Hi Guys,

The first leg of the competition has been concluded, and the following participants have submitted their investment ideas:

1)       Gaurav – Info Edge (Link)

2)       Faraz – Karutri Global (Link)

3)       Sneha – Molycorp Inc. (Link)

4)       Gajanan – Lovable Lingerie Ltd. (Link)

5)       Manan – Tide Water Oil (India) Ltd. (Link)

6)       Tirthank – Micro Technologies (Link)

7)       Satish – Geodesic (Link)

8)       Kavan – Everonn Education (Link)

9)       Girish S. – MindTree (Link)

The ideas and strategies are varied; unique, and equally competitive. The question is, are you ready to back them to double your money? So let the commenting duels begin! Be it to find loopholes in fellow participants or to be in the race for the prize of The Best Commentator!

Popularity: 79% [?]

Name – MindTree

CMP – INR 376.60

Market Cap – USD 0.3 billion

Profile: MindTree, a well – respected midsized information technology company offers services ranging from application maintenance, Business Intelligence, Independent Testing, product development, etc. Currently co-headquartered in Warren, New Jersey and Bangalore, it has 3 development centers in India and 23 offices spread across Asia, Europe and the United States. MindTree has been involved in the creation of Bluetooth technology and is an Associate Member of the Bluetooth Special Interest Group.

History: MindTree Consulting filed its draft red herring prospectus with the SEBI for its IPO in December 2006. The IPO was oversubscribed more than 100.0 times. Along with many other awards, MindTree was declared the Number 1 Most Admired Knowledge Enterprise in India by Teleos, in association with the KNOW Network. Today, MindTree, with over 30.0% CAGR growth in past 3 years, has proven that the idea called MindTree holds promise.

Few promising points about the Company:

• P/E of only 9.1x, as compared to the industry P/E of 25.7x
• Healthy EPS of INR 30.78
• Income from software development grew to INR 12,332.0 million for the year ended March 31, 2010, which represents an increase of 22.0% over INR 10,126.0 million in 2009. Growth across both overseas and domestic markets was witnessed. Export revenues grew by 20.0% to INR 11,417.0 million whereas domestic revenues grew 42.0% to INR 915.0 million
• Company has added a built-up capacity of 106,000.0 sq. ft. and added 1,000 seats. With this, the total built up capacity of the Company in India stands at 1,326,000.0 sq. ft
• Strategic Acquisitions:

1. NOIDA based ASAP solutions in 2004 for all cash deal
2. Bangalore based Linc Software Services Pvt Ltd. in 2005 for stock and cash
3. TES – Purple Vision in December 2007
4. Majority Equity Interest in Aztecsoft
5. Chennai based 7Strata : Remote IT Infrastructure Management Services

• Liquidity: The Company maintains sufficient cash to meet its operations and strategic objectives. As on March 31, 2010 the Company had liquid assets of INR 1,614.0 million as against INR 477.0 million as of March, 2010. These funds have been invested in deposits with banks and in money market mutual funds

Strategy going forward: MindTree will now focus on fewer verticals unlike the earlier strategy where it was positioned as an all-services IT provider. This would help the company getting repositioned as a niche IT player in select verticals. As per the new strategy, company will market its service offerings as – IT services and Product engineering services (PES). PES would include both R&D services and software product engineering services into one entity.

Conclusion: The Company recently lost contract worth USD 2.5 million from Japan based Kyocera. Though this will hurt the revenues of the Company, I think this is a very good time to enter the stock as it is trading at a heavy discount.

The Company has already shown glimmers of recovery in Q4 FY 2011 after it wrote off this wireless business venture.

Rupee appreciation is the only hurdle, the Company will be facing in the long term. Resignation of Ashok Soota (co-founder and executive chairman) is also not expected to have a long term impact on the stock.

The number of strategic acquisitions has given a very strong sentiment to the investors. With strong Q4 results and healthy future prospects of the Company, doubling the money via this multi – bagger in less than 3 years is certainly on the cards.

Popularity: 80% [?]

Company Name: Geodesic
Market Cap: USD 183.0 million
CMP: INR 92.00
LTM P/E: 2.6x
Free Float: 76.8%

Geodesic, incorporated in 1999, is a Mumbai-based software technology company and is engaged in software product sales and related consultancy service. Its business units include unified communication services, collaboration and customer relationship management (CRM), mobile media, electronic computing, and financial products and services. CRM is an integral continuum, which includes a set of integrated module. The company’s unified communication, collaboration and CRM unit focuses on the banking and financial services institutions, SME’s, and large retail industry. Its Mundu products are retailed across www.mundu.com and application stores, including Nokia’s Ovi Store, Apple’s App Store, Palm Store and Blackberry Store. The company recently launched its app on the Android market which has been a great success in India, till date. Android, as we know has a tremendous potential in the Indian market, primarily due to its availability and price efficiency.

Why Geodesic?
Fundamentals
The company’s revenues grew at around 3.0x over the last three years to reach INR 503.2 crores in 2010, resulting in a CAGR of 42.8%. Despite the economic slowdown in 2010, the company witnessed a minor fall of 1.0% in its topline growth, displaying stability in its earnings. In the first nine months of this fiscal, the company has already recorded revenues of INR 487.9 crores, which if annualized (although not appropriate) translates into INR 650.6 crores (29.3%) already.

