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Geodesic Limited- A Software product and solutions company, focused on the lucrative
collaborative communication market, leading the eventual convergence
HBJ Capital, IndiaWeb: www.hbjcapital.com
E-Mail: [email protected]: 098867 36791
collaborative communication market, leading the eventual convergence of mobiles, desktops, smart devices and the world wide web.
HBJ Capital’s “10in3” stock for the month of March 2009
“10in3” powered stocks are winning subscribers’ delight - Buy this company’s
share & keep it for the life time.
Emerging Sector Innovative Company
HBJ Capital’s 10in3 Stock for
Mar’09
Small Cap Leader Popular Product base
Mar’09
Who, what, where, when and why?
1. From the desk of CEO, HBJ Capital.2. Blue Ocean Formation – The VoIP revolution, telecom's biggest
ever threat – (Page #9)3. Geodesic Limited : A Software product and solutions company 3. Geodesic Limited : A Software product and solutions company
– (Page #13)4. When to buy : Best buying price for Geodesic Limited. –
(Page#63)5. Don't have time : Just read this section "How can we say that
Geodesic has bright future?” – (Page#68)6. Methodology used by HBJ Capital to discover 10in3 stocks.
“Super ! Thanks for the extra effort you guys are doing in making these reports interesting, I really appreciate it, and I am sure now my portfolio looks much better” - Sachin Gupta, Parvati Hill, Pune
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Testimonial for the previous reports…
possible include some technical analysis in the charts” -Patrick – Dallas, USA (PE Firm)
reports by month end” - Subu T, Hosur Road, Bangalore
It was a very interesting report on 10in3 stock for Feb’09. I never use to invest in commodity based stocks/companies but this one has changed my mind -Raman Rao, Senior Analyst, IDFC (Saidapet, Chennai)
“Very well done! Your reco made me rich by 20-30% in last 3 months itself, can I get some previous reports too?” –Christophe Paul – CEO, Mumbai based VC Firm.
Dear Investors,If there is any sector which is less impacted due to slowdown, it
is telecom or FMCG sector. Just imagine that when recession prolonged then even these sectors get hit and consumer look for cost savings. In first place you can’t live without talking over the phone, it has become necessity now. Only thing which you can do is reduce the phone bill. In this case you will move towards low cost of communication like chat client (IM) or VOIP etc
Do you know, world has approx 300Cr handsets (India has ~30Cr which is 10%) out of which 45Cr handsets are Smartphone (iPhone etc) which supports 2G/3G.
From the desk of CEO, HBJ CapitalGrowth rate over 60-70% since last 5 years; sustained earnings with bonus ; niche player with good product
base. This innovative product company can be a good investment opportunity!
Smartphone (iPhone etc) which supports 2G/3G. Smartphone market is growing at 30% pa.
Global messaging market expected to grow from $65bn in 2007 to nearly $117 by 2012. Approx 38% of broadband households, worldwide, will subscribe to VoIP services by 2011.
A booming Smartphone market and focus on leveraging its technological expertise puts Geodesic Limited on a high growth trajectory.
Contd…The old analog world (print, TV and radio) of media scarcity has given way to a media cornucopia of unprecedented abundance - Internet, blogs, e-mail, iPods, mobile phones, VoIP, play stations, or social networking and much more.
These are exciting time for software solution companies like Geodesic Information Systems, focused on information, communication and entertainment (ICE) for mobile phones and computers.
It is more than just a ‘messenger' company….. Geodesic Information Systems, which operates under the ‘Mundu' brand, is widely recognized for its
pioneering interoperable instant messaging that successfully combines Google Talk, ICQ, MSN and Yahoo across the Internet, wireless devices and platforms.
Geodesic primarily services companies, by making and maintaining websites, portals and publishers by helping them increase the online traffic on their websites and create solutions that increase productivity and them increase the online traffic on their websites and create solutions that increase productivity and profitability, and lastly, retail customers by way of its Mundu suite of products.
The company generates its revenue in the form of license/subscription fee, customization charges, share in ad-revenue and charges for support and maintenance.
Its all about communication and collaboration, watch this small, smart & innovative company which has all the merits to create huge wealth in long run.
Regards,KHS, CEO, HBJ Capital, www.hbjcapital.com#141, 5th Main, Girinagar, BSK 3rd Stage, Bangalore – 85Call : 098867 36791 or Mail : [email protected]
Look For New Emerging Sector which are not yet established or no large cap
leader available from that space.
Always look for latest trend, changes in the economy or the new policies
created by Indian government for any old/new sector.
Rule#1 : Look For New Emerging
Sector.
One must have patience to hold sector leader for longer time till the sector is
established.
The Sector as a whole should exhibit growth. Companies which are first
movers in their sector and are able to hold on to that advantage, they enjoy
better PE multiples.
Sector.
Blue Ocean Formation
The telecommunication IndustryThe worlds second largest Cell phone market (India) is about to see a major change. The Telecom
Giants are expected to show a down turn with every passing quarter. The new recommendation by TRAI (Telecom Regulatory Authority of India) severely causes threats to the Telecom giants. by TRAI (Telecom Regulatory Authority of India) severely causes threats to the Telecom giants. The strong recommendation to provide net telephony would reduce the ARPU (Average Revenue Per User) significantly. The Telecom companies have no other option but to continue to reduce their calling rates and fall back on VAS(Value Added Services).
2G – 3G – 4GAs we progress from 2G to 3G the ability to transfer and receive data along with voice improves
dramatically. We are getting better connectivity to the Internet with every new handset and a shift in technology. Since the VoIP companies can provide the same services as the telecom operator without requiring huge infrastructure, it posses as a huge potential threat to the existing Giants.
Red Ocean (Telecom Industry) Vs Blue Ocean (VOIP)
Geodesic is well placed to ride the next wave in shift in Telecommunication industry with its VoIP
Shifting to the new TechnologyWe now expect the technological shift to happen with the easing of rules and regulations. The
already available VoIP technology looks to be the next step in telecom industry. There could be other technologies waiting to take over VoIP as well but as of now we believe VoIP looks like the next logical step. The smaller communication companies like Geodesic, Tulip Telecom maybe in a sweet spot to ride the next technological wave.
ConclusionWe believe that the Telecom Giants are about to peak out on their revenue. The only way to sustain
is to bank significantly on the VAS. The new emerging smaller companies in the Telecom space could be the next in line to see significant growth.
Geodesic is well placed to ride the next wave in shift in Telecommunication industry with its VoIP venture. We expect a sea change in the telecom industry and VoIP to become the next technology. It has had a phenomenal growth rate of 94% topline & 102% bottom-line CAGR over FY05-08 period. This growth has come from its various products which continue to do well and contribute to the growth.
The future triggers include plans to acquire 3 companies and capex plans of $10Mn to globally launch its new VoIP product across the globe. Its performance has remained robust in the current global slowdown. The stock is available at cheap valuations of ~3x FY 09 earnings today.
We believe VoIP to be the Blue Ocean forming in the Red sea of telecom industry & Geodesic to be the key beneficiary.
The worlds second largest Cell phone market is about to see a major change.
VoIP is a step ahead in the wireless communication, it uses the existing infrastructure to provide a much
cheaper and better service.
Geodesic is well placed to ride the next wave in shift in Telecommunication industry
with its VoIP venture.
The new emerging smaller
companies in the Telecom space could be the next in line to see significant
growth.
The smaller communication companies like Geodesic, Tulip Telecom maybe in a sweet spot to ride the next technological
wave.
with its VoIP venture.
Niche player with sustained revenue modelNiche player
Geodesic operates in a niche area in technology. Thecompany derives most of its revenues fromdeveloping instant messaging platforms/services andlicensing them mainly to enterprises under the‘Mundu’ brand. Instant messaging is a rapidlyexpanding mode of real-time communication acrossthe world.
Geodesic’s product (Mundu ICE stack) caters to clients ranging from portals and publishers to telecom operators, mobile handset manufacturers,
Hybrid revenue model
For its enterprise and portals and publishing clients, Geodesic charges a license fee, a customization fee, annuity based service charges and charges for upgrades and updates.
