Alert
This week we were researching about two IT companies in Specific. One of which we have presented with the detail report and the another one is Intellect Design. Our work is in progress for Intellect design so incase if we find it suitable we will present a detailed research report about the same in the coming weeks.
Saksoft is a completely debt free company providing digital transformation solutions that empower the business of its customers to adapt to rapidly digitalising and transforming world.
Saksoft
Current Market Price on the date of publishing this report-: 102 Rs
(Date of Publishing this report – 30th October 2022)
Introduction
Incorporated in 1999 with the name Sak Infotech Ltd, company was established with the objective of providing IT solutions for business problems in the banking, financial and insurance sectors.
Saksoft Ltd is now a leading provider of Information Management Solutions to successful businesses all over the world. The company is a mid-sized information technology company that offers end-to-end business solutions that leverage technology and help their clients improve their business performance. They also offer full-service software solutions such as consulting, design, development, re-engineering, systems integration, implementation, and testing.
Headquartered in Chennai India, company has 16 offices in India, Europe, Asia and USA. USA is the company’s largest market accounting for 47% of its revenues, followed by Europe 29% and APAC 24%. .
The Company has been awarded ISO 9001:2015 certification for its quality management system and ISO 27001:2013 certification for its information security management system, demonstrating its commitment to process excellence.
As of March 31, 2022, the company employed 1554 full-time professionals. As of March 31, 2022, the average age of the Company’s workforce was between 30 and 40 years. Of top 500 employees in the company, Saksoft saw attrition of less than 10% in previous year thereby retaining majority of its workforce.Recently company was awarded as one of the best place to work for the year April 22 to 23.
The company follows a very unique model of targeting customers in a very niche segment, companies with revenue ranging from $100 million to $2 billion. The company believes that, while these businesses are affected by the recession, they are less so than large corporations. Also, according to management, when they try to go after larger clients, they will face competition from larger companies such as Infosys, TCS, and others, putting them on the defensive. As a result, when they target companies in this range, they can gain a competitive advantage over the competition.
Acquisitions
Over the years company has made several acquisitions as well as started new foreign subsidiaries such as
- In 2000, the company started their Singapore Subsidiary, namely Sak Software Pte to manage operations in Singapore and Asia Pacific.
- In 2001, Saksoft acquired the business and assets of Synertech Inc., based at Boulder, USA and renamed it as Saksoft, Inc.
- In 2001, company opened a branch office in London to manage business from the U K market.
- In 2002, company acquired the business assets of NeemTree Technologies Pvt Ltd.
- In January 2003, company established a subsidiary in Germany.
- In 2007, company incorporated Saksoft Pty Ltd, Australia as a wholly owned subsidiary company.
- In 2010, the company incorporated a wholly owned subsidiary Saksoft HK Ltd in Hong Kong with a view of creating an expansion in the business opportunities for the company on Asia Pacific markets.
- Recently company acquired MC Consulting PTE, a Singapore based company specializing providing technology based businesses.
Business Products
Digital Solution
Under Enterprise Applications companies capabilites include
- Web Technologies – Custom Development and re-engineering of legacy applications covering the end-to-end life cycle
- Content Management System – Expertise across WordPress, Drupal, Woo Commerce and Magneto
- BI Product Implementation – Company’s experts across various BI products can help consult, implement, migrate and support
- Mobility Solutions – Solutions across Android, iOS, and UWP using Frameworks like Flutter, Xamarin, React Native, and native development
- Collaboration – Implementation, enhancement, upgrades and cloud migration
- Omni Channel Solutions – Information access and enablement through multiple channels
Under Augmenting analytics company’s capabilities include accelerating data-to-insights-to-action journey which provides user with actionable insights to act on.
Company also provides Intelligent Automation solutions which include
Robotics Process Automation -: Automate repetitive manual task and eliminate human errors, Optimise process and Improve efficiency
Data Analytics – Automate data driven insights and leverage the hidden power of raw data to make meaningful business decisions.
Internet of Things – Leverage the hidden power of data from connected devices for endless business possibilitie
Machine Learning / Artificial Intelligence – Company’s Data Science experts make the most of open source machine learning frameworks to deploy solutions addressing specific business problems
Test Automation – Use company’s home-grown Test automation frameworks to increase release velocity, augment testing efforts and reduce time to market.
Company offers Enterprise Cloud where company helps enterprises to move their existing infrastructure to move to cloud as well as scale automatically depending upon the needs of the organisation.
Verticals
Company operates in 6 different verticals namely
- Logistics and Transportation
- Fintech
- Healthcare
- Retail e-Commerce
- Telecommunication
- Public Sector
TelecommunicationThe company’s Analytics-as-a-Service (AaaS) platform provides subscription-based data analytics software and procedures via the cloud. From managing static to streaming data and enabling reporting, predictive and descriptive analytics, to providing dashboards and reports, the company’s end-to-end Analytics as a Service solution caters to various analytical purposes.