Although, the company doesn’t have a core peer in the domestic market, internationally there are number of companies involved in developing apps for the smartphone market. The company is trading at a P/E of 2.6x, which is at a steep discount to its peers across the globe which is trading at P/E of 23.2x.

Revenue Drivers
Geodesic derives most of its revenues from developing instant messaging platforms/services, Internet radio, IP telephony and other such applications and licensing them to enterprises as well as retail users (directly or indirectly) under the ‘Mundu’ brand. The company has added new clients in nearly all its segments of operations. Usage of its retail offering instant messaging, VoIP platform and mobile SMS over IP has witnessed a rapid increase. With all these segments set to expand in a big way as companies and portals, offering social networking, etc., seek to cut costs, Geodesic is well positioned to tap into this opportunity. The company also has acquired many small software companies across the globe which helps it to tap in those economies and also, enables the company to be ahead of the curve.

It has a developed revenue model comprising license fees, customization fees, per-usage fees and recurring revenues. In fact, 55.0% of its revenues are recurring revenues. This enables revenue visibility and better margins as well. The company has also bagged contracts from the Government of India, as part of its e-governance program, which gives a tremendous upside to the earnings potential of the company. The company recently bagged a deal from the Madhya Pradesh government for implementing Public Distribution Service. Other deals include traffic management and the NREGA (now Mahatma Gandhi NREGA). Chandamama, the children’s magazine that it owns, has also witnessed a ramp-up in revenues.

The way forward
The Indian smartphone market is expected to increase significantly with the smart phone sales grown 3.0x times between (July-Sep) of 2010 compared to 2009. Moreover, the market potential is huge with – 80.0% of smartphone market still untapped, and according to a recent survey by Delloite, 90.0% of all users want to move to smartphones. This has also been helped by declining prices of the smart phone market. In the Q2 2011, 80.0% of the total Indian smartphone sales were lesser than the avg. sales value of INR 18,000, the proportion of which rose to 90.0% in the Q3 2011. Due to ever increasing demand of apps such as Live TV aided by the introduction of the 3G technology, the number of apps for these markets is expected to increase significantly. Moreover, NDTV in its recent survey rated Mundu as the #1 App for India, which puts the company in the driver seat and first mover advantage.

Popularity: 89% [?]

I have chosen Lovable Lingerie Ltd. as my stock pick for Investomania. The Company had a market cap. of Rs. 4,119.4 million ($90.7 million) as on March 31, 2011. I think the Company has great potential for value creation as it caters to a market (premium women’s inner-wear) which can be expected to gain foothold in the coming years.

Company Description

Lovable Lingerie Ltd. (LLL) is one of India’s leading women’s inner-wear manufacturers. Its products are sold under the flagship ‘Lovable’ and ‘Daisy Dee’ brands of the company. The Company’s ‘Lovable’ brand is one of the key brands in the premium inner-wear segment and is currently sold in over 1,400 stores across the country. The company procures retail space in large format stores like Westside, Shopper’s Stop, Lifestyle etc. and markets its brands in 127 such counters in 21 cities all across India. The Company has 3 manufacturing facilities of which 2 are situated near Bengaluru and the third one in Roorkee, Uttarakhand. LLL’s operations start from the point of procurement of raw material to cutting, molding, stitching, and dispatch, thereby having a major chunk of operations in the value chain enables it to meet the time, quantity, and quality requirement of its customers.

Industry Profile

The overall inner-wear market (excluding kids) in India was worth Rs. 11,913.0 crores in CY 2009, which has seen a CAGR of 15.8% over the last 4 years. In volume terms, the market for men’s inner-wear segment has a share of around 48.0% while, the women’s inner-wear market has a 52.0% share. In value terms the women’s market has a a much higher 66.0% share as compared to the 34.0% share of the men’s market. Having a larger value share of the market in spite of the fact of lower volumes enables the manufacturers to have a higher average selling price than in the case of men’s inner-wear. The women’s inner-wear market has grown at a CAGR of 16.8% over the last 4 years. Currently the market is fragmented with almost two-third of the market controlled by unbranded, unorganized regional players, while the remaining is controlled by the few big organized and branded players. However the arrival of some international brands has brought about some changes in the market. The companies have been able to market their products through some bold advertisements, fashion shows etc. and have been able to position their products in order to understand and cater to the needs of the customer. The women’s inner-wear market is further classified in to super premium, premium, mid-market, economy, and low-market segment. The mid-market and economic segments account for almost 75.0% of the market. However in recent times the premium and super-premium segments have witnessed the highest growth in terms of volumes which indicates a growing trend in the market to move towards more niche brands. The super-premium and premium segment includes players like Marks & Spencers, Triumph, Loveable, La Senza, and Enamor. LLL also has presence in the economy and mid-segment through its Daisy Dee brand.

