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Xelpmoc Design and Tech Ltd

Company

Founded in 2015, Xelpmoc Design and Tech Limited (Xelp) is an end-to-end professional & technology service provider with a keen focus on product development, data science and analytics. Xelp’s core competence lies in building next-generation technology in Artificial Intelligence & Machine Learning Space, with a keen interest in Natural Language Processing & Data Analytics. The company primarily caters to e-commerce, education, transportation & logistics, recruitment, fintech, social networking, among several other industries.

Interesting story behind the name – it’s the reverse of COMPLEX – XELPMOC : So the motto being trying to solve complex problems with ideal solutions.

Management
Key Members:

  • MD & CEO: Sandipan Chattopadhyay – MD & CEO, Founder – Expertise in tech devpt of several start-ups, credited with JUST DIAL success (Growth of 160X), co-founder of Moneycontrol and built the first website for TATA. Very honest and has excellent exposure in the field. Worked at Tata motors, Standard Chartered Bank, Deutsche Bank, Edelweiss Business Standard etc. “Red Hat Innovator Award 2019”. IIM Calcutta alumni and a statistician from ISI, Calcutta.
  • Chairman: Mr Tushar Trivedi (since 2018) – Expertise in banking (Experience @ Kotak Mahindra and Citi Bank)
  • Srinivas Koora – Director and CTO – Deputy CFO at Just Dial.
  • Jaison Jose – Director – Expertise in HR and business development.

**History at a glance: **

  1. Started in 2015 as a 24-person company.
  2. 3 Promoters: Sandeepan Chattopadhyay, Rajesh Ramlal Dembla and Srinivas Koora
  3. 2015: First technology services agreement with Fortigo Network Logistics Private Ltd and made an investment in the company.
  4. 2017: First agreement with the Govt Org – Food Safety and Standards Authority of India, GOI
  5. 2019 – Went public at NSE and BSE
  6. 2020 – Operational Breakeven and Net Profit (Zero debt company)

IPO

  1. Started in 2015 as a 24-person company.
  2. 3 Promoters: Sandeepan Chattopadhyay, Rajesh Ramlal Dembla and Srinivas Koora
  3. 2015: First technology services agreement with Fortigo Network Logistics Private Ltd and made an investment in the company.
  4. 2017: First agreement with the Govt Org – Food Safety and Standards Authority of India, GOI
  5. 2019 – Went public at NSE and BSE
  6. 2020 – Operational Breakeven and Net Profit (Zero debt company)

Business Models

  1. Focused on building the next generation of technology in Artificial Intelligence (AI) and Machine Learning (ML), with a keen interest in Natural Processing & Data Analytics.
  2. They work with Govts, Businesses, Individuals and Startups and help them take advantage of their data as technology partners and consultants
  3. Building AI and ML tools for solving problems powered by Natural Language Processing and in house developed Intelligence Data Management System.

** Focus on Startups **

  • Tech deployment for multiple startups at early stages: Give tech solutions and charge fee as well as take equity if the start ups are promising with potential – this is a very good growth model.
  • Startups – Focusing on HEAL sectors – Health Education Agri and Livelihood – Key GDP contributors but underpenetrated and full of potential for AI and ML in India. They offer expertise and tech support as well as buy equity in start ups – huge GROWTH potential.
    • 4TIGO – (Uber for Trucks in India) – Freight exchange facilitator for the truck ecosystem in india – (Nandan Nilekani – co founder of Infy and startup giant has stake in this too) – Xelpmoc provides tech solns as well as has equity and doing very good (already the co is growing very well with good revenue generation)
    • Mihup - Voice tech sector – Mobile assistant using ML and AI for human-machine and machine-human interaction
    • Snaphunt – HR sector – Singapore based south east Asian talent hunt programme
    • Woovly – social media sector – to bring people together with common bucketlist
    • Pencil – publishing sector – to help authors and writers to upload script, design etc for publishing

They have a pool of around 10 – 20 startups in focus all the time with promising potential.
Details, investments and current fair value can be obtained from their AR 2019-20.
As on March 31, 2020, they had invested around 3.36 crore Rs into startups and the fair value on that date stands at 34.8 crores.
The startup ventures has already given them ~10X returns on investments with a YOY growth of 27.33%.

