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Document code: FOTL_121020171_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
KELLTON TECH SOLUTIONS LTDResult Update (CONSOLIDATED BASIS): (Q1 FY18)
CMP: 93.85 OCT 12th, 2017
Overweight ISIN:INE164B01022
Index Details SYNOPSIS
Kellton Tech Solutions Limited is a CMMi Level 5and ISO 9001:2008 certified global IT servicesorganization.
Kellton upgraded to CMMI Level 5 CertifiedCompany, thus scaling the pinnacle of global qualityand process standards.
Total revenue was Rs 1753.07 mn during the quarteras compared to Rs 1404.34 mn during thecorresponding period of previous year reflecting agrowth of 24.8% on Y-o-Y basis.
The company reported an EBITDA of Rs 254.21 mnfor the quarter as compared to Rs 190.92 mn duringthe corresponding period of previous year,registering an increase of 33.16% on Y-o-Y basis.
The EBITDA margin for the quarter stood at 14.5%as compared to 13.6% in Q1FY17.
Net profit stood at Rs 144.82 mn for Q1 FY18 ascompared to Rs 120.29 mn in corresponding periodof previous year, up by 20.39% on Y-o-Y basis.
EPS stood at Rs 3.10 for the quarter under review ascompared to Rs 2.57 in the corresponding period ofprevious year.
Net Sales and PAT of the company are expected togrow at a CAGR of 39% and 36% over 2016 to2019E, respectively.
During Q1 FY18, the company has won theprestigious ‘Early Digital Learning Program(EDLP)’ project of the Republic of Mauritius fromEdCIL, a Government of India Mini RatnaEnterprise.
The company has acquired a total of nine newclients during the quarter.
Stock DataSector IT Software ProductsBSE Code 519602Face Value 5.0052wk. High / Low (Rs.) 149.45/79.00Volume (2wk. Avg.) 11000Market Cap (Rs. in mn.) 4425.61
Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs. In mn) FY17A FY18E FY19ENet Sales 6147.70 7561.67 8922.77EBITDA 867.53 1082.17 1280.45Net Profit 537.54 641.87 766.09EPS 11.40 13.61 16.25P/E 8.23 6.89 5.78
Shareholding Pattern (%)
As on June 2017 As on March 2017
Promoter 62 62
Public 34 34
Others (FIIs& FPIs) 4 4
1 Year Comparative Graph
KELLTON TECH SOLUTIONS LTD S&P BSE SENSEX
PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)Kellton Tech Solutions Ltd 93.85 4425.61 11.88 7.90 3.51 0.00Trigyn Technologies Ltd 102.00 3053.00 12.37 8.25 0.93 0.00Intense Technologies Ltd 81.80 1809.70 2.91 28.11 2.51 0.00Datamatics Global Services Ltd 107.55 6337.10 15.18 7.08 1.19 15.00
Document code: FOTL_121020171_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
INVESTMENT HIGHLIGHTS
Consistent revenue and profitable growth over the years
Continue to focus on fast growing and cutting edge technologies – mobile application development, content
management systems (CMS), analytics and cloud computing
Acquisition philosophy guided by twin objectives - deepening Kellton’s technical expertise & acquiring customers
Kellton Tech powers 30% of $21 billion eCommerce Market in India
Experienced Management team with 1400+ employees
Served +300 clients ranging from start-ups and early stage enterprises to Fortune 500 companies.
Brand consolidation of all group companies under umbrella brand Kellton Tech.
Credit Rating of A- by ICRA
Executing marquee projects including
World’s largest mobile based eGovernment health Project (msehat) in U.P
World’s first successful deployment of iBeacon powered conference app supporting indoor location, gamification
& real time analytics
India’s first Security and Surveillance project for Kandla Port.
COMPANY PROFILE
Kellton Tech Solutions Limited is a CMMi Level 5 and ISO 9001:2008 certified global IT company with a portfolio
comprising an exhaustive list of IT services in the web, mobile, security, ERP, Cloud Computing and IOT space.
Founded in 1993; the company has accelerated its growth after the new management led by Mr. Niranjan
Chintam and Mr. Krishna Chintam took over the company in the year 2009. The company is committed to
providing end-to-end IT solutions, strategic technology consulting, and offshore product development services. It has
forayed into newer technologies like Big Data, Cloud Computing and Internet of Things.
