Take Solutions Ltd - Value Pick - GTS 6

Received 187 answers to the Guess The Stock 6 and not one got it right, I guess this time the clues were very tough.

TAKE Solutions Ltd
Market Cap: 2100 Odd Crores.
CMP: Around 162
Current P/E: Around 16 against FY17 EPS.
POSITIVE: Niche business serving recession proof industry, Shriram Group
NEGATIVE: Low margin SCM Business sale not going through.

Take Solutions is a niche IT company which has two business divisions Life-Sciences Solutions and Supply Chain Management. Life-Sciences (LS) division form more than 75% of the company's total business.. 

Under the LS business Take has its subsidiary named Navitas Lifesciences which provide Healthcare software solutions to leading pharma companies. Navitas now is a company consisting of multiple acquired brands such as Navitas, Ecron Acunova, Intellent and others.
Navitas provides end to end services across the various stages of the drug development life cycle, starting right from clinical trials to filing regulatory submissions. They have helped bring 330 + Drugs in the market and has filed more than 100,000 regulatory submissions. The company has put together a strong head count consisting of Doctors, PhDs and bio-statisticians. Though spread over geographies, almost 97% of the LS business revenue comes from the US.

In Supply Chain Management (SCM) business the company caters to clients from the technology, consumer packaged goods, oil and gas and automotive sectors.

As for SCM business the company has been keen to sell SCM division since the margins are well below double digits for the same. However, the deal has not gone through yet and this has remained as an unwanted work in progress for the company.

The company started the LS business after the recession in 2008 when one of its Pharma clients asked the company to do regulatory filing on its behalf, That is when the management spotted the potential of this recession proof business.

The management in a recent interview has cited that they are working towards building the LS division and grow it to clock about half a billion dollar revenue in LS segment (3250 Crores INR) by 2021. (Approximately, 225% growth from current revenues).

As per the company's last con-call: LS business division margins are more than 22-24% and SCM business division margins are going down well below the double digit mark and the company is advanced stage to sell the SCM business but would not like to give a deadline to it.

As for Financials for FY2017: Net Revenue were 1345 crores, Net Profit was at 130.72 crores and the annual EPS was at 9.85. The company has about 230 crores debt on its books, Promoters have 63.14% pledge-free holding. Let us take a look at its financial table :-

Financials: The company has been paying dividend consistently since listing, The revenues have grown from 182 crores to 1300+ crores in the last 10 years. The net margins are below 10% due to low performance and high capital requirement of the SCM business.

Positives: The company is operating in a very niche recession proof sector with very high growth potentials. The promoter in a recent interview said that in this business TAKE is the only company in India that has managed to enter and build business, he went on to say that even in the Europe there are not many companies working in this business. The business, the promoter group, the company's plans and commentary are some of the very key positives.

Negatives: SCM business over hang is a key negative, even though deal is said to be in final stages and should meet completion soon, in the past as well the company was said to be close to completing the division sale but it did not materialize. Which hints that there no takers for SCM business at the valuation the company is seeking.

Valuations: The stock is available at 16x its earnings on the P/E front against FY17, with the kind of MOAT the company has on offer, the growth potentials, The management quality, the guidance of 3300 crores top line. 

All in All, The stock seems to be in the value territory in a market which has sharply run-up and a potential multibagger from CMP.

::LINKS::
Take Website
Navitas Website
Management Interview
Screener-Take

Note: The above is not a research report but information as 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 Take Solutions LTD in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.