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December 15, 2015

Intrasoft Technologies : Temptation to book tax free profit .

                I was waiting for Dec first week from last few months so that I could sell my entire remaining holding to get tax free profit of around 8-9 times of my initial capital(brought in range of 45-52 ) invested but instead of selling I started buying back more from already booked profit , you will say we know you are Idiot but this much never thought. I had already sold my some shares when I bought Olympia Industies and TechNVision , and reduced to 40% when despite write off by the company and market price was still above 560 . This first week of December , I could have easily said Thank You very Much Intrasoft and Bye-Bye but no I didn't . Despite write-off why I still bullish on it . Initially like others I though it is very much negative but when I talk to one of the senior investors whom I interact on email said if you expecting all products from product based company are going to be commercially successfully then you are having wrong expectation . There will be some products which will not taste commercial success . He said even Google try lot of things , at different stages they stop those project only handful of projects escalates to next level . I am not sure how they write off cost of these project but they had to reflect it . But Google is Google we can't use it for comparison at all . Intrasoft explained that "When we started the e-commerce venture, we pursued 3 or 4 models at the same time because we did not know what will work out. We thought that the auction format will work out and we thought the marketplace model for itself worked out. So as we got traction on the current model we pursued the development on that and put on hold the other models. When we recently reviewed the assets under development and found them non-revenue generating we found it prudent to write them off. Anyway, since April 13 we were advised to debit all software development expenses directly to the PL account thus there has been no addition for
the past two and a half years."
It is true conservative investor don't like write off but in product based companies it is a reality unless debited in PL account . If I correctly remember then around 2008 Vakrangee has done write off of around 50 crores . But from 2008-09 level of under Rs 1 (adjusted) Vakrangee share now trading around 165 . It means whopping 165 times return in 7-8 years .



PE can be misleading : 
If two companies are trading on same PE of 100 then does it mean both are trading on same high valuation ?
Lets say I give choice of two companies to choose for investment for 5 years both trading on high PE of 100 (Ignore moat other factors for simplicity)
A . Top line Growing 50% CAGR and has NPM of 30%
PE is going to be half after 5 years due to various reason not related to company .

B. Top line Growing 50% CAGR and has NPM of 0.5%
PE is going to be half after 5 years due to various reason not related to company .

Of course you will choose A . But now if I say that A will have same NPM of 30% after 5 years but B will have NPM of 3% then ? Then , equation will be change and I will have to choose B .

Why ? 
A will give around 3.5 x return if PE drops to 50 but B will give 21x return even if PE drops to 50.
So, basically if a company which has scope for NPM expansion(generally young companies) trade on higher PE then it can be misleading and it is completely wrong to compare with others who already has good mature business with very good NPM .

When business news channel compare Intrasoft and Archies then




But ,next time if you analyse a company with high PE then apart from quality, moat , expected growth and other factors, don't forget to add the scope of NPM improvement .

Most of the Indian investors expect profit growth , high ROCE , high margin from even from young companies  . They are not at fault because unlike USA we have not seen companies growing their top line first and then focus on profitability . We all have seen young IT companies like Infosys not only growing their top line but even same time bottom line from very young age .On the other  hand we have seen Pantaloon which was expanding top line but it was funding it growth through debt or equity dilution because it had asset heavy business model .


Due diligence of reported GMV : 


Few investors might not be believe in reported numbers of Intrasoft , lets cross check reported numbers . In fact , we should always do our due diligence before buying any stock .
Ideally , I should have done lot of offline check like talked to management , employee ,vendors , courier partners , Amazon , ebay, even Intel if I am seasonal full time investor. But I am not full time investors so I don't have luxury do all these . So , I relied on online whatever information available to do cross check . Of course , it is estimates and it can't be 100% accurate but it should be accurate with error margin(contingency) of around 20-25 % .

As we know Amazon USA contributes highest GMV to Total GMV of Intrasoft . They have never disclosed GMV shares but As per my initial analysis . It should be the following  .

Amazon USA30-40%
Ebay USA25-35%
123stores.com5-8 %
Rest (Amazon Canada , Alibaba’s 11main.com , Sears.com New Egg ,Rakuten (buy.com) , Bestbuy.com and newly added Jet.com )25-35%

Intrasoft has TTM revenue of around 497 crores out of these around 460 cr should be GMV of e-commerce division .
Now if we talk to seller on Amazon ,eBay you will come to know that actual orders are 8-12 times of feedback count .
Now look at the following feedback count of 123stores on Amazon USA .
http://www.amazon.com/sp?_encoding=UTF8&asin=&isAmazonFulfilled=&isCBA=&marketplaceID=ATVPDKIKX0DER&orderID=&seller=A3SQ9YFE6CSCS0&tab=&vasStoreID=



If we see last TTM feedback count is 42310 but reduce to 40000 due to seasonal effect from last month .
Now as per management Average Order Value in Q2 FY2015-16 = Rs. 3994

But, lets verify it from independent website which track and give rank to Amazon sellers .

http://www.marketplacepulse.com/amazon/usa

http://www.marketplacepulse.com/amazon/usa/stores123



You will notice that how fast 123store is growing in USA. They have life time rank of 372, 1 year rank of  72 and one month rank of 30 .