Kellton Tech is a global leader in digital transformation, propelling businesses into their future by transforming the way
they operate. The company enables the execution of the digital vision, strategy and roadmap, thus driving the digital
journey of enterprises. It infuses unprecedented levels of business agility and synergy into organizations through the
power of disruptive technologies like I-SMAC (Internet of Things (IoT), Social, Mobility, Analytics, Cloud), Artificial
Intelligence, Big Data, Chatbots & Blockchain among others. Its sharp focus on I-SMAC has enabled it to consolidate its
hold in this market.
For two innovative decades, Kellton Tech has put into practice the vision upon which it was founded viz. "to offer infinite
possibilities with technology".
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Headquartered in Hyderabad, India, Kellton Tech’s global footprint is strengthened by offices in US and Europe. It
employs over 1,400+ people catering to 300+ clients ranging from startups to Fortune 100 companies, spread across
verticals such as BFSI, travel, e-commerce, manufacturing, logistics, healthcare and others. Kellton Tech powers 30% of
the $21 billion eCommerce market in India through its clients.
Kellton Tech has expanded its business portfolio following an organic and inorganic path by making acquisitions in
United States (US) and India. It has an impeccable track record in integrating and assimilating acquisitions. The
acquisitions are an integral part of company’s strategy which has enabled Kellton Tech to acquire capabilities and become
a trusted digital partner of customers.
Kellton Tech foresaw the rise of digital technologies ahead of the curve and invested significantly in building the requisite
expertise in various technologies well before they appeared on the horizon. Its heightened sensitivity to the emerging
market trends and evolving customer expectations has enabled it to tap into niche markets in vogue while retaining its
strong focus on its key traditional areas.
Kellton Tech could successfully pursue cross-selling opportunities and leverage its enhanced capabilities to full potential
during this period. The enhanced capabilities were derived from organic efforts to strengthen and expand its offerings
portfolio, and through acquired companies. Kellton Tech has achieved the right mix of traditional and IP-based Digital
capabilities, which would help it maintain a high-growth rate hereon organically.
SERVICES:
1. Digital Transformation Solutions/ ISMAC
Digital Commerce
eCommerce Portal Development, mCommerce Application Development, Web and Mobile Applications Maintenance
and Support
Enterprise Mobility
Strategic mobility consulting, User Experience (UI/UX) Design, Mobile Application development, maintenance and
support, mobile device management
Digital Governance
mHealth applications development, security and surveillance applications development, RFID Solutions
IoT, Big Data and Analytics
IoT applications development, location based services (LBS) application development, analytics and reporting
Software R&D Labs
Proof of concept, minimum viable product, application development, maintenance and support
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Outsourced Product Development
Application Development, Maintenance and Support
Digital Marketing
Internet Marketing, SEO, SEM/PPC, SMM, Analytics and Reporting
ISMAC
ISMAC – Future is here
(* Courtesy: Kellton’s Investor Presentation)
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2. Enterprise Solutions
Business Enterprise Solutions
ERP Implementation, Maintenance and Support
Business Integration
Enterprise Application Integration, Service Oriented Architecture Strategy, Maintenance and Support
Business Process Management
Business Process Analysis and Optimization, Process Design and Integration, Process Management, Activity
Monitoring and Analytics
Business Segments
Digital Transformation Business
In FY17, Digital transformation contributed ~55% of revenue. Digital revenue has grown at a CAGR of 33.14% fromFY14 to FY17 with growth being higher at 50% in FY17. The growth was led by capability edge in digital transformationand acquisitions.
Digitization is disrupting business as never seen before. According to Gartner, 75% of the business will be a digitalbusiness or will be preparing to become digital by 2020. Management is expecting large opportunities with companieslooking for enterprise digital transformation deals, given its expectation of mass adoption in the near future. It hastechnology partners such as Mulesoft, Software AG, Microsoft Azure, SAP, IBM and IBM Watson, Kellton Tech is verywell positioned to grasp this opportunity
Digital Transformation is Disrupting
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Industries currently Adopting Digital Disruption
The annual survey conducted by Russell Reynolds Associates studies above 2000 C-level enterprises about the impact,structure, enablers, and barriers of digital transformation across 15 major industries. The graphic above shows thepercentage of executives surveyed who responded that their business would be moderately or massively disrupted bydigital in the next 12-18 months, industry-wise.
