Three interesting ideas
It's been over a month since we last posted. The single reason is that we didn’t discover something “new” at a reasonable price where we saw deep value or large upside potential. Hence in this post, we share 3 ideas that do seem interesting.
1. A quasi-tech stock under 150 crore market cap & down 70% from its peak
We have been tracking this company since its IPO in 2019 given its unique business model that is hyper-growth oriented, its pedigree management team with pedigree track records & experience & the potential upside given its scalability and low base.
Unfortunately, since its listing the company faced two major headwinds i.e. of COVID-19 and the unwinding of the startup / private markets both of which majorly affected the company and its businesses fundamentally. Given the promise of the business the stock prices did rise significantly but given the muted results of its own business and its investments the stock today is 70% down from its peak.
We do believe the founders, their fundamental approach towards building business & the compounding of their efforts will eventually yield positive results, but we wouldn't invest yet. We will closely be tracking this company for signs of real growth/inflection. We do believe it's a good 12-24 months away ie. if it happens.
What’s unique about this company is, if and when growth takes place which is essentially going to be via a transaction/exit it will immediately catapult to a different trajectory in terms of valuations & growth.
2. A demerger of a microcap company (<350 crores M.Cap) into two separate companies representing the company’s two very different businesses. Both businesses will be independent going concerns even post-demerger and we do see a short-term upside as we do see a high probability that post the demerger both the entities combined will trade higher than the single entity today. Please note there will be a time lag between the listing of the second company once demerged. We are yet to develop a long-term case but are broadly positive about the company given its track record in terms of growth, debt reduction & other essential metrics.
3.“A telecom infra as a service provider” - This company is a service provider in the telecommunications infrastructure sector. They build, own, and manage basic infrastructure elements like telecom towers, optical fiber cable systems, and similar assets. These are offered on a shared basis to wireless and other communication service providers. The nature of their business allows them to operate with high efficiency, reflected in their operating margins of over 65%. They generate annual revenue of just under 200 crores and have a profit after tax (PAT) margin of 40%.
Their market capitalization is approximately five times their sales. Currently, they operate 5,000 towers and have plans to triple this number in the next three years. Impressively, they’ve successfully optimized their infrastructure supply chain, which enables them to set up at half the capital expenditure (CAPEX) compared to existing companies in the sector. Consequently, the payback period for each tower is around 2.5 years.
These ideas have been shared vaguely and in brief simply because we aren't convinced about buying them yet. We have undertaken deep scuttlebutt in some of them.
Also sharing an update on one of our ideas!
“A high growth Potential AMC”: This AMC had two significant updates since we wrote about it.
A month ago, they introduced their New Fund Offer (NFO), an open-ended scheme primarily investing in equity, but also includes debt, money market instruments, and bullion. The fund is positioned as a "Many-Goals, Single Fund" solution. They employ a quant-based approach to filter potential investments through a model that focuses on low volatility, momentum, and valuation. After this initial filtering, they conduct individual due diligence using fundamental markers, resulting in a risk-adjusted portfolio consisting of around 30-40 stocks.
They recently hired a Chief Business Officer who is a veteran BD guy in Financial Services to build distribution across channels
We want to emphasize that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. It is crucial for readers to conduct their own due diligence and exercise caution.
Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss this in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reachout at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com