Vedavaag Systems Ltd: Financial Inclusion theme

VEDAVAAG Systems India Limited is setup in the year 1998 and over the years evolved as a niche player of e-governance solutions and citizen services infrastructure management.

VEDAVAAG went public in the year 2000 and got listed in Bangalore and Hyderabad stock exchanges. The company during the initial days executed many intranet and client specific applications for customers such as Andhra Bank, Oriental Bank of Commerce, Nokia, Web Sprocket Inc, Information Logistics, Singapore and others. VEDAVAAG built strategic relationship with Electronics Corporation of India (ECIL), a public sector undertaking to reach out into e-governance sector.

VEDAVAAG bagged its first project in e-Governance solutions along with ECIL in year 2001 to execute a five year contract for computerized bus pass services for Delhi Transport Corporations and went on to bag similar contracts from many other state road transport undertakings in Tamilnadu, Karnataka and Maharashtra.

VEDAVAAG has built well acclaimed solutions for local body management - for municipal e-governance – covering Panchayats, Nagar Palikas and Municipal Corporations. VEDAVAAG bagged its first project to deliver local body e-governance solutions to Municipal Corporation of Delhi in the year 2003 and that paved way for VEDAVAAGs growth in to e-Governance sector in a big way.

VEDAVAAG has setup over 2000 citizen services centers in Delhi, Haryana and Bihar to reach out to people. These centers have been setup under the Government of India Mandate to provide various G2C, B2C and B2B services. VEDAVAAG has launched various citizen services under the brand ABHEE and proposal is on to setup these centers are free standing units on franchise basis.

VEDAVAAG is certified for ISO 9001:2008 for its e-Governance applications delivery and services management since 2006.

VEDAVAAG got listed in Mumbai Stock Exchange in April, 2009. The company did a turnover of Rs 10.6 Cr in the year 2008-09. VEDAVAAG expects to make quantum jump into performance in the years to come as it completed Common Service Centers roll out in the current year.

From the latest AR vedavaag is the buisness correspondent for SBI.

My theme for investment:


  1. All government related documentation and data , and various services is being digitised eg aadhar, birth and death certificate, jobs,entrance exams , banks, e commerce, loans, pensions etc these offer ease for both government and the citizens and also the service providers to reduce cost and provide their services to a wider audience without significant expenses.

  2. CSC will be relevant as it will act as interface between digital and human as biometric scans, holographs check, cash payments , cash deposits, package delivery centres for amazon. assisted Purchase centers for amazon etc. etc needs physical interface,

  3. Limited CSC’s in a area. Competitors wont enter in a area where another company is a CSC as it wont be profitable for both. So the areas covered by a CSC will have a first mover advantage. Also not sure if government will allow multiple CSC’s in a area as already allotments are complete.

  4. No debt

  5. Conservative Management, No future guidelines due to the uncertainity. Dont give guidelines of 2000cr revenues by 2020 like Tera Software . These are the management who are more likely to fake it when they dont make it.

  6. In future CSC’s will play a pivotal role in bringing rural areas to the mainstream. The CSC’s are the metaphorfical pipelines/railroads that once laid will provide a steady revenue stream in the future. As of now only 5 companies that are listed have presence in the CSC market. What I found are the below.

a. Vakrangee - P/E 26 they are the most innnovative and focused in utilising this network.
b. Aksh optifibre - Significant presence in Rajasthan - P/E of 10.
c. Vedavaag - Significant presence in Bihar, Delhi, Haryana, Small cap company at 12 P/E.
d. SREI sahaj- Big company so CSC wont offer much difference to the overall revenues.
e. Tera Software - Only few CSC , also Management seems untrustworthy.

So that leaves us with Vedavaag and Aksh Optifibre.

There are multiple ways this value can be unlocked.

  1. Sale of the E governance division e.g SREI sahaj model
  2. Company realises the gold mine they are sitting on and utilises it to the fullest like Vakrangee.
  3. Various Private players like retailers and service providers realise this goldmine and offer services through these CSC. E.g Amazon partnering with Vakrangee and Banks setting them up as Buisness Correspondent.


Considering a monthly profit of Rs 2500 ( after 70% to the Franchise and all operating costs ) for 1 CSC of Vedavaag.

=30000/ year

Considering that we expect a 10% return on investment amount while valuing a single CSC. The Valuation will be (30000/10) x 100 = 3L / CSC

Now Vedavaag has 2000 CSC. So 3L x 2000 = 60 Cr. Company is now valued at 60cr. So we are getting the projects division for free.

Similarly Aksh optifibre will be valued at 3L x 10000 = 300 Cr only for the CSC’s not considering the OFC division.


  1. Note that we havent considered e governance projects revenues that it provides for other government services.

  2. Also 2500/ month profit is a very conservative estimate and may increase exponentially in future.


  1. Buisness depends on the Village level enterprenuer and so not relaible.

  2. Difficult to ensure control over a large network as these companies dont have relevant expeirence and manpower.

  3. Buisness model may be flawed.

  4. Companies may not be able to utilise the opputunity as their core buisness is different.


  1. Other competitors coming in. Aggresive play by Vakrangee.

  2. Prices for e gov services regulated by Government , Hence may be just break even and not as profitable as calculated.

  3. Failure to attract Private service providers who may provide value addition.

  4. Disruption by Technology.

  5. Small cap company so shares traded are very few and liquidity is a problem. Always locked in UC now.

Mods may please suggest any changes and I shall make the same. Wrote this a bit in hurry so all detailed data might not be attached.

