revenue growth and why bottomline will only grow 15%, they didn’t have any clarity on the strategy or number for this FY except that it will be higher than FY22. And just abruptly ended the answer saying “zindagi mein aage bhi toh badhna hai”. And so many such random one liners for other questions as well.

It just reminds of Warren Buffett and Charlie Munger’s famous quote “invest in a business any fool can run, because someday a fool will.”

Business economics are so good here that a poor management may also deliver great results 2-3 years down the line. But seriously contemplating an exit on any sharp up moves.

14 Likes

I believe promoters are quite passionate for the business. They are not traditional MBA types and have good grasp over music business. This business have a simple performance lever:

What content to acquire at what price so that its generates good return on investment?

As analyst/investors we need to think and assess how efficiently and effectively they can execute this.

Honestly, I got the impression that many of the analysts are only concerned about getting inputs for their financial models are are least bothered about understanding the business.

9 Likes

Have you considered that they already understand the business and are trying to understand the management plans instead?

1 Like

Yes, some of them asked pertinent questions. Thanks to them.

Tips has provided the clarification.

My understanding for the company : they may be a bit less sophisticated to deal with analysts community ( precisely that is why they are at discount than sargama) but they know their business.

Dialogue from movie “Guru”

Mere ko yeh golf khelna nahi aata… Yeh ghode ki race bhi nahi khelta… Lekin apne dhande ka mazboot khiladi hoon main

Few other observations/ their behavior patterns:

  1. they are open to change and trying to speak in the analyst voice.( as they know that better their communication, better may be their valuation )

  2. In one of the concall about spinoff and investment in unrelated busiess … Kumar taurani was candid in his response that even they have 75% stake in the company …why would they do something which may impact the company.

Disclosure: Due to my investment in the company, i am biased.

26f97bf0-ed56-44d3-89db-1ca0172e1279.pdf (937.6 KB)

5 Likes

One of things that i am struggling with is modelling growth rates here. I know management has guided for 25% Plus but now that the pandemic is behind us one should expect moderation in growth.
We know Music Industry is expected to grow at 15% and leaders like saregama expect to grow at 25% for the next 3 years. Now If we assume the top 4 labels grow above industry average and the laggards grow below industry average then where does Tips fit into all this?

2 Likes

Cost of Acquisition of Shares of Tips Industries Limited (“Demerged Company”) and Tips Films Limited (“Resulting Company”) is communicated
tips communication.pdf (1.0 MB)

1 Like

TIPS has clarified on the difference in EBITDA

1 Like

So it cost of acquisition is Rs 1,000, it’ll be split into Rs 400 for the music company and Rs 600 for the movies company?

Yes, you are correct. You have rounded off…otherwise it would be 400.05/599.95. Thx

But there’s another thing here - shareholders gert only one share in movies for every three shares in the existing company. I wonder how that changes things.

I am new to Fundamental Analysis, kindly help me understand. When I compare the management compensation with Saregama, Tips management is getting 4+% of sales where Saregama management is getting 1.4%. Of course, the amount in rupees will be similar because of sales numbers. Also Tips management has taken loans of 5.8 crore with less than 5% interest rate. This is more than 10% of the net profit and 30% of free cashflow. This amount supposed to be used to acquire more content or grow business. This seems to be management exploiting. Is my understanding right or can you please share your perspective on this.

5 Likes

I am very confused about this demerger. If some one has 90 shares of TIPS. He will have 90 shares of TIPS and 30 shares of TIPS films. But what will be the prices of TIPS films. How much will price of each share of TIPS reduce by.

Does any one understand the details?

1 Like

Has there been any update on the demerger? Any timeframe within which we can expect the listing of Tips Films?

2 Likes