For retail customers, it charges a fee based on subscription. This model clearly provides a sustainable revenue
telecom operators, mobile handset manufacturers, system integrators and even end-consumers.
Geodesic also licenses its instant messaging platform to mobile handset manufacturers and telecom operators, thus providing it with sustainable revenue streams, with scope for expanding margins.
The product’s capability of allowing seamless chat services across Google Talk, Yahoo! and MSN has been a major selling point to drive sales.
clearly provides a sustainable revenue stream.
The significant proportion of license revenue means that it is also able to de-link revenue growth from headcount growth, by optimizing costs.
Founded, by Mr. Pankaj Kumar, Mr. Kiran Kulkarni, Mr. Prashant Mulekar and Mr. Mahesh Murthy, in the year
1999.
The aim was to develop a global brand, as a products company, operating out of
India.
A Snapshotof Geodesic
Enterprise clients : financial services, manufacturing industries, service
organizations, portals and publishers. Retail clients are individual smart phone
owners.
At present, enterprise and retail segments contribute about 75-80% and
20-25% to the net sales respectively.
of Geodesic
A Snapshot… The company offers its products and services under
the "Mundu brand name for the retail segment. Geodesic is widely recognized for its scalable content, contact management, presence, real-time communication and collaboration platform.
The company has effectively used the above platform to build and deploy innovative front-end applications, viz. Mundu Instant Messenger(IM), Mundu Radio, Mundu Speak, Montage, etc., for the retail segment. Mundu IM has been recognized as one of the top 10 applications and has been used by more than 7% of the iPhone users.
Geodesic has been on an acquisition spree over the
Geodesic (http://www.geodesic.com) was founded, by Mr. Pankaj Kumar, Mr. Kiran Kulkarni, Mr. Prashant Mulekar and Mr. Mahesh Murthy, in the year 1999.
Geodesic operates in a niche area of developing various innovative products in the information, communication and entertainment space.
Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from it's first year. Focusing its inventive capabilities across all aspects of communication and collaboration the company is widely recognized for its pioneering universal instant messaging system Geodesic has been on an acquisition spree over the
last three years. In 2005 alone, it acquired three companies, Picopeta Simputers (Rs20Cr in Cash & Stock), a Bangalore-based company, Engage Solutions, a Hong Kong-based company and a majority stake in Clangula IT of Sweden. Geodesic acquired a web developing company, E Dot Solutions and a 60 year old children magazine -Chandamama, in 2007.
its pioneering universal instant messaging system (www.mundu.com).
Geodesic's business model is a highly flexible combination of license/ subscription fees, per user per annum recurring revenue, pre-paid voice minutes and advertisement/ Click through revenue share. They derived 95% of revenues from licensing and subscriptions for their product suite and services to institutions and the retail segments.
The term "geodesic" comes from geodesy, the science of measuring the size and shape of Earth; in the original sense, a geodesic was the shortest route between two points on the Earth's surface, namely, a segment of a great circle.
Contd… Geodesic is a proud recipient of several
international awards including Deloitte Touché Tohomatsu Fast 500 Asia Pacific for four consecutive years, Deloitte Touché Tohomatsu Fast 50 India in 2005 and Red Herring 'Top World 100' small cap technology companies for 2005.
In January 2008, the company raised USD125 mn, by issuing FCCBs, to fund future acquisitions. Geodesic's current customer base consists of more than 95 enterprise customers and over 8.2 lakhs retail customers.
Geodesic's talented staff of more than 400 employees ensures innovation, utility and ease of
Geodesic is all set to contribute significantly to the wave of Convergence by launching innovative world class products such as the Geodesic IP phone that operates across different platforms of landlines, mobile phones & desktops/laptops that will work on all prevailing internet connections and will help users save 75-80 % on long distance calls.
Geodesic derives its revenues from the following segments
1. Institutions: Geodesic caters to a wide range of institutions including Financial Services, Manufacturing Industries, Service organizations, Portals and Publishers. employees ensures innovation, utility and ease of
use. The combination of a highly competent team and state-of-the-art tools enhance the development of future-proof, useful business solutions.
In its quest to attain market leadership, Geodesic has also set up offices in the US, UK, Sweden, Mauritius, Germany and Hong Kong with the head quarters in Mumbai, India.
Geodesic is a publicly traded company on both India's major Stock Exchanges: the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
organizations, Portals and Publishers. Geodesic targets the institutional segment through a right mix of direct sales team, system integrators and value-added resellers.
2. Retail: Geodesic distributes Mundu- a suite of products including IM, VoIP, Radio, Email, Montage, etc to smart phone users around the world. Geodesic retails its products through its own web site (www.mundu.com) and through popular Software retailing web sites, Handset manufacturers and Carriers.
#1. Information #2. Communication
Focusing on 3 emerging space
Future Growth Prospect #3. Entertainment
emerging space
InformationInformation
Internet is the fastest growing media advertising channel today and most large organizations have started allocating to the tune of 15-20 per cent of the total ad-budgets to online advertising.
Geodesic has developed a context based advertising product called ‘ADePT', which helps companies in user acquisition and thus gives a boost to the ad-revenue generated on their website.
Another product, Mundu ‘Remote Desktop' allows users on the move to log to their office and home systems from mobile phones and manipulate information as per their convenience.
The company also offers a customer relationship management (CRM) software called Spyder that enables companies to conduct targeted marketing and keep a check on service misalignments.
The knowledge acquired during developing, the low cost computer – Simputer, was used to develop ‘OLAI' – Open Learning with Autonomy and Interactivity, a web based outdoor computing platform that allows students to read e-books, write notes and tag them with e-books and relevant content on the internet. Targeted at the worldwide education market, OLAI is expected to be priced in the range of $450-600.
Communication Communication
Mundu's IM not only lets you communicate with all the major IM service providers through a single user interface but also facilitates in multi-network conferencing.
Geodesic charges $11 as a one-time subscription fee to download the IM, whether desktop computer or mobile phone. Daily downloads of IM in FY08 have been in the range of 1,800 to 5,000, which give us an idea about the popularity of this product worldwide.
In the mobile phone segment, the Smartphone users are the prime target audience of the Mundu package, which includes services of instant messaging (IM), voice-over-internet-protocol (VoIP) and internet radio.
Geodesic licenses its instant messaging platform to mobile handset manufacturers and telecom operators, thus providing it Geodesic licenses its instant messaging platform to mobile handset manufacturers and telecom operators, thus providing it with sustainable revenue streams. The company has already launched its messaging services in Nokia and Sony Ericsson Smartphone handsets and has an agreement with players like BenQ.
As these companies increase their Smartphone presence in rapidly growing markets such as India and rest of Asia, Geodesic stands to gain from their expanding presence.
Geodesic' Mundu IM is already being used by more than 4 lakh iPhone users through the internet, which could get a huge boost once Apple allows third party software platforms on its phones. Its VoIP product, Mundu Speak, allows users to make calls around the globe for charges as low as 1.5 cents per minute (USA), with zero installation charges as of now.
It is the ‘cost-cutting' feature of Mundu Speak that has tempted the company to work out a subscription model, which it plans to roll out in a couple of months, as the company is very upbeat about this product.
EntertainmentEntertainment
Geodesic provides access to 1.5 lakh radio channels worldwide through its mobile internet radio service Mundu Radio, which is bundled along with the IM.
In association with Geodesic, Idea Cellular recently launched a GPRS and internet radio package, giving access to over 40 digital channels to its users for Rs 149 per month, wherein Geodesic will earn 30 per cent of the subscription charges.
Geodesic entered the publishing business last year by acquiring the 60-year old iconic children's magazine, Chandamama for Rs 10 crores, which is currently a small revenue contributor.
With an archive of more than 5,000 stories, the company plans to make tools available for people to create online communities, stream audio and video content available for people to create online communities, stream audio and video content and produce animation and graphic sequences.
