Speciality Chemicals Industry Overview in India

January 12, 2022

Key growth drivers of the market:

  1. India has a huge technically skilled workforce which helps boost the specialty chemicals market in the country. As of 2016, 51.09% of the total population of science, technology, engineering and math (STEM) graduates were from India. Apart from the availability of a large educated population, India offers unskilled labor at much lower wages as compared to other countries. The availability of a large talent pool, along with a nominal wage rate makes India an attractive production hub for various foreign companies. This, in turn, acts as a driving force for the specialty chemical market in India.
  2. The Chinese government announced the closure of various chemical companies that produced hazardous waste, which led to disruption of the supply chain. The developed markets are, therefore, now focusing on having an alternative supplier of chemicals apart from China to ensure an uninterrupted supply of end products, making Indian players more competitive.

Key deterrents to the growth of the market:

  1. In the specialty chemicals market, only a few Indian players have the capability to compete with global giants in terms of product development and innovation. As a result, Indian specialty chemical manufacturers are generating less revenue, and sales have also dropped as compared to foreign companies.
  2. Indian specialty chemical manufacturers are often forced to deal with cyclicality, especially in the textile manufacturing sector. Therefore, companies face difficulty in surviving during periods of low demand. This, in turn, hampers the growth of small specialty chemical manufacturers of India.

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List of network effect share in India | List of network effect Companies in India

January 08, 2022

List of network effect share in India
  1. IEX 
  2. NSE / BSE 
  3. MCX 
  4. IndiaMart Intermesh
  5. Naukri

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Saregama Fundamental Analysis | Saregama Share Analysis

January 06, 2022

Saregama Fundamental Analysis:

A thread about different segments of its business model.

Revenue from segments like Music (IP + Carvaan), TV & Films (Yoddle Films & Tamil TV) & Publications are shown.
(1/9)
1. Music IP
Image shows collection of their retro music, their library has IP of 130k music.

All music streaming platforms from Amazon, Spotify, Apple, Ganna acquire license of its music and share advertisement/subscription fees depending on customer engagement. (2/9)
It also Licenses its music to Television Channels (for TV serials, reality shows) & OTT platforms (like Netflix & Prime) where they issue license at fixed fee.

25 youtube channels with 44m subscribers, ad revenue is shared with Saregama (3/n).
This segment is the cash cow and expected to 20-25% growth in future.
In FY21 due to no release of movies, they did not acquire new contents and margin shot up.
In future they want to have share of at least 20% of total new music. (4/n) 
Risk: New Content acquisition cost is amortized over 6 years and payback period is approximately 5 years.

As marketing cost is up front (hit P&L in the first year), profit margin may reduce for first few years. (5/n) 
2.Carvaan:
A device with preloaded songs suitable for older people

Generates 25% gross margin and influences other people to consume retro music in digital platform

Recurring revenue by providing podcast content (ad revenue shared with content owner) is being envisaged (6/n)
3. VideoSegment: Yoodlee Films
Creates Low budget content for 3rd party platforms and issues period-based licenses for fixed-fee.

Licensed 16 films (Netflix Hotstar & Zee) in 4yrs
Target to reach 100 films in next 3-5 years, TV series will also be released soon. (7/n) 
4. Video Segment: Tamil TV Serials
Provides around 9-10 hrs of content (3 serials) per week

IP owned by Saregama, so monetize it on Youtube and Facebook also

South TV Youtube channel: 577M views in Q4
Roja continues its leadership position on Sun TV (8/9) 
5.Publication Segment: Open Magazine

Launched in 2009 as a print-only weekly available in select Indian cities.
It has now also rolled out a digital version, giving it a global reach.
Negligible revenue and no plan for scaling up (9/n) 

• • •

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Deepak Nitrite Future Outlook | Capex Plan |

January 06, 2022


Second leg of the journey is about delinking from margin volatility. Some key words here-formula linked arrangements, high margin products & downstream chemicals. This is essentially what an investor's thesis in Deepak today is. FY25-26 will be interesting


 

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How To Prepare For Bear Market

January 06, 2022

How To Prepare For Bear Market:

1. Not to get stuck in expensive stocks during a bull run. 2. Country diversification. 3. Protecting the downside is very important. 4. Try to hit 1s and 2s and not go for large returns.