Growth Potential:

  1. India – 3rd largest start-up ecosystem. ~9000 start ups incepted between 2014-2019.
    2.Xelp focuses on High growth sectors (CAGR > 35-50% since 2014)
  2. Direct equity investing in startups can give manifold returns
    Current Startup Investment Sectors:
    AI/ML : 27%
    IoT : 23%
    Big Data Analytics : 21%
    Block Chain: 7%
    AR/VR : 5%
    Drones: 4%
    Others: 13%

Financials
Picture5

Key highlights:
a. 13.6% QoQ increase in Income
b. 258% increase in PAT
c. Debt free
d. Breakeven achieved
f. EBIDTA - 158% QoQ increase and will be positive this year
g. Revenue - 7.5% QoQ increase
h. Continuous increase in Sales.

Key Risks

  1. MicroCap
  2. Startups may not perform

Disclosure - Invested for long term.

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Thanks Saran for starting the post on Xelpmoc ,couple of aspects i could not validate and anyone who ahs more info could please throw some light…
[1] " 1. Focused on building the next generation of technology in Artificial Intelligence (AI) and Machine Learning (ML), with a keen interest in Natural Processing & Data Analytics." When i last checked in LinkedIn i could not find much of employees in this AI, ML space and most employees seemed to be freshers or interns and lookout for job. I do not know much about AI,ML but there is not much info from this company on this to understand any better.
[2] credited with JUST DIAL success (Growth of 160X) , where can we find more info this ? Was he (Sandipan ) the one who made growth of 160x for Just dial ?

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@satishwe : My pleasure. I remember reading con call (2020) where he mentioned he takes professionals from all field who are problem solvers (including engineers, maths majors, economists too). I also read a blog by one of his interns who was doing data sciences

https://medium.com/sabuj-jana/what-was-your-first-internship-experience-like-d69003ff92b5

Regarding AI and ML, they have said in their investor presentations and AR that they have already built some tools (products)
Picture7

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@satishwe

contd…

Also their startup Mihup is a good example which is AI powered machine learning mobile assistant for all 4 types:
Machine to Machine, Machine to Human, Human to Machine and Human to human interactions.

I did check his linkedin profile that says he was in Just Dial, and also had read an article about his success in Just Dial (in yourstory.com)

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There are also two other articles which might be of interests to investors

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I also came through an excellent report prepared by Mr. Pradeep Madhwani (a fund manager) on xelpmoc. (Link Below)

https://t.co/qHbTucRifv?amp=1

Just to add two other interesting things which really stands out:

  1. Investment of MIT, US in this co (as FII)
  2. IPO with a discount for retailers. Also IPO just after 3 yrs of starting the company so that retail investors can ride the growth of the company like seed investors. SO they purposely did not go to the PI investors and instead chose IPO. This was also a statement and showing the light to new startups that they can take this route too!
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Thank you for creating thread on Xelp. I was planning to create it . You have summarised it beautifully. It has turned profitable from last 2 quarters. Some people are calling high valuations seeing its PE. PE is misguiding the true potential. Market prices in the future and that is getting reflected in price.
Disc : Invested from 66rs. Largest holding of portfolio.

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If the investments have returned 10X returns in 3years then it will not be 27% CAGR, it will be approx 100% CAGR for 3 years

I am also researching on this. Few points for which I am trying to find answers
a. The revenue they are generating is from the services being offered by them to these startups and to other customers. They get the equity as well in turn for offering their services in these startups. How they will be able to monetize these investments? For example if they sell a stake in any of the startups will they be able to generate all that cash?
b. In AR 2020 I can see they dont have any holding shares for Fortigo (Page 142-AR2020) But in investments they are still showing it as 5.21% holdings(Page 9-AR2020)


c. I am not getting any info about their new startup Caitalyst Inc.
d. What are SEBI guidelines for holding companies? As somewhere Mr. Sandipan was saying the holding company cannot invest with their own funds.

Disc: Hold tracking position

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My pleasure and congratulations on getting hold of this gem early…Yes current valuations are higher…but have to look at forward PE and not current PE as the growth for this company is immense…In addition, this is a co which is relatively younger…so all the ratio’s will show the company in proper light only once the co is at least 5-10 yr old. And they are headed in the right direction…It is a light asset co too…

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I was referring to their YOY growth on their investments in start ups from Mar 2019 to Mar 2020 is 27% (from 27.4 cr to 34.9 cr).

