Hi Naruto,
Please see attached image which describes hiring of Chairman as adviser.
More importatntly, his remuneration is set as 25 Lakhs/month or 3 crs/annum.
This Item was approved later around May 2019.
Can you also please share information on Satyajeet Prasad selling shares?
This is the part I referred to -
Isn’t it 2.5 Lakhs per annum in screenshot? Can you please confirm.
More clear in above page
Virinci Postal ballet.pdf (303.2 KB)
Also added the full notice. You can see details and financial terms on Page 11 and 12.
Thanks
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It has not been disclosed as per my knowledge. I noticed it in the quarterly shareholding pattern.
Please see if you can share a proof. That’ll help
Please see below. From the June 30 SHP, SP held 440,000 shares. From the July 03 SHP, SP held 81,158 shares.
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I met the management yesterday. I interacted with MVS Rao (Group president) and Vishal (CEO - New Business & KSoft). Had a 3.5 hour discussion.
Please find the discussion summarized -
Hospital Business
- Flagship hospital at 31% occupancy. 125 full-time doctors & 45 doctors who are empaneled to use the facilities on a revenue share basis.
- They are looking at an annual revenue run rate of 170 Cr.
- They see it going to 35% and 40% subsequently.
- 50 beds in flaghship hospital are ready but they are not using it because they have existing capacity and it costs to operate ACs, personnel for it.
- Earlier, doctors used to think a lot before consenting to move to “Virinchi” because it is an unknown name in healthcare. Now, they are able to attract decent doctors & it will get easy over time.
- Cancer block - they are deliberating whether to set it up in the underground level 4 of existing hospital (cost would be 25 Cr) or in the adjacent site across the road and they have to setup a skywalk in that case(cost would be 45 Cr).
- They are constantly trying to attract new doctors. They mentioned that for example, when a doctor comes from yashoda(a popular chain in Hyderabad), sometimes it doesn’t necessarily maintain the same level of business post transition to virinchi. Doctors typically come with an entourage of young doctors, technicians that they are comfortable with etc,. Some corrective steps need to be taken in that case.
- Sales team - there is a dedicated sales team which is responsible for getting patients into the hospital. This burden is not with the doctors.
- Medical Tech - they have purchased license from Philips to read the data from their real-time health monitors and have built a information wall in a room. That room will have information from 140 patient beds getting updated real-time. The head doctor responsible for monitoring would take a look at the information flashing and gives instructions to the nurse. They still do physical rounds but they use tech wherever they can.
- Complete paperless except where it is legally necessary like operation consent etc,.
- They constantly work on right sizing the expense side with doctors. Let us say it is not working out with a particular doctor, they look at renegotiating the contract with fixed + variable and sometimes the doctors quit. They say that doctors who quit spread a bit of negative feedback.
Expansion update - They have enlisted the services of O3 consulting to scout the PE partners. They have met with “True North” a bit early and their response was to wait and see. Now that they are EBIT and Profit positive, they want to reach out to them again.
- They got interest from other PEs in which case the investing parties are keen on controlling stake and complete sale. As that is not aligning with the ethos, they are staying out of it.
- Geography wise, they are more keen on Chennai because of the size of the city.
- They are also scouting on possible locations in Chennai even though the funding side is not very clear.
IT Products
- They operate in a very niche subprime lending. They collect over 500 data points about their customer along with their spend habits.
- These guys will be tech enablers. I think they work with 20/35 customers.
- Their next big competitor is 40% their size.
- While this business is a cash cow, the sector they operate in has a limited room for growth.
- Sales cycle takes anywhere between 1.5 years to 2 years.
- Their business model is based on number of stores in which it is used & pay per loan if used online.
- Advance America is their biggest client. They are acquired by a mexican company. Now they are looking to get some mexican presence as the store dynamics are similar there as well.
- Geographical expansion - They tried in UK earlier with one of the client but it didn’t work out. They are looking at Canada and Mexico.
- Another client is doing a reorg and he will be online again on september 2019. Because of the variable billing nature of the business, they will see a blip in revenue from this guy.
- They are also negotiating to replace Advance America’s IT team. Discussion is happening.
IT Services
- Revenue mix - 80% body shopping, 20% services.
- Body shopping is getting difficult with visa regime etc,. Earlier it used to be 130 people on their rolls but now it has come down to 70.
