ValuePickr Forum

Xelpmoc Design and Tech Ltd

Few points: Newbee here
Looks Like CFO has been selling in small quantity,
Volume of share for trade is very small!!
Hitting upper circuit everyday ? 4X in a month what is happening?

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If poor cash flows and absence of anything on balance sheet isn’t a red flag, then nothing is.

I have spent my career identifying and flagging of such stocks.

@adminph2 , @basumallick Watch our for subtle hints in this thread. Few users need to be monitored carefully

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The company is a one man show, Sandipan Chatterjee is the brain behind it, none second to him. Risk high on this ground.

Yes absolutely. Any microcap is a risky affair.

Few points worth noting from the recent Q2 results:

  1. Fair value of investments (very conservatively stated, which is good) @ 43.9 crores (increase from 34 Cr)
    2.EBITDA : 14.9 (43% increase QoQ)
  2. PAT: 15.6
    4.Employee cost reduced from 1.05 Cr to 0.99 Cr, Employees increased from 99 to 106
  3. Cash flow : from -4.2 Cr to 1 Cr
  4. EPS increased from 0.64 to 2.58 (TTM EPS)

Concall updates:

    1. Operative revenue YoY: 129.9% growth (1.5 Cr to 3.47 Cr INR)
    1. More than half of the revenue from Intl clients
    1. Mihup concluded series A funding -
    1. TSIM - Won awards - Top-10 startups of Hyd and a winner of women led startup
    1. EduTech expansion - from single digit to double digit coverage of schools
    1. Investment in new startups -
  1. a. Afterthought Feedback Services Private Limited (Hyd based market research co)

  2. b. Groupfit Ventures Private Limited (Preventive healthcare startup)

  3. c. Bombay NaikTechXP - a data science tech in wealth management space

    1. Addnl investment in startups with stakes:
  4. a. Signal Analytics Private Ltd (fully owned subsidiary) - to expand globally (Europe market)

  5. Growth Sign :

  6. Looking to hire more employees

  7. Expansion in Europe and UK

  8. Very very conservative valuation: Amity investments said the valuation of 439 million is far less than what other sources are saying about valuation of Xelpmoc is!!! The management agreed that yes it is very conservative valuation.

  9. Very good growth in the fav startups :

  10. eg Mihup valuation doubled in one quarter from 5 to 11.84 Crores

  11.  Fortigo 19.5 Cr to 21.79 Cr 
    
  12. Note that all this is happening right in the middle of a PANDEMIC!!!

  13. Few of the startups were also affected by COVID:

  14. Madworks Ventures Private Ltd -( from 99 lakhs to 12 lakhs)

  15. Mihup - Bagged Tata Motors contract - Every tata motors car has mihup technology

  16. Xelpmoc vs Infoedge :

  17. Sandipan’s view: “We are very flattered to know that we
    are being compared as a mini Info Edge. But we want to state clearly that we are Xelpmoc and
    we want to be known as the company which looked at it in a different way. Our entire
    involvement is much, much more deeper than just investments. So that is the reason why
    probably the comparison with Info Edge ends. Our main focus is to make sure that the principle
    is we believe that when the money is being spent on technology, we have the best value for that
    amount of money. So instead of giving money to a startup to buy technology, we would rather
    build the technology for them and give more value for that money. That has been our philosophy
    from day one, and we want to adhere to that”.

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Looks like a mistake…

Thanks @Rahul_Mohata
Sorry yes it was a typo – From 12 lakhs to 7 lakhs

It seems overvalued at this market cap, since it is a recent listing and not much history is available, at this market cap it seems has no margin of safety.
Average salary per employee is roughly 4 lakhs , not a reasonable salary for software engineers with ai and ml job. Would not recommend newbie investors to buy/hold this stock at cmp.
Dscl: No holdings.

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There is a reason why offshore industry work with Foreign companies and that is the exchange rate arbitrage. For all the talks, any company planning to scale up focused on providing 3rd party service will find it very very difficult to get margin comparable to offshore companies. On top of that they are working with startups, why would any company want to give higher margins. The kind of work that they are claiming they do - generally indian companies insource. Besides if it is more than 10-15 people companies will set up own setting than to rely on vendors.

