_Business - _Offer G2C services (bill payment, electoral rolls, Aadhar, pds) , BFSI (banking services, direct benefit transfer, pension , insurance) and B2C services (telecom, education) in rural (reaching gram panchayat level) and semi urban areas by setting up banking correspondent (BC) outlets.Plan to increase its BC outlet count from 6,975 as of Sep 30, 2014 to 50,000 over three years, including 35,000 from a possible 160,000 rural areas and 15,000 from a possible 90,000 urban wards. More details about business adequately elaborated in the annual report.

Current price: 105

Market cap: 5300 cr

Div yield: 0.24%

Compounded CAGR 10Y*/5Y/3Y

-Sales: 57%*/46%/30%

-Profits: 61%*/27%/53%

*(Figure for 10 year is standalone)

Healthy return on equity & capital- FY 14 RoE/ RoCE: 28% / 32%

Healthy OPM and NPM margins

-FY 14 OPM/NPM: 27%/9%

-Trailing 12 months OPM/NPM: 26%/11%

Consistent tax payer: tax payout more than 25% in last few years

Key positives

)- Established track record of execution
)- They have exclusive contracts in few areas which restricts competition at least in BFSI and G2C space. Also have tie ups with banks which makes them the preferred partner .

)- Established infrastructure - As they partner with more players in the B2C space and the number of transactions also goes up in the BFSI space, volumes can go up with the same infrastructure - thereby causing margins to expand.


)- Change in government stance on financial inclusion etc can affect their business’s future prospects- in my view this is unlikely

)- Dependency on franchisees/Sustainability of the BC model - If the franchisees fail to ramp up the transactions as anticipated, it will affect future revenue n margins.

)- Promoter holding: 38%(shareholding on the lower side though no pledges)

)- DIIs/FIIs: 10% (none of the big guys are there except LIC)

)- Debt has increased in last 5 years, FY 14 end Debt: 408 crs, Debt to equity ratio: 0.60. The good part is that of the total debt, Long term debt is only 86 crs. Balance is short term debt (adequately funded by current assets) arising from working capital intensive nature of the business (but overall seems ok as RoE is good).

Overall,If I just extrapolate 9 month numbers for FY 15 into full year, FY 15 Sales / PAT / EPS: 2,776 crs / 328crs / 6.50 which translates into 86% growth in EPS in FY 15. At RS 105, it is trading at 16x FY15 earnings which looks cheap considering earnings growth track record.

Has anyone else invested? How do the future prospects look like ?

Disc: invested.

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I think this stock has a huge long term potential as they have almost exclusive e-governance contracts.
Long term triggers remain intact for the company.

  1. They have applied for payments bank license and I believe they are a strong contender to get one
  2. Setting up of 50K white label ATMs in the next 3 years
  3. Financial inclusion remains primary objective of the government

In my opinion stock looks cheap at the moment (18x FY14 earnings and 14-15x FY15 estimates) as it is expected to grow 20% each year for next 2-3 years.

Disclosure: invested

The stock is coming on the radar of FIIs.janus overseas fund has purchased 1.52% stake(76.5 lac shares) in the company.FIIs has increased its shareholding from 3.33% in march 2015 to 5.32% in june 2015.LIC has also increased its stake.

who is the nearest competitor of vakranjee?

I am invested in Vakrangee and see a great potential
financial inclusion and its tie up with banks

can anyone share more analysis on this ? What makes this business model tick ? Who are the key competitors ? Is this model viable for the entire eco system … What happens if vakrangee gets a payment bank license ? how scalable is this model … etc

If someone has already done a detailed analysis on this and can share… that will be useful… Post that we can all jump in and try to figure more…

I was from bANking industry. My father holds a very high position in PSU bank.
I am sure, I can be a little help to you, if you give me some questions.
I will do some research and get back to you.
I am also willing to contribute a little.

Report from destimoney on vakrangee… This should answer most of the questions on the business model and its long term prospects…



Thanks a lot …
Its really very very helpful…

Hi All, has anybody looked into Corporate Governance part of it? I am convinced about the business model but heard that the promoters were involved in insider trading case some years ago. If anybody has any insights, pls share.

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This link will help

Vakrangee - promoter quality

I think RBI is unlikely to grant Vakrangee a payments bank license - especially considering the kind of promoters/management. However, nothing is impossible in India - the ability of Vakrangee management to ‚Äėmanage‚Äô the govt. and regulators is quite ‚Äėimpressive‚Äô

@PP1: Thanks for the link. Management seems to be a big concern.

read about tie up with amazon in ET to reach people in rural and semi-urban areas

Vakrangee 2020 vision

Read the presentation. Basically they are focusing on major expansion drive on Vakrangee Kendras.