Growth prospectsAccording to a recent study by In-Stat, a primary research company, there are about 450 million Smartphones worldwide at present and its market is expected to grow at over 30 per cent CAGR for the next five years. Mobile phones users are showing a clear preference to have all their utilities on one single device. Geodesic has integrated its base Mundu platform with CRM solutions and various mobile phone applications (e.g. radio on mobile and desktop management). Mundu user's choice of music, news, communication and other content explodes without the need to carry separate devices. The wider application base has resulted in strong client addition in FY08.It also proposes to extend its VoIP suite with launch of VoIP hardware phones priced below Rs 1,500 (in FY09), which could be a huge market in itself going forward.
2010-11 market estimates
CMS – $4.3 billion
2010-11 market estimates
CRM - $10.8 billion
Rule# 3: Look for “Scale of
Opportunity”.
2010-11 market estimates
50% OF INTERNATIONAL CALL MINUTES WILL BE VoIP
2010-11 market estimates
Communication Collaboration - $ 1.30 billion
Opportunity”.
Look at the “Scale Of Opportunity”
Scale of OpportunityOpportunities 2010-11 (Enterprise/Retail market estimates)
Content management system (CMS) – $4.3 billionCustomer relationship management (CRM) - $10.8 billionCommunication Collaboration - $ 1.30 billion In 2006, 21% of international call minutes were VOIP which is expected to be 50% by 2010.Global messaging market $117bn Global music industry $33bn38% of broadband households, worldwide, will subscribe to VoIP services.
Virtual Collaboration on rise.From 2000 to 2005 one can see rise in volume of communication between two people at “different time, different place”. Volume of working alone has seen downtrend. This lead to a need of low cost, efficient communication device.
Geodesic Information Systems Limited, a Information Technology company
founded in April 1999.
Geodesic got listed at the exchange by merging with a listed co. called B.V
holdings
Evolution ofGeodesic
Six (6) wholly owned subsidiaries in India and abroad.
In order to expand its product range Geodesic has acquired companies which would complement its existing product
portfolio.
Geodesic
Milestones : Year 1999-2004
Geodesic Information Systems Limited, a Information Technology company founded in April 1999. The company, a small start up company then, entered into the competitive space of Instant Messengers. It was able to excel in this competitive market with their flagship product Mundu. Geodesic has been the first Indian to excel in this competitive market with their flagship product Mundu. Geodesic has been the first Indian company to venture in the Instant Messaging market with a very innovative messenger named Mundu.
Geodesic got listed on the exchange by merging with a listed co. called B.V holdings which was in existence since 1982 . Rakesh Mathur, a well know name who founded and later sold Junglee dot com has picked up 2% stake.
During 1999-2004 period, very few has conviction to bet on this company, it was the time when software development was in limelight with Infosys, Wipro taking the hot seat and no one was ready to believe in India based product company.
This company has been doing well for several years now, its not that it has shown spectacular results all of a sudden. Revenues and margins are at par with industry standards. They are not a software exporter but a software product exporter in the telecom space. The industry been growing at 100 % for the past 5 years.
Milestones : Year 2005-06 Geodesic in 2005 has acquired Picopita Simputer,
India, Engage Solutions, Hong Kong, and a major portion of Clangula IT of Sweden. Overall, Geodesic has seen a magnificent growth of 80% YoY with operating profit moving within 50%-60%.
In order to expand its product range the company is planning to acquire companies which would complement its existing product portfolio.
During year 2005-06, it was slowly getting Recognisations by then it was a 32 bagger in 3 years, but just because they are product company very few people dare to come out of Infosys/Wipro very few people dare to come out of Infosys/Wipro and bet on this little angel.
Recently Geodesic Information System has changed its name to Geodesic Ltd. This company cannot be classified as a typical software company as it has a different revenue mix and business model.
The company has ventured into VoIP segment with its product Mundu Speak. Majority of the Geodesic's revenues are realized from the enterprise clients.
The unique feature of Mundu messenger is its ability to integrate other existing messengers (AIM, ICQ, Yahoo, Google Talk and Jabber for enterprise clients) on one single IM platform.
Geodesic's entry into the VoIP segment makes it enter the dynamic Telecommunications Industry in India. Geodesic recently has decided to launch low cost devices for VoIP.
Milestones : Year 2007-08Highlights of FY08: Launched new products for different segments and have
covered new geographic territories and new market segments with our unique marketing and acquisition strategies.
Successfully launched Mundu Montage -for touch screen Windows Mobile phones. Montage lets users create a collage of text, video, images and multimedia content and post it to users' favorite social networking sites or simply e-mail/ID to their friends, family and colleagues.
Successfully launched Mundu Speak during the third quarter of FY2008 and have seen steady growth in subscriptions and usage. The product has already been subscriptions and usage. The product has already been recognized as the product of the year by no less than TMCNET in the mobile communication space.
Successfully rolled out Mundu Radio for carriers - a carrier grade entertainment product in conjunction with IDEA Cellular in the last quarter of FY2008. The response to the white labeled IDEA Radio has been phenomenal.
The Company raised US$ 125 million in the form of Foreign Currency Convertible Bonds at YTM of 6.6% with tenure of 5years for overseas acquisitions and investments in joint ventures & wholly owned subsidiaries.
Six (6) wholly owned subsidiaries in India and abroad.Highlights of FY08 (Contd.) :
Launched our Instant Messaging on a wider range of mobile phones including Blackberry phones and BREW phones (CDMA Version) during the fourth quarter of FY 2008.
Acquired Chandamama-India's most popular children's magazine to build our value added services. They are in the process of digitizing and mobilizing Chandamama content to ensure that our products provide relevant content to a section of the target audience.
Foreign Subsidiaries#1. Geodesic Information systems Inc (GISI), USA, #2. Engage Solutions Limited (ESL), Hong Kong, #3. Geodesic Information Systems AB (GISAB), Sweden, #4. Geodesic Information Systems Pte Ltd. (GISPL), Singapore, #5. Geodesic Technology Solutions Limited (GTSL),
Hong Kong.
Indian Subsidiaries#1. Chandamama India Limited (Chandamama)
They have acquired E-dot solutions-Web technology specialists to enhance our retail web site and provide a scalable web site to cater and support millions of users worldwide.
Amalgamation with parent company (Geodesic Limited.)
#1. Picopeta Simputers Pvt Ltd, Bangalore (Picopeta)#2. Edot Solutions India Pvt. Ltd, Mumbai
The Price Earnings should be less than the growth. In other words the Price
Earnings to Growth PEG < 1.
Always buy low PE stocks because a low PE means that growth has not been factored into the stock making it fit
candidate for a PE re-rating.
Rule #5 : Price Earnings (PE) Vs
Growth
Value Vs Growth : Always go for Growth, because even promoters don’t know the real value of their businesses.
What makes this company stand out of the crowd?
Growth
Financial Numbers (Last 5 years)
Geodesic has witnessed a phenomenal growth in net sales and profits over the last five years. Net sales and profits have increased at a CAGR of 101% and 112% respectively, since FY’03.
Sales has gone up 15 times & profit 14times during last 5 years. Equity capital rises by 3.5 times. Company always had a +ve cash flow.
Operating & Net Profit margins are either maintained or increasing. We expect the company to continue with its robust performance, going forward also.
The company is expected to perform well on account of strong growth being witnessed in the smart phone market and the wide range of services that the company offers to this market.
Valuation Ratios (Last 5 years)
Average PE of the company was always in the range of 15-25, but poor sentiments has pulled down its PE to just 3x FY09 earnings, making it a undervalued stock.
Mcap/Sales as on today is just 1 as compare to average value of 6-10 during last 5 years. ROE (Return on equity measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested) is in the range of 29-40% during last 5 years which is a descent return over the period.
Income Statements (Last 5 years) Consistent growth in
sales and profit numbers during last 5 years.
Employee cost is just 5% of total sales & manufacturing expenses constitute 30% of the sales.
