FUTURE OF VAKRANGEE
LATEST INFO & ANALYSIS
VAKRANGEE
has at last released its Q4 and FY 18 results. It has also released a Press
Report and an Investor Presentation.
Some
commentators find fault with many things that Vakrangee has done and not done.
They are right to some extent. But, overall, the course of action that
Vakrangee has chosen for itself cannot be dismissed lightly. Let us discuss the
Hits and Misses, Things Done and not done in some detail.
First the
Q4 FY 18 Key Financial High Lights :
VAKRANGEE
|
Q4 FY18
|
Q3FY18
|
Q4FY17
|
YOY
|
QOQ
|
INCOME
|
1847
|
1802
|
1145
|
61.31
|
2.5
|
OTHER INCOME
|
20
|
8
|
3
|
566.67
|
150
|
TOTAL INCOME
|
1867
|
1810
|
1148
|
62.63
|
3.15
|
TOTAL EXPENSES
|
1753*
|
1447
|
901
|
||
*Includes One Time, Non-recurring OTHER EXPENSES on Bad Debts
amounting to Rs.220 Cr
|
|||||
P B T
|
113
|
364
|
246
|
-54.07
|
-68.96
|
NET PROFIT
|
76
|
247
|
161
|
-52.8
|
-69.23
|
NPT+ONETIME OE/Bad Debts w/off
|
296
|
247
|
161
|
83.85
|
19.84
|
EQUITY(FV RS.1)
|
106
|
106
|
53
|
0
|
|
EPS (DIL)
|
0.72
|
2.31
|
1.43
|
-49.65
|
-68.83
|
The current Market price of the scrip is Rs.42 and
the PE Ratio on that works out to 15. If we remove the effect of onetime
write-off of Bad Debts of Rs.220 crores, the picture is reasonably decent.
The company says – it is now a Debt-Free company.
Now, let us also look at FY 18 consolidated Results
For Full
Year FY2017-18 (Consolidated)
➢ Total Income is
Rs.6,536 Cr against Rs.4,006 Cr in FY
17, a growth of 63%
➢ EBIDTA : Rs.1038
cr in FY 18 against Rs.951 cr in FY 17, a growth rate of 9%
➢ EBIDTA
(excluding legacy business write off) stands at Rs.1,258 Cr in FY 18 against Rs.951Cr in
FY 17, a growth rate of +32%
➢ PAT : stands
at Rs.680 Cr in FY 18 against Rs.531 Cr in FY 17, a growth of + 28%
➢ PAT
(excluding legacy business write off) stood at Rs.900 Cr in FY 18 against Rs.531 Cr in
FY 17 , a growth of + 69.63%
➢ EPS (basic) on
a Face Value of Rs.1 stands at Rs.6.43 in FY 18 against Rs.5.02 in FY 17. But,
we must remember that this EPS has resulted on Post Bonus, doubled Equity in FY
18, that too after writing off Rs.220 Cr as bad Debts.
The company has issued some
significant Future strategy Updates for clarifying the position of the company
on many aspects, which are summarized below :
Company
Strategy Updates
1. Hold
& Consolidate for the Current Year
➢ Focus to
convert / upgrade all 45,000+ outlets to the Nextgen Vakrangee kendra – Silver
or Gold model with standardized Look & Feel
➢ Focus is on consolidation and
standardization of all 45,000+ kendra outlets
➢ Conversion /
Upgrade / churn to happen in a gradual manner.
➢ Long term
target for 2020 = 75,000 kendras
2. CAPEX ON ATM Business
➢ ATM is
mandatory
➢ ATMs to be
provided to all Nextgen Franchisees on Custodian Basis by the Company
➢ Capex of more
than Rs. 2.00 Lakhs per ATM to be
incurred by Vakrangee.
Ø Return on Investment is lucrative compared to
current return ratios.
Note :
The company has not stated as to how
many ATMs are already available and how many more are needed. This needs to be
clarified by the company. Huge part of current cash reserves will go for
provision of the ATMs as CAPEX.
3. Impact on
Profitability & Revenue Growth
➢ Franchisee to
incur capex plus working capital investment upto Rs. 10 Lakh for silver kendra and upto Rs.
18-20 Lakh for Gold kendra.
Ø Revenue
sharing ratio to change hence resulting
into impact of profitability for the company
➢ During the
process, at any time there would be around 10,000 outlets under up-gradation or
churn mode for a period of 6 months, impacting the Revenue and profitability
growth for that period
Note :
Investors must be prepared to see
lower profits margin for next 2 quarters, according to this strategy. But, long
term future may be good.
4. To focus
on Vakrangee Kendra Business
Ø Company to
focus only on Vakrangee Kendra Business.
Ø Company has
stopped taking new mandates in relation to legacy business
➢ There are old
outstanding receivables on legacy e-Governance business of Rs.219.95 Cr which
stands written off.
Note :
This is good for company and
Investors. Vakrangee must not take such legacy Businesses in future in which it
is helpless to recover the Dues from the Debtors.
5. Update on
Current Progress for the Next-Gen Franchisee Model
Ø Already
Received more than 7,800+ applications for the Next-gen Vakrangee kendra Silver
or Gold model.