- Future climate - might not see great growth but happy if they maintain the revenue run rate. (While they didn’t exactly articulate this, this is the sense I got.)
vCard
- UPI based Credit Card payments through their app “vCard”
- They did a beta testing with 500 customers
- Partnered with RBL which will take care of credit card.
- They will get paid on customer sourcing fee, transaction charges (when done through app) & renewal fee.
- They also roped in a NBFC “DMI finance” where DMI’s customers can use vCard to do UPI payments for their allowed line of credit. Say a customer gets a 30k as a line of credit, he can use vCard to spend. He can do merchant purchases / transfer to his account. They will be doing it via UPI. They are looking at Ola, Uber drivers who can save upto 35k but do not qualify for credit anywhere. They are looking to be tech enablers.
- At max, they will spend 1 Cr beyond product development. They are looking to raise VC money / external funding for future scale up without tapping into virinchi/virinchi hospital money.
- Experience of kfund gave them deep understanding of underwriting.
Misc
- Dividend/ Buy Back - they are considering it. They had a very big discussion in Mar 2019 internally but didn’t go because of cash reasons.
- Based on their information “Satyajeet Prasad” did not sell his stock.
- Promoter’s son is not working in the company. He is of 12 years old.
- Promoter doesn’t take compensation in any other way except through commission. I told them that so far Virinchi has a very good name in the market with stellar IIT/IIM talent it is able to attact. Abrupt high commission is coming a bit in different direction. I suggested that it could have been structured as a dividend so that everyone would benefit including promoter. They said they’ll consider.
- Promoter also has significant stake in “Vivo Biotech”. They rent out the facilities to them therefore a rent of 7.5 lakhs comes up per quarter.
- Annual document should be out in a week’s time frame. Mudar Patherya’s company is preparing it.
Thanks to all the forum members for helping with the queries. Please let me know if I have missed out on any of the queries posted.
I forgot to talk to them about credit rating update. Will check & update.
This is my first management interaction and they were open to all the questions giving detailed answers & reply all emails in a detailed fashion.
Business wise, given the IT services slow down, with hospital being the sole growth driver, would expect slight growth rate in FY20
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Hi Naruto,
Thanks for the details. Any details on starting concalls again?
Also about debt, how do they see debt moving in coming 1-2 years.
Thanks,
Ankur
Annual report -
Below is the mail response for investor queries.
Is there any update on credit rating? Is there a possibility to reach out to players like Piramal Enterprises and negotiate a better interest rate?
- Currently we are rated by India Ratings (Fitch). However, we have now approached CRISIL to try for a better rating, but cannot assure till it is finally awarded. In the current scenario, it will be difficult for most of the NBFCs to take up new proposals. We are approaching different Banks / FIs for better Rate of interest & Payment terms
QFund - is there a possibility to buy out the next player who is of 40% QFund’s size. As we operate from India, might give some cost synergy.
- We have approached some players in the US for acquisition in the past. However, given that this is a niche segment, existing players plan to continue running their businesses. It is true that if we were to acquire our competitors in the US, along with the revenue, the margins will also improve due to cost synergies.
When is the next conference call going to be scheduled?
- We understand the importance of investor calls. We plan to hold the calls in future. We will keep the investors informed once the time frame for the calls is firmed up.
How do you forecast the debt moving in next 1-2 years.
- Total consolidated debt as on March 31, 2019 was Rs. 162 Cr. Presuming that there is no additional borrowing, based on the repayment schedule of the existing debt, it is expected to be around Rs. 143 Cr by the end of March 2020.
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Any reason why the stock is correcting even with the decent fundamentals?
Q3 FY20 Concall Notes
Hospital
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Main hospital in Banjra Hills will have 3 blocks and an additional Oncology block. Block One which is operational has 350 beds. Couple of months back we operationalised the 2nd block with 50 beds which is for economy segment. 3rd block will have 100 beds and the Oncology block will have 100 beds. Total will be 600 beds.
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100 bed Oncology block will need capex of Rs. 40 cr.
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Will start the Oncology expansion process in next 2-3 months. It will take 18 months to complete after the process is started.
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Hospital business has become self sustainable. Cash flows from hospitals are able to meet out there own interest payments.
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Operating at 30% capacity as of now. We will be comfortable at 35% capacity utilisation. In next 2 years we are looking at 60% capacity utilisation.
