BEYOND NAKED EYES -GEODESIC LTD
Hi Friends,
If you have done some filter for value buying companies in Indian Market you would have bumped into Geodesic for sure.
Now it's a company in Interesting Space of Information boom via touch of screen so I thought of digging further into this firm.
I have been tracking this company since last 1 year but couldn't decide on why I should enter this company where Auditors changed more than once.
KEY POINTS:
2. Promoter's stake is pledged for what? when they have sufficient cash in books.
Cash in Bank comprises of 38% in Consolidated Balance sheet. Dividend Payout ratio is extremely low.
Now if it's growing company I don't expect dividend more than 40%, But I won't be comfortable promoter pledging & such low payout ratios.
All of the company management status don't tally with facts in front of naked eyes.
In India most of us using iphone/ipad /smart phones heard of skype , what'sup.
Have you heard of Mundu and Spokn.
Check the stats from xyologic, check the feedback column and ratings section before you can download Mundu or Spokn from ipad/iphone.
This shows management figure is not tallying by miles for Spokn, Mundu or any apps.
users can download free stats from this website on Apps
www. xyologic.com
Example: Chandamama , Managment states subsrciption is 150000 however total download is only 4000 as per App store across Ipad/Iphone category & xyologic reports are very close to reality.
- Management statement in website.
- Mundu TV: The average revenue for user is about Rs. 70 at this point of time, and the company has clocked close to 4.5 million downloads in about six-and-a-half months. According to Geodesic, Mundu TV has been the Number 1 app on the OviStore and on Apple’s iTunes App Store under the Entertainment category.
- Conversion on Mundu TV: Geodesic informs that it witnessed a conversion of 4% out of that 4.5 million and the average price roughly comes out to be in the range of Rs. 60 to Rs. 70, because the package cost initially is Rs. 49 for five channels and Rs. 99 for ten channels. It has also signed up with almost 30 channels and has got some music content; education content; some sports content;in addition to all live news channels.
Point 3: FCCB was issued in January 2008, 125 million USD, these bonds carry an yield of 6.60%. T
The conversion price of the Bonds, subject to certain conditions, will initially be ` 302.27 per share with a
fixed rate of exchange on conversion of ` 39.13 = US$ 1.00.
Now that rupee is at 55 against USD & CMP at 39.
As on 31st March, 2011 Bonds with the nominal value of US$ 113.50 million are outstanding.
Dilution of equity if Bonds are not repayed will be huge. Imagine if you need to pay back 113.5 USD million back to bond holders. That maybe the reason why Cash in hand represents 38% in Balance sheet 1282.63 crores. Roughly will have to shell out 830-850 crores for repayment of Principal & Cash when comes to payment of FCCB bonds or Dilution in Equity to that extent . Bond conversion date is 18th January, 2013.
During the year ending March 2010, the Company has repurchased FCCB of the face value of US$ 8.50 Million.
This amount could only be ultilised outside India for acquisitions & therefore cannot be remitted back to India.
Point4: Recent Conference Call scripts note:
Kiran Kulkarni Yes, we sell them our Mundu apps, for example Alcatel bundles in about 10 million handsets with Mundu Radio.
the product for about 120 days for free and post that the user decides whether to buy the product.
MARCH 2012 CONFERENCE CALL SCRIPT
Raunak Nagra Okay then, how much do we charge if the user wants to use..?
Kiran Kulkarni It depends upon the service from $0.99 to US$ 6.99, depending upon what services he adopts.
We have about 40 telecom operators at this point of time,
and about 4.95 million users, on an average we get about $0.35 a year and then we do customized services
In terms of Chandamama, the subscription remains at about 150,000
Point 4: Subsidiaries are majorly in Tax heaven countries. All taken from Annual Report of company available to common Investors on their website.
Check some points from Annual Report decoded carefully after 3 readings.
Most of below points of the management are hard to reconcile with above facts.