Interest charges were lower during 2004-07, lower during 2004-07, but has gone up a bit due to outstanding $125mn FCCB (loans) during 2008.
Consistent dividend (15-30%) paying company during last 5 years.
Balance Sheet (Last 5 years) Equity share capital was just 6.72Cr in
2004 which is increased to 18.43Cr by 2008; a 2.74times increase in 5 years.
Reserves & Surplus has gone up by 13times during the same time period.
One can see Rs506.67Cr ($=Rs40.53) as Unsecured loan which is nothing but the $125mn FCCB raised during 2008. As on today $=Rs50, hence MTM loss for this loan is ($125mn*50 = Rs 625Cr) approx Rs118Cr, this is one 625Cr) approx Rs118Cr, this is one reason why market is punishing Geodesic stock from the day rupee started depreciating.
Sundry debtor (an entity from who amounts are due for goods sold or services rendered or in respect of contractual obligations) has 83.18Cr due which is almost 30% of the 2008 sales as receivables which is a cause of concern.
Quarterly results for the past three years
During last 3 years, Geodesic has performed better QoQ except for one quarter, Sept’07. On FCCB of $125mn, 6.6% interest paid per annum, which comes down to $8.25mn (If $~Rs
40 then Rs 33Cr per year but now $~Rs50 hence Rs 41.25Cr per year as an interest).
Liquidity & Turnover Ratios Debt/Equity ratio is 0.68 mainly due to FCCB. Bonus issued during 2005, 2007 and likely to be
issued during 2009, when company will celebrate 10th year.
High inventory/ receivables, almost 30% of sales which is not a good sign.
Current Ratio is higher at 10.97 (this ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations).
Interest cover ratio has come down drastically Interest cover ratio has come down drastically during 2008 to 18.08 due to FCCB. A ratio used to determine how easily a company can pay interest on outstanding debt. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.
OPM & NPM are good, it shows that their products are in high demand and they are able to save almost Rs40-45 per 100rs of sales.
Equity Share Capital History Geodesic started ESOP way
back in Oct’2003 which clearly shows its wealth sharing attitude.
Bonus issued in the year 2005 & 2007 and expected during the year 2009 also, this year coincides with the 10th
years celebration for Geodesic.
Preferential shares are also issued to promoters and issued to promoters and HNI/FIIs.
Until June’08, total equity share outstanding was 9.2Cr (Share capital = 9.2Cr *FV of 2 = 18.44Cr).
FCCB Issue - The Company had successfully launched US$125 million
unsubordinated, unsecured foreign currency zero coupon convertible bonds
due 2013 (the 'Bonds') in January 2008.
EMPLOYEE STOCK OPTIONS -Management has granted 12 Lakhs options to the eligible employees of the company
and its subsidiary during the year 2008
FCCB, ESPO& Buy back
Latest announcement & share transactions also included.
Buy-Back 25% of Equity Capital, i.e. 2.3 crore shares (Max amount Rs 109.86Cr). Maximum price for Buy-Back = Rs. 75
per share.
& Buy back
FCCB Issued & its impact. FCCB Issue - The Company had successfully launched
US$125 million unsubordinated, unsecured foreign currency zero coupon convertible bonds due 2013 (the 'Bonds') in January 2008. Yield to maturity of 6.60% per annum. Purpose is for overseas acquisitions and investments in joint ventures/wholly owned subsidiaries and for any other use.
MTM Loss - One can see Rs506.67Cr ($=Rs40.53) as Unsecured loan in their balance sheet which is nothing but the $125mn FCCB raised during 2008. As on today $=Rs50, hence MTM loss for this loan is ($125mn*50 = Rs 625Cr) approx Rs118Cr, this is one reason why market is punishing approx Rs118Cr, this is one reason why market is punishing Geodesic stock from the day rupee started depreciating.
FCCB Buyback - In Jan'09, Geodesic has approved the proposal to buy back Company's USD denominated Zero Coupon Convertible Bonds (FCCB Bonds). They have plan to buyback 25% of the Equity shares of the Company through open offer @ Rs75 per share up to Max Rs109.86Cr.
Geodesic’s Buy-Back might not succeed ? Following are the current market facts about
the trading pattern of Geodesic’s equity shares:
• Current price of Geodesic’s share = Between Rs.60 – Rs.65.
• Average Volume of trade on a normal day = between 15,000 shares to 30,000 shares. (The volume had spiked in between when an FII made block deals to purchase 1.6% Equity in the company on 20th March.)
Maximum Amount allocated for the Buy-Back = Rs.109.86 crores.
Maximum Number of shares to be purchased = 25% of Equity Capital, i.e. 2.3 crore shares.
Maximum price to be paid during the Buy-Back = Rs. 75 per share.
From these details we conclude the following estimations:
• Maximum number of shares that can be purchased at Rs.75 per share = 1.465 on 20 March.)
• The earliest that the buy-back can start is still about 4 weeks away, i.e. at least one week after the announcement of the Result of the Postal Ballot.
• If the company is to buy about 25,000 shares everyday at a rate of up to Rs.75 per share, the number of days it will take to buy about 1.5 crore shares = 600 trading days.
• Will the buyback succeed?
purchased at Rs.75 per share = 1.465 crore shares, i.e. 15.88% of Equity Capital.
• For 25% Equity Capital to be bought back, maximum price that can be paid = Rs. 47.70 per share.
Expect bonus and/or special dividend in 2009.Special Dividend or Bonus on the occasion of the
company completing 10 years of operation. The last bonus that the company had given
was 2 fiscals ago at the ratio of 1:2 ( 1 bonus share for 2 shares held). In the last 2 fiscals, the company has managed to nearly quadruple its revenues & profits. The growth rate is still very strong & is expected to remain so in absolute terms for the next few fiscals.
We are expecting the company to issue
If the Buy-Back programme fails… The company is expected to announce its
annual result sometime in the first half of May. The results are again expected to be good with at least 10% Quarter-on-Quarter growth in revenues as well as net profits.
Looking at all these facts, we strongly feel that the share price of Geodesic is not going to stay below Rs.75 by the time the Buy-Back begins in the last week of April. So there is a very high possibility that Geodesic may not We are expecting the company to issue
bonus shares in the ratio of anything between 1:1 to 3:1 (i.e. between 1 bonus share to 3 bonus shares for every share held).
Next AGM is in August-September’09 when one can expect some announcements. For an investor buying Geodesic shares at Rs.60-65/-today, the potential capital/value appreciation of 20-30% could happen by Aug-Sept’09.
very high possibility that Geodesic may not find many sellers below its limit price of Rs.75 per share.
If the Buy-Back programme fails miserably & almost the entire sum of Rs.109.86 crores remains unused. Then this amount might be used by the company to reward its shareholders through other forms like Bonus and/or Special Dividend.
ESPO Issued & its impact As on 1st April 2007, options granted and not exercised (in force) = 15,62,743 options During FY08, management has granted additional 12 lakhs options to the eligible employees of
the company and its subsidiary. Options granted during the Year FY08: 9,00,000 and 3,00,000 options convertible into equity shares of Rs.2 each granted on April 09th 2007 and September 24th 2007 respectively
Range of Exercise Price (Rs.)• 31st Mar 07Rs.40.22-Rs. 119.73• 31st Mar 08Rs.79.82-Rs.210.05
Some of the key recruitments over the past one year include… Mr. Sanjay Ramakrishnan joined as Vice President of Web Marketing. His previous Mr. Sanjay Ramakrishnan joined as Vice President of Web Marketing. His previous
assignments included Google (Head of Marketing-Consumer Products), Intel, World Space and Spice Tele.
Jeff Peddle joined as Vice President-Sales and Business Development. He has a total work experience of 15 years, and was earlier associated with Acorntek Inc., Delivery Network Inc, and ADVAL Messaging Solutions.
Mr. Subramanyan as the CEO of Chandamama India Limited. Previously he was in charge of Jasubhai Digital Media.
The company hires excellent individuals like a product manager from Microsoft or taking into board people of Simputers fame.