As per them Average sale price is $75.98  = around Rs 5000 . Management has given Rs. 3994 avg for all the e-commerce websites .
So lets assume that it is 4500 on Amazon USA .

So total GMV of Intrasoft on Amazon USA should be = 40000 * 10 * 4500 = 1800000000 = around 180 crores = Around 39% of 460 crores .

If we consider avg order at 4000 then it comes to 160 crores which is 35% of 460 crores which is also in our range .

Now , look at eBay feedback count .



If we see last TTM feedback count is around 40000 lets reduced to 38000 to seasonal effect from last month .
So, total GMV of Intrasoft on eBay USA should be = 38000 * 10 * 4000 = around 152 crores = Around 33% of 460 crores .

Their own website 123stores.com has around 7000 daily unique visitors(last year it was not around 2500) (source : http://123stores.com.alexaview.com/ , if order conversion rate is mere 5% then they should have daily order of 350 .

So, total GMV of Intrasoft through their direct website 123stores.com = 350 * 4000 * 365 = 511000000 = 51 crores = around 11 % but management always said below 8% .

So, our estimates and reported GMV are very close, not much variance .

If you seen http://www.marketplacepulse.com/amazon/usa/stores123  closely you might have noticed that it says only 581 product in stock or even if you visit http://www.amazon.com/s?marketplaceID=ATVPDKIKX0DER&me=A3SQ9YFE6CSCS0&merchant=A3SQ9YFE6CSCS0&redirect=true it shows only 574 .
Somehow , there is some issue with Amazon USA storefront , not only for 123stores but others as well . It shows count only from few categories only .

Lets cross check it as well . Give following query to Google .


site:http://www.amazon.com/ "sold by stores123"
site:http://www.amazon.com/ "sold by Pharmapacks"
site:http://www.amazon.com/ "sold by Wayfair"

stores123 gives around 48,800 results while Pharmapacks gives 40,500 . Please note Pharmapacks is second ranking seller on Amazon USA and these results are only for the listing where they are are offering top 3 offers to customer for given listing/product. So , actual listing may be 4-5 times more . Even Wayfair returns around 88,100 records which has market cap of more than Rs 24000 crores . https://www.google.com/finance?cid=1060469309126722  . We will go in detail of Wayfair in next few sections .

So, it proves that they have lot more listing than what Amazon store front URL of 123store is indicating  .

Now check on eBay it is showing more than 160000 product listing .

http://stores.ebay.com/DynamitePrice






Now , you will get confused like me . What is this store name DynamitePrice ? I had received Intrasoft eBay store URL from them officially . But since name is something different we should cross check that as well . I didn't get DynamitePrice and 123store or  Intrasoft relation using Google search . I tried lot of things still no luck . But , then somehow I got relation hint once I found that DynamitePrice eBay store is using some image URLs of 123stores.com by viewing view source option(HTML).


Now, they have appointed Grant Thornton as new auditor for 123store (USA e-commerce division) .
Grant Thornton LLP is the American member firm of Grant Thornton International, the fifth largest accounting network in the world by combined fee income.[1] Grant Thornton LLP is the sixth largest U.S. accounting and advisory organization.


What I liked about management they used to upload audited result of USA subsidiary from last few years even before coming to limelight last year . It may be easy to cook book in India but in USA it is comparatively very difficult due to improved laws in recent past .
So , if they are cooking book then following parties should be involved like management , Amazon , eBay , old auditor , new auditor Grant Thornton and even Intel which holds around 12% .

It is very rare possibility. So , I don't have any doubts on reported numbers .


