1
Aug 07, 2017
Vakrangee Ltd
Recommendation (Rs.)
CMP (as on Aug 07, 2017) 463
Target Price 530
Previous Target Price 530
Upside (%) 15
Stock Information
Mkt Cap (Rs.mn/US$ mn) 237542 / 3722
52-wk High/Low (Rs.) 465 / 163
3M Avg. daily volume (mn) 1.3
Beta (x) 0.8
Sensex/Nifty 32274 / 10057
O/S Shares(mn) 529.4
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 53.9
FIIs 1.3
DIIs 0.8
Others 44.0
Stock Performance (%)
1M 3M 6M 12M
Absolute 5 32 52 150
Relative to Sensex 2 22 33 117
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Prasanth Victor
040 - 3321 6271
v.prasanth@karvy.com
Addition of Service Offerings will Ramp up the Business
PAT increased by 38.3% YoY on strong revenue growth:
During Q1FY18,
the revenue stood at Rs. 13047 Mn as against Rs. 9183 Mn for the corresponding
quarter last year, registering a YoY growth of 42.1%. EBITDA stood at Rs. 2655 Mn
in Q1FY18 as against Rs. 2215 Mn, a growth of 19.9% YoY. PAT is at Rs. 1680 Mn
increased with a growth of 38.3% YoY and 11.0% QoQ. EBITDA margins in Q1FY18
settled at 20.4% down by 312 bps QoQ. We expect EBITDA margins to stabilize at
17%-18% as the commission sharing ratio with franchisees changes between 65%
to 80% based on the milestone revenue targets.
Update on New Services:
In Q1FY18, Vakrangee made alliance with DMI
Finance Pvt. Ltd. for lead generation of oering loan products & collection of EMIs.
In e-Governance segment, Vakrangee made tie-up with IRCTC for railway E-ticket
bookings.
Vakrangee Kendra Outlets set to start accepting the pre-bookings of Reliance
Jio phones from Aug 24, 2017 onwards with a targeted sale of 10 Mn Jio phone
handsets. In that context, Kendra outlets will act as delivery & collection point for the
ordered handsets. Other services include issuance and activation of SIM connection
through the E-KYC facility; and mobile recharge will be provided.
New store Format - Vakrangee Kendra PRIME and Master Franchisee
Model:
In Q1FY18, board of directors has approved the proposed feasibility
study of new store format called Vakrangee Kendra PRIME and Master Franchisee
Model. Vakrangee Kendra PRIME is primarily to focus on urban locations where
the population density ranges from 0.03 Mn to 0.5 Mn with facilities like additional
counters, additional store area, better exclusive services and enhanced customer
experience.
Master Franchisee Model is like operating multiple franchisees by an entity or by a
corporate rm covering entire state or district. This idea might enhance to expand
faster in various locations and also the activation of services becomes more easy.
Valuation and Outlook
At CMP of Rs.463, the stock is trading at FY19E P/E of 25.8x; we give a “BUY”
recommendation with a target price of Rs.530 per share at P/E of 29.6x FY19E
EPS, which represents an upside potential of 15%.
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary (Rs. Mn)
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Net Sales 27805 31907 40005 57892 81324
EBITDA 7232 8220 9460 12472 14985
EBITDA Margin (%) 26.0 25.8 23.6 21.5 18.4
Adj. Net Prot 3218 3948 5308 7821 9475
EPS (Rs.) 6.4 7.6 10.0 14.8 17.9
RoE (%) 39.4 31.1 29.2 32.6 29.9
PE (x) 27.3 36.0 41.7 31.3 25.8
Source: Company, Karvy Research; *Represents multiples for FY15, FY16 & FY17 are based on historic market price
India Research - Stock Broking
BUY
Bloomberg Code: SQSI IN
Company Update
Speciality Retail
Vakrangee Ltd
Bloomberg Code: VKI IN
80
110
140
170
200
230
260
Aug -16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar -17
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Vakrang ee Ltd
Sensex
2
Aug 07, 2017
Vakrangee Ltd
Exhibit 2: Q1FY18
YE Mar (Rs. Mn) Q1FY18 Q4FY17 QoQ % Q1FY17 YoY %
Turnover 13047 11475 13.7 9183 42.1
Expenditure 10392 8782 18.3 6968 49.1
EBITDA 2655 2693 (1.4) 2215 19.9
Depreciation 8 131 (94.0) 212 (96.3)
Interest 59 99 (40.9) 136 (56.9)
PBT 2589 2462 5.1 1866 38.7
Ta x 908 948 (4.2) 651 39.4
PAT 1680 1514 11.0 1215 38.3
EBITDA Margin (%) 20.4 23.5 (312) bps 24.1 (377) bps
EBIT Margin (%) 20.3 22.3 (203) bps 21.8 (152) bps
Net Prot Margin (%) 12.9 13.2 (31) bps 13.2 (35) bps
Source: Company, Karvy Research
Key Takeaways of Conference Call
Vakrangee is planning to extend its network to 50,000 outlets by FY18E. As on June 30, 2017, the company expanded and
made 37,688 outlets operational across 16 states, which include 26,737 rural outlets and 10,951 urban outlets.