Latest announcements & its impact July 29th 2008 - Geodesic Information
Systems Ltd has informed BSE regarding a Press Release dated July 29, 2008 titled "Geodesic inks deal with Medion AG to provide award- winning Mundu IM service on new mobile communications device; Leading European Manufacturer to Bundle Mundu IM on Consumer Handheld Devices” – There is huge demand of Mundu and other products across the globe and this company is spreading its arm thru various JVs.
Sept 8th 2008 - Geodesic Information Systems
Apr 10th 2008 - Geodesic Information Systems Ltd has informed BSE that the Company has decided to establish a subsidiary Company in Mauritius to streamline the Company's stake in its subsidiaries and for a better integration and a smoother flow of information and operation. – Subsidiaries formation in Mauritius will help Geodesic save money from double taxation treaty.
May 6th 2008 - Geodesic Information Systems Ltd has informed BSE that the Sept 8th 2008 - Geodesic Information Systems
Ltd has informed BSE that the Company has become a member of BlackBerry ISV Alliance Program. It has bought its innovative mobile services to black berry users. – Smartphone is growing at 30% rate YoY, and sooner most of the IT folks will have such devices which will help easy access to web and streaming videos, obviously Mundu will be the choice due to low cost and good interface.
Systems Ltd has informed BSE that the Company proposes to extend its software VOIP (Voice Over Internet Protocol) suite with launch of VOIP hardware phones (wired and cordless) in this Financial Year (2008-09). – VOIP is going to shadow existing telecom wire & wireless industry, it has immense potential, it is just a matter of time, once TRAI acts on this front, Geodesic ‘s product will take the centre stage.
Latest announcements & its impact (Contd.) Dec 15th 2008 - Geodesic Ltd has informed BSE that
the Board has taken note of the resignation of Mr. Mahesh Murthy and Mr. Rakesh Mathur, Non-Executive Directors due to their pre-occupation at its meeting held on December 15, 2008. They have ceased to be a Director of the Company with immediate effect. - Mahesh Murthy was one of the founders of Geodesic. A few years later he chose to be the non-executive director of the company due to some personal interest, he has started a Venture Fund called Passion Fund in 2000 and a search engine marketing company called Pinstorm in year 2004. He continues to be an investor in Geodesic
Sept 29th 2008 - The Company has changed its name from "Geodesic Information Systems Ltd" to "Geodesic Ltd" w.e.f. September 19, 2008. – What made Geodesic change its name? It was needed because they are not only in the field of information but also communication and entertainment hence the new name.
Oct 7th 2008 - With effect from October 07, 2008, the issued, subscribed and paid-up Equity Share Capital of the Company stands increased to Rs 184,429,948/- divided into with a small stake of 0.82%.
Jan 30th 2009 - Proposal to buy back Company's USD denominated Zero Coupon Convertible Bonds (FCCB Bonds), as per RBI guidelines under automatic route. To buyback of 25% of the Equity shares of the Company through open offer through stock exchanges. Approved the maximum buyback price as Rs 75 per share. – Details on this & its impact is covered under FCCB & Buyback section. Geodesic believe that its share price is highly undervalued hence it is better to buyback and maximize the shareholders returns.
increased to Rs 184,429,948/- divided into 9,22,14,974 Equity Shares of Rs 2/- each. –What we have seen in this company is, they reward their employees thru ESPOs and believe us, this is the best way to keep your employees an integral part of the long term vision. Geodesic earns close to Rs110Cr (FY08) on approx 350 employees, which translates it into 0.30Cr per employee per year, which is much higher compare to other IT players.
Disclosures – SAST & Insider TradingInsider Trading
Apr 1st 2008 - Deutsche Securities Mauritius Ltd – Pre acquisition /sale = 4.22% ; bought 0.87%; total holdings 5.09%.
May 28th 2008 – Rakesh Mathur -Pre acquisition /sale = 1.44% ; sold 0.21%; total holdings 1.23%.
March 26th 2009 – SR Global (Mauritius) - Pre acquisition /sale = 1.66% ; bought 5.87%; total
Disclosures – SAST July 30th 2008 – Genesis Asset Managers &
Genesis Indian Investment Company Limited bought 34K shares of Geodesic from secondary market. Total holdings are 1.38% and 3.65% respectively.
Oct 13th 2008 - Tree Line Asia Master FD (Sing) Pte Ltd has acquired 53.94 lakhs shares (5.85%) from secondary market. Total holdings after acquisition is 6.05%.
Feb 9th 2009 - Total no of outstanding 1.66% ; bought 5.87%; total holdings 7.53%.
Conclusion: FII were buying, only one non-promoter has sold small stake.
Feb 9 2009 - Total no of outstanding shares of the Company : 9,22,14,974. Mr Mahesh Murthy has pledge 760,230 Shares. % of shares pledged to total no of outstanding shares of the Company : 0.82%
Conclusion: FII were buying during last 1 year, Mahesh Murthy who was seen continuously reducing his stake has pledge his remaining holdings of 0.82% stake in the company.
Unknown management with passion & vision to make it BIG.
IIT/IIM & IISc graduates normally do well.
Pankaj Kumar, Chairman / Co-Founder - IIT
Prashant Mulekar, Executive Director - IIMProf V Vinay, Chief Technology Officer - IISc
Rule #4 : Unknown Management - See their
passion not qualification.
Kiran Kulkarni, Managing Director
Atul Chitnis, Chief Products Officer
Vinod Sethi, Independent Director
Avoid companies backed by established promoters
qualification.
Geodesic Management – IIT/IIM/IISc Pankaj Kumar, Chairman / Co-Founder
• Pankaj Kumar has more than 23 years of experience in Indian IT industry.
• An alumni of IIT Roorkee, Pankaj is a Co-founder and currently serves as Chairman of Geodesic.
• He steered the company during its formative years and led it to become a product oriented, technology focused idea driven company.
Kiran Kulkarni, Managing Director• Mr. Kiran Kulkarni is the Co-founder/ Managing
Director of Geodesic Limited and has held the helm since Geodesic's inception in 1999.
• An Electronics and Communication Engineer, Kiran is responsible for the overall strategic direction of the
Prashant Mulekar, Executive Director• Prashant Mulekar has more than 15 years of
experience in the complex field of Finance. • He graduated in BE (Mechanical) from VJTI, Mumbai
and did a PGDM from IIM, Lucknow and then went on to work with TELCO and SIDBI (the principal financial institution for the promotion, financing and development of small scale sector industry).
Prof V Vinay, Chief Technology Officer• Dr V Vinay is the Group Chief Technologist for
Geodesic. Dr Vinay is a PhD from India Institute of Science Bangalore.
• He has served as a professor at the India Institute of responsible for the overall strategic direction of the company and works with Geodesic's development team to turn great ideas into useful software solutions.
• Kiran pioneered a low cost value communication and collaboration system for the enterprise as well as a consumer.
• Kiran has one of the best long-term track records in the industry and was a Co-founder/ Director of Aftek Ltd prior to Geodesic. An expert in networking and web technologies.
• Kiran is the winner of 'The Indira Super Achiever Award' - aimed at recognizing professional talent that has made a difference.
• He has served as a professor at the India Institute of Science for over ten years from 1995 to 2006. He has invented a novel method of text entry in to the keyboard-less Simputer, called Tapatap.
• He was awarded the prestigious Sir C. V. Raman Award by the government of Karnataka for excellence in informatics for his role in developing the Simputer. Dr
• Vinay currently serves as a President of the Indian Association for Research in Computing Science.
Geodesic Management Atul Chitnis, Chief Products Officer
• Atul Chitnis has been at the forefront of India's technology evolution since the 1980s, predicting and driving new technology waves such as data communication, networking, the Internet, wireless and mobile computing, and Open Source, among others.
• A hardcore products man, his focus areas include mobile and hand-held computing, wireless data networks, Linux and Open Source and entertainment technologies - topics he frequently writes about.