Difficult market to scale up in a profitable manner.

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Skills in AI/ML and data sciences command premium in global markets as well as India. Traditional outsourcing companies have very limited capabilities in this space, this situation opens promising opportunities to organizations that have proven capabilities. Why would Xelpmoc leave all these opportunities and work for startups that are either cash starved or funded companies whose shares do not hold promise.
Several Indian companies are early technology adopters, e.g. ICICI Bank implemented Blockchain when several top notch global banks did not include this technology in their roadmap. Similarly, Asian Paints, Bajaj group, ICICI and many more Indian companies are early adopters of technology, giving wide opportunities. Why is Xelpmoc not targeting these potential customers and build a strong revenue stream. Unlike mainframe maintenance or ERP implementation, AI/ML and data science projects involve lean teams.
If Xelpmoc is not winning or trying to win these opportunities, I would say this company is following an inefficient business model. Being a technology person, I would shy away from this company.

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I had below observation from 2019 AR.
Why did the company dole out bonus in 2018 when it was not making any profit?
When it had the debt of 31 odd lacs in 2018, why did it went ahead and lent money to the tune of 53 odd lacs to Nectar Consultancy Services Private Limited and Scimata Computing Private Limited that too at 9%?
Any idea about 3 times increase in the Auditors remuneration in 2018(IPO expenses has separate header though)?
When we were writing off our investment in FNXPL(Fortigo Network Xelpmoc Private Limited), what was the need to give sale of services to it that too to the tune of 37 Lacs?

Few positive points I came across
WTD including CEO are just taking 15 Lacs remuneration per annum and remained constant for last 2 years. Whereas for rest of the employees, it has given industry level hikes. WTD remuneration to the employee one is in low single digit which looks very conservative.
Looks decent when it comes to the disclosure and transparency stuff.
Average salary looks industry standard
Loos very conservative when it comes to CTC of WTD which can be inferred by below point
Car for use on company’s business and telephone at residence will not be considered as perquisites. These things needs to get reimbursed from the company.
Dividend policy already in place.

PS: I bought few shares for tracking purpose today. Will try to find what company has to say about these. Still studying. Will keep posted.

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along with the above questions i sent below queries as well
Why is the loan given to Nectar has been classified as Non Current Investment in the AR 2016
Because of the ESOP, i might be fine with the salary of WTD of 3.75 lacs for FY17-18 but Secretary being paid just 80K. A clerk in Tier 2\3 earns more than that. Can you throw some light on this? Was this reason behind Abhay Khadam’s resignation? AR 19-20 hardly talks about it leave behind acknowledging his efforts?
I know remuneration of the directors is nominal but 4 times(from 3.75 to 15 lacs) jump in an year time isn’t too much?
What went wrong with Gyankosh Solutions Private Limited which was almost 100 bagger to classify it as impaired later on?
Reason behind Venu and Vijay resigning as auditors from the company initially and later on pulling them as Internal Auditors?
Reason behind appointing Bhavna Chattopadhyay as director for such a short duration and later on moving her to the CEO office with an inflated salary? Was she moved considering that factor in mind or what?
Its always better to make use of A4 for the AR purpose. Its become too exhaustive to traverse in A2 sheet.
Sandipan being the Co-Founder & Director Engineering of Mihup, does he juggle between Xelpmoc and MIhup or what?
I just want to know what are some mistakes that Company think have made while investing in Startups and lessons learn from the same which needs to be kept in mind for the next course of journey
Myself being in the angel network and invested in few of them, if we, shareholders want to refer any venture\idea how can that be done?

After following up couple of times, i got the replies today. Not at all satisfied with the response received. All the response received were beating around the bush. I might wait for couple of years before taking a firm decision on the future course.

The biggest red flag IMO is that they went public with barely anything to show for it. If you look at successful technology companies (product or consultancy) you usually see excellent engineering blogs, in depth research in the form of white papers, webinars from domain experts and so on.

None of that is present on their website or youtube channel. If I didn’t know any better I would say the promoters are just in it to make some easy money.