Digital disruption is difficult to navigate for traditional enterprises. Embracing a technology shift makes it difficult forenterprises to change their business processes. Kellton Tech provides assistance, guidance and thought leadershipthroughout the client’s digital transformation journey. Its core services include defining initial strategy, providingcustomer research analytics, integrated marketing support, and agile innovation for the enterprise.
Kellton Tech’s experts helps customers define the strategy for how to undertake this digital transformation by providingthe capabilities for organizations to align this transformation with their business strategy, manage risk and compliance andfind efficiencies within their application portfolio to drive cost savings. Its solutions help clients achieve higher customervalue and market differentiation.
Key Clients under Digital Transformation Business
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The recent Transformational project executed by Kellton Tech was for India’s Leading Digital payments and walletprovider, India’s largest airline, and a multinational insurance giant, helping them usher a revolution in digital paymentsscenario.
Enterprise Applications Business
In FY17, Enterprise applications accounted for ~26% of revenues. In the Enterprise Application business, Managementexpects a movement from traditional SAP, ERP towards Cloud solutions such as Hybris and S/4 Hana as big opportunitygoing forward
Kellton Tech provides an end-to-end analytics platform using technologies like Big Data, IoT to improve businessperformance and operational efficiency. An in-depth analysis of structured as well as unstructured data is done throughthe following process:
Collect data from multiple sources. Store data in servers using Hadoop MapReduce, Cloudera, HortonWorks etc. Process the collected data to gain insights using technologies like Hive. Utilize trending data visualization technologies like Tableau, Splunk etc. to improve business reporting and
monitoring activities. [ this part appears to be out of place in a report of this nature]
Example of Transforming Retail Industry
Taking the example of the retail industry, big data technologies can be used to reduce license cost and integrate hugevolumes of data, with a minimal impact on client’s reporting structure. Hadoop Map Reduce is used to leverage data fromterradata. Enterprises can transform and aggregate huge volumes of data into relevant customer insights with the help oftechnologies like Hive. Kellton Tech’s solution recommends the integration of MongoDB and Hive to integrate theseinsights and improve the efficiency of client’s reporting and monitoring systems thereby impacting the overall businessgrowth. Solutions provided by Kellton Tech help clients to achieve efficient data migration and quicker aggregation oflarge datasets at an affordable cost.
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Kellton Tech’s clients are transcending and extending into customer engagement models driven by employees intoworkforce engagement along with suppliers transcending and extending into business networks which is disrupting the ITindustry.
Kellton Tech builds a connected world. Customized IT solutions, digital transformation strategy, strategic mobilityconsulting, Governance, risk and compliance, etc. using technologies like IBM, Software AG, and efficient tools of digitalcommerce and marketing are few of the services that Kellton Tech excels in.
Key Clients under Enterprise Applications Business Segment
Hybris Omni-Commerce Platform
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Kellton Tech provides omni-channel commerce solutions—developed on industry-leading commerce platforms—to helporganizations achieve top-line growth. Kellton Tech works with best-in-class platform partners to deliver comprehensivee-commerce and omni-channel solutions to address the unique needs of clients. Kellton Tech continuously invests inpartner solutions and technologies for faster time to market in its clients’ omni-channel transformation journey.
PRODUCTS:
Kellton Tech has built several IPs that push the envelope of technology further, redefining the way in which business
processes operate. These push enterprises in advanced world to unprecedented levels of digitization, even as they are
primed to function in the heat and dust of developing economies through cutting-edge, cost-efficient innovations.
Following are select IP-based Products from Kellton Tech:
KLGAME: Kellton Tech Location based Gamification, Analytics and rich Messaging Engine
Kellton Tech IoT: A scalable enterprise standard based platform for connected devices, sensors, beacons which coversdata acquisition, device provisioning and management, data processing and analysis, dashboards, alerts.