• His popular PCQuest column, COMversations,
On Board…• Vinod Sethi, Independent Director
– Vinod is a renowned name in the capital market. Finance, global perspective, strategic and investment planning are his expertise.
– He is considered as an expert in investment banking and is known for his uncanny sense of timing that helped Morgan Stanley clock a remarkable performance.
– During his tenure with Morgan Stanley, he set up its Indian business and grew its assets under management to US$2.4 billion.
• His popular PCQuest column, COMversations, helped bootstrap Indian users into the consumer datacomm era.
• Atul is well known for his work with the Free and Open Source Software (FOSS) community, and is also the founder of FOSS.IN, one of the world's largest grassroot technology conferences.
• He is also a member of several Project Review and Steering Committees with the Department of Information technology (DIT), Government of India.
– Vinod is also the founder of Sethi Capital Inc., a New York-based private equity firm that would invest in companies of the future.
Promoters didn’t sell their stake during last 1 years.
FIIs increasing their stake by 1% & domestic institutions reducing stake by
1%.
Shareholdings
Net on Net there was no major change in shareholdings during last 1 year
Mahesh Murthy & Rakesh Mathur has reduce their stake.
A glance into history…Early days year 2002
Promoters holdings use to be 55.54% with majority held by Pankaj & Kiran. Mahesh Murthy was holding just 6.07%, he was more like a PE investors and in the next six years his holdings has come down to 0.82%.
One of the prominent investor from Pune, Mr. Shivanand from Pune, Mr. Shivanand Mankekar has taken 7.13% stake in 2002 itself. He is famous for making 100 baggers in Financial Tech & Pantaloon Retail.
Lloyd George Investment Management (Bermuda) Ltd a/c LG India Fund Ltd was the 1st FII to take 3.66% stake (15.66 Lakhs) in June'02 itself.
Dec’07– Promoters & Non-Promoters
Promoters holdings were 23.90%. Public holding more than 1% stake constitute Public holding more than 1% stake constitute
52.95% stake. From above two we can ensure that approx.
75% of stake was in strong hand. Looking at the list of FII holding this small
company, it gives clear picture that sooner or later Geodesic is going to become a big player.
Apart from FII/DII, Rakesh Mathur of Junglee.com fame having a stake of 1.46% in 2007.
Dec’08– Promoters & Non-Promoters
As on 31st December’2008, the promoter group owns 23.65% stake in Geodesic Ltd.
Out of this, Mr. Kiran Kulkarni & Mr. Pankaj Kumar together Out of this, Mr. Kiran Kulkarni & Mr. Pankaj Kumar together own 19% stake in the company.
Institutional investors control almost 62% shareholding in Geodesic Ltd., out of which nearly 57% is with FIIs (Foreign Institutional Investors) and the remaining 5% is with domestic Mutual Funds & Insurance Companies.
Retail Investors own 7.2% stake in the company while other non-institutional investors control 4.7% shares of Geodesic Ltd.
Over the last 12 months, there has been only a minor change in the overall shareholding pattern with FIIs increasing their stake by 1% & domestic institutions reducing stake by 1%.
The Market cap should be less than Rs 500 crores (Preferred). There is a very
high probability of getting a multibagger out of a small cap.
Companies with small market caps are more prone to going up a number of times compared to companies with
large market caps.
Rule # 2: “Small Cap” with
Leadership Position.
Company should control more than 30-50% of Market. The size of opportunity
is very important.
All multibagger companies started from a base of very small market
capitalization, non cyclical, non MNC & majority of these companies were
driven by first generation entrepreneurs.
Leadership Position.
Geodesic product portfolio across retail & enterprise customers.
When it comes to products company (whether it is a software company or a manufacturing company) there is a small thump rule you can apply to find out if the company will do well in the future or not?
“If a company is able to make a product which is 7 times good as an existing one and in 1/7th cost, there are very less chance that you will loose your money invested in that company”
And we think Geodesic is one such company!!!
MUNDU SPEAK
Free calls to Mundu users
Make cheap domestic/international calls
MUNDU SMS
Get replies on your mobile
Integration with phonebook.
ProductsMUNDU MESSENGER
All-in-one Messenger
File Transfer
MUNDU RADIO
Unlimited radio stations
Play Mp3 stored in your handset
Products
Web Products
MUNDU WEB IM Mundu Messenger enables real-time collaboration
between trusted lists of IM contacts across public IM Networks on the Web, Desktop and Mobile phone. Mundu IM helps users to stay connected with their IM buddies in a single window.
ADEPT (AD DESIGN AND PLACEMENT) ADePT provides a tightly integrated and editorially
targeted self-service Pay-Per-Click (PPC) and Pay Performance Marketing (PPM) advertising model solution.
The capabilities include account, campaign and extensible fraud and credit management. It brings a performance-based billing model to advertisers and online portals seeking greater flexibility.
It provides presence based self-serviced end-to-end online advertising solution for online portals and their advertisers.
It helps generate revenues for our portal and The product allows users to login to their Yahoo, MSN, GTalk, ICQ, AIM, and Jabber networks simultaneously and chat with buddies across all accounts. This product comes handy for those who are frequently away from their PC, or not able to connect to internet from their desktop computer.
Mundu IM users can also share photos, ringtones, songs and other files, stored on their mobile, with all their IM contacts.
It helps generate revenues for our portal and publishing customers by integrating context sensitive advertisements with chats across Mundu Interoperable Instant Messenger.
Mobile & Wireless Products
MUNDU INTEROPERABLE MESSENGER Mundu Interoperable enables real time
communication and collaboration between trusted list of IM contacts across popular public IM services including AIM, ICO, MSN, Yahoo and G Talk on the web, desktop and
MUNDU SPEAK Mundu Speak provides unlimited talk-time and
allows users to make inexpensive voice calls using Voice over IP (VOIP) on your Mobile phone.
It has the lowest tariff ever offered by any VoIP service provider. With Mundu Speak, one can make calls from their mobile phone / PC to any other mobile phone or landline phones. Calls between two Mundu Speak users are completely free.
This product is designed to help users lower their mobile spend, especially on international calls. The product is available for Windows Mobile Pocket PC, Palm OS, Windows PC (Desktop Version).Yahoo and G Talk on the web, desktop and
smart mobile phones. This product has predominantly been white
labeled by B2C and B2B enterprises and retailed to end consumers on smart mobile phones.
Mundu Instant Messenger is available on Mundu IM on Pocket PC, Mundu IM for Apple iPhone, Mundu IM for Blackberry, Mundu IM on Palm OS, Mundu IM on Symbian Phones.
Palm OS, Windows PC (Desktop Version).MUNDU RADIO Mundu Radio allows users to tune into thousands
of internet radio stations on their mobile phone. The pre-configured list of stations plays music, news, podcasts, etc. Besides, users can also add their favorite stations into the playlist, if not part of the default list.
The product is available on Windows Mobile PocketPC, Windows Mobile SmartPhone, Palm OS, Symbian.
Mundu Platform
Instant Messaging Instant Messaging is now becoming a communication medium of
choice for consumers world-wide. The total volume of instant messages is predicted to exceed that of e-mail messages. Consumers use various forms of messaging, through a variety of access points, and typically within a variety of networks.
There are more than a billion accounts on IM today. Due to the
Over 100 million users now use PC-to-PC calling from their Instant Messengers, with a large number of new users being added every day. For the first time, Mundu brings white-boarding technology from the enterprise world to the consumer world.
The Mundu suite of products are all created to augment Geodesic's mission to integrate different aspects of electronic content, communication and collaboration to build a global There are more than a billion accounts on IM today. Due to the
closed nature of the IM networks, majority of this user-base is fragmented across 5 major networks.
Mundu provides a way to break the barriers and tap into this community of users for low-cost customer acquisition and engagement. Although most users access IM through desktop applications, consumer trends reveal a significant movement towards web browsers and mobile phones.
Mundu enables customer engagement anytime, anywhere irrespective of the platform of choice.
collaboration to build a global community without barriers and connect people across the world.