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Sir, I humbly disagree. This company had stated that they could easily get seed funding but they wanted to give retailers an opportunity to invest in the initial stages of their growth. I believe it wont be a big deal for them to raise money with the credentials of the promoters…This was explicitly mentioned in one of their conference calls and also as a matter of principle - to promote and encourage the start ups to go public to raise money instead of looking for value investors. I believe the management is honest here and we should give them the benefit of doubt.

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Please don’t address me as sir, I’m just a random 28 year old investor who is still learning.

That is just a selling point, don’t blindly believe anything the management says. Question everything. Putting your money in small companies in India means doing a lot of research on your own and very risky. Unlike SEC (US regulator) SEBI is not very powerful to protect small investors.

we should give them the benefit of doubt.

That’s what I thought when I first came across, although only for a few seconds. Lets assume for a second that we do give them the benefit, how do we as investors evaluate their ability to invest in startups when they haven’t shown meaningful results? The promoters maybe trying to emulate SoftBank model but that company has more than a decade of experience investing in other companies.

Investing in this company is too risky even if the management is genuine.

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I agree somewhat with the view that we should exert caution in investing in such a small company as the risk is certainly very high. The Online PR generation (white papers, blogs, seminars etc) can be done by putting some efforts on it but I guess the company has decided to not allocate any resources for that yet. You have to have some degree of confidence in the management that they will allocate the resources wisely (& towards PR) as they have now turned profitable.

As they are showing consistency in profitable operations, they have to be given at least some credit for it, if not full & keep tabs on future results. (I am not considering their investments; I am assuming these at 0 value just for the sake of valuing it).

Every company starts with 0 experience & gradually the promoters and management steer the business ahead and get the experience and generate profits & then they list gradually with some numbers to showcase & get decent valuations with investors. This company decided to go ahead with public listing first without bothering to showcase profitable numbers with confidence which speaks for itself that they must have had a pretty solid business plan being executed. I am assuming you would have seen the FII shareholding as there are some established foreign funds already invested in this company which gives me at least confidence that they would have had a good business model to show for themselves. There are numerous PE firms eager to buy in small companies with a decent enough business plan like these before listing & make good gains on listing later when they turn profitable.

Everyone has the option to invest in IT Blue chips like Infosys & TCS for safety and decent returns but we are on this thread interested & reading about this company that means we want that alpha over others blue-chip which it can offer with some degree of risk involved, If the company survives & scales. Of course, no one is going to give this company a huge PF allocation right away and it is up to us to analyze the information available in public domains, ascertain a value for it, check the RedFlags & invest if we still have confidence, else give it a pass & go with the tried & tested ones out there.

I know I could be very wrong in my assessment of this company and it could fail to sustain and survive. At this stage all we can do is research well about the promoters, read the ARs to decide basis our industry knowledge, if we are okay to allocate any capital to it. I have had a tracking position since May this year and looking to increase my stake soon as I see the Mar 20 profits were not a one off and they have been profitable since then. On the other hand, I have seen much bigger, better & more renowned companies with too many products, clients, IPs and bigger balance sheets and what not, turn to dust. As per me what matters more is execution and the Jockey. I am willing to take my chances with some of my capital here.

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I didn’t mean to say those white papers, webinars etc should suffice for investment but rather the bare minimum to even start getting interested in the company. That kind of PR is for the company’s clients to showcase what services it can provide for them, that it understands the domain well. Not for investors or the general public.

Hence the complete absence of that makes me very uncomfortable. I invest with a long term horizon so if the management feels even a bit sketchy I’ll run away as fast as I can, even if I could easily make profits in the short term. That’s speculation, not investing.

But if you’re comfortable with your reasoning I won’t say anything else.

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More than white papers and PR etc, their portfolio companies talks for themselves. Fortigo, Mihup, Pencil, Woovly etc.I personally hold pencil as well and can vouch for them. Few of them are already 100 baggers for them. We should give credits to their school of thought, transparency which we get to know only after going through their site, Annual Reports, transcripts. We don’t get perfect company ever and If we are getting one, it will be out of reach for many of us on many parameters. I have taken a small position and personally think we are at the base of the inflection point. Even though, i have raised few flags, but i can live with that, until and unless i come across deeper ones. Until then people will be throwing darts in the dark

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