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Wednesday, November 6, 2013

Microsec Financial Services Ltd:-The next big multibagger in making

Management Interaction note:-

Scripscan:Microsec Financial Services Ltd
Traded in:Nse-bse
CMP:20

I recently had an interaction with the MD(BL Mittal) of the company.Here's the quintessence.

About the MD:Mr. Banwari Lal Mittal is the Chairman and Managing Director and is also a Promoter of the Company. He is the founder of Microsec Group. He holds a bachelor’s degree in commerce from Calcutta University. He is a fellow member of the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the Institute of Costs and Works Accountants of India.He has more than 17 years of experience in different fields including investment banking, wealth management and corporate advisory. Mr. Mittal has in the past worked with the M.P. Birla Group in a managerial position for about eight years.

Q)Your ipo was concentrated most on the LAS(loan against shares) biz.Whats your outlook for that in the coming years.I do know you don't like funding promoters.And will you be able to maintain the NPA to the least possible level?

Ans)We don't have time to nap.Our balance sheet is clean,have taken the approvals from shareholders to shift the focus.The time has changed completely.Las as a product won't work now.We fund to provide liquidity to our brokerage under tight risk management and our NPA is 0.We are turning.Company on innovation rather than capital,in just two years time the world will see it happening on the land of India.It is worth for shareholders.

q)In the financial services arena a lot of people are apprehensive about your company because of the regional play.You do have the pan India centric strategy as I may recall from your past interviews.What are our plans in that regard?

Ans)We have plans ready to scaleup to Pan India,our club kautilya model will do wonders.Our application for Mutual find is in final stage,but right now the time is difficult ,we will go on fees based model.I am not impressed by the model of India info line or edelweiss.In financial services no body is pan India.They all have more than 75% of business from one region.In India where inflation is 10% the NBFC model is under stress .Say if Roe of NBFC is 10%,it earns nothing because its netwoth is gone down by inflation.For each incremental roe ,you need to leverage the balance sheet by 1 more times,means for 20% roe you need 20 times leveraging.So if 5% nap you are gone for the day.The so called pan India NBfc borrow short term Cps and lend for long term,this cycle will bust anytime.

q)You have started a website called foreseegame.com.Whats all about that?You also plan to open an online pharmacy retail store site called Sastasundar.com?

ans)Foresee is a digital platform that creates engagement between brands and consumers through prediction-based games.Launched this year in March, the platform has 80,000 registered users and it creates games on digital platforms around brands.The game help brands get focused consumer engagement with a high brand recall value and promotes consumer brand loyalty.Besides, it is an end-to-end brand promotion and marketing solution which creates consumer engagement and converts consumer interaction into potential purchase.We expect our users to increase to 1.2 lakh by October and 5 lakh by June next year, helped by the huge opportunities in social media, which is growing on both PCs and mobile platforms.Sastasundar would be a game changer in the Indian medical pharmacy field.

q)To my knowledge you get 10rs per game from the brands right?Or there's some other royalty?Foresee already boast of an Alexa rank of 35k worldwide which is commendable.In future is there any chance that you will also accept advertisement like moneycontrol.com?and sasta sundar will come live only after 26th of October?

ans)Yes the per engagement RS.10 is also very less.It will go to new heights on 26th Oct.Sastasundar.com will be live to cut the medical bills of Indian by 70%.

q)What if someone tries to replicate the Sastasundar business model?Have you got any moat out here?

ans)We have filed patent ,have 20 trademark,5 copy writes,and than also it will take at least a year to make it happen,we have strong Iprs and don't forget completion makes business.See how many companies came after infosis.We need to build competitive strength.Forseegame will give us one lac customer in first month of launch with foreseegame our branding cost at sastasundar is minimal.


Q)What makes you confident on the game of prediction?See the youths or we guys,we lack patience and get bored of stuff very quickly.Anything Microsec is doing in anticipation of that?

Ans) That is what the game of prediction is all about.Take case of Kerala state lottery.Out of 20 lakh customers, 15 lakhs are youth and they buy a ticket per week.We are portal of free lottery for whole India.From the Period of Mahabharat till date people are not bored of prediction and lottery and I do hope no body will be bored of prediction ever.Each day we are introducing new event and making the members engaged with the games.Even if we target 2% of India's add spent at 1000 crores,it would be free ATM.