- Key revenue source – Enterprise CRM: Many people have, in the past, asked us to find out about Geodesic’s primary source of revenue. In its earnings call, Geodesic said that its Unified Communication and collaboration platform which incorporates CRM, and covers four mediums – e-mail, instant messaging, SMS and voice. This business contributed around 42 percent of its revenues. This is an enterprise product, and they get clients through system aggregators (which service Fortune 500 companies) on a license fee model, and also through direct sales, with a per-month and usage fee. Geodesic MD Kiran Kulkarni said on the call that the platform offers a communication cost reduction by 40%.
- Telcos, Handset and Retail: Over 37 Telecom Operators and 11 Handset Vendors together contribute about 23% of Geodesic’s revenues. The Handset Vendors pre-bundle its applications- Mundu IM, Mundu TV, Mundu Radio and others.
How does it make money from this? Geodesic says that it charges a small fee to the Handset Vendor as a pre-bundling fee allowing its customers to use the app for a period of 120 days, post that the consumer has a choice of either using the product or simply stop using the product. The conversion is considered retail sales – which contributes just 8% of Geodesic’s revenues.
Geodesic added two Telecom Operators and three Handset Vendors, including a tablet maker, during the 1st Quarter. Micromax in India has started bundling Mundu TV with all their Android phones starting Bling 2. Some notes on this segment:
Disclaimer
for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be
reliable, but we do not represent that it is accurate or complete and it should not be relied on as such.This document is provided for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it
deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his
own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors.
Well, I may not dis-agree with your analysis and conclusion but just want to point out that looking at iPhone downloaded apps (150K) is an incorrect indicator. If you had look at android stats, you would have found out that the number is bigger at 239K total apps. However, that also may not tell the correct picture - the fact of life is that till 1/2 years back, iphone/droid were not dominant players in relevant markets. More accurate picture would be known if we know apps download from Nokia (Ovi) and Blackberry stores. Also, some apps might have been registered under subsidiaries e.g. Mundu TV is registered under GTSL at Bbry store (http://appworld.blackberry.com/webstore/content/35067/?lang=en)
ReplyDeleteSir I'm very convienced of what i have written. I personally have ipad n iphone. So I did install mundu n spokn to check the quality of service. Imagine your sms is delivered after 1 month to recipient & twice it didn't even deliver the message to recipent residing in metropolation city of Mumbai & Bangalore.
ReplyDeleteYou can check the fate of Glodyne Technoserve from my previous posts.
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ReplyDeleteAlso this post http://fraudex-2012.blogspot.in/2011/12/geodesic-whats-cooking-under-mundu.html had some more info regarding this company but sadly this blog does not hold any content. I still have the cached page in my Google reader but dont know how can I share it with you.
DeleteGreat research and crisp writing. Have you analyzed Zylog Systems? It seems to be a decent co in trouble, can recover. Would be great if you can analyse.
ReplyDeleteas correctly anticipated geodesic board as postponed the AGM till feb 2013.
ReplyDeleteStuck with Rs 2 lakh worth of shares of geo the value has depreciated by 60% what may be the best way out?
ReplyDeletesell it and buy something else. too many red flags make it very unlikely that you will make up this money. in any case if you have such a roaring bull market the other thing you buy must go up even more. This guy has suggest KRBL. See that report and buy.
DeleteGeodesic came out with a buyback offer in 2010 through open-market purchase at a maximum price of Rs 150, with a total outlay of Rs 30.7 crore. The offer closed in November 2010, with the company utilising 67% of the allocated amount. As per the shareholding data available till 30 September 2012, promoter holding stood a mere 25.35%. Of this, 60% is pledged with lenders. The company announced another buyback in November 2012 for up to 25% of equity shares at a maximum buyback price of Rs 75.
ReplyDeleteI did not like to read further.Why the promoters pledged shares while the company was having lot of cash????Please understand that the promoter and the company are different and distinct legal entities. Promoters might have pledged his shares to finance his daughters marriage or buying shares or other property.If you come across a company where promoter is using company finances,get out immediately.
ReplyDeleteExcellent work...appreciate the Diligence....its at around 6.9 now. do you think its worth a buy ? holding a 1000 shares bought around 25 , was thinking of averaging
ReplyDeleteAvoid in all circumstances
ReplyDelete