Kellton Tech Q2FY18 Concall Summary

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 Financial Highlights

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  • Total revenue for the quarter stood at Rs. 185.2 crores, which is 5.4% higher than the preceding quarter
  • EBITDA of the company stood at Rs. 28 crores which is growing by 34.6% year-on-year and 9.6% quarter-on-quarter
  • PAT of the company stood at Rs. 14.96 crores which is 2.4% higher than the preceding quarter
  • EPS of the company increased by 62.3% quarter-on-quarter and stood at Rs.3.17
  • Total revenue for six months stood at Rs. 361.07 crores
  • EBITDA for six months stood at Rs. 53.56 crores which is growing at 34.6 YoY
  • Net profit of the company stood at Rs. 29.58 crores which is 8.2% of the total revenue

Revenue and Future Prospects

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  • Revenue of the firm is expected to grow at 5.5% quarter-on-quarter and a little over 20% YoY
  • Acquisition of Lenmar has helped in attracting BFSI customer
  • IoT technology has helped in increasing the business
  • There would be a reduction in the number of pledge shares
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Costs

  • Bank guarantee fees on some contracts of the company has resulted in the escalation of the financial costs
  • Timely renewals of debt limit has also resulted in additional finance costs

Dividend Policy

  • Dividend payout to the investors would not start before FY2020 because of maintaining a cash reserve for growth prospects

Acquisition

  • Strategy for acquisition would remain the same, i.e., increase capability or expand the customer base
  • Cultural fit has to be taken care of before acquiring any new firm

Project Information

  •  Almost 80% of the new orders are from repeat customers
  • Majorly the projects time span from six to nine months but they could be multi-year also
  • Kellton take up multi-year projects which is the combination of both building the systems initially and then providing maintenance and support for next few years
  • In one of the projects for the company in oil and gas industry, they can provide real-time data to the company with the help of the sensors installed near the oil wells and with the help of predictive analytics they can predict about the problems and changes that are needed to handle a particular situation
  • It makes IP or Platforms, and because of that they can respond quickly and better to client requirements

Industry Characteristics

  • Digital transformation industry has a size of more than trillion dollars
  • Nearly 66 % of the total revenue of the Kellton Tech comes from the digital transformation
  • According to Gartner, 20% to 30% of all the companies around the globe have shifted to digital transformation, and by 2020 nearly 70% of the companies would be using this

Business arena

  • Kellton Tech works with all the industries
  • Highest revenue generating industry for Kellton Tech is Information Services and Technology industry
  • It also works with Media & Entertainment, Manufacturing, Energy & Utilities, Education, BFSI, and Retail
  • Kellton has the capability to completely transform the traditional way of doing business into Digital

Competition

  •  Kellton make timely investments in new cutting-edge technologies
  • They claim that by the time large player adopts a technology they move to a new technology

Employees

  • Kellton has limited reliance on the H1 visa holders as employees
  • Employees are paid salary according to their experience and at par with US citizens and Green card holders
  • Kellton does not have huge bench strength of employees because it directly places them in projects

Trade Receivables

  • Kellton claims to have done better than other players in the industry in terms of trade receivables which currently stands at 73 days

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