Lets evaluate on required qualities which experts like Ian Cassel look into micro cap multibaggers Run by "intelligent fanatic" :No doubts , we don't consider Arvind Kajaria in intelligent fanatic category yet but if he continues to do what he did in last 5 years to next 4-5 years then not all but some people like me will include in this category .We should give whatever credit Arvind Kajaria and management of Intrasoft deserve . Whatever, Intrasoft did in last 5 years is simply amazing and if continue to grow at same rate for next 5 years then it will more amazing . They had revenue of around 23 cr from e-commerce (123stores) in 2010-11 but after 5 years this years they are likely to post around 720 crores from e-commerce division (considering 130% growth for two remaining quarters) . It will be around 31 times in 5 years with 99% CAGR over 5 years . If they deserved criticism for something they could have done better then also deserved appreciation for what they have done so far in e-commerce division. Market leader and dominates the small but growing market : 123stores/Intrasoft is not market leader of e-commerce but they are growing fast and may be become top 5 seller on Amazon USA in next 2-3 years . If we consider marketplace inside marketplace model then Nasadaq listed WayFair comes first then not sure but Intrasoft should be second in the world . Asset light business model : Both WayFair and 123stores has quite similar business model . They're not actually carrying much of any inventory. They're the middleman between all these independent vendors and suppliers. They're connecting them to people who are shopping online. If you're gonna sell stuff that's 1,000 lbs or 500 lbs it seems like that's the way to do it. Rather than having massive warehouse facilities where you're holding all that inventory. They directly ship from vendors .They are cash flow positive. Earlier WayFair used to have major business from third party websites but now it has 81% from own websites like Wayfair.com, Joss & Main, AllModern, DwellStudio and Birch Lane . It still has GMV around 19% from third party websites like Amazon , eBay , even WalMart etc . But , 123stores has more than 90% business from third party websites . Even though they don't usually carry inventory but before some big festival sale they own some inventory so that they can quickly fulfill order received and avoid cancellation.As per my knowledge Even they have arrangement to return inventory if not sold . Normal days based on earlier volume , they get certain quote of a product XYZ from vendor. They add certain cost like shipping , marketplaces fees and gross profit etc .Based on this they decide price and list that item in different marketplace. Once , order received their integrated system in real time(or may few minutes time gap) inform to vendor . Now , vendor pack it and handover to courier service partner of 123store and this get delivered to customers . After few days they received payment from marketplace . They settle their due with vendor . This is normal flow but there might be some other flow like return etc . Now obliviously you will ask why Vendor will come to 123stores instead of direct listing ? Business models born because of certain needs .They can but they choose because 1) It is very difficult for small or new seller to show their listing at top . Even if it is lowest price then also it will not appear in top . Like Google, Market Place search engine has some complex formula to order listing of item for a given search.No doubt price is one parameter but there are few others as well like total number of order processed , Feedback etc . 2) They will need some technical expert to decode it . 3) In house team of technical expert will not be affordable to many vendors because of minimum wages in USA . 4) They will also need a team of non tech person for lot stuff like competitor pricing , talking to customers to address some issues , even handling marketplace communication etc .Most of the market places require that you answer an e-mail within 24 hours.The would have to hire customer support agents just to answer Amazon’s queries. 5) Remember what Achal Bakeri ("intelligent fanatic"), founder and CEO of Symphony Limited said "In an ideal world, I would outsource everything, except the bank account". Vendors try to focus on their brand, quality etc. and they just want to outsource online selling to WayFair or 123stores . Wayfair claims to have seven million products from over 7,000 suppliers so there is lot of scope for 123stores . Scalable Business model : It is highly scalable business model . In fact , they just need to clone it for new marketplace and new country. They already might have good design pattern , they just need to extend interface, start coding as per new marketplace and in few months integration ready from technical point of view . US e-commerce market is very huge if somehow the growth slowdown for them then they can enter in any other developed market . It is very huge scalable business model. You have every right to think otherwise if you have any doubts . They have not completely utilized 123greetings.com for free leads to business to their website . So far they have only small link . There are milions of unique user visit 123greetings.com every month . I am still clueless why US people use so much for greeting , In India we just wish on what's up . Nevertheless , if they do little redesigning with banner of 123store with attractive offer then they may get lot of free business leads . Not sure about legal aspect but they have very huge email database of 123greetings.com , they can utilize it to send marketing message with best offer of 123stores for free business leads . High ROE : We will have to give exception on this parameter which will be compensate by high growth of more than 100% . Low debt or debt free : Company has grown topline of e-commerce division by 31 times in last 5 years but debt has been reduced from 11 crores to mere 5 crores . This was possible because of asset light and highly scalable business model . Small equity base and equity dilution : They have not diluted equity from at least last 5 years even grown so much. In fact, they do still have treasury shares around 8% which can be use for expansion. This is amazing you can fund the expansion by selling treasure share without diluting equity . Little institutional ownership : Intel venture capital has picked up 12% stake long time back not just because of expectation of long term profit but also to serve some strategic interest of parent Intel . Zero MF holding and FII just started buying in only last quarter (Sep 2015 ) . 
On other hand if you looked at WayFair then Bank of America upgraded Wayfair from a neutral rating to a buy rating and set a $45.00 target price on the stock in a research report. Citigroup Inc. lifted their target price on Wayfair from $33.00 to $45.00 and gave the stock a neutral rating in a research report . Piper Jaffray reiterated a buy rating and set a $60.00 target price on shares of Wayfair in a research report.Finally, Wells Fargo reiterated an outperform rating on shares of Wayfair in a research report.Five research analysts have rated the stock with a hold rating, nine have given a buy rating and one has given a strong buy rating to the company’s stock. The company has a consensus rating of Buy and a consensus target price of $48.31. Bye the way all are not positive on Wayfair, Whitney Tilson has short position in it . He has personally raised formaldehyde issue, stock reacted little negative but then bounce backed rapidly. Undervalued : When I first discussed Intrasoft it was hugely undervalued and was having market of just 70-75 crores . Now, it is 600 crores but at this valuation also it is undervalued . Black Friday & Cyber Monday ( 5 days period ) they have reported 160% growth . So, if we consider these remaining quarters they will show 130 growth in GMV then total revenue for year will be around 785 crores . So ,assume on safer side Rs 700 crores from e-commerce division which we will use for baseline . Now we will see magic of compounding at high rate and focus topline , topline , topline , topline ................. again topline and then profit business model which has tested success in USA but in India we not experience such success so far ( excuse me for my ignorant if any )

