- NOT a geographic information systems company:- The name certainly evokes that sentiment in me(and I suspect I'm not alone). They are into the following businesses
- Communication/collaboration:- like Cisco
- Mobile VAS:- under the Mundu brand
- Electronic computing platform:- They have developed Linux based handheld device GeoAmida, which is used in several E-governance projects. The UID scheme may boost these sales, as may the increasing IT usage in both State/Central projects
- Financial products/services:- Like most other IT Cos
- Content:- Chandamama brand but also they serve as content aggregators.
- Attrition rate well under 5% for the past 6 years-a commendable feat in any industry specially IT.
- Berkshire Hathway approach to managing subsidiaries- operate as an aggregation of separately-managed small and medium- sized businesses, most of whose decision-making occurs at the operating
level. They would rather suffer visible costs maybe of a few bad decisions than incur invisible costs that come from decisions made too slowly – or not at all.
- Infosys style conservativeness with cash;- They prefer security to high returns on cash/investments.
- Transparent tax planning:-The company discloses(Pg 29 FY10 AR) that Geodesic Holdings Limited (GHL), Mauritius primarily acts as the Holding Company for all subsidiaries of the Company outside of India.This is to streamline the processing and operations of outside subsidiaries!!
- Owners of iconic brand Chandamama:- This mythological based magazine is expected to break even in FY11, and has good content library value
- Marquee client list:- They have vastly successful client relationships(Apple/HDFC etc) and their Ipad app Mundu TV is the No1app on Apple India store.
But every rose has its thorns. The negatives:-
- Their tax exemption expired in Mar-11(like for all other IT companies in EOUs), but given the export dependence(98%+ sales) , their effective tax rate may still be lower.
- Non transparent segment reporting:- Despite the plethora of business activity description and their 'hands off' approach to operating subsidiaries, they have not chosen to disclose any breakup. This is counter productive in terms of valuations because they do not get the rich valuations that Onmobile gets. This incidentally, is the biggest hurdle to fairly valuing this company.
- Investor Relations seems a bit weak
- Have stopped posting the conference call transcripts after 4Q'10. I do not know whether they even hold it an analyst conference call or not.
- The analyst research reports(downloadable on the investor relations homepage) are quite old, indicating that possibly the coverage on this stock has ceased.
- They had to send a corrigenda to the FY-10 Annual Report(albeit minor detail) which does not reflect favorably on the financial reporting process.
To my mind, upside triggers for this stock are:-
- Aadhar Project:- This may boost the demand for GeoAmida, as would other E-governance projects
- Apple Store launches:- If they can continue the run of successful apps, market may reward them.
- Improved reporting/visibility:- If the conference calls are held more often AND segment details published, valuations may improve.
- Possible M&A-given the very high FII holding, the stock is ripe for a hostile acquisition. Of course, the high FII holding is also a chance to pick up the stock at fire sale prices if FIIs start exiting India en masse. The promoter holding of 20% is quite low....