Analytics as a service solutions range from retail and healthcare to logistics and financial services, and they sync with various applications such as Oracle Retail, SAS, and SAP, among others. The company’s Analytics as a Service platform promotes domain-specific analytics, with KPIs strategically handpicked for each domain, as well as the majority of the best use-cases, ranging from forecasting customer demand to facial analytics for identifying customer/gender/age to footfall analysis.
Financials
For the year ended March 22
- For the full year FY22, the revenue stood at Rs.480.43 crores as compared to Rs.385.81 crores in FY21 witnessing a growth of 24.5% which is the highest growth in terms of absolute numbers in Saksoft’s history.
- For FY 22, the EBITDA stood at Rs.79.02 crores as compared to Rs.64.42 in FY21, which is a growth of 22.7% year-on-year basis.
- FY22 profit after tax stood at Rs.63.26 crores as compared to Rs.45.44 crores in the previous year, witnessing a growth of 39.2% year-on-year.
- This resulted in the earnings per share being at Rs.63.37 for the current year as compared to Rs.45.68 in the previous year, witnessing a growth of 38.7% year-on-year.
- Company’s debt position stood at Rs.4 crores and cash portion stood at Rs.94.84 crores which makes it a net cash company.
- Company repaid a debt of Rs.20 crores during the year and the cash outflow of the investment in MC Consulting for the first tranche was about Rs.15 crores.
- For the FY 22, the return on equity stood at 20% and the return on capital employed stood at 25.8%.
For Q4FY22
- In terms of revenue, Q4 FY22 revenues were at Rs.139.09 crores as compared to Rs.97.45 crores in Q4 FY21 and Rs.124.47 crores in Q3 FY22 reflecting a growth of 42.7% year-on-year and 11.7% on a quarter-on-quarter basis .
- Q4 FY22 EBITDA stood at Rs.22.15 crores as compared to Rs.15.55 crores in Q4 FY21 and Rs.22.07 crores in Q3 FY22. Thereby, registering a growth of 42.4% year-on-year and flat on a quarter-on-quarter basis. The EBITDA margin for the quarter stood at 15.9% as compared to 16% in quarter four of the previous year, and 17.7% in quarter three of the current year
- Q4 FY22 PAT stood at Rs.17.55 crores as compared to Rs.12.51 crores in the quarter four of the previous year and Rs.14.93 crores in the quarter three of the current year. This is a growth of 40.3% on a year-on-year basis, and 17.5% on a quarter- on-quarter basis
Managements comments and future outlook
Management is confident that over the next three years, company can deliver +20% CAGR, top line growth. Last year, company delivered 25% growth so, 20% seems very possible at this stage.
And now company is aiming to grow much faster to achieve its mission to become $100 million company by 2025.
Company’s target market is the middle segment, the companies which are typically $100 million to $2 billion in revenue size. This companies are very less impacted by the recession. Therefore the management is quite hopeful that the impact of the recession on the company wont be much.
Sectorial Outlook
By 2025, we expect that there could be over 100 zettabytes of data stored in cloud (a zettabyte is a Billion terabytes or a trillion gigabytes). In three years, the total global data storage could exceed 200 zettabytes of data, half stored in cloud as compared with only 25 percent of all the computing data stored this way in 2015. (Source : https://www.jchs.harvard.edu)
The US geography continues to dominate the global IT market. IT revenues from this geography are expected to reach USD 411.80 Billion in 2022, the highest in the world. US IT revenues are expected to grow at a CAGR of 6.38% from 2022 to 2027, a market volume of USD 561 Billion by 2027.
The global opportunity for embedded finance is expected to reach USD7.2 trillion by 2030. Global blockchain in the telecom market is expected to grow at a CAGR of 77.9% from 2022 to 2030, reaching USD 1.37 Billion by 2024.
The Asia-Pacific market contributed around 22% to the Company’s overall revenue mix. Much of the growth in this region is coming from customers seeking to build robust infrastructure to enhance resilience against cyberattacks and disaster .
A survey of U.K. business leaders where company has significant presence found that 70% companies expect their IT spends to grow this year, with 69% planning to launch new digital projects, tools or initiatives, and 65% intending to invest in a new field of technology, including artificial intelligence (AI), the Internet of Things (IoT), big data and cybersecurity. Some 64% businesses are planning to invest in cloud this year while similar numbers are looking to enhance their customers’ digital experience 68%.
Please note all ideas are for long term only that is atleast 2-3 years. Therefore in case of significant volatility in short term users need to be cautious and wait for appropriate opportunity before jumping in.
Conclusion
Saksoft a completely debt free microcap company operating in a niche segment with its target market comprising of mainly middle segment, companies typically USD 100 Million to USD 3 Billion by revenue size. Additionally as per the management this segment, comprises of fast growing companies, that are generally less affected by economic slowdowns. Also management has guided for 20% top line growth in the coming period as well as said that it plans to be a $100 million company by 2025. Thus by this Saksoft is worth exploring for long term.