Kellton Tech Mobility Framework: An end-to-end mobility solution provisioned with data collection, data integration,analytics and enterprise dashboards. It’s a cross-platform framework with online-offline mode and intuitive UI andUX.
Kellton Tech SehatSense: A raspberry-PI based healthcare cloud-enabled device with health sensors for elderly care,mother and child care etc.
Kellton Tech Chatbot Solution Framework: A chatbot middleware solution which can connect to any conversationbackend and any business tools like HRMS, ERP etc. With its high-impact Conversation Design and transformation,it gives the users near human-like conversation quality for business scenarios.
Kellton Tech Media Solution Framework: A highly scalable world-class solution for media industry designed toimprove user digital experience and workforce productivity.
Kellton Tech DevOps Solution Framework: A solution which provides complete application and infrastructure healthdashboard, thorough application performance analysis, bottleneck analysis and detection, early warnings, system onautopilot for capacity, disaster recovery etc.
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Business Highlights of Q1 FY18
Won the prestigious ‘Early Digital Learning Program (EDLP)’ project of the Republic of Mauritius from EdCIL, a
Government of India Mini Ratna Enterprise. The project involves Supply, Commissioning, and Maintenance of Tablet
based Learning programs in Mauritius. The order value is estimated to be around Rs 62 crore.
Upgraded to CMMI Level 5 Certified company, thus scaling the pinnacle of global quality and process standards.
Featured in the Forbes Asia’s latest 'Best under a Billion' list of the top 200 publicly traded companies in the Asia-
Pacific region.
New Client Wins during Q1 FY18:
The company has acquired 9 new clients, prominent of them are:
A cutting edge solution utilizing analytics, cloud and SaaS to provide leasing clients with a complete digital lending
experience; gaining real-time insights and actionable intelligence to increase operational efficiency for a leading land
services provider
A Digital Transformation solution, leveraging real-time analytics and technologies like smartwatch to increase sales
efficiency of a leading global biotechnology company
A mobile first health care solution to enhance the quality of healthcare services for a leading online healthcare
platform
A content rich online portal for students, enhancing user experience and catering to all the information needs of a
leading educational institution.
People:
Net addition of 15 in the Current Quarter
Total Headcount ~1415
Historical Acquisitions:
The Company has expanded its reach globally via acquisitions. Kellton Tech is steadily expanding its offerings portfolio
through organic growth and synergistic acquisitions. It has strengthened its foothold in technology and through its
expanded workforce it is capable of offering a diverse range of IT services and solutions.
2017:
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Acquired Lenmar Consulting, US-based global IT services & solutions company with strong presence in banking and
financial services (BFSI sector).
2016:
Acquired Bokanyi Group, leading US-based cloud and analytics service provider
2015:
Acquired ProSoft Technology Group Inc., a US-based ERP, EAI Solutions company
2014:
Acquired eVantage Solutions Inc., a US-based IT consulting company. eVantage Technologies is a leading IT
solutions provider and VIVOS is focused in offerings related to IT and life-sciences space.
Acquired Vivos Professional Services LLC, a USA based focusing on life-sciences & healthcare space
2013:
Acquired Supremesoft Global Inc., a US-based IT consulting company
2012:
Acquired SKAN DbyDx Software Pvt. Ltd, a mobility solutions company. SKAN Dbydx was competent in mobility
while supremesoft, a Software Development and IT Services company will substantially strengthen their expertise in
cloud computing and data analytics.
2011:
Acquired Tekriti Software Pvt. Ltd., a software services company focusing on web/open source
Acquired MCS Global, Inc., a US based IT consulting company
Acquisitions Detail (step down subsidiaries of Kellton Tech Inc.)
Date of Acquisition Acquired Entity Region Description
March 2017 Lenmar Consulting USA
Offers IT services & solutions inBFSI space; Has 100 employeesserving 20 clients
January2016 Bokanyi Consulting
USA
(Texas) Provides Enterprise, Analytics &Cloud services; Specializes in SAP
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HANA implementation
May 2015 Prosoft Technology Group USA (Illinois) ERP-EAI provider
April 2014 eVantage Technologies US (New Jersey) Implementation of ERP solution
October 2014Vivos Professional Services,LLC USA (Virginia)
Focus on healthcare & Life sciencesindustry
October 2013 Supremesoft Global Inc. US IT consulting company
December 2012 DbyDX software US Mobility solutions company
December 2011 MCS global USA IT consulting company
August 2011 Tekriti Software US Enterprise Software Solutions
Awards / Accolades:
Kellton Tech Solutions has won ‘Best e-Governance Initiative of the Year' award at Digital India Summit organized
by BW Businessworld.
mSehat, a Kellton Tech project which earlier in the year was featured as a case study in a WHO report, won the Skoch
Award for Best Health Initiative in India.