CAGRGMVPAT @ 3% NPMMcap @25 PEMcap @30 PE
Best10022,4006721680020160
Avg8013,227396.819920.2511904.3
Decent302,59977.971949.252339.1


They have grown by around 100% CAGR in last 5 years , currently growing at 130% CAGR but still growing at 100% CAGR in next 5 years is very very much difficult but not impossible .
So , I will again warn you 100% CAGR is best case , We will have to track it during entire holding period and take decision depend on it . This is not moat investing where we buy and forget it .Even at 30% growth in topline we can have 3 times return in 5 years . 
So during our holding period we have to closely watch growth rate and how much NPM will it achieve once business got mature .  One of the rarest of rare but still possible possibility is they never turned profitable consider that as well . It is very very low risk but still risk , can't ignore it completely .


Margin Of Safety : 
Let assume they continue to grow at 100% next year , it means GMV will be 1500 crores . Now investor says we don't want model which can work for US based investors . We want immediately profit , can't hold loss making company or high PE , it gives some non explainable feeling and we also don't have patience ( kal kisane dekha hai ?) .  Somehow , due to these type of investors management comes under pressure , they started to focus on profit . So instead of targeting 3000 crores next year they target same GMV of 1500 cores but at 4% NPM . So they can make around 60 crores since investors love profit making company that too in e-commerce they may give at least 20 to 30 PE .  Probable market cap will be in range of 1200 crores to 1800 crores in two year . Not bad from current level of 600 crores.

Another margin Of Safety comes from NASDAQ listing . Earlier some investors request about appointment of reputed auditor and NASDAQ listing . First wish has been fulfilled . As far NASDAQ listing is concern they were open if Indian market don't give comparable valuation and it adds shareholder's value . 
If NASDAQ listing happens then it can easily get 2-2.5x GMV because it is growing faster than WayFair . Some of the believer of Wayfair model who has missed the bus due to late IPO may show good interest in 123stores.
Once, they get some scale and do roadshow to existing investors of WayFair for fund raising then also they are likely to get good response .



Conclusion : It is one of rare visible opportunity with some margin of safey. 


P.S. (17 Dec 2015)

         Vakrangee investors made 165 times(sorry, by today's price 185 times) in 7-8 years after IT asset write off , it doesn't guarantee Intrasoft will also give good return despite write off . But one thing is sure market reacts badly to detox but if business is good then it may even rewards in long run .



       
      I have added this section since one of the blog reader Aman Vij has raised valid red point about write off.
       Now , after this I dig into write off matter of Intrasoft. I am not accounting expert but I tried my level best to understand it . However , If you have CA background you can send email to me with your unbiased analysis to value2wealth.india@gmail.com .

Now a days write off means complete write off and no direct or indirect benefits to the company . But , earlier it was not the case .
Even before the IPO (2009) , Intrasoft use to write off using "Miscellaneous Expenditures Written off" . It again look like simple write off but no it means "The Expenditure having the impact on the workings of the company in subsequent years or benefit of which shall continue in one or more subsequent years is recognised as Miscellaneous Expenditure.Such Expenditure is written off in equal installment in five years starting from the year in which they have been incurred. "

It was use as account of amortization . E.g  you are working on a XYZ product in year x but that product is going to be launch in x+1 or x+5 years then this term "Miscellaneous Expenditures Written off" is used because this year this product is not going generate any revenue or no use. There might be some alternative to this approach but they followed this .

Now , problem started when after IPO money they rapidly started working on some products but that might have increased deferred revenue Expenditure , but after few years as per revised Schedule VI they no more use this term so they had to debit General Reserve Account .

    You can not have doubt on corporate governance on a Tata group company . You will better understand it from Voltas example , how that revised Schedule impacted the companies.
Voltas -Utilization of share premium a/c to adjust the deferred revenue exp- confirmed by High Court Mumbai    
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=1edb8ccb-c832-4bbf-a7e7-a6506822dca7

Intrasoft had also accumulate lot of deferred revenue exp , they had to adjust that in General Reserve Account after revised Schedule VI. Now , they have clearly indicated in last conf call this is last write off as per their review process. Let's hope for the better .