Q)You expect a 20% growth in month on month as far memberships are concerned in foresee right?I aint gonna ask you about this year or next year but lets talk about 2020. Based on your words,would it be correct to expect 150-200crs of pat by 2020? As of now foresee got 1 lakh members.So if all these 1 lakh members play a single game in forseegame,microsec would make 3crs revenue monthly?Is that a correct estimate?Also About the huge figures you are aiming by 2020,which vertical you feel would contribute the most?And have you thought about any ballpark percentages contribution?Since its digital surely the NPM too would be very high isnt it?Say over 40-50%?.

Ans)Foresee should see a 20% growth for sure.Sastasundar along with it would grow immensely too.Yup we expect those figures on the PAT mark.NPM would be in double digits.You are correct on the monthly revenue estimate.We have detail plan,by 2020 we shall be having business with roe of 50% with growth rate of 20% .The segment result would be financial services 20%,foreseegame 40% and sastasundar 40% .The common thread is digital,going forward all our financial services would be digital.We are in the business of providing knowledge base services on digital platform.Focus is innovation ,knowledge and digital.


q)You did 35crs of consolidated revenues the 1st quarter vs 45crs done in the whole last fiscal(company did 45crs of turnover and around 9crs of profit for the fiscal 2012-13).Can you tell me what led to this massive jump that too under the present turmoil?And is it sustainable going forward?

ans)No ,it is just liquid fund liquidation.We will take about one year before growth starts coming ,real picture would be in the next financial year.

q)You have already sucked in most of the weaker hands through creeping acquisition and its only a matter of time I presume before we see the promoter's stake at the maximum permissable limit of 75%.A lot of market analysts are predicting that a decade later maybe or say earlier the company will pay the dividend of what the present market price is.Whats your say on that?

Ans)Let us not see the Market cap.Our focus is to build world class Business Model which has sustainability and have core competence .We have build the business around that and I am happy that starting from financial planning ,benchmarking of research ( the example of the best performer in research and we don't have single pie due in NSEL neither of our own and nor of our client ,we issued early warning )to consumer engagement by sharing value and making available the best medicine at low cost all our projects have social impact.

Q)Last question-Will you remain debt free for next few years?And can the shareholders expect a dividend from the next fiscal?I am not interested in knowing what you will do in these fiscal or next fiscal,what can you guide me for 2020?What is your message for the 22000 shareholders of Microsec?Immediate disclosure would be even I own your shares too.

ans)By and large we shall remain debt free,we may take some working capital in our sastasundar.com,because it is medicine distribution.That may require huge inventory once we go national.From the year 2014 -15 we shall be having distributable profit,both our new venture are innovative and we expect to close this year adding 50 brands at foreseegame and establishing sastasundar.com.Next year will be year of growth and than cash flow.The model is robust and I can tell you no company has plans on innovation like we have.We have globally scalable model with strong competitive advantage without need of much of capital.If things go as I plan we shall be a billion dollar marketcap company in year 2020.Just calculate the revenue of these project and club it with our financial service business.It looks like magical.I am sure we shall lead,rest is upto god.I will make sure my investors get return.

My take:The MD was very open and frank to all the questions.I am really not sure whether he will scale to 6000crs marketcap in 7 years from a mere paltry 60crs marketcap now.But even if he manages 1/10 of that or say 600crs(if 10 lakh members plays a game daily it would make 20crs yearly PAT,add up a 30 PE)that would make microsec a massive multibagger or a 10 bagger.I see nothing wrong with his dream too,infact its quite a reality.Even 100crs PAT will give microsec over a billion USD valuation as its fully a digitalised business now(no listed peers and comparing Just Dial marketcap of 8000crs for a 80crs PAT figure to make the statement stronger and believable)At 20rs you have hardly anything to loose folks.Reader fraternity don't bother me by asking about its target price as its only meant for guys who can stay put for atleast three long years.


btw:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

33 comments:

Anonymous said...

Arunji,

Thanks for your advice on APM industries now it has reached 52 week of 26.9 and i sold the entire stock at 26.50. Regarding Microsec Financial tech services in the last 2 quarter the company shows loss is it advisible to invest at the current price. pls advice

Arun Mukherjee said...

I have said it all.Congrats on your profits in apm.Company came out with great numbers as was expected by me.Microsec is a multibagger

Santhosh said...

Arun

While browsing about stocks, i find your blog. I like your blog. Keep posting :) .

Thanks

Rohan said...

Arun.,

Thanks.for such a good find. I'm planning to buy this after your reco.
Can you do me a favour and let us know incase some day ur view on this changes?