GeoAmida - World's first integrated mobile computer While innovation & entrepreneurship has created enormous
wealth, be it economic or knowledge, 4 billion people in global villages are largely untouched as yet. That's two-thirds of the global population still living under US$2 per day. The challenge will be to reach out and enable the Bottom-of-Pyramid (BoP), to make them an integral part of the mainstream economy.
A WRI-IFC study indicates that BoP may generate US$ 5 trillion. The stakeholders - governments, enterprises & service providers need to create solution to achieve it quickly, effectively and efficiently. The key will be to 'reach out' to customers with 'full service'.
www.geoamida.comWorld's first integrated mobile computer – www.geoamida.comWorld's first integrated mobile computer –Linux based, biometric & smart card enabled, multi-lingual real time computing & transaction system.GeoAmida has been designed to meet and exceed the technological challenge of reaching the unreached.GeoAmida technology platform enables the Government, Financial Institutions, NGO's and Enterprises to offer & deliver sophisticated services to their remotest customers, opening up new markets and creating new opportunities.
What iPhone did in 2007 was already achieved by 2002 in India.
List of Business relationships for GeoAmida, impressive list!!! A large NBFC Karnataka PDS Two of the largest Indian Software
Companies Mid-size Technology & Managed
Service Company A large 'Navratna' PSU A large PSU engaged in telecom and
high technology field A renowned system integrator
A Simputer was built on the premise that a computer is more useful when it is easy to use. It is the world’s first and only computer that responds to the gestures of the user – one can turn
the pages of an e-book with a flick of the wrist. It is also the first computer to have an integrated smart card reader/writer which can be used for
identification, sharing and security.
A renowned system integrator based in Chennai
20 more affiliates
Spyder – Customer Alignment and Retention Management
Spyder is a web based advance CRM system, designed and developed keeping in mind the unique requirements of complex contact management needs of financial institutions.
Engage Spyder comprises a suite of tools that enhance customer retention by: the means to track client and prospect communication Enabling personalized responses in alignment with client specific needs.
Execution of targeted mail shots, road show coordination, tracking of who has received literature on a given product.
Spyder is designed from the ground up to understand the nature of products in the corporate financial services industry. Spyder makes sure that products are presented to the right customer, which helps in obtaining and maintaining a superior relationship with the customer
Providing mechanisms to target clients based on their interests and generates alarms when misalignment occurs, Consolidates interactions with clients (email, meetings, product distribution notes etc) and summarizes from both the client perspective and the internal staff perspective.
customer
http://www.engagespyder.com/
INDIA’S ONLY COMPANY TO WIN RED HERRING INNOVATORS AWARD.
Winner by THE C|NET & PC MAGAZINE
AWARDS AND RECOGNITIONS
Mundu speak won Product of the year awards 2007 - for innovative
communication solutions awarded by TMCnet-Technology Marketing
Corporation.
Deloitte Touche Tohomatsu Fast 50 India in 2008.
Deloitte Touche Tohomatsu Fast 500 Asia Pacific for four consecutive years.
RECOGNITIONS
INDIA’S ONLY COMPANY TO WIN RED HERRING INNOVATORS
Geodesic is a proud recipient of several international awards including
• INDIA’S ONLY COMPANY TO WIN RED HERRING INNOVATORS AWARD.
• Winner by THE C|NET & PC MAGAZINE - Mundu Radio won the CNET 'Webware 100' Award for the Mobile Category. Winning this award in the Company of high caliber nominees such as Google and Yahoo proves the merit of our products.
• Deloitte Touche Tohomatsu Fast 50 India in 2008.• Deloitte Touche Tohomatsu Fast 500 Asia Pacific for four
consecutive years. • PC Magazine-a renowned technology Magazine has rated
Mundu IM V4 as one of the top 12 mobile applications in 2007.• Mundu speak won Product of the year awards 2007 - for
innovative communication solutions awarded by TMCnet-Technology Marketing Corporation.
• 100 small cap technology companies for 2005.
Enterprise & Retail Customers… The client base for Geodesic also includes
portals such as Naukri, bigadda.com, Edelweiss Capital Ltd, First Global Stock Broking, Business Standard and Dialog Telekom.
Geodesic's current customer base consists of more than 95 enterprise customers and over 8.2 lakhs retail customers. Mundu IM has been recognized as one of the top 10 iPhone applications and has been used by more than 7% of the iPhone users.
Geodesic has signed six new Enterprise customers across USA, Europe and Asia during the quarter ended September 30, 2008. These include Handset manufacturers, Telecom Providers, BFSI and Value Added Service Providers.
Geodesic has added around 397,000 new retail users during the second quarter.
Phase 1 buying – Enter below Rs 50 (One can take small exposure even
below Rs55-60)Phase 2 buying – Buy below Rs38
Best buyingprice?
Buyback @ Rs 75 might keep the price of Geodesic in the range of Rs50-70.
Phase 3 & final buying – Buy below Rs26 (Unlikely to fall at this level)
price?
Let’s have a look @ share price history
Historical PE of Geodesic was in the range of 15-80 (during last 5 years) but it is trading at PE of around 3 today which is unbelievable and at throwaway price.
Mcap of Geodesic is around Rs460-500Cr today, which was seen Dec’04 & Jan’05. So, you are getting a company with valuation what it was in year 2004-05.
Historical Chart from Feb 2002 Onward.
Geodesic share price was just Rs33 in Feb’02 which rises to Rs 1,065 in Jan’05. A 32 bagger in 3 years!!! Today it is trading in the range of Rs60-65 with minimum downside. Due to share buyback (as high as 25% of
equity capital) placed at Rs75, it is unlikely to fall below Rs38 which was seen in Jan-Feb’09. We can see that, it has formed a base in the range of Rs50-75, beyond Rs75 it can go as high as Rs 150 and
below Rs50 it can fall down to Rs 38-40 levels which is a good deal for long term investors.
From Jan’08 till now….
During last 1 year, which was one of the toughest time in memory, Geodesic share price fell down from Rs225 to 150 levels 1st and only after Oct’08 massive sell-off it was seen around Rs50-75 range in 2009. Possibility of further fall below Rs 38 which was the 52 week’s low is unlikely under current scenarios.
Last 6 months Chart.
Limited downside below Rs38, current price is around Rs60-65 (March 27th), it can fall down to Rs50-55 levels but below this levels is not likely.
Buying strategies for next 3 month need to be followed after taking initial exposure at Rs50-55.
Very optimistic view on the company Investment Rationale
How can we say that Geodesic has
bright future?
HBJ Cap’s face 2 face with Mgmt. Our Perspective
bright future?
We have optimistic view on this company • At the CMP of Rs. 63 (Mar 27th 2009), Geodesic is trading at ~ 3x its FY09 earnings of 20. This
we feel is reasonable, given the high growth rates & the inflexion point for its VoIP venture. We presently hold a very optimistic view on the company & its prospects going ahead.
The Recent Development in the Telecom Industry to free Net Telephony is very Positive for Geodesic. Recently TRAI's (Telecom Regulatory Authority of India) recommendation to Free Net Telephony has got
Geodesic in a sweet spot. Its VoIP (Voice Over Internet Protocol) application, which is already available online can now be targeted in India. If the DoT (Department of Telecommunications) accepts the proposal then the ISP's (Internet Service Providers) will be allowed to provide VoIP services. The call rates for VoIP users is 1/6th of current charges. The calls made within the same provider can also be virtually Free.
Geodesic has recently launched its VoIP on Cell phones. The subscribers using Mundu services can use Mundu to make calls at fraction of the rates. The call made from Mundu to USA can be made at US 1.5 cents(0.60 p if $=Rs. 40).Geodesic has list of call rates to countries around the world with specified charges mentioned on its $=Rs. 40).Geodesic has list of call rates to countries around the world with specified charges mentioned on its website http://speak.mundu.com/. Geodesic has successfully launched these services on smart phone devices. To use VoIP service the user would require some kind of connectivity to the Internet which could be GPRS, 3G or WIMAX.
