Viaan Industries - Trying to find its business - Analysis

[reach.sriharsha]

Viaan Industries
In Sep 2014 Mr. Ripu Sudan Kundra(AKA Raj Kundra) & Mrs. Shilpa Shetty Kundra acquired
defunct Kolkata based Hindusthan Safety Glass company from shareholders and promoters
with intention to improve their Jems and Jewellery business. Following is the news link
https://economictimes.indiatimes.com/markets/stocks/news/shilpa-shetty-raj-kundra-snap-up
-defunct-hindusthan-safety-glass-industries/articleshow/42311328.cms
Currently company business as per its website looks like below( http://www.v-ind.com )

1. https://www.viaanstudios.com/
   Viaan Studios is a leading developer and publisher of high quality games and
   animation.
2. https://www.chasebid.com/
   Bid and Buy website
3. http://bestnaturalsindia.com/
   Best Naturals is one of the first Ayurvedic brands in the world to combine the
   power of astrology with Ayurveda. Direct selling and invite only by current
   distributor.
4. https://www.matchipl.com/
   Poker app. Looks like they are trying to do their own ‘cricket -IPL’ ‘Kabbaddi’ in poker
   arena. Jointly owned by Viaan & International Federation of Match Poker
   Do not get confused with IPL terms, this has nothing to do with Cricket IPL
   and Rajastan Royals.
5. http://www.v-ind.com/yo-yo-yogurt/ & http://yoyoooo.in/
   Our Pre-mix Major ingredient’s are from USA especially for Yo-Yo and we assure you
   only the finest ingredients are used.

Viaan Industries also entered into mobile phone business in 2015. Company claims it
imports the phones from China and major revenue comes from selling phones in CIS region.
Related news link.
http://www.thehindubusinessline.com/info-tech/shilpa-shettybacked-viaan-enters-mobile-pho
ne-segment/article7916330.ece ).
About 5 lakh Viaan handsets are currently manufactured in China, which Kundra estimated
will be absorbed by the market within three-four months. “We might assemble the handsets
in India,” Kundra said.
APO Mobiles, a Ukraine registered company, has taken the rights of selling Viaan phones in
7 CIS countries, including Ukraine, Belarus and Kazakhstan, and is also planning to do the
same Europe. “We intend to generate revenues of $ 80 million in one year,” Kuldeep Kumar,
Managing Director of APO, said. . In all these products/Services brand Ambassadors are
Shilpa Shetty and Raj Kundra themselves. In house ambassadors no additional expense.

                                       **Financials**

Please note since pre 2015 does not qualify I have studied last 2 year available data for
below analysis.
Some interesting snippets from AR 2015-1016

Stock manipulation story. This was during very early days of taking over company. Unless
something serious I am missing, I will take this story with a pinch of salt.

Stock manipulation: Viaan Industries

                                                                                **Analysis**

• In year 2015 company was taken over from defunct state by new management and
  new management spent money to get into track. So first year earning should not be
  considered for all fairness.
• In second year company posted 11cr profit but they have not paid any tax. This is not
  good. Since the company has many import based products I expected taxes to be
  paid in due time.
• The current AR financial result do not talk about viaan mobile phone related
  business at all. So I hope its gone bad.
• Their Poker league can bring some cash. Playing teams have to pay certain amount
  and they have also back integrated with Mobile app so that general public can also
  pay. Its paid app. So some revenue can flow from it, but very little. Not sure how
  much profit/revenue split between viaan and International Federation of Match
  Poker.
• They seem to have app for each of their business line. For example poker league
  is major business and they have paid app through which people can participate
  Similarly they have a TV show in colors “Aunty Boli Lagao Boli” which is
  integrated with “chasebid” app/website through with people can bid live. The
  show might have finished its 1st season. Since I did not see this Sunday(as per
  their website). So if some one know about TRP or popularity of this show it would
  be great to know how Viaan is doing with respect to its products(TV show &
  gaming app).
• The company is booking sales, but its trade receivables stands at 60cr. That means
  company booked sales but money not received. Please note their sales figure is 135
  Cr. so trade receivable is roughly 44% of their sales. Last year Trade receivables
  were at 8cr(march 2016) this year March 2017 it is 60Cr. !!!. Close watch on Trade
  receivables needed in future also.
  
  
• In addition to above details, the Receivable days is increased from 89 days in 2016
  95 days in 2017. Which means avg sold item gets its money after more than 3
  months.
• Short term borrowing (the money needed to run company) increased from 80 lakh to
  1.32 cr. This may be valid because as mentioned in AR, they have set up new office
  and considerably invested in employees.
  