Kellton has ranked 19th and 193rd in the 2016 Deloitte Technology Fast 50 India and Fast 500 Asia-Pacific
respectively.
The company has won the prestigious Digitizing India Award, a Cisco initiative in collaboration with CNBC.
Featured in ‘Best Places to Work’ by ‘The CEO Magazine’
KLGAME was nominated in the finals of HYSEA Annual Summit and Awards 2015
Ranked 21st in Deloitte Technology fast 50 India 2014
Selected among the ’20 Most Promising Travel & Hospitality Solution Providers’ and ‘Top 20 Enterprise Mobility
Companies in India by CIO Review
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QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)
Results update (Q1 FY18):
Rs. In Million Jun-17 Jun-16 % Change
Revenue 1747.78 1400.94 24.76%
Net Profit 144.82 120.29 20.39%
EPS 3.07 2.57 19.55%
EBIDTA 254.21 190.92 33.15%
Kellton Tech Solutions Ltd has achieved a consolidated turnover of Rs. 1747.78 million for the quarter ended of 30th June,
2017 as against Rs. 1400.94 million in the quarter ended of 30th June, 2016, an increase of 24.76%. During the quarter, net
profit increased by 20.39% to Rs. 144.82 million from Rs. 120.29 million in the corresponding quarter ending of previous
year. Reported earnings per share of the company stood at Rs. 3.07 in Q1 FY18 as against Rs. 2.57 in the corresponding
quarter of the previous year. Profit before interest, depreciation and tax stood at Rs. 254.21 million as against Rs. 190.92
million in the corresponding period of the previous year, up by 33.15%.
Break up of Expenditure
Break up ofExpenditure
Value in Rs. Million
Jun-17 Jun-16 %Change
Cost of MaterialsConsumed 24.81 4.55 446%
Employee BenefitsExpenses 859.24 731.60 17%
Depreciation &AmortisationExpenses
10.54 8.35 26%
Other Expenses 614.80 477.28 29%
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Operating Metrics
Revenue by Industry
Revenue By Industry Q1 FY17 Q4 FY17 Q1 FY18BFSI 6.0% 6.9% 7.1%Education 0.0% 0.0% 0.0%Energy & Utilities 6.6% 6.7% 6.8%Healthcare & Life Sciences 13.6% 13.9% 14.0%Information Services & Technology 31.9% 27.4% 27.1%Manufacturing 7.5% 7.5% 7.7%Media & Entertainment 2.2% 2.5% 2.0%Others, Aviation & NGO 5.2% 6.0% 6.0%Professional Services/ Business Services 14.7% 14.9% 14.4%Retail 12.2% 14.0% 14.2%
Document code: FOTL_121020171_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Clients
The company has 344 number of clients and the breakup of the same is given hereunder:
USA - 276
Europe - 6
India - 57
Others - 5
Key Management
Name Designation Independent / Non-Independent
Krishna Reddy Chintam (Promoter) Managing Director Executive
Niranjan Reddy Chintam (Promoter) Chairman & Wholetime Director Executive
Rajendra Vithal Naniwadekar Director Independent
Srinivas Potluri Non Executive Director Non-Independent, Non Executive Director
Brij Mohan Venkata Mandala Director Independent
Karanjit Singh CEO & Whole Time Director Executive Director
PVV Srinivasa Rao Additional Director Independent
N Kalpana Reddy Additional Director Independent
The company is managed by handpicked professionals from a cross-section of the industry.