Geodesic is very well placed to grow further at a rapid pace thru their other products too. Picopeta, a subsidiary of Geodesic has developed a hand-held computer called Simputer, which has two USB
ports, Internet accessibility with most of the CDMA phones, Card Reader and Writer. The Simputer is one of the most powerful hand held computers and is now under pilot testing by the government for the traffic police and all India national Cards scheme.
The Chandamama subscriptions have seen a rise of 60% after the acquisition. Geodesic's innovative approach and model has helped it come a long way.
Investment Rationale 1. The company has significant Intellectual Property Rights (IPR) based offerings and its subsidiaries like Engage
Solutions has top 7 Asian financial institutions as its clients. Being in the product space in mobile and online domain it is relatively shielded from outsourcing based business vagaries and has incredible operating margins of ~60% for last three years, revenue CAGR of 81% and an EPS CAGR of 47%
2. We believe this profitable growth will continue in coming years due to the explosion of Smartphones (450mn, growing at 30% CAGR), value added services ($2bn Indian market by FY10) and eventual convergence of communication devices. The company’s products find application in communication, geographical mapping, feed based news updates, online advertisements, customer retention, entertainment etc. Mundu Speak was the only Indian product ever to have made to the finals of CNET Webware. The company revolutionized the internet radio market when it launched “Idea Radio” which was far superior to IVR based offerings or generic FM radios.
3. Enterprises are always looking to reduce their communication expenses. We believe Geodesic has right kind of products in terms of collaborative Mundu suite and Mundu Speak to serve this market. It’s VoIP hardware phones would hit the market in FY09 and we believe it has the potential for huge revenue growth.
4. Their OLAI (Open Learning with Autonomy & Interactivity) is a web based computing platform targeted towards the huge education sector. The differentiation lies in the traditional integration capabilities embedded in OLAI solution which enables the students to read eBooks, tag them with internet data and store huge amount of information. It is a high end product of price ~$500 and would be launched in this financial year (late quarter). We expect a lot of traction for this product.
Our Perspective1. We are impressed by the revenue model of Geodesic Information Systems. Unlike many other companies
working in similar domain, their products are monetized. They are not only in “eyeball” grabbing market but add value to the offerings of their partners. We believe unless an application can add to incremental revenue of a service provider or an OEM it would not survive in the market for long.
2. Large telecom players would be reluctant to accept offerings like VoIP (allowing users of Mundu Speak to talk endlessly without paying airtime charges). As the company works closely with service providers for its application deployment on their network, it may be forced to take a strategic decision of VoIP vs Other Applications.
3. Dependence on the Mundu IM platform (over 90% revenue), USA market makes the company vulnerable to recessionary risk. We believe they have a great offering in ADePT which has not been exploited till now. Digitization of Chadamama should also start contributing in near future.
4. Investments with at least three years horizon can be made in the stock of Geodesic considering its niche business focused on instant messaging, and the stock’s attractive valuation. At Rs 64, the stock trades at a business focused on instant messaging, and the stock’s attractive valuation. At Rs 64, the stock trades at a throwaway valuation of two-three times its likely 2008-09 earnings.
5. With a net profit margin of over 45 per cent, much higher compared to most other listed, products-focussedtechnology companies, Geodesic operates in the high-growth areas of instant messaging and VoIP. The company has a large roster of well-established clients.
6. In a possible trigger to valuations, Geodesic has announced a buyback of up to 25 per cent of the paid-up equity share capital (maximum of Rs 109.8 crore) from the open market, at a maximum price of Rs 75. This is expected to be executed over the next few months.
7. Instant messaging is a rapidly expanding mode of real-time communication across the world. The global messaging market, which was $65 billion in 2007, is predicted to touch $117 billion by 2012 according to Portio Research. A more recent report also states that Mobile Instant Messaging, which generated $2.5 billion in 2008, is expected to increase to $12.4 billion by 2013.
Infosys Vs Geodesic – Just a comparison. Between the year 1998 & 2000, Infosys’ revenues were comparable to that of Geodesic’s current revenues.
Infosys’ profit margins were around 23%-25% throughout. Infosys’ income & profit growth was strong at 40%-80% year-on-year throughout the period between 1996 to 2006. During most of those 10 years, Infosys’s share price was trading at around 30 times its EPS (Earnings or Profit per share), except few spikes.
On the other hand, look at Geodesic’s performance over the last five years between FY’03-04 & FY’07-08. Revenues & Profits have grown at rates between 80% to 140% per year. Net Profit margin has improved to over 50% levels, twice that of Infosys. And Geodesic is currently trading at just 2-3 times its last years EPS. Why? Because most of the people still don’t believe that India can do big in product space!!!
Now lets compare the bonus history of Infosys & Geodesic. Between 1996 & 2006, Infosys has given bonus thrice at the rate of 1:1 & once at 3:1 & split its face value once from Rs.10/- to Rs.5/-. Effectively, 100 shares thrice at the rate of 1:1 & once at 3:1 & split its face value once from Rs.10/- to Rs.5/-. Effectively, 100 shares held in Infosys in year 1996 would have grown to 6400 shares post 2006. And a major portion of the multiplication happened after Infosys gained reasonable size in revenues & profits. On the other hand, Geodesic has given bonus once at the rate of 1:1 & once at 1:2, multiplying the number of shares by three times. And in 2005, the share’s face value was split to Rs.2/-. And looking at the growth rates that Geodesic is managing, there will be many more bonus issues in coming years.
Infosys has been consistently giving away 20% of its profits as dividends. In recent years, Infosys has been declaring special dividends to celebrate certain milestones. Geodesic has been much less generous on the dividend front. It has been giving away between 5% & 10% of profits as dividends. It has been conserving cash to invest in expansion of business & acquisitions. At some point, Geodesic will also start sharing a higher percentage of profits as dividends.
HBJ Cap’s face 2 face with Mgmt.During crises period ` this co can cope better as - the products are high margin, employee strength is only 350, after product cost recovery the remaining is profit and most products are cost saving ones .
Mundu has been around for nearly 9 yrs now and is still growing. If it was easily imitable then it would not have survived this long. The company has significant Intellectual
VOIP is going to change the rules of the game, we have hardware, software & popular product to start with, just watch our next move!!!
Like Mundu, GeoAmida & OLAI (Open Learning with Autonomy & Interactivity) has huge potential and both
company has significant Intellectual Property Rights (IPR).
has huge potential and both are at the turning point.
You have got very high receivables, almost 30% of FY08 sales? Also your MTM loss & interest outgo is going up for FCCB due to rupees depreciation?
We are at the early stage of product launch and just like DTH market in India where initial setup cost is more and returns comes later, our inventory is high but gradually it will come down. Share buyback will solve FCCB related issues.
Risks & Concerns Advice
Risks &Concerns
Human behavior Assumptions
Concerns
Risks… Inorganic expansion of smaller companies could pose to have initial hiccups. Most of the M&A
fails or sometime over paid. Operating profit margins for the company will be significantly depressed in comparison with past
performance, once the VOIP operation will start. Software margins have reduced as anticipated due to an increase in salaries as well as addition in
number of people due to anticipated growth and high attrition rates. The risks to this business are scalability challenges in executing any multi-million dollar deals,
technological obsolescence and competition from platforms such as IBM’s Lotus Sametime. Disruptive technologies do emerge, and can leave all competition behind... There are a lot of
players in the Unified messaging space. Let us not forget history - IBM and Apple were true pioneers in personal computing, but Microsoft did beat them with DOS... Apple was again way pioneers in personal computing, but Microsoft did beat them with DOS... Apple was again way ahead in GUI with Macintosh, but Microsoft again beat them with Windows..
Advice :- The strong performance in the past is not a bullish sign and doesn't indicate the same or better
performance in the future. Each year is different from the previous one! Do not let representativeness bias win over your common sense! Always do your homework and
do not forget to do a research before you invest your money! The business is consumer driven. Therefore in a slowdown the company may be adversely
impacted as the partners would want to reduce their prices in order to stimulate demand.
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