Some of the other companies used deferred revenue exp, Fixed Assets Discarded or write off are ...

Dabur
http://www.bseindia.com/bseplus/AnnualReport/500096/5000960311.pdf


 Repro
  http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/Repro_India_Ltd_200514_Rst1.pdf


  http://www.bseindia.com/bseplus/AnnualReport/532687/5326870314.pdf
 
 Ashok Leyland 
 Ashok Leyland Ltd has informed BSE that the Board of Directors at its meeting held today (December 10, 2002) has approved a proposal to write off against the Share Premium Account of the Company as sum not exceeding Rs 1600 million representing Deferred Revenue Expenditure (primarily related to Voluntary Retirement Scheme Payouts) and diminution in value of some investments and fixed assets. 
 http://www.bseindia.com/corporates/anndet_new.aspx?newsid=f01a1096-65d1-4909-a1a6-e529180596f4

  BHARAT HEAVY ELECTRICALS LTD
 http://www.bseindia.com/corporates/resultNotes.aspx?Scrip_cd=500103&scripName=BHARAT%20HEAVY%20ELECTRICALS%20LTD.&qtrcode=31.00

Torrent Pharma
http://www.bseindia.com/corporates/resultNotes.aspx?Scrip_cd=500420&scripName=TORRENT%20PHARMACEUTICALS%20LTD.&qtrcode=35.00

STEEL AUTHORITY OF INDIA LTD.
http://www.bseindia.com/corporates/resultNotes.aspx?Scrip_cd=500113&scripName=STEEL%20AUTHORITY%20OF%20INDIA%20LTD.&qtrcode=40.00

 

GMV Amazon USA Ranking :
            store123 has improved it's one month ranking today from earlier 30 to 25 (http://www.marketplacepulse.com/amazon/usa/stores123) . I believe list get updates everyday. Interestingly it might have in top 5 contributor to third party sale on Amazon USA in last one month because as per marketplacepulse.com it's Average sale price is $75.98 while other having like $10 , $20 . If we multiply one month feedback and Average sale price then we may get GMV ranking based on feedback count . I am sure it will be in top 5 but I will do this exercise on spare time or weekend . 







Disclaimer :  Please treat this post as starting point of your research and not conclusion to invest in any discussed stock. As always , please take the advice of a SEBI qualified financial adviser which I am not .

SideNote/MustRead : I am not sure how much you can learn from Idiot like me but you will defiantly learn lot from Jana Vembunarayanan . Please read his valuable lecture note https://janav.wordpress.com/2015/12/12/final-lecture-note-its-not-easy/



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December 2, 2015

TechNvision / Solix technologies : First big player implementation deal win for Solix Enterprise Archiving Big Data Suite .


Our tiny company TechNvision/Solix technologies ( Discussed here )  with mcap of below 50 crores( and BSE believe it should not move up more than 100% in year)  has been selected by more than 1600000 crores market cap (16.30B pound or 24.67B USD ) company BAE Systems for  Enterprise Archiving . Solix badly needed first big reference customer . This is just beginning more to come .



SANTA CLARA, CALIF. (PRWEB) DECEMBER 01, 2015
Solix Technologies, a leading provider of Enterprise Data Management (EDM) solutions, announced today that multinational defense, security and aerospace company BAE Systems has selected the Solix Big Data Suite for enterprise archiving. BAE Systems partnered with Solix to retire its legacy applications and data, which will help the company reduce costs and meet compliance requirements.
According to Forrester, nearly 80 percent of enterprise data is unstructured, and 60 percent of this subset is stale or non-business related. Gartner recently named data growth as the top infrastructure challenge for data centers. As Forrester’s Noel Yuhanna wrote, “In the era of Big Data, archiving is a no-brainer investment.” Legacy applications require similar action--Capgemini found in its Application Landscape Report that up to 25 percent of applications in a typical enterprise computing portfolio are candidates to retire.
Archiving and/or retiring inactive data and applications into Apache Hadoop using Solix Big Data Suite allows companies to reduce the cost of enterprise data management. For enterprise-grade companies, Apache Hadoop is an ideal platform for Information Lifecycle Management (ILM).
“In a world where users produce 2.5 quintillion bytes of data every day, enterprise archiving has become a critical tool for businesses,” said Sai Gundavelli, Founder and CEO of Solix. “We welcome BAE Systems to our growing list of Solix Big Data Suite clients.”

source

http://www.solix.com/company/news-events/press-releases/bae-systems-selects-solix-for-enterprise-archiving/
http://www.prweb.com/releases/2015/11/prweb13103042.htm
http://www.itbusinessnet.com/articles/viewarticle.jsp?id=4192785&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Ibn-ItBusinessNet-news+%28IT+Business+and+Technology+News%29

As a side note , I request you to go through must read interview of Ian Cassel (MicroCapClub.com) on safalniveshak.com . I am big fan of Ian ,  Basnat sir and professor Sanjay Bakshi .

http://www.safalniveshak.com/ian-cassel-microcap-investing/


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November 5, 2015

Prem Watsa Acquire ADI Finechem Limited

     Prem Watsa (Fairfax India)  has entered into an agreement with existing shareholders of ADI Finechem Limited ("ADI") to acquire approximately 45% of the outstanding shares of ADI at a price per share of INR 212 per share (collectively, the "Shareholder Transaction") for total consideration of approximately INR 1.3 billion.