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We are consciously not pushing hard in government schemes like Arogyashri. It will increase the capacity utilisation but payment is recovered in 6-7 months. Currently revenue from this is very minimal.
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Cash + Insurance is 85-88% of sales. Insurance companies pays in 30-45 days. Receivables are pretty much in control from this.
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Economy segment block is for lower segment patient. It is not for government schemes. Looking for regular economy patient.
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Average revenue per bed is Rs. 28000.
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Before moving to new geography will make sure that existing hospital is able to take care of it’s own debt. Future geographies will be in South India only, currently Chennai is in mind.
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Future capex of hospital will be through PE funding and not through debt.
IT Product (Q Fund)
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Q3FY20 IT product revenue is less yoy because of one time license fees of Rs. 28-29 cr in Q3FY19.
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On going business growing at industry growth rate of 5-7%.
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In serious discussion with one big customer, without that business 5-6% growth will continue.
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From an organised player perspective we have close to 50% market share. We are also targeting the unorganised sector now. Unorganised sector is as big as organised.
IT Services (K Soft)
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IT services business has bottomed out. It will sustain current margins and sales figures.
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Transition of business shift from US to India has stabilised.
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Expect Rs. 56-58 cr sales for full year going forward. Growth in this segment will start after one year.
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Margins are down because of higher visa cost and higher visa rejection rate at 50%.
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Wherever possible we have shifted our existing clients to offshore service model.
V Card
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Very strong customer interest. As of now building the business process.
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Growth is still away but stability is coming.
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Lending conditions are strict and therefore drops off rate is high as of now.
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Other than RBL Bank we are in talks with one NBFC for lending requirements. Focus will be to use the NBFC funding for small ticket size customers rejected by the bank.
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500 cards issued to people outside of out pilot testing period.
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Started with 12 cities, currently we are live in 48 cities.
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Will not use company’s cash flows for customer acquisition. Will look for growth capital from outside.
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Salaries and other expenses on VCard is done through P&L.
Other Points.
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Debt repaid in H1FY20 close to Rs. 20 cr. Will repay Rs. 10 cr more till March 2020.
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All debt repayment on time now in last couple of months. Sorted out earlier problems of payment delay with the lender.
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Cash Flows from operations at Rs. 28 cr for Q3FY20 and Rs. 82 cr from 9MFY20.
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Loans and Advances in balance sheet of Rs. 42 cr are for supplies.
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Promoter cannot buy shares in FY20 as 5% limit is already exhausted. Promoter will be eligible to buy from April 2020.
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On Demerger - No plan as of now. Will wait for hospital business to mature. Will think about it then.
Regards
Harshit Goel
Disclosure: Tracking positin
3 Likes
I now see them aggressively promoting their V card in social media platforms like Facebook… For a company with 20+ RoE and ROCE and decent growth, the valuation market is giving is unbelievable. Might be it knows something which we don’t.
Too many red flags on Promoter front.
I thinks interesting in this co. is only the Hospital part. If someone from Hyderabad, share feedback of the hospital (in general) vis-a-vis other major hospitals. If hospital is having genuine response, then this co. is good bet from demerger / PE investment angle.
Hi saurav, could you please enumerate the red flags.Would be a great help to people like me who are invested in virinchi.
I would say Virinichi hostipal is not bad but it is not very good hospital also.
Hydrabad is hub for healthcare, it is very common to find good hospital at every corner
So don’t invest based on hospital bussiness.
Few pointers due to which I am not comfortable with the Promoter/ Mgmt:
- Structure of ESOPs allotment and that too to the extent of 8-9% of the share capital.
- Pl check salary expense and median salary of the employee. Nos dont add up, infact there is a big gap.
- Promoter getting salary as consultant
- For the last 1-1.5 yr, hospital utilization hovers around 30-35%, with claims of improvement.
- Capacity of 5000 beds in next 5 yrs has become tagline of the company, with not even a new single bed added in last few quarters.
- In last concall, the Cash flow nos shared didnt add up with the cash deployment strategy shared by the mgmt.
- If we go back to FY15-FY16 annual reports, hospital asset capitalization took place without any mention by the mgmt on the same. Co has never been forthcoming of funds deployment strategy.
would request you to verify the pointers at your end.
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Having a hospital segment, how does Virinchi play out during this scenario of Corona?