Regarding your queries:
a. Yes. They will generate cash by selling stakes. If the co is doing great then they should not be having a problem in selling it for a good price. If the co is doing not so great or they think is not meeting their expectations on growth (which they had faced, as mentioned in the recent con call) they have sold it to the promoter at the cost price. Which is also a win-win situation. Worst case scenario would be a booking at loss.

Your same question was asked in recent con call and here is the answer:


b. Sir ** Fortigo Network Logistics Private Ltd ** is different from ** Fortigo Network Xelpmoc Private Ltd. ** . The former is the co in which they still hold stakes, but the latter was a joint venture from which they exited with loss (~ 5 lakhs).

Don’t know the reason behind exiting joint venture.

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This may answer about their employee recruitment:

Regarding Caitalyst Inc, I do not have much info (understandably as they are a small startup) other than that this info:

Their linkedin profile says:

We have set a mission to create an affordable and searchable dataset using Machine Learning and AI technologies and provide sophisticated tool box for search & evaluation, portfolio analysis and competitive intelligence of pharmaceutical pipeline and marketed assets.

Founder : Jit Basak (IITK and Uni of Chicago alumini, with a MBA from UCONN, France)

d) Regarding SEBI guidelines for holding companies : yes I too remember reading this. Not clear how this plans out…Anybody can help us in this???

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How do you see the prospects of Niyogin Fintech Ltd (a BSE listed company) which is developing a platform for rendering lending and other services by making financial professionals as partners. As part of this, they acquired majority stakes in Moneyfront, a company having a platform for investing in direct mutual funds and IserveU, a well established company in rendering services like cash deposit, withdrawal, money transfer, insurance etc in rural areas.

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I am loving this thread. Niyogin fintech has acquired IserveU around 3-4 weeks back if I am not wrong. Niyogin is the ‘not so popular’ platform based company which deals in leasing money and things nagesh mentioned. Last quarter was very nice. A turnaround story in making. It was in my radar and bought after last quarter results. Still adding. I am hoping a move like Xelpmoc from Niyogin.

Dics : 7% of portfolio currently.

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An article which gives brief about acquisition and future prospects of Niyogin

Stock ticks most of the Red Flags I look our for in stocks to Avoid :

  1. Random , improper name
  2. Consistent Negative Operating Cash Flow
  3. Abysmal/Poor Return on Equity
  4. Look at the Gross Block of the company - Nothing there at all
  5. A B2B Business where it is difficult to validate sales from independent sources
  6. A confusing, high jargon business explanation.

As mentioned, these are red Flags and not allegations. Please take care about all of them and excercise sufficient due diligence

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The posts here are getting confused between Xelpmoc and Niyogin. @Administrator request here to split the thread in to two.

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Hi Nitin, how did you build conviction around Xelpmoc to make it your largest allocation in your Portfolio, considering it is mostly investing in start ups and hardly breaks even ?

I invest mostly in smallcaps when they are unknown. I had been going through this company since it was listed. First bet is on promoter. He made Infoedge, moneycontrol, Tata first website. For me management is very very important while picking smallcaps. I gathered all information slowly when it invested in fortigo ,mihup and other exciting ventures. I am from IT field so understand these things well. When its share price was 66rs , its investments were close to its market cap. Fortigo is backed by Nandan Nelkani(Infosys) . When you have such big names and such innovative business , you don’t ask for more in smallcaps. Slowly things became more clear during annual reports and management commentary and thus increasing my conviction. Shareholding pattern too was very tempting. I like finding companies when noone is talking about them. I went heavy in this. Same way I have gone heavy in Niyogin after last quarter results(sorry to mention this in this thread, but there is no separate thread for that , so mentioning here). Annual reports and management is all I need to find my conviction in small caps. Hope it helps.

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Share price moves first and numbers are formed later and judging a stock by its name, is like judging a book by its cover. The things you have mentioned are not red flags. Please go through annual reports and management commentary and history before getting to any conclusion. Most of the multibaggers of future are sitting on negative cash flow and poor fundamentals. Had fundamentals been strong, you wouldn’t get it at cheap price. If by looking fundamentals on screener , one could find multibaggers, this market would have been full of millionaires.

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