Ø Pan India
marketing planned over the next few quarters to increase the Brand awareness
➢ More than 50
outlets in Mumbai Metro Region to be operational by 31st July.
➢ Grant Thornton
to start the Business quality analysis from 1st July onwards. first report by Sept
end.
6. Update on
Dividend Payout & Capital Allocation Policy
➢ Based on the
current Capex plan for the ATM business and increased spend in marketing expenses,
the company plans to change the Capital Allocation policy.
➢ Capital
allocation policy to be finalized based on the outcome of 5,000 operational
Next gen outlets.
Note :
Vakrangee must prove that it is
investor friendly. Investors in Vakrangee have already lost sizeable wealth by
the erosion of share values, which the company failed to arrest. Yes. It can
make all Grand plans for the future of the company.
But, I feel, the company should have
come forward with a good dividend, to recognize the pain of the Investors at
this point of time and reward them for staying with it.
Vakrangee is clearly missing that
opportunity.
Update on
Market Rumors
&
Change in Auditor
• Update on Market Rumors
➢ no show cause
notice either from Stock Exchanges or Security Exchange Board of India (SEBI)
or any regulatory body for being involved for any price and volume
manipulation.
➢ The rumors of
are completely baseless and factually incorrect.
Note :
PWC had commented something on
Election Books, Bullion and Jewellery. Neither PWC nor the company nor any
regulator is clarifying much on this. We don’t find any such Business in the
quarterly or annual statements submitted by the company. Then, what is it?
There must be transparency in all aspects of Business. Vakrangee must aim for
such transparency at least in future.
• Update on Change in Auditor
➢ Company’s
financial statements present the true and fair view
➢ PWC had
satisfactorily done the limited review for the period till 31st December 2017.
➢ Company has
already appointed M/s. A. P. Sanzgiri & Co., as the New Statutory Auditor.
➢ Current Full
Year March 2018 results have been satisfactorily audited by M/s. A. P. Sanzgiri
& Co.
Vakrangee has already gone through 3
Phases. The 4th Phase is explained as below :
PHASE.4 :
Exclusive next gen assisted digital
convenience store :
Banking, financial services, e-governance,
insurance, e-commerce, logistics and ATM services;
Standard design by Lewis & Hickey,
Branding and signage, ATM mandatory, Digital signange and CCTV, Pinpad devices
for all kinds of pmts,
Upgrading all 45000+franchsees to
next gen Vakrangee kendras – Silver Model 200 sft and Gold Model 300 sft
Lewis & Hickey are the brand
consultants
Vakrangee has estimated the TOTAL
OUTLET POTENTIAL as 3,69,977
Ø
RURAL : 2,94,442
Ø
URBAN : 75,535
Ø
RBI WHITE LABLE ATM LICENCE FOR 15,000 WLA
Ø
MAINTAIN RURAL : URBAN 2:1 RATIO
ABOUT VAKRANGEE :
Vakrangee is focused on building
India's largest network of last-mile retail outlets to deliver real-time
banking & Financial Services, ATM, insurance, e-governance, e-commerce and
logistics services to the unserved rural, semi-urban and urban markets. These
will be Nextgen Assisted Digital Convenience stores
It has signed “Common BC” and
“National BC” agreements with various public sector banks for offering
real-time banking to unserved and under-served Rur-ban population. Banking at
“Vakrangee Kendra” outlets is a unique experience with disruptive technology
and real-time transactions.
Outlets also provide insurance
products, e-governance services and e commerce products.
Also offers assisted e-commerce
services offering strong platform for buying/collecting/delivering large
variety of products;
Alliance with RedBus for offering bus
ticketing services Cinestaan Digital
Private Limited to offer free and offline videos to citizens and with Netmeds
Marketplace Limited to offer medicines and other health Products
Alliance with (IRCTC) for offering
Railway E-Tickets booking.
Tie-up with (LIC), HDFC Life
Insurance Company Limited, Bajaj Allianz Life Insurance Company Limited and
other Insurance Companies.
Alliance with FedEx , Blue dart and
First Flight Couriers Limited for courier and logistics services (Forward
Delivery as well as Reverse Pick Up services).
Strategic tie-up with Indian Oil
Corporation Limited to set up about 20000 plus IOC Retail Outlets
Final Note :
The Q4 results are marred by the Bad
debts written off and also the Dividend not considered. Next 2 quarters results
are also likely to see lower profitability due to capex issues.
Vakrangee must not only look at its
Business from promoter perspective but also from Retail Investor Perspective.
Retail Investors in Vakrangee are terribly shaken by the steep erosion in their
Invested wealth in Vakrangee. In
fairness to them, Vakrangee should have declared a Good dividend and used the
balance cash for CAPEX.
Keep the retail Investors on your
side, Dear Promoters. Otherwise, they will get disheartened and desert
Vakrangee at whatever be the Market price. Current Rs.42 price may come down
further also, if this attitude persists.
Again, rumours, again ugly demands
from Media etc will ensue.
I do hope, Vakrangee will see the
sheer logic behind keeping the retail investors always happy, which it has not
been doing so far.
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