  
• All in all promoters are trying to make good business case by foraying into many
  businesses and hope things to work in one or another. One good thing is they are
  trying to monetise from various aspect via technology and app.
• Following are few questions which I have
  ○ Can Raj & Shilpa would have done such diversified business with private
  company?
  ○ If it can be done via private company why they chose public company path?
  ○ Why they did this by acquiring defunct listed company? (This partially
  because lots of regulations and also to get their IPO flowing they need good
  business to be established)
• Shilpa Shetty is associated(director) with another company “Best Deals TV Pvt Ltd”,
  which is from Akshay Kumar. Looks like they may be sharing facility etc. In AR some
  entries for advances as well. They have agreement to sell their products via
  teleshopping looks like. Since Akshay is a Canadian citizen, does it have any other
  effect? (Need to check more on this aspect).
• In 2017 AR company is claiming their UAE business is doing very good. But its not
  mentioned details of its operations. Company has also an office in LONDON.

NOTE: Some of the points above might be normal for any company, please provide your comments.
Disclosure: Not invested. Tracking

[Alphin]

I did look into this company earlier, but its not worth the time or effort as per me, there is no product, its all hot air.

Also a buisness needs good management, the actors and actress don’t seem to be experienced or devoted to the business.

[ASP]

Raj kundra’s betting case in IPL , doesn’t give a sign of confidence in management.

[rareks]

Viaan Industries has signed an exclusive licensing deal to launch a digital live trivia game show for India. iQ Live is a trivia game, not wholly dissimilar from TV gameshows like Kaun Banega Crorepati & Who Wants To Be A Millionaire, except minus the studio audience. Twice a day 1.30pm and 9pm, a host walks everyone watching through a series of 12 multiple-choice general knowledge questions. Its free to play, get all 12 right and you win a share of the daily cash prize pool which will go into lakhs.

Get a single question wrong, and you’re out! The company funds the daily prizes through advertising & marketing tie ups. It’s a new rage in the USA & China where these apps have a devout following of millions of users. This is Viaan Industries Second LIVE game show the first was Aunty Boli Lagao Boli on Colors TV and Now iQ Live which is a pure live digital show.

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BRIEF-India's Viaan Industries ‍Signs Licensing Deal With Stream...

[ragsingh0305]

They came out with their q4 results on second week of may. Sales and profit are up considerably…it also alloteded preferrential warrant to promoters at 42 i guess on may 12… yesterday share price tumbled 15%…
I am really sceptical about one thing…they seem to making profits in all their venture so quickly and so considerably…this does not give great confidence…it takes while to break even in the business forget about harvesting profits…is the financials fake… that’s the biggest and most perturbing question i have… other members views are appreciated

[padi]

I have been tracking this stock for a while now and would like to offer my observations to forum members. I prefer reading the company a little differently, precisely because of the sector its predominantly present into and my observations from the past couple of quarters.

A quick peek into its past business model: FMCG (MLM model) + Mobile phones trading + Gaming + Animation! Investors were confused about their biz model, not knowing what the management really intends doing. Over the last couple of quarters, while the so-called FMCG biz has already been shut, the mobile phone trading biz seems to be heading in that direction (going by the previous 2 quarters result). In the process, while topline and profits could seem to be impacted negatively, this seems to augur well for the company, in my opinion. Here’w why i feel that way: (a) the residual business of gaming and animation are extremely high growth sectors, offering non-linear growth and with negative working capital and (b) this ‘could’ keep the management more focussed, rather than spreading themselves too thin on diversified interests.

I would warrant a closer look at their offerings in gaming business. In my opinion, the only offerings which matter from a 1-yr revenue and profits perspective are

(1) GOD - Game of Dot.
This is a simple to play, cricketing-based skill, game in which participants need to predict the position of the ball by looking at the image. Players must test their ability against that of the Expert Panel Judge. To play the game, participants need to register on the game website, purchase a dot package and can start playing active games. Registered users can participate in all active competitions, weekly or monthly, provided he/she has purchased adequate DOTs and he/she can place up-to a maximum of 150 dots per game.

Its been more than 8 months since the launch of this game, establishing its proof of concept. Based on mgmt interactions, it seems that this vertical has been performing better than their expectations and is scaling up faster. With relatively lesser expenses to be incurred (daily prizes and sales promotion), this is one vertical which can significantly add to profitability of the company over the next 12 months.

(2) Lagao Boli TV show
This is a unique concept for Indian viewers – Reverse price bid of an aspirational products, a passenger car, Bike etc put up on auction during the show. Bids can only be put thru an auction app, Lagao Boli (developed by Viaan), which viewers need to download. A weekly show (Sundays), featuring standup comic to engage audiences, is when this auction is conducted parallely.