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Birlasoft Share Analysis | Birlasoft Fundamental Analysis and Future Outlook

December 31, 2021

Birlasoft Fundamental Analysis and Future Outlook

* Industries & Domains - Auto, Banking, High Tech, Manufacturing, Capital Markets, Insurance, Media & Ent, Energy, Life Sciences, Healthcare, Utilities
I clearly see some segments that can easily create a drag on rest of the business - Mfg, Energy, Utilities are some of those segments. However, in capex friendly scenario, this can generate Alpha
* Services - Digital & Enterprise Tech. #Birlasoft categorizes their services business only in 2 segments. Which is very wise. Keep things simple. Don't over categorize. Digital Services include CX, Analytics, Connected products, Automation, Cloud & Blockchain
Enterprise Services include very enriched & diverse offerings. Right from JD Edwards (I don't know who uses it now), Oracle, MS Dynamics, PTC to SAP, they offer enterprise services in every leading ERP platform
Services further include CRM, Supply Chain, Prod. Lifecycle, IT transformation, Application Management, Testing, and Cloud Infra.
* Products - Very rich product/solutions portfolio. intelliOpen intelliAsset TruView CLM TruServ FSM TruLens iLink Supplier Risk Radar Akoya Producer Workspace Submission Automation ZeROTechDebt KwickPick iSight WMX Smart Street Lighting Smart Meters TruRPA TruCommerce Cont..
Customer 360 Dealer Portal TruCX ConnectedBI Infor CloudSuite ClickRecovery Phew!! Such a long list of tools & products. Mostly these are accelerators & not a fully blown products. Kind of Rapid Deployment Solutions & Tools. But still, significantly large number.
* Cloud/Digital? - Co includes cloud/Digital business in the digital vertical. Just like LTI does! * USP - Very aggressive management in enterprise space. This is one major USP that even some larger cos miss. For e.g. Persistent does not have any significant enterprise practice
Enterprise practice opens up doors to large accounts, large TCVs, better possibility to grow solution offering. Despite being a small company, #Birlasoft is aggressively chasing enterprise deals
* Client Profile - Dependance on the US has grown even further. Nearly 82% of revenue comes from US clients. EU/India client contribution has fallen. Contract type split is steady between T&M & Fixed. 43% comes from T&M, rest from fixed.
Note the more the T&M contracts, the lesser is impact on margins in unforeseen situations. Higher the % of fixed contracts, projects has to be managed very tightly, there is no margin for error or a miss because it impacts margins severely otherwise.
Surprisingly, total clients has fallen from 310 in Q2FY21 to 280 in Q2FY22. It has steadily came done over all quarters but total rev. has gone up, showing co is able to gain pocket share of existing clients
But co is losing clients. Not sure why. Need more digging. Perhaps, answer is in the concall. I haven't listened to any yet. Top 5 clients contributes 29%, Top 10 45% and Top 20 61%. So reliance on top 5 isn't major drag IMHO.
* Revenue Profile - Cloud rev. is growing steadily which is an industry wide trend. Enterprise rev. has fallen slightly, while digital transformation rev has grown slightly as well. Rev by industry is pretty stable. Manufacturing contributes significant rev ~44%.
* Scale Profile - This is my personal view. #Birlasoft is only 14k cr mcap co so the growth nos will be very high. This is obvious given present trend in IT. Do not look at % numbers as we're on small base. Look at contract type split, TCV growth, Growth in enterprise trx
A lot depends on how fast co gets back on track in enterprise segment as that's where the long, sticky accounts belong to. This is also potential case to gain more pocket share We will not take a deep dive on services & products. Let's try to assess how different.
Services - Digital One USP is #Birlasoft bases everything on business advisory services (kind of consulting) & then percolates down the individual services. Very good portfolio of services in Smart Eng/Mfg, Connected Products, Supply Chain, CX, Cloud, DevOps and Microservices