Thanks
Rohan

Rohan said...

Hello Arun,

One more question, I wanted to know if HDFC or HDFC bank which one of these would be better buy from 10yr perspective?

Also your views on Srei infra, Sesa Sterlite and coromandel intl.

Arun Mukherjee said...

@Santosh-U are welcome buddy.Keep visiting the blog and keep posting comments.Be in touch.

@Rohan-Ya will update about miscrosec here itself provided something new comes out.

Hdfc bank would be my bet but if I have to pick a banking bet will go for jammu bank.You will find my note here in the blog itself.

I like sesa sterlite and coromondal international from your lot.

Rohan said...

Thanks Arun for prompt reply..I had already bought J&K bank based on your reco...Missed avanti feeds as I had gone outstation.

You are doing a fantastic job! Keep up the good work :-)

manish khatri said...

Should i buy cairn india ,godawari power and ispat at current levels.

Arun Mukherjee said...

u r welcome rohan

Arun Mukherjee said...

Cairn you can buy..

manish khatri said...

Should i buy cairn india ,godawari power and ispat at current levels.

manish khatri said...

Sir thanks for your immediate reply.i want to buy one more stock .l and t or united phosporous which one i should buy.
Period: i can hold for minimum 3 years

manish khatri said...

Sir thanks for your immediate reply.i want to buy one more stock .l and t or united phosporous which one i should buy.
Period: i can hold for minimum 3 years

Arun Mukherjee said...

u can buy both..

manish khatri said...

Thanks a lot sir

manish khatri said...

Thanks a lot sir

Anonymous said...

Hi Arun,

This stock has fallen almost 40% and also company is posting losses.

Why will it go up, any particular strong fundamentals?

:KP

Arun Mukherjee said...

The stock has moved up 40% since the coverage and why it will move up?I have posted such a lengthy discussion with the management for the sake of that only.Read it carefully and you will get your answer.

Anonymous said...

Is this same way you spoke to Sudhir Babu?

Arun Mukherjee said...

Not only to him,whoever I spk with.

madhav said...

Hi arun ji,the stock has reached to rs.30.can i buy now or wait for some time.

Arun Mukherjee said...

Wait for corrections

Anonymous said...

Guys
By chance you get influenced by this man, dont buy microsec. Eventually it will land around in single digit.

kamal said...

DEAR ARUN,
congrats for doing a great job of identifying future multibaggers and sharing with the retail investor.
being a business analyst,i have few doubts/ques about the microsec.
1)the md&a does not elaborate on the business on hand and rather discuss the international and national issues which i think doesnot affect them.

the chairman and director report does not confirm a multibagger in the making as the attitude of management is skeptical.
pl comment and correct me
regards,
kamal

Arun Mukherjee said...

Kamal,

The business or the verticals are pretty simple to understand.A lottery and a pharmacy portal.So as far am concerned if I can understand it without much involvement of my brain,I tend to get satisfy without much comments from guys at helm.

They have just started,so there's hardly any noises.Also these folks are greedy and clean.The shareholding pattern and the high amount of cash in books,sooth the nerves.

The vision is clear,there's the first mover advantage too.Not many will come and construct a 170cr warehousing facility in record time.Nearly 1.5 lakh members of the portal would ensure other portals of it get much visited too.

Am posting in bits as most aspects are covered.Ernst being the group auditor,dont even need to spend time on the accounting stuff.

Shiprachowdhury Ghosh said...

sir i am a very small invester ,I m fan of ur analysis .can I buy microsec at current level ? can wait any longer period .please reply please? i will be waiting ur mercyful reply

Arun Mukherjee said...

Yes u can

Anonymous said...

Hi Arun,

After reading your post I have invested in Microsec..... let us hope it will reach to new high..... I have stucked badly in Concurrent infra, can you please let us know when is it going to relist and relisting price...

Thanks,
Vikas

Arun Mukherjee said...

Conc would take time,microsec a probable multibagger.

Anonymous said...

Thanks Arun, today I bought 600 shares

Vikas

Anonymous said...

Hope this will not be a next concurrent , jhs or Jaibalaji in making.

Arun Mukherjee said...

Can very well be,but the case is bit different here.The named ones suffered from debt wheras the marketcap of microsec at coverage is 60crs,and its got cash in bank superior to it with nil debt.

Bhoomi Desai said...

Thanks for the articles I find this is one of the very interesting article to read, i will visit again for more article... Equity Tips

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