Abhishek Vinod Singh (IIT Kanpur) - Sr. Vice President, Americas & Europe
Brian Bokanyi - VP, Operations
Nitin Verma (IIT Kanpur) - Sr. Vice President, India & APAC
Jim Burton (America Strayer University, Maryland) - VP, Healthcare & Life Sciences
Gerard John - GM, EMEA
Key Risks
Risks include appreciation of the Indian Rupee versus other currencies, breach in the data confidentiality that could lead to
loss of contract or penalties, shortage of skilled manpower that could put upward pressure on the employee expenses and
new innovation or technology introduction by rivals could pose further risk to the business.
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Technology Obsolesces: There is a tendency to rush towards latest fads in technology, and by the time a company equips
itself with the necessary specific expertise, the fad may be no longer be in vogue.
Highly Competitive Market that may impact pricing power: The volatility in the technology space and the changing fads
in the industry that requires companies to constantly innovate to remain competitive and thus put pressure on margins.
Technology being highly volatile, there is a need to cater to newly developed markets in quick notice and capitalise on the
opportunities they offer. However, companies risk being caught off-guard if after all the efforts they put in, the market
need has evolved or moved on.
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FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as of March 31, 2016 -2019E
FY16A FY17A FY18E FY19E
SOURCES OF FUNDSShareholder's Funds
Share Capital 234.13 235.72 235.78 235.78Reserves and Surplus 1023.08 1532.48 2176.12 2937.76
1. Sub Total - Net worth 1257.21 1768.20 2411.90 3173.542. Share application money pending allotment 0.33 0.00 0.00 0.00Non Current Liabilities
Long term Borrowings 321.47 437.81 519.25 581.56Deferred Tax Liabilities 14.27 13.94 13.38 12.71Other Long term Liabilities 78.42 55.46 59.89 63.49Long term Provisions 4.67 12.23 14.67 17.31
3. Sub Total - Non Current Liabilities 418.83 519.44 607.19 675.07Current Liabilities
Short term Borrowings 428.01 538.19 608.15 662.89Trade Payables 176.09 205.18 227.75 250.52Other Current Liabilities 206.49 314.53 361.71 408.73Short Term Provisions 603.52 605.74 623.92 642.63
4. Sub Total - Current Liabilities 1414.11 1663.64 1821.52 1964.77Total Liabilities (1+2+3+4) 3090.48 3951.27 4840.62 5813.38APPLICATION OF FUNDSNon-Current AssetsFixed Assets
Tangible assets 69.40 89.00 108.58 129.21Intangible assets 1115.23 1530.18 1913.73 2336.10Capital Work in Progress 7.21 10.21 11.75 13.16a) Sub Total - Fixed Assets 1191.85 1629.40 2034.06 2478.47b) Long Term Loans and Advances 16.06 24.47 31.08 37.30c) Other non-current assets 0.69 0.41 0.48 0.59
1. Sub Total - Non Current Assets 1208.60 1654.28 2065.63 2516.35Current Assets
Inventories 33.22 23.92 27.75 31.91Trade receivables 1222.93 1467.73 1731.92 2043.66Cash and Bank Balances 78.84 161.31 203.25 247.96Short-terms loans & advances 405.76 564.69 712.10 854.52Other current assets 141.14 79.35 99.98 118.97
2. Sub Total - Current Assets 1881.88 2296.99 2774.99 3297.03Total Assets (1+2) 3090.48 3951.27 4840.62 5813.38
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Annual Profit & Loss Statement for the period of 2016 to 2019E
Value(Rs.in.mn) FY16A FY17A FY18E FY19E
Description 9m 12m 12m 12mNet Sales 3589.90 6147.70 7561.67 8922.77
Other Income 6.70 9.75 12.19 13.41
Total Income 3596.60 6157.45 7573.86 8936.18
Expenditure -3092.91 -5289.92 -6491.69 -7655.74
Operating Profit 503.69 867.53 1082.17 1280.45
Interest -87.67 -102.87 -121.38 -138.38
Gross profit 416.03 764.66 960.79 1142.07
Depreciation -25.10 -42.28 -49.04 -55.42
Profit Before Tax 390.93 722.39 911.75 1086.65
Tax -81.20 -184.85 -269.88 -320.56
Net Profit 309.73 537.54 641.87 766.09
Equity capital 234.13 235.72 235.78 235.78
Reserves 435.34 1023.08 1664.95 2431.04
Face value 5.00 5.00 5.00 5.00
EPS 6.61 11.40 13.61 16.25
