TANLA SOLUTION (RESEARCH DONE A YEAR AGO)
MANAGEMENT:
(in FY20 acquired very experienced Talent from
Bharti Airtel, Vodafone etc)
UDAY Kumar
Reddy ( Chairman and MD)
·
Founder of Tanla solutions Limited , MD and
Chairman since 1999.
·
Holds an
MBA degree from Manchester Business School in the UK.
Amrita
Gangotra (Joined 31 july, 2019)- Independent Director
·
Worked as Director Tecnology in Vodafone for 6
years
·
Worked for around 7 years as Director-IT &
CIO in Bharti Airtel
·
SR. Project manager of Nestle for 9 years
·
Sr. System Manager in HCL ltd for 2.5 years.
Sanjay
Kapoor – Non executive Director appointed on 31st August 2019 (Senior advisor and mentor)
·
Consulting since last 5 years
·
CEO of Bharti Airtel Limited India & SA
for 7 years.
Sanjay
Baweja- New Independent Director appointed on 31st August 2019
·
CFO for suzlon for around 1 year.
·
CFO in Flipkart for 2 years.
·
CFO for Tata communications ltd for 6 years.
·
CFO 9 North part of Bharti Airtel limited for
4 years.
Rohit
Basin- New Independent Director
appointed on 31st August 2019
·
Worked in Organisations such as Standard
chartered bank, PWC
·
Also served as Independent Director on Forties
Health care.
BUSINESS: (Cloud Communication
Provider)
A2P Messaging monetization: (Application to person)
In simple
words If we do a transaction from an app/Bank we get a message of OTP that OTP
go through Tanla solution or managed by Tanla solution. (called A2P monetizing solutions)
In
Segments reported as Mobile VAS (Value added Services)
Now
entered into Mobile Advertising.
Recent Acquisitions:
Closed
Acquisition of Gamooga Softtech Pvt Ltd
for 48.45 cr on 30 August 2019.
About
Gaamooga Softtech Pvt Ltd.
Marketing
automation solution which helps e-business deliver personalized actions at
their customers through various channel such as email, web, mobile, social and
display. (Mobile Advertising)
Closed
acquisition of Karix Mobile Pvt Limited on 10,April 2019 for 340 cr .
About
Karix Mobile Pvt Limited: (Strategic acquisition)
Business of Cloud Communication provider
FINANCIALS:
P/L analysis 9MFY20
9MFY20 9MFY19(cr)
Revenue
from Operation 1420.8 686 Rise by 107%
Cost of
services
1141.6 588.5
%
of RFO 80.3% 85.8% Cost
of service reduced (positive)
Employee
expense
90.9 13.7 Rise by 6.6 times
Employee Expense (Recurring) 49.6 13.7
%
of RFO 3.5% 2% Employee cost increased new management
EBITDA
126.4 68.4
EBITDA (Ex Non Recurring expenses) 174.9 68.4
EBITDA
%
12.3% 9.9% Adjusted EBITDA margin improved
PBT
-164.8 22.0
PBT adjusted 103.6 22.0 Up 4.7 times
Assumed
tax@25%
25.9
PAT
Adjusted 77.7
EPS
Adjusted 5.32
Annualized
EPS assumed 7.10
PE as on 8th
June 2020 70.55
PE
multiple
9.9
Balance
sheet is available as on 30 Sep 2019, 9MFY20 data is from P&L.
9MFY20 30.09.2019 31.03.2019(cr)
PPE 152.8
349.7
Total
Depreciation 293.7
Total
Depreciation% of PPE of 31.03.2019
84%
As highly
technology Driven Company booked depreciation to the extent of 219.6cr in
9MFY20.
TCCCPR
(Telecom commercial communications Customer Preference Regulations) 2018,Voice
and text communication should be provided using BLOCK CHAIN . Due to New
technology re-assessment of useful life of technological assets was done which
resulted in HEAVY DEPRECIATION.
·
Reduction in Margin is due to Very high
Employee cost. Of the Total Employee cost
41cr is due ESOP cost which is non recurring.
·
Total Non recurring cost is 48.8cr(41cr
employee and 7.8 cr acquisition cost including legal consultant etc)
ü
So Company has done good on all front Revenue
rise, Cost of service as % of RFO reduction ,EBITDA Margin increase & PBT
on adjusted basis
ü
Employee cost % of RFO rose from 2% to 3.6%
may be due to Big names brought into management.
ü
PBT adjusted is excluding heavy depreciation
and Non recurring cost.
·
In spite PPE reduced considerably yet Revenue
shot up very high and trend has been from FY14.
( Cr ) 9MFY20
1HFY20 FY19 FY18 FY17 FY16 FY15 FY14
Revenue 1429.5 881.7
1004 792 579 432 242 105
Growth 42.4% 27% 37% 34% 79% 130% -
PPE 152.8 349.7
452 462
Trade receivable 352.1
307.8 266.5 113.6
TR% of revenue 40% 30.6% 33.5%
C&CE 131.4
155.0 165.4 133.3
Borrowings 56.04 59.9 0 0
·
Borrowing
rose as Tanla took loan to repay loan of Karix
and Unicel technology its subsidiary whose
Rate of interest was very high.
·
Debtor
days as on 30.09.2019 has been as high as 145 days.
KARIX Revenue in FY18 was 540cr .(Growing at CAGR
of 19%)
For FY20 total revenue with
CAGR growth will be 769cr.
So for 9MFY20 Revenue from
Karix comes to around 576.8cr.
Gamooga Revenue in FY18 was 5.7
cr.(Growing at CAGR of 80.5%)
For FY20 total revenue with
CAGR growth will be 18.6cr.
So for one quarter Revenue from Gamooga comes
to 4.64cr.
9MFY20 9MFY19(cr)
Revenue
from Operation 1420.8 686
Assumed
contribution from Karix 576.8
Assumed
contribution from Gamooga 4.6
Revenue growth without
Acquisition 839.4 686
22.4% growth
So extraordinary growth have come from all ends however it was major
due to Karix acquisition.
BUYBACK
Announced Buy back of 1.9 cr shares @ Rs 81 =153.9 cr Total Buy
Back amount.
In
Investor presentation company told C&CE
stood at 204.8cr that means very high amount of cash already
With the company to perform the buy back.
Promoter
holding before 35.24% i.e 5.36 cr shares
Buy
back shares 1.9 cr
Total
shares after buy back =15.21-1.9=13.31 cr shares
Promoter
holding will increase to =5.36/13.31= 40.3%.
So
Adjusted EPS after Buy back will be For FY20= 5.84*12/9= 7.8
AT
CMP =70.5
PE
multiple
= just 9.
ROCE
(Adjusted)
= 15.7%
PB
(Adjusted)
= 1.08
Conclusion:
·
Company has good revenue growth, improving
EBITDA margin, High Cash reserves, good management after latest recruitments
and attractive valuation.
·
However, inspite considerably reducing PPE
other than acquisition how company is able to generate revenue …need to be
clarified from management.
·
Depreciation of Asset has been huge as
technology became outdated …How much of remaining asset is still left.
·
Company has DE ratio very very low i.e. 0.08.
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