ADI Finechem Limited is one of my portfolio stock which was under-performing in the recent past .

Current price is very attractive opportunity to enter or increased holding in it . Now it will Prem Watsa  company and liked by Sanjay Bakshi . If I am not wrong then Sanjay Bakshi already like this stock and not sure if he holds it or not. I am not able to recollect where professor Sanjay Bakshi has mentioned about liking of this stock . But one thing is sure he has high liking for Prem Watsa  .

If you are long term value investors then I can see there is very limited downside at current price around 225 , but upside is high in the long term.


http://www.bseindia.com/corporates/anndet_new.aspx?newsid=68E6A74E-1091-44A4-8EEF-F28EFA2550E6 

Prem Watsa, Chairman and CEO of Fairfax Financials, has compounded book value at 21.2% and stock price at 19% since 1985. There was a great deal of excitement when Fairfax took over the Thomas Cook operations in India.


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1. Provide your email ID.
2. Check your email inbox for confirmation email and click on confirmation link.

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November 3, 2015

Venture Capitalist Vs Value Investors


             Generally, Venture Capitalist and value investors don't talk to each others and explain their valuation methodologies .  There is a gap . Both are critics of each other, but never get on the same page.
We as value investors make fun of Venture Capitalist on social media , they should also doing same but not sure about that :) .

What is the definition of Venture capital? 
            Venture capital (VC) is money provided to seed, early-stage, emerging and emerging growth companies. The venture capital funds invest in companies in exchange for equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology , IT and now a days e-commerce.

Bridge between Venture Capitalist  and Value Investors (or Secondary Market Investors )
        Professor Aswath Damodaran has made attempts to provide some bridge . If you don't know Aswath Damodaran then he is a Professor of Finance at the Stern School of Business at New York University (One of worlds top ranking business school , maybe 5-6) , where he teaches corporate finance and equity valuation. He is another professor like Professor Sanjay Bakshi from whom we can learn lots.

Please go through his following Talks at Google .





He also nicely explains valuation for the life cycle of a company.

http://www.valuewalk.com/2015/10/aswath-damodaran-the-corporate-life-cycle-investing-finance-and-management-lessons/



Valuation of loss making companies in sunrising sector e.g. Uber .


The Uber Narrative Rollercoaster: A Wild Ride!








There are other videos of Aswath Damodaran are available on you tube . Please go through them whenever you get time . Defiantly, You will learn something new. You can also follow him on his blog http://aswathdamodaran.blogspot.in/



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October 3, 2015

TechNVision Ventures Ltd(Solix technologies) a bamboo value stock pick

             Although, my blog is about value investing in India, but I am not a pure value investor. I like to play according to the condition of the market. If ball is in right area then hit for six don't push for single which is very safe. If you are looking for pure value investor then I am not the right person . I feel lot of quality stocks are very expensive, they will give return, but one thing is sure they can't match their past performance and if growth numbers below par then it may be turn as bad bet at a current high price like it happened with Hawking Cookers. So, It may make sense to hold them, but not ideal candidate for new investment. We will have to find our alternate approaches. I  feel better ways to make the money in current sitution(in fact always) to find bamboo types of value stock picks with  less than the 200 Cr market cap.

What is bamboo stock pick?
If you water this bamboo in the first year, nothing happens. If you water it the second year, nothing happens. If you you water it in the third year nothing again happens. However, if you water it in the fourth year, it will grow 90 feet in six weeks.


It is not easy to pick bamboo type stock picks, but I am experimenting with it.

You may see some bamboo pattern in a lot of stocks e.g. Avanti Feeds which was around Rs 30 in 2001 and also around 30 in 2010.



      I evaluated some the companies and finally zeroed on TechNVision Ventures Ltd because of it's a subsidiary Solix Technologies, Inc.. I have already brought around 20% of my desired allocation in it, but before further buying I need some inputs from the IT Technical Experts (Technical Architect) etc about its product and it's prospects . So, if you are Technical Architect, or have some technical background then please send your views about prospect of products of TechNVision /  Solix Technologies, Inc at value2wealth.india@gmail.com  I will take that as input for the next article on TechNVision Ventures Ltd .