Co is also providing services in PLM, MES, IoT, Wearables, AR/VR, Automation, Collaboration, Big Data & AI. All the services have a common layer of Cust. Experience, Cloud enablement, DevOps based operations, Microservices based design.
I find this very good. No matter the customer profile, you offer a standardized services that perfectly fit to operate in today's rapidly changing tech paradigm
Their blockchain services is also OK. Nothing major, just the std. consulting, design, architecture, testing, deploy. But at least they have defined solutions they cover very clearly. No illogical stuff such as - prevent genesis block tempering and all which does not happen now
Let's now move to individual solutions intelliOPEN - Smart, touchless, contactless screen & monitoring solution that provides EHS solution in COVID times. Helps business open safely. Automate screening, comply social distancing norms, contact tracing & thermal screening etc.
intelliAsset - Asset monitoring solution that enables remote asset visualization, analysis & enable diagnosis, maintenance activities. Product has integrated analytics, diagnostic engine & predictive intelligence.
TueView CLM - Contract lifecycle management. Enables guided customer onboarding, contract management, tracking & payments. This covers aspects related to deal management, negotiations, licensing, track payments, rights & options etc.
TruServ FMS - Cloud solution built on top of Salesforce to provide automated field service management, IoT integrations for touchless processes. Covers entire value chain of this business from service anticipation to delivery, scheduling & conflict management to cust. feedback
TruLens is a tool built to expedite salesforce implementation so this is a very product specific tool. So I am not spending more time on this one.
iLink is very manufacturing specific product that brings harmonization in a lot of segments. And this is very business specific - BOM, Item & Revisions, Change order & demand planning etc. It is very specific to certain industries.
But there is a beauty here. 43% rev comes from MFG & naturally, products are also positioned perfectly to enable speed of delivery.
I always say this - in the era of cloud/digital, you can't wait for a perfect launch. Your speed of going to market matter a lot more than anything else. You can pick 2-3 key challenges, offer sol for it, go to market, keep improving & launching more features.
Akoya helps cos manage parts specifications & stay compliant to industry standards. Help them plan new products, find parts that can be re-used and so on. It helps predict supply chain changes, build What-IF scenarios for alternate parts & suppliers
Submission Automation brings AI based automation & collaboration to underwriting business. It has OCR module that extracts data from various sources, sort the documents based on priority, and led to decision making
Smart Meter - Regardless of the hardware/infra, you need a very strong software that enables you to deploy smart meter tech to any kind of meter, any kind of region, any manufacturer & build a platform through which you can monitor, handle data etc
KwickPick - Automated warehouse picking solution that uses smart glasses to live stream the order picking via AR Object Identification. This is kind of an extension of another solution called WMX. But I won't get into more detail unless asked specifically
In sum, I'd say there are a few things that matter for small base co - Larger portion of T&M Contracts W/ increasing TCV & then larger share of enterprise accounts. Since enterprise accounts are sticky, it provides a doorway to grow small account into much bigger strategic acct.
Gain more pocket share. That's how you grow from a small co to mid to large co. I think for #Birlasoft, don't look at % numbers but look at absolute growth numbers. I have given enough hints on what to track.
I think management is aggressive & if they execute well, 7-8y down the line, they would be where LTI is today.
Again, there is only so much one can know about a co. If there any gaps in my study, pl be so kind to call them out politely. Happy to learn together. PS: I am not covering valuation aspect here. You all are much better at doing valuations so I leave that you.