Disc: Invested in Both Vedavaag and Aksh


Any reason why company, despite being in operation since 1998 and in IT field could not even reach 100 cr in revenues. Any reasons for that ? Management bandwidth ? What has changed ? Clarity on this will help a lot.

-Jiten Parmar

I have following points to make

I. Company has not paid any dividend for last 10 years. (Source -

II. The rate of tax payment is fluctuating over the years. But I could not find any reason in annual reports for same

III. Promoter holding is very low at 23.39% and 36.3% of promoters holding is locked for reasons not known to me.

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I have 2 points to make here.

  1. Tera Software is lot more better than Vedavaag systems in terms of promoter integrity.
    In fact their proximity to ruling power party is good for business.

  2. This is renamed company of SARC systems. Promoter had bad history of defaulting against promised payments. Though recently stock price is moving, being the long term share holders we have to be careful in not trapping these companies.

Disclosure: Not Invested


I was initially looking into buying Tera software also but didn’t because of following.


  2. They are mostly into projects and the revenue is unpredictable. However management is claiming about high growth and revenue forecasts which seemed high considering the business they are in. I am of the opinion that the high growth rate may not be sustainable.

Regarding case against Vedavaag , Ihad already researched about the mentioned case and if you read in detail vedavaag has also filed a counter case to the petioner about how they used blank checks issued on trust basis and also petioner had supplied defective equipments. In a business there may be such incidents , however I feel it is not relevant now. Also it doesn’t point to a purposeful fraud by the management.

Ma’am ,

As you have rightly stated that being a long term investor we should be aware of promoter integrity.

So, proximity to any party for obtaining projects as mentioned in the article is a risk we should avoid. Any ruling party will change on the years ahead and so will the fate of the compnay.

Better to steer clear of companies whose fortune will depend on such external factors.

Good find. Why not Vakrangee who is market leader and has demonstrated performance. For this kind of business model the runway seems huge. An optically high PE masks the growth potential of the co. Plus Vakrangee has achieved its growth at very good efficiency parameters of profitability and return ratios.

Discl. Was studying Vakrangee. Someone cautioned me that promoters have fraud history. So going slow.


You are correct, Vakrangee is a better and organised player in the segment and also the market leader. But since the areas of operations are geographically isolated , the areas covered by Vedavaag and Aksh are not affected by Vakrangee unless Vakrangee tries to be aggressive in those areas also.

For eg. Amazon has partnered with Vakrangee , so it will have access to certain geography, however in order to cover other areas they will have to partner up with Aksh and Vedavaag also. If this scenario happens, the p/E will match upto vakrangee.e ven though Vedavaag won’t be the market leader it will definitely ride on such growth.

I also think market has already priced in high expectations of Vakrangee and any hitch in meeting the expectations will cause the stock price to fall or remain stagnant. I haven’t done detailed analysis for Vakrangee but shall revert when I get some time.

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i was checking on Vedevaag . There have been some dubious related party transactions with loans to promoters etc in the past which was a put off for me. In my opinion promoter integrity is low which is not factored in the price.

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Some recent updates on the company.

Issue of warrants on 18th Jan, please find the BSE release Here
Hoping that I am not making any mistakes in understanding this: Allotment of 1,00,00,000 warrants was approved @ Rs. 39/sh. This will increase the number of shares to 2.425cr from 1.425cr as of Dec’16 shareholding pattern and Rs.39cr may be infused in the company. Also, based on the subscription split, it appears that promoter holding may increase to 38% if all the warrants are converted to equity shares as detailed in the releases of 18th Jan.

Alongwith Dec’16 results, Vedavaag also provided a brief update on its market

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Disc: exited a long time back… reason being no margin of safety…

Update fron Moneylife

These are the numbers from annual reports, they have -ve OCF only in two of the last eight years.

Tired best to be accurate with figures, any inaccuracies can be due to manual errors.

Q2 results announced.

When I tried to check the reason for sudden 9.72% upward movement in price today, found that YoY EPS growth is almost 100% from 1.33 -> 2.62. 6% growth compared to FY18Q1 (2.47)


Disclosure: Tracking and Not Invested.

At this point of time, with vakrangee unraveling, would you consider this company a good buy? CMP to BV is very close 1.

I would recommend a BIG AVOID for this company. It seems to me like another pincon story.

Then to me @jitenp observation seems to be absolutely correct. Plus, I would suggest please read these complaints against SBI:

My grandfather who has a SBI (rural area) account had similar issue with unknown debits from his accounts. Upon inquiry the branch manager says the transaction is too old so we can’t find details about it. To me, SBI also seems like an avoid because of the work culture, employee eco-system of the government banks.

Anyone tracking this company in recent times? I see that Co. has recently entered into new segments like AI, ML & IOT.
Vedavaag PPT Q2.pdf (6.6 MB)

CF_Vedavaag Systems Ltd…pdf (198.7 KB)