Why TechNVision (Solix ) ?
                    There might be some big IT player like TCS, which can get benefited because of growth in the Big Data and Cloud but we can't get multibagger out of it. But TechNVision (Solix Technologies, Inc.)  can be become mutibagger if it is able to ride on growth of Big Data, Hadoop and Cloud technologies. This stock is not yet discovered by the stock market since past performance is not impressive, but some IT biggies (Gartner , Cloudera , IGATE ,L&T Infotech, Apache , cognizant , Oracle , SAP ) see a lot of potentials in it.

Big Data and Cloud Growth prospects :
                     Just do little research about Big Data and Cloud growth prospects and you will see that it is going to six-seven times the growth rate of the overall information technology market . This is going to be the next biggest trend in the IT industry.

What is special in TechNVision  (Solix Technologies, Inc ) ?
                     Past performance is not impressive but I believe growth is on inflexion point. It may be visible in next 4-5 quarters .

If you want to see special about TechNVision  (Solix Technologies, Inc)  then see the following Gartner Magic Quadrant released by Gartner in 2015  . Please note, Gartner is quite reputed name in forecasting and reaching  IT Industry. Most of the biggest companies in the world, including Indian biggies like Infosys, TCS   give their reference, and also use their research to target segments/market.



          What Solix Technologies, Inc(market cap less than 30 cr)  is doing with biggies like IBM , HP , Informatica which have a market cap of Rs 30,000 Cr to Rs 9,00,000 cr in the leaders segment ? It speaks about their product quality for Enterprise Archiving products. We rarely see Indian companies like this because maybe most of them are in service Industry.

Solix Big Data Suite is going to get traction in coming quarters.

           Solix Technologies, Inc have received Cloudera CDH5 certification for the Solix Big Data Suite – Enterprise Archiving (version 2.1). By moving less frequently accessed data from production databases into Apache Hadoop, enterprise archiving improves the performance and dramatically reduces the cost and complexity of maintaining tier one systems.The Solix Big Data Suite provides secure, compliant, low-cost, bulk data storage for structured and unstructured data, and is an ideal platform for enterprise archiving and enterprise analytics on a petabyte scale.

            As per my limited knowledge only other Indian company TCS has received similar certificates from Cloudera and KPIT is also on the way to achieve it.  TCS has a similar comparable product called TCS ActiveArchive Big Data Suit .

           If you have a good product then also it is very hard to fight with biggies . So, Solix is doing partnership with other biggies which need similar product as part of the complete System Integration but they don't have in house .
Most of the System Intgrators like IBM works as a front face with their clients, e.g. Big XYZ Bank to provide a complete solution . IBM can't have all the systems so they need multiple vendors which can fulfill the gap .


TCS has their own systems for archiving enterprise big data database so others have the choice to develop their own or work with partners like Solix .


When, I was researching this stock I got a pleasant surprise, when I saw IGATE which has a market cap of almost Rs 25000 Cr had announced in June2015 that they have tight up with Solix technologies ( Refer http://www.marketwatch.com/story/igate-partners-with-solix-to-provide-comprehensive-enterprise-data-management-solutions-2015-06-03 ) . We rarely see the biggies announce tied up a tiny company like this.
It again shows they think something good about the product of Solix Technologies. Now IGATE is going to be acquired by CapeGemini so now it will big player CapeGemini will work with Solix if they don't have in house similar product .
Even, cognizant technologies Ltd has also given some good weightage to Solix and mentioned them as their partner ( refer http://www.cognizant.com/partners/solix ) for providing complete solution .

Even, L&T inoftech also given good weightage to their partnership with Solix (Refer http://www.firstpost.com/business/biztech/business-tech/big-data/lt-infotech-partners-with-solix-to-offer-enterprise-data-management-solutions-1992465.html )

You can get a complete list of all partnership at http://www.solixcloud.com/solix-partners.htm


Compare with Peers :
            If we ignore the market cap then there are two comparable peers in listed segments are Ramco Systems Ltd and 8K Miles Software Services Ltd . I have not done much research on these two companies, but these two are also having cloud based products but not sure about Big Data/Hadoop. In fact ,  8K Miles Software Services Ltd  also provides service to move their client on Cloud. 8K Miles Software Services Ltd was darling of market from last 2 years has given around 10x return in last two years . Even, Ramco Systems Ltd has also given 10x return in last 2 years or so . 8K Miles Software Services Ltd showed good numbers in the last year, while Ramco Systems Ltd is turned from red to green last year. Arun (arunthestocksguru.com) has quite bullish on Ramco (http://www.arunthestocksguru.com/2015/07/ramco-systems-ltd-can-cloud-player-take.html) while Porinju Sir (Porinju Veliyath) is bullish on 8K Miles Software Services Ltd from long time. Ramco System has a market cap of 2250 crores and  8K Miles Software Services Ltd has a market cap of 1500 crores while TechNVision Ventures Ltd has a current market cap of only 30 crores . TechNVision Ventures Ltd will also go on same path only if good product translates into good numbers of deals and good deals into good revenue and good revenue into good profit / EPS . It will not move fast just because of good products . Again, this stock we will have to give enough time don't sell if 2-3 quarter's number are below par.