Company Profile

LLL’s core competency lies in its understanding of the needs of the women’s inner-wear market and accordingly manufacturing them in order to foray in to untapped segments of the market. LLL’s strong position in the market is on account of its facilities’ connectivity to major cities in India and an in-house product design and development division coupled with the fact that the Company has integrated every stage of its operations with the latest technology. For CY 2010 the company had an installed capacity of 6.8 million pieces and a utilization of 74.6%. Another key advantage for the Company has been its supply chain network. The Company offers multiple brands and due to its mass customization capability,  is able to procure its raw materials in bulk and thereby at cheaper rates. Moreover its distribution channel is spread across 103 distributors in India. The Company caters to more than 1,400 retail outlets for its ‘Lovable’ brand while its ‘Daisy-Dee’ brand is present in over 7,500 outlets across the country. The Company’s flagship brand ‘Lovable’ is an 85-year old brand well-known across the world. LLL acquired the brand in 2000 for exclusive use in India, Nepal, and Bhutan. The Company acquires the ‘Daisy Dee’ brand in 2004 and in 2009, acquired the ‘college style’ brand which caters to the young demographics in India.  The Company’s sales have increased to Rs. 87.0 crores in FY 2010 from Rs. 30.7 crores in FY 2006 which indicates a CAGR of 29.8% for the 4 years. The Company’s PAT was Rs. 10.6 crores in FY 2010 as compared to Rs. 2.9 crores in FY 2006.

Outlook

The Lingerie industry in India is expected to grow at a CAGR of 18.3% over the period 2009-2014. It is currently estimated at Rs. 7,898.0 crores and is expected to be worth Rs. 18,324.6 crores in 2014. The growth is primarily expected from the increase in demand in the super-premium and premium segments of the market.
With the increase in disposable income, a market with huge potential due to its population, and increase in the number of working women, prospects for branded products which cater to this segment are bright. LLL’s current IPO proceeds are being lined up for

• Setting up of a new facility in Bengaluru, which will increase the total capacity by 2.5 million pieces per year
• Brand building and brand development of its ‘college style’ brand
• Increasing distribution network through more exclusive brand outlets and setting up of more counters in retail stores
• Investment in JV with Lifestyle Galleries of London Ltd., a company based in UK, to cater to the super-premium segment in India.
• The company also plans to extend its brand into sleep and home wear, since it already has presence in leisure wear. Such diversification allows it to tap new market segments to drive revenue growth.

However, the increase in expenses due to brand development and entry of more established world-renowned competitors in the Indian market will cut margins to some extent. The Company has mentioned that it would spend around Rs. 4.2 crores on brand building for FY 2011 and around Rs. 14.3 crores in FY 2012.  Moreover the increase in capacity is expected to be fully operational by FY-2013. But the improving economic scenario, a large population and a healthy portfolio of brands can make this company ‘lovable’ to the investors.

Peers

The only listed comparable for  LLL in India is Page Industries which caters mostly to the men’s inner-wear market. As of March 31, 2011 the company was trading at a P/E of 45.6x while that of LLL was around 28.2x on the basis of FY 2010 earnings.

Popularity: 71% [?]

I’m sure, we all believe in the well-known India Growth Story coupled with rapid GDP growth, rising disposable income, improving standard of living, etc. But is the growth inclusive? Has it changed the lives of millions of people still living below the poverty line? Are we successful in proving jobs to thousands of literate people? The answer to that is a big NO which has given rise to increasing level of crimes. In India around 403,181 property crimes accounted for the year 2007 and rate of recovery was around 35%.

And this creates a huge market for organized players in Security space.

Looking at 3P’s of the Company “Micro Technologies”, namely Product, People and Price, the Company to looks like a screaming buy.

Product: Micro Technologies is a leading provider of IT based security solutions which cater to residential, commercial, vehicle, internet, mobile, and banking segments. The Company has been in the security services market from 20+ years and has tie-ups/delivery records with various organizations (MTNL, Railways, MIDC, BARC, L&T, ICICI, Axis Bank etc.) for providing its services. The Company has been continuously focused on geographically diversifying its offerings to South Africa, Australia, Japan, and Saudi Arabia. For retail penetration, the Company has been expanding its distributor network and plans to increase retail outlets from 100 at present to 250 in coming 1-2 years.

People: The only way for me to judge the quality of management is by understanding what industry stalwarts think. The Company has been awarded “Best under a billion’ by Forbes. Nasscom has given the ‘Innovative Products Award’ for its wi-fi system.  The vehicle security product has global approval from South African Independent Accreditation Services. Last, but not the most important point that speaks about the management’s trust in the company is a 4% increase in promoter’s’ stake from 30% to 34% in Dec 10 quarter when stock price fell from 200+ levels to sub 120.

Price: The Company has demonstrated stellar financial performance in last 4 years with revenue CARG of 42%, net income CAGR of 28%, a stable EBITDA margin of 36-38%. At CMP of INR 136.00, the Company is trading at PE of 1.7x. One of the possible reasons for such valuation could be its lower institutional holding (at sub 5% levels). The stock is also not covered by any of the institutions based brokerages. The only listed peer Indian peer Zicom trades at 7x earnings. There is every possibility for the stock to get re-rated in future and prove to be a multi bagger.

Popularity: 71% [?]