Vakrangee Software Ltd - Rs 65.00

Incorporated in 1990, Vakrangee Software Ltd (VSL) is a leading provider of complete document and data management solutions encompassing large-scale data capturing & management, scanning, digitization and printing. It has three business segments, viz - document management services, printing management services and IT enabled services. Over the years, VSL has emerged as the only provider of document management and printing management solutions in the organized sector. With more than 15 years of experience in servicing various government organizations, company forayed into the private sector for the first time during last year, which includes large companies from the banking and financial service, retail, power and telecom sector in both its document management and printing management vertical. Its IT enabled services comprise software development, system requirement study, tailored software development, system integration and election-related services. To meet the growing customers need in the printing management segment, VSL tied up with Eastman Kodak and has installed one large scale variable colour data printer which is the largest in Asia. Hence company boast of having the largest scanning and variable data printing capacity in India with 6 million pages per day. Presently, VSL derives 55% of total revenue from document management solutions and balance 45% from printing management solutions.

Till date, VSL has executed several prestigious projects including digitization of land records in Uttar Pradesh, managing electoral rolls for the Election Commission of India in Maharashtra, Gujarat, Rajasthan, MP and UP, delimitation exercise (redrawing boundaries of LokSabha and assembly constituencies) for Maharashtra state and handling documents in 22 offices of the Registrar of Company (RoCs) across different locations. It has also been associated with the Ministry of Corporate Affairs for the digitization of critical records under the MCA 21 project, the largest successful e-governance project in India so far. Company enjoys a pan-India footprint through 32 site offices. From 100% dependence on govt contracts, company has remarkably, within a year de-risked its business model with nearly 40% revenues now coming from private sector. It competently manages the printing of statements (monthly/quarterly/yearly), bills and mass communication collaterals of these private service providers. VSL’s service matrix includes secured data hosting in the Vakrangee Data Centre, data composition/mining from the data dump like CRM data, transaction data, billing data, design of a one-to-one communication layout and superimposing the relevant text data of each customer of the client to make an effective and efficient personalized communication statement, followed by printing the data stream so prepared in a physical format or SMS/e-mail it to the end customer. Couple of months ago only company has received the ISO 27001:2005 certification from BM TRADA certification scheme for its Information Security Management System for all process of mass level Hardcopy and Softcopy Management for Document Management Services (DMS) and printing Management Systems (PMS) business.

To maintain its growth momentum, VSL is focusing more on private sector and is constantly adding new clients to its list. Accordingly, it has entered into a strategic alliance with Eastman Kodak to offer mass customization & personalization of customer communication practices in India and has been granted with the Kodak Gold Plus accreditation status. Besdies, it is setting up a new hub office at Gurgaon with another large scale variable colour data printer followed by 100 other small offices across the country. Further, it is contemplating to open a mega global client-servicing centre at Navi Mumbai, by the end of 2010-11. Ironically, VSL is even contemplating to set up a software technology park in future. At the same time it will continue to execute government projects and Infact has recently received a Letter of Intent (LOI) from Tata Consultancy Services Ltd (TCS) for working as a build partner for 6 Pilot sites which are Bangalore (Lal Baugh), Bangalore (Sai Arcade), Mangalore, Hubli, Kirtinagar (New Delhi) and Gulbarga under the Passport Seva Kendra (PSK) Project.

On the other hand VSL is expanding its wings globally and is in the midst of forming a 100% subsidiary in Philippines. Meanwhile before incorporation, this subsidiary has already entered into a tripartite agreement with 1 Document Corporation, Philippines and IL&FS Technologies Ltd, Philippines for executing the land titling computerization project of Land Registration Authority (LRA), an administrative agency of the government of the Republic of the Philippines. This work involves grooming, scanning, digitizing, encoding and storage of about 2 cr Land Titles. The work of Grooming and scanning is to be carried out at 168 Offices of the Registry of Deeds spread across the Philipines. VSL expects the revenue of about Rs 75 cr for the subsidiary in the first year of incorporation.

Today, e-Governance is the fastest growing business opportunity as well as a major social responsibility initiative in India. It is further fuelled by the implementation of Right to Information Act (RTI) by govt of India, which makes it mandatory for all govt departments to have all the information in digital form. This includes not only conversion of historical data but also to keep present as well as future information in digital form. In view of the innumerable ministries, departments, offices at center and state level and other authorities, e-Governance has emerged as a huge opportunity for the IT industry in general and for the company in particular. On the other hand the BFSI and the telecom companies are also offering customized statements and other means of communications to retain its customers, opening up a sea of opportunity for VSL. Moreover the need for a paperless work environment across the globe enhances future prospect of the company.

Since last three years, VSL’s topline and bottomline has been growing at an impressive CAGR of 90% and 160% respectively. Moreover, company has been consistently registering an OPM of more than 40% & NPM of 20%. For the nine months ending Dec 2008 it has recorded 50% rise in topline to Rs 218 cr but only single digit growth in bottomline to Rs 34 cr due to dismissal performance during the Dec’08 quarter. Company is yet to come out with the March’09 quarter nos. Accordingly it is expected to clock a turnover of Rs 290 cr and NP of Rs 42 for full year. This translates into EPS of Rs 20 on equity of Rs 21.40 cr. For FY10 company can post much better nos on a consolidated basis. Its EV/EBIDTA stands at merely 1.2x times. Unfortunately this debt free company which generated positive cash flow of Rs 150 cr thru operating activities is today available at the same market cap of Rs 150 cr. Having a book value of Rs 127 cr, Cash EPS of more than Rs 50, dividend yield of 3%, VSL is available reasonably cheap at an EV of Rs 140 cr. Incidentally, during March’08 warrant holders (including promoters) exercised their option and got their 22.50 lakh warrants converted into shares @ Rs 241 per share despite substantial fall coupled with bearish sentiment in the stock market. Although, promoters hold only 19% and doesn’t enjoy that good reputation in the stock market still it’s a good bet at current levels. Investors are recommended to buy this scrip as it can still double even from current levels in next 12 months.

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