The question that arises in my mind is will we need such kendras in 2020 (the question is not so many…the question is will we need at all?) considering the technological advance and smart phone penetration we are witnessing.

People have already started migrating to online applications to get benefit of govt services…atleast most of the people in metro do not visit such offices/kendras…

Just imagine how facilities like offline ticket booking (started by Airtel 3 years ago) is extinct…and after 5 years the advancement will be exponential…even rural public will have access to smart-phones (or super smart phones may be!!) in next 4 years…where will Vakrangee Kendras get business…

Posting this just to have more perspectives…you can share any other technological or social advancements that can impact the business model of this company…

This is by far the best presentation on the business model of the company.

A Vakrangee Kendra is nothing else but an ATM and a low cost village branch of a bank. Will we not need bank branches and ATMs in 2020? Food for thought…

Agreed @gyansr:

To dissect it more granularly let’s see what functions currently done by Kendra could be removed by technological advance or social advancement (read urbanization). I am quoting the functions as per their website below:

The kendras might not be totally useless (or maybe) but the volume of work being done might decrease significantly.

Banking Services:

  • Enrollment of banking customers >>> People in metro have started enrolling online
  • Collection of loan documents >>> Online loan application and disbursement possible
  • Providing debit and credit cards PIN >>> Already banks have facility to generate PIN through OTP in mobile
  • Verification of primary data >>> May still prevail
  • Enabling general banking transactions >>> Could be done online or though ATM without human intervention in future
  • Sale of third party banking and financial products >>> Products like FD, Insurance etc. is done online these days

G2C services

  • Basically collection of taxes and levies, recruitment application collection, grievance management, issue of certifications

Taxes are now paid online, recruitments forms too, grievance portal active for many depts. and digital certificates could be the future (as we have digital signatures)

B2C services

  • Mobile and DTH recharges >>> With advent of app culture who will go to shops or kendras for recharges??
  • FMCG and e-commerce suppliers >>> This could be big in future and can definitely sustain or further scale up (recent deal with Amazon is reflection in this direction)

E-governance projects:

  • PDS, UIDAI, CSC, FI, IGRS etc >> UIDAI is almost in last phase‚Ķothers could continue but they are low margin businesses (don‚Äôt know if this can be replaced by any technological advancement)

BFSI- While label ATMs:

This could grow further given low presence and low interest of banks to go into villages but requires approval from RBI (currently I believe they have approval of upto 15,000 white-label ATMs)…we need to think of urbanization as counter force for volumes in such ATMs

This is solely my personal perspective…additional ideas or counter points would be constructive to take discussion forward.

Disclosure: Not invested


Their main idea is to have a foot print in 75000 villages through these Kendras. That is more than 10% of all the villages in India. This should roughly cover at least 10 crore population(Company claims 5000 people per branch and thus they are thinking of a reach to 37 crore customers, but I am being conservative here) . If they have any model that sustains( It could be ATMs, FMCG/E-commerce delivery, Courier collection and delivery(I think this is a natural extension), banking etc.), this access alone could be worth quite a lot. Any business that wants to reach scale quickly can tie up with them and gain immensely. Amazon already understands it. Others will quickly come around to the same understanding. You can think of them as a modern and private Indian Post (Banking/Delivery/Collection to the last mile).

I think they already have an approval of setting up 50,000 bank branches (with individual banks and it does not require RBI approval). They also have RBI approval for setting up 15000 ATMs.

IF (and that is a big IF), they can deliver profitably from these branches, there will not be any difficulty in getting next set of approvals. Their business plan looks sound, but there ability to execute may not be sound and we are not sure if they will be able to deliver these numbers profitably. Also, whether PSU banks with whom they have tie-ups will pay them on time to be profitable is another question to ponder. Promoter pedigree might also not be the best as mentioned by some boarders earlier.

Disc- Not invested and not contemplating either but this certainly is an interesting theme.

Absolutely @gyansr…bull’s eye on the distribution network part…that will be their biggest MOAT or competitive advantage…but the question is execution and also will there be enough people left in long term in villages (due to effect of urbanization) who would like to visit these centres for various services…and will the big courier companies still not be prominently present (through expansion…because they don’t need RBI approval) to cash-in e-commerce opportunity (if they unfold as envisaged)…!!!..and if at all they still serve will the margin be big enough to survive (again due to falling population in villages due to urbanization…and commoditized nature of distribution commission)…!!!