Season 1 of this series, showcased on Colors channel, concluded in Dec '17. While the content and format was well accepted, the bidding process faced a lot of technical glitches not allowing bidders to place bids or register themselves, making the company lose significant potential revenues. While these technical glitches got addressed to a large extent closer to the end of the 1st season, the company decided to launch the 2nd season, only once they were completely satisfied with the technical aspects. This bidding format is also available on a different format and mobile app called “Lagao Boli” in which bidders can bid for aspirational products like mobile phones, TV, Smart watches etc, on a daily basis.

With the management claiming to have solved all technical glitches and ready to launch the 2nd season very soon. With fixed costs covered by the broadcaster and possibility of significant non-linear revenues (IF content and quality proves to be good, with proper marketing and promotion),this vertical ‘can prove’ to be a significant revenue driver for FY20.

While there are several other offerings in the company i.e. PokerRaj (real money gaming), Match IPL (skill based poker gaming league), Mobile games, Animation series in ‘Adventures of AliBaba’ etc, i feel they would take time to start contributing meaningfully to the company revenues. In their current state, their numbers don’t move the needle.

With the business now appearing less complicated and with lesser working capital intensity, this could be a interesting play on the, extremely potent and promising, gaming sector. Other than Delta Corp, Viaan seems to be the only play on the sector.

Caveat is the promoter (Raj Kundra) perception, news flows and the past disappointment in delivery. One should be congnizant of the inherent risks associated with such companies and sectors. Performance disappointment or promoter led -ve news flows could wipe out capital.

I would appreciate views from other forum members on this stock, if any.

[padi]

One needs to understand the nature of the industry that Viaan is operating in. And i am inclined to draw a parallel to the pharma indusrty.

Just like how an innovator pharma company has to keep incurring expenses on R&D to discover a new molecule, without any guarantee which of those molecules will eventually get a patent. While doing such new drug discovery, it may also have to abandon work on some molecules at various stages because of non conformity with the results expected.

Likewise, a gaming company has to constantly keep launching new games (and discard those which dont succeed), with the hope that one of their games finds a hit with the consumers. This is a very high risk, high return industry and we need to understand that. Also, like in the pharma industry, you need a promoter with a scientist-like mindset, in the gaming industry you need a maverick promoter who understands the younger generation mindset. Raj and Shilpa surely display such tendencies, with a huge follower base on social media to aid faster market visibility for their launches. While Viaan Inds, in my opinion, has got all the right ingredients for success with all its capabilities, one needs to keep a venture fund mindset, while investing in this stock. Its a 0-1 game. Either you end up making huge profits or you need to be prepared for a capital wipeout. Invest only with that mindset. Else there are hundreds of other investible companies that you can look for.

[reach.sriharsha]

I completely agree on gaming companies needs to try out till they get really big hit. But gaming industry inherently has biggest loophole, that is no games is played forever, forget forever not even for 6 months straight. So the company need to execute and get returns within this short span.

Consider what happened with angry bird, when it was at its peak evaluation was in billions, but the company refused to sell. Now its not worth thousands.

Consider games like PUBG, the amount of I.T infrastructure needed to support such massive user base costs bomb in the pocket, but company is not making ‘direct’ money from such user base.

So there is some ‘sweet spot’ and ‘fine time line’ in case of computer gaming. Monetizing is not so easy in game industry.

[padi]

Appreciate your point of view.

Gaming is a vast and diversified industry. Im sure you are aware that games like PUBG are played globally and have country leagues played, with millions of dollars as prize money. And this has only increased over the years. For every one PUBG, there would be hundreds of games, may be delivering similar experience as that of PUBG but died a natural death. Thats the way it is. Then theres real money gaming: Teen Patti, Poker, Black Jack etc. having a huge player base globally and again with millions of dollars of prize money awaiting serious players. And then there is social gaming, something like Angry Birds, which become a fad and then collapse. To improve the chances of success, companies in this industry need:

• Dedicated and focussed management - As opined, this is required as a success (small or big) may be achieved, not before the failures of couple/dozens/hundreds launches

• Deep pockets - to keep funding constant new initiatives/launches that the company may have to resort to and garner consumer mind share, digitally and otherwise.

• Vision - This is an absolute must, without which the other attributes can get supressed

This can go on and on and i’m no expert in this industry to discuss it in detail. Im just giving the views on top of my head.

Any consumer related business has to be super dynamic in nature, as changing consumer preferences is extremely difficult to predict.

[padi]

Despite having a business model, which IF executed properly can unlock huge potential for the company, its very disheartening to see such moves being undertaken by the company. Look at their latest announcement of acquiring a 50% stake in a yet-to-be-incoporated entity, Avalanche Technologies, in which the promoter of Viaan is also a Director in the the target company!!! What is a Gaming company doing by acquiring a generic IT company?? What synergies did they visualise?? this is so bizzare. These are classic examples of how an ideally-good business model can be killed if promoters lose sight of the vision.

Acquisition of Shares in Avalance Technology Private Limited