You can see details of the Solix Big Data suits at http://www.solix.com/products/solix-big-data-suite/solix-big-data-suite-standard-edition
TechNVision Ventures Ltd has another subsidiary Emagia which also provide cloud solution for receivables management (http://www.emagia.com/products/emagia-cloud/)


Share holding structures:
              TechNVision Ventures Ltd is quite closely held entity . One of the reason might be to avoid a hostile takeover . Promoter sharholidng is 74.32%, but in reality, it's around 84% . How?  You will say what about SEBI 75% promoter shareholding . Officially, it is 74.32%, but Solix Esops Foundation Trust (4.72%) and Solix Employees Housing Welfare & Housing Trusts (4.72%) holds to gather around 9.44% . Even though TechNVision Ventures Ltd is old company, but they have reinvented themselves and working like some of the new era startups . I believe even Valaboju Narendra and Tornala Mohit Kumar might be closed to promoters and turned investors . Public floating stock is quite low so trading volume is also low , very hard to get shares .









1 . If you find this as interesting story, then spend around 1 hours in first hour on this video (https://www.youtube.com/watch?v=GMk1hPH9z1w) If the link doesn't work then search "Computer America Solix" . Sai Gundavelli (Founder and CEO) talked about Big Data and company prospects etc .


2 . Go through 7 page interview of Sai Gundavelli (Founder and CEO) at http://www.sramanamitra.com/2015/07/22/scaling-a-technology-company-against-major-competitors-solix-ceo-sai-gundavelli-part-1/
The highlight of this interview is their competitors got acquired by big companies like IBM, Informatica etc .
He answered one of the questions "Companies have been tapping us for potential acquisitions. Companies are never sold. They’re always bought. I think we’re looking for that magic moment. At this point in time, this product can make a billion dollars in revenue. I can confidently say that. I’ve got one customer who’s willing to pay $3 million. A lot of these companies are trying to do more than a custom project. We are productizing the entire thing. I don’t know whether we can become another mini-IBM but there is a possibility. Most probably, the company will get acquired. I’m not trying to sell."

They are hoping to make total 1 billion dollar revenue (6500 Cr) out of this product of Solix even if it makes 650 crores it will mutibagger for us . This is company view, but I need views of Technical Experts on it . Please send your detail email to me at value2wealth.india@gmail.com   if you have a technical background .

Another point to be noted from his interview is that due to big data their deal size is increasing around 6-10 times . They are in the process of signing deals (not officially signed yet)  of around 20 Cr with one of the largest financial institution of the world .

Usfull Links about Solix and Big data :

I will keep updating it

# Solix says SAP archiving will be available during the second half of 2015
http://directria.ulitzer.com/node/3348175

# Solix Big Data Suite: First ILM Application Framework for Enterprise Analytics on a Petabyte Scale
http://news.sys-con.com/node/3131218

#  Gartner likes its improved search and reporting capabilities and the fact it supports Open Database Connectivity, Java Database Connectivity and Java and web servicers
http://www.cmswire.com/information-management/do-we-have-to-keep-all-this-darn-data/

# linkedin URL for updates
https://www.linkedin.com/company/solix-technologies

# How Application Tiering with HADOOP Reduces Infrastructure Cost
http://sandhill.com/article/enterprise-application-tiering-with-hadoop/
http://www.dataversity.net/infographic-how-application-tiering-reduces-infrastructure-cost/

# The Big Data promise
http://www.smartdatacollective.com/saigundavelli/318806/how-pivot-your-data

# SBI uses big data mining
http://timesofindia.indiatimes.com/business/india-business/SBI-uses-big-data-mining-to-check-defaults-biz-loss/articleshow/48397829.cms




Concern / Risk:

           1.  As always I love to take calculated risk, but If things don't turn out as expected then it is a risk, but current market cap is very much low as compare to my expectation .
           2. If subsidiary Solix Technologies, Inc got acquired by some big company then definitely they will pay handsomely . But, it will be on hand of promoters to reward similar to minority shareholder since of the following structures of subsidiaries . So, It will be always good if some reputed investors come on the board and make sure they minirorty shareholders get the same reward as promoter .



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Disclaimer :  Please treat this post as starting point of your research and not conclusion to invest in any discussed stock. As always , please take the advice of a SEBI qualified financial adviser which I am not .

Disclaimer

I am not an Investment advisor and do not provide this service via this Blog. The Blog is a personal diary and the stocks discussed on the blog represent my personal views and analysis. They are not recommendations to buy or sell stocks. I do not intend to recommend any stocks for financial or non-financial gains and may or may not be holding the stocks discussed on my blog.

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