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Saturday, October 17, 2015

Microsec Financial services:Agm Notes

After the launch of my Share Bazaar android app,the workload has increased many a times. Hardly there's any time to do blogging. As you all know the app has been a huge hit with downloads been nearly 25000 in a very small time. For the uninitiated,to download-go to play store and search Share Bazaar Arun. Do give your reviews and ratings folks.

Microsec Financial Services AGM Notes (Q&A)

E-commerce Divisions:-
1. Are we planning to raise Private Equity for both our E-Commerce division?
Ans: We were anxious when we started both e-com divisions but in retrospect we believe it was one of the greatest decision we ever made. Usually in a typical e-commerce start up, it takes huge amount of cash burning to achieve a GMV of 100crs but we are aiming to achieve that feet by remaining debt free. We are going to set a benchmark by achieving this only from a single state in India (West Bengal) which has been unprecedented in the world of E-commerce. And yes we are looking to raise money for both the verticals.

2. What is the USP of our E-com Services? Will ban on selling online medicine(if at all happens) affect us?
Ans: The USP of the company is our last mile delivery where 99% of the logistics costs are borne by the franchises. (Company gave the examples of newspaper where the logistics costs are Zero.) We don't sell prescribed drugs online. Sastasundar forwards the lead to its offline brick&mortar franchise/healthbuddies and they deliver the order to the customer. It's just a lead generation medium.

3. As medspa, Apollo pharmacy, netmeds, pm ventures are all in the same business as Sastasunder, What are we doing to thwart competition?
Ans: Competition makes business and the arena is too large. The retail pharmacy market is worth over 70000crs and there's a room for everyone to have their own pie.

4. We are entering Karnataka. What would be the strategy? Are we also entering other states?
Ans: Strategy is to repeat what we are doing in Kolkata. Sastasundar will further expand in Mumbai and other big cities by 2016.

5. In medicine distribution we need large inventories. Even we supply the inventory to our franchise owners. How are we playing it? Are we ready for addition in future debt?
Ans: Company is against too much debt however we may need some for taking care of our WC requirements.

6. What is the ratio of repeat customers to new customers? What are we doing to retain our old customers?
Ans: Repeat Customers contribute to 75% of the present top line. Company is taking all initiatives to retain its existing customers.

7. What is the credit cycle from where we procure the medicines?
Ans: (Didn't gave a clear answer but hinted of a good credit cycle once they garner in big volumes)

8. How many franchises we have till date? What is out average franchise revenue? What is the number of franchise we are looking to add over the coming few years?
Ans: 87 in total, 81 franchise and 6 company owned stores. Company looking to appoint more franchises. Aims for a number of 225 within the next fiscal.

9. What is the ebitda margin we will have after counting for 15% discounts and 8% commission to franchises? How can we compete with the retail pharmacist stores?
Ans: Our medicine distribution margins are 30%. The retail pharmacist averages margin of around 20%. So there's nothing to worry on that front. Sastasundar makes around 7%.

10. How many brands are attached with as on date?
Ans: It's around 120 and yes the target is to tieup with 500 brands ASAP.

11. We brag about 11 lakh users in foresee then why is the revenue is not even 50 lakhs?
Ans: Foreseegame will see increased monetization from Brand partners going forward, however current strategy is more focused on acquiring more brand partners.

12. Foreseegame itself is engaging but the worst part is we have just 33k likes Facebook on user base of 1.1 million. Why aren't we looking at it? One of our peer came into the arena much later yet they have 7-8 lakh fans in no time and increasing at a rapid speed.
Ans: (The Company appreciated the fact and promised to look into the issue at the earliest.)

13. Why aren't we marketing enough? We don't see foresee ads in TVs. They are nowhere. We haven't even done a SEO, let alone AdWords. Nobody can see us if they Google up online games. Why is it so?
Ans: Not fond of marketing in the television world. SEO and other needed necessities are actively looked upon which will help the company to increase its users.

14. Have we got a break even target in our verticals? When we will break even in e-com verticals?
Ans: Company looking to break even by fy17-18. Both e-com verticals are exceeding expectations as of now.

15. Do we make profit from every transaction? What is the ratio of our private level biz to the medicine biz? What is the margin we make from our private biz?
Ans: We are making profit from most transactions, if not all. The ratio is hardly much to talk about as of now. Private level business margins around 50%.

16. What about our recent launches: chef on and others? Are we seeing any traction? What has been the acceptance of our customers?
Ans: Chefon: the made to order segment has seen immediate traction after its recent launch. Company is getting 400-500 enquires on a daily basis.

17. In Foreseegame we often provide Sastasunder currency to our game buddies which in turn inflates the topline. Out of 21crs topline in Sastasunder, what has been its contribution last fiscal?
Ans: That is less than half a percent of the total turnover.

18. Any revenue guidance for foresee and Sastasunder in the present fiscal? Next year 17 and by 2020?
Ans: Foreseegame should more than double its turnover this year. Sastasundar's GMV should be heading to 100crs within the next few quarters.

19. Zapak games recently got valued at 1000crs, be it alexa rank or minutes spend in the site it’s beneath foreseegame by every standard. Are we looking to unlock value by divesting a stake?
Ans: Lot of offers from private equity. Foreseegame will dilute in favour of a private equity to unlock value. Should be done at a good valuation.

20. Ironically whenever we announce our results, we see our stock being hammered owing to higher losses. Would we see the same in future?
Ans: (We aren’t bothered about stock prices or market cap. The company is in a solid footing and with time, the right valuation should definitely chip in.)

Financial Services Division:-

21. It’s been quite a while since the demerger/divestment news was announced by the company. When is it actually happening?
Ans: Our core was finance and it's a pretty emotional decision to hive off the same. However, we believe in being ahead of the time and hence will soon do what’s best for the business.

22. We have a capital employed of over 100crs in the financial vertical. We have got large holdings running worth several Crs. We did a PAT of 10crs. It's a brand with intangibles adding up to a good few Crs. Tailwinds are blowing with few recent brokerage deals. Sudhir Valia acquiring fortune financial at 35crs and Sudip banerjee buying out JRG sec at 100crs. So we should get a good valuation right?
Ans: (They appreciated the fact and hinted about a good deal coming soon. Fathoming the body language, it seems like they will just sell the finance arm rather than demerging it as the full focus is on ECOM.)

23. Presuming we will sell out the Financial Services Division as admitted by Mr mittal earlier, how are we going to deploy that money? Would it be fully on Ecom? Or can there be a special onetime dividend?
Ans: As of now we are not in favour of a dividend as the stock price would just adjust it immediately. The money received would be deployed in the ECOM ventures.

24. Promoters own 71% in the company as on date, bit below the max permissible limit of 75%. Why aren't you buying out the rest? This fiscal year the promoters hardly bought anything.
Ans: Microsec is the only stock we acquired in last few years. We desire to own the maximum permissible limit of 75% soon.

25. We had an internal target of achieving a billion dollar market cap by 2020. How achievable does it look under the present juncture?
Ans: Futile to discuss about market cap at the present juncture. We believe in long term wealth generation for the stakeholders.

26. Is there any chances of selling out fully provided we get an extravagant offer, at a much premium to the present price?
Ans: No chances of selling out in the next 5 years.

What I Perceive: Finance business to be sold soon and then in due course would be demerged in two separate companies. Sastasundar and Foresee to be separately listed in the future.

P.s:Please refrain from asking buying/selling stuff. 

BTW:For different stock market related services and also for techno-Funda tutorials,rush a mail at my mail id to know more about it.

Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that I might have MICROSEC in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.

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