On the operational front, for the e-commerce vertical, Amazon services roll-out is well on track. With respect to bus ticket
booking services, redBus services are now activated across all the outlets along with gold products booking.
Churning rate, which is basically attrition rate of Kendras, is around 3% on annual basis. That means around 1,000 outlets
would be discarded on annual basis, by considering as non-performing outlets and the same will be replaced with other
franchisees.
As on Q1FY18, revenue from Vakrangee Kendras business contributes to about 70.5% of overall revenue.
Management indicated that the company is targeting to add another 8-10 services from various verticals which is under
review as of now.
With respect to logistics couriers booking, services are activated across 16 states and 582 postal codes.
In insurance division, services like life insurance from companies such as HDFC Life, Bajaj Allianz are activated across all the
outlets. In Non-life segment, Tata AIG, Reliance General Insurance and also in health insurance Religare Health are activated
across all the outlets. HDFC ERGO, Aditya Birla Health and CIGNA TTK are in the integration stage.
Key Risks
Swift change in government policies.
Slow ramp-up in addition of Vakrangee Kendras.
3
Aug 07, 2017
Vakrangee Ltd
Financials
Exhibit 3: Income Statement
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Revenues 27805 31907 40005 57892 81324
Growth (%) 42.4 14.8 25.4 44.7 40.5
Operating Expenses 20573 23687 30545 45420 66339
EBITDA 7232 8220 9460 12472 14985
Growth (%) 35.3 13.7 15.1 31.8 20.1
Depreciation & Amortization 1649 1640 734 419 434
Other Income 59 56 53 75 80
EBIT 5643 6636 8779 12128 14631
Interest Expenses 749 560 501 59 0
PBT 4893 6076 8278 12069 14631
Tax 1675 2128 2970 4248 5155
Adjusted PAT 3218 3948 5308 7821 9475
Growth (%) 83.9 22.7 34.5 47.3 21.2
Source: Company, Karvy Research
Exhibit 4: Balance Sheet
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Cash & Equivalents 382 1672 6032 9843 17380
Sundry Debtors 11993 8595 8244 9789 10254
Inventories 1694 5071 4992 5318 5789
Loans & Advances 207 2 1 0 0
Investments 16 15 18 18 18
Gross Block 10495 10607 10306 10656 11056
Net Block 2728 1322 287 218 184
CWIP 101 0 0 0 0
Miscellaneous 3251 4246 3110 3069 3069
Total Assets 20372 20923 22684 28257 36695
Other Liabilities & Provisions 2213 846 400 428 410
Debt 3530 2950 1440 0 0
Deferred tax liabilities 425 130 0 0 0
Trade payables 2131 1166 307 322 338
Total Liabilities 8299 5091 2147 750 748
Shareholders Equity 503 529 529 529 529
Reserves & Surplus 11570 15302 20008 26977 35418
Total Networth 12073 15831 20538 27506 35947
Total Networth & Liabilities 20372 20923 22684 28257 36695
Source: Company, Karvy Research
4
Aug 07, 2017
Vakrangee Ltd
Exhibit 5: Cash Flow Statement
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
PBT 4893 6076 8278 12069 14631
Depreciation 1649 1640 734 419 434
Interest 677 544 501 59 0
Tax Paid (1422) (2927) (2945) (4248) (5155)
Inc/dec in Net WC (5770) (2603) 74 (1786) (939)
Others (38) (57) 46 0 0
Cash ow from operating activities (11) 2673 6687 6512 8971
Inc/dec in capital expenditure (44) (134) (112) (350) (400)
Inc/dec in investments 16 2 0 0 0
Others 25 22 648 0 0
Cash ow from investing activities (2) (109) 537 (350) (400)
Inc/dec in borrowings (549) (577) (122) (1440) 0
Issuance of equity 1478 7 1 0 0
Dividend paid (151) (159) (796) (852) (1035)
Interest paid (677) (544) (501) (59) 0
Cash ow from nancing activities 102 (1273) (1419) (2351) (1035)
Net change in cash 89 1291 5806 3811 7536
Source: Company, Karvy Research
Exhibit 6: Key Ratios
YE