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Persistent Systems Share Analysis | Persistent Systems Fundamental Analysis and Future Outlook

December 30, 2021

Persistent Systems Fundamental Analysis and Future Outlook 

Industries & Domains Served:
  Banking, Financials, Insurance, Healthcare, Lifesciences, Industrial, Hi-Tech, Telecom, Media. Banking & Financials being a steady driver, while Lifesciences has been the alpha generator.
Services: Digital -Design & Consulting Business Intelligence - AI/ML, Data Stack, Data Integration Product Engineering - Product, platform design & engineering IDA - Identity & Access services, privacy management 
CX Services - Customer Experience strategy, Implementation, Integration, analytics services IT Infra - Cloud Infra & Managed cloud
Products: Digital bank & credit union solution - a complete cloud, microservices led design enabling go to market for digital banking services. Mainly focused on credit  
LOS -Loan Origination System to automate origination & approval of loans. Patient Mobile Experience - Mainly electronics medical record system
Cloud/Digital is mainly Salesforce-focused. USP - Strong practice in AI/ML, Software Engineering, Platform Engineering
Client Profile - Client concentration of top 10 as % of total revenue has fallen from 51.1% in Q3FY20 to 45.4% Q2FY22 & at the same time large client count has gone up from 10 to 22 over the same period, indicating strong market position
Total contract value has been growing very slowly, steadily * Revenue Profile - NA 78.7%, EU 8.8%, India 10.5%, RoW 2% * Scale Profile - Healthcare & Lifesciences has witnessed exponential expansion on both Revenue & YoY growth metrics
* Partner Profile Implementation partner ecosystem is very important. Appian, AWS, Dassault, Google, IBM, Mambu, Microsoft, RedHat, Salesforce,
Recent Acquisitions: Recently acquired Fusion 360 that further cements domain consulting in the payments ecosystem. This business concentrated in NA so geographical diversification isn't improving after this acquisition
Shree Partners acquisition has brought domain consulting skills for Travel & Hospitality segment and this acquisition is geographical diversification supportive with EU/India business
Software, Hi-Tech segment has a dominant share in the revenue profile. However, the recent deal wins in this segment are very traditional services specific. Website migration, Legacy to cloud migration etc.
Persistent is still under $1bn revenue company which is not really surprising. Persistent positioned itself in a niche that did not grow as anticipated an IP monetization perspective  
Further, the frontloading of investments for developing IBM Watson platform brought a major drag on BS. Not only their investment in Watson led to nowhere, it also stopped the co from becoming a multi-billion $ org. It paid the price dearly & is now fully out of the overhang.
Key Risk: Nearly 16% of revenue comes from the top 1 client. and 36% comes from top 5. So client profile really needs to improve. Loss of just 1 account strikes a bunch of revenue off.
Persistent was known to monetize their IPs very effectively. However, IP-led initiatives have their own side effects. 1st - frontloading of the costs, 2nd - Revenue realization isn't linear.
Co has strategically reduced its dependence on IP-led initiatives which reflects in the reduction in revenue % from this segment as well as reduction of total clients in this segment.
Persistent has a lot of frameworks but fewer products of their own. Although they always took IP lead approach, I am wondering why the co hasn't managed to release at least 3-4 strong products in the market yet. Or, if you think they have one, pl let me know.
Key driver is their strong service line. The data-driven business intelligence division has some amazing offerings. Data management & governance isn't really major contributor in my view since there are many products available in market that does this with a plug-play approach.
In AI/ML segment their offerings are pretty stable - Document analytics, enterprise search, conversational platforms etc. are very commonly delivered by many other peers.
But the Explainable AI is an amazing offering that enables organizations to understand why AI systems take a certain decision & interpret that in common manner. They build & deliver AI models that help companies analyze bias, drift from the anticipated pathway, and other mismatches.
Basically, Explainable AI helps people understand how AI systems model, think, and decide in a layman's term. This, in my view, is an amazing offering. I wonder why Twitter handles never mention Persistent's AI practice enough.
The reason why I say Persistent is an extremely technologically sound company is this - there are certain programming methods, languages that form the core, a founding platform of the technology.
For e.g. C/C++ used to be one such strong programming platform that saw many companies build their strong products on top. E.g. SAP! The ABAP programming language of SAP compiles into C++.
Persistent has ensured that no matter what new technology, programming language comes, they never lose the connect with the foundational blocks. This has been their strength.
On the cloud side, I'd say Persistent is more of a salesforce expert. Although they have partnerships with almost all hyper scalers, they are nowhere close to what #LTI does for e.g. in the multi-cloud ecosystem.
To sum Persistent's journey since IPO - It is a founder-led, technically superior co that has strong leadership foundations. However, a few bumps down the line held them back but the co is not back on the growth track. Persistent is still a very strong technology-driven company
In sum, Persistent has been around for a long time but they can still do a lot better in terms of market positioning & product launch. #TCS & #LTI have been doing amazing on this front.
TCS is grooming startups on cutting-edge tech while LTI is launching a complete ecosystem through products. This makes traditional IT cos position better in the days of #SaaS. #Persistent certainly needs that change in my view.
Before we conclude, pl note there always is a possibility that someone known more in some areas. If you think I have missed covering certain aspects, pl be so kind to point them out. Let's collectively learn more about our companies together, better.

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