Quarterly Profit & Loss Statement for the period of 31st Dec, 2016 to 30th Sep, 2017E
Value(Rs.in.mn) 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17E
Description 3m 3m 3m 3mNet sales 1582.42 1653.61 1747.78 1870.13
Other income 0.40 4.35 5.28 5.55
Total Income 1582.82 1657.96 1753.07 1875.67
Expenditure -1361.50 -1417.60 -1498.85 -1603.63
Operating profit 221.32 240.36 254.21 272.04
Interest -21.26 -32.07 -31.05 -32.61
Gross profit 200.06 208.29 223.16 239.44
Depreciation -9.66 -16.36 -10.54 -11.49
Profit Before Tax 190.40 191.93 212.62 227.95
Tax -50.74 -48.82 -67.80 -71.80
Net Profit 139.66 143.11 144.82 156.15
Equity capital 235.32 235.72 235.78 235.78
Face value 5.00 5.00 5.00 5.00
EPS 2.97 3.04 3.07 3.31
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Ratio Analysis
Particulars FY16A FY17A FY18E FY19E
EPS (Rs.) 6.61 11.40 13.61 16.25
EBITDA Margin (%) 14.03% 14.11% 14.31% 14.35%
PBT Margin (%) 10.89% 11.75% 12.06% 12.18%
PAT Margin (%) 8.63% 8.74% 8.49% 8.59%
P/E Ratio (x) 14.19 8.23 6.89 5.78
ROE (%) 46.26% 42.70% 33.77% 28.73%
ROCE (%) 37.27% 40.71% 37.36% 34.15%
Debt Equity Ratio 1.12 0.78 0.59 0.47
EV/EBITDA (x) 10.06 6.04 4.94 4.23
Book Value (Rs.) 14.30 26.70 40.31 56.55
P/BV 6.56 3.51 2.33 1.66
Charts
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VALUATION RATIONALE
Kellton increased its focus on BFSI market, extending digital transformation to banking and financial sector. Kellton Tech
has acquired Lenmar Group to strengthen the capabilities in the BFSI sector. Kellton has won multiple prestigious awards
from industry-leading platforms; enhancing brand value and recognition. Kellton continue to focus on fast growing and
cutting edge technologies – mobile application development, content management systems (CMS), analytics and cloud
computing. Kellton continue to be seen as the go-to digital partner for end-to-end enterprise transformation. Today, the
company is best positioned to drive digital transformation initiatives across the spectrum of industries.
OUTLOOK AND CONCLUSION
At the current market price of Rs. 93.85, the stock P/E ratio is at 6.89 x FY18E and 5.78 x FY19E respectively.
Earning per share (EPS) of the company for the earnings for FY18E and FY19E are seen at Rs. 13.61 and Rs. 16.25
respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 39% and 36% over 2016 to 2019E
respectively.
On the basis of EV/EBITDA, the stock trades at 4.94 x for FY18E and 4.23 x for FY19E.
Price to Book Value of the stock is expected to be at 2.33 x and 1.66 x for FY18E and FY19E respectively.
We expect that, Kellton will maintain consistent revenue and profitable growth in future. Hence, we say that, we are
Overweight in this particular scrip for Medium to Long term investment.
The way Kellton Tech. is growing since last 3 years plus the kind of growth they are targeting for next 2 years, it can be a
multibagger.
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INDUSTRY OVERVIEW
India is the world's largest sourcing destination for the information technology (IT) industry, accounting for
approximately 67 per cent of the US$ 124-130 billion market. The industry employs about 10 million workforces. More
importantly, the industry has led the economic transformation of the country and altered the perception of India in the
global economy. India's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the
US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However, India is
also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation centres in
India.
The IT industry has also created significant demand in the Indian education sector, especially for engineering and
computer science. The Indian IT and ITeS industry is divided into four major segments – IT services, Business Process
Management (BPM), software products and engineering services, and hardware.
The Indian IT sector is expected to grow at a rate of 12-14 per cent for FY2016-17 in constant currency terms. The sector
is also expected triple its current annual revenue to reach US$ 350 billion by FY 2025.
Total spending on IT by banking and security firms in India is expected to grow 8.6 per cent year-on-year to US$ 7.8
billion by 2017.
India’s internet economy is expected to touch Rs 10 trillion (US$ 146.72 billion) by 2018, accounting for 5 per cent of the
country’s GDP.
The public cloud services market in India is slated to grow 35.9 per cent to reach US$ 1.3 billion according to IT
consultancy, Gartner. Increased penetration of internet (including in rural areas) and rapid emergence of e-commerce are
the main drivers for continued growth of data centre co-location and hosting market in India.
The bright spot, however, is that many businesses are keen to attain enterprise-wide digital convergence, having woken up
to the infinite possibilities that these technologies offer. From the margins the digital story is now mainstream, and the
Indian IT industry is well-placed to harness the global digital opportunities. Meanwhile, the trade sentiment about the
Indian economy seems largely optimistic. The government’s focus on mission Digital India continues to offer hope to
masses and businesses. The IT industry is poised to ride this digital wave to their advantage while improving government
systems’ ability to serve the citizens.
Technology:
Kellton Tech aims to extend its capabilities across the spectrum of digital possibilities. As a pioneer in ISMAC (Internet
of things, Social, Mobile, Analytics, Cloud) armed with acquisitions in ERP arena, Kellton Tech is poised to capitalize on
the cloud ERP space such as SAP HANA among others. Indeed, the added strength in the in-memory and streaming
analytics space opens new windows of opportunity.
Today, Kellton Tech is fully-equipped to enable businesses to make the digital leap, sustain their forward thrust and help
them acclimatize with the new digital landscape. With the emergence of Digital Systems Integration, its traditional
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integration and BPM services are being re-engineered and re-invented to integrate ISMAC constituents too. Kellton Tech
is also at the forefront of capitalizing on the shift from traditional SOA and Webservices to APIs and Microservices.
IoT uptake KLGAMETM has been successfully implemented in various events, where Kellton Tech was a partner. The
capability and capacity of the innovation is now beyond apprehension, and its pilot projects reveal the same. Much like
the digital wave, which it was able to profitably ride, thanks to its early focus, KLGAMETM is another arena where
Kellton Tech has prepared the groundwork ahead of the curve and expects to tap the emergent market.
While Kellton Tech takes pride in the fact that it drives 30% of the digital traffic in the Ecommerce market of India,
mSehat gives it a unique satisfaction of harnessing the power of digital technologies to affect tangible change among the
masses. As more projects of this nature are undertaken with the same effectiveness and efficiency, the mission Digital
India will transform the very face of public systems and revolutionize citizen services.
Outlook:
The Government of India’s thrust on mission Digital India will bring many opportunities to IT companies, and Kellton
Tech being a leading enabler of digital transformation stands to gain from these initiatives. Likewise, the global IoT
market is growing at a rapid pace and Kellton Tech, armed with its IoT innovation KLGAMETM, is well-placed to
benefit from this market upsurge. Having harnessed its digital prowess to improve the health outcomes of masses, Kellton
Tech will continue to use its cutting-edge technology for the betterment of masses and earn their goodwill.
Meanwhile, as noted earlier, the surge in nationalism appears to have become a global phenomenon. “Glocalization” may
not be restricted to offerings portfolio alone, and might extend to people practices, given how politically charged the issue
of jobs creation is. However, Kellton Tech is well-positioned in terms of its compliance with local employment
stipulations and is poised to ride trends where necessary, whether these are driven by business needs, financial sops or
political compulsions.
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The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.
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The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:
Name of the Analyst Qualifications SectorsCovered
Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport
Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)
Pharma &Diversified
No Interest/ Exposure
U. Janaki Rao M.B.A CapitalGoods
No Interest/ Exposure
B. Anil Kumar M.B.A Auto, IT &FMCG
No Interest/ Exposure
M. Vijay M.B.A Diversified No Interest/ ExposureCH. Shailaja M.B.A Diversified No Interest/ ExposureV. Harini Priya M.B.A Diversified No Interest/ ExposureMD. Naveed M.B.A Diversified No Interest/ ExposureA. Bikshapathi M.B.A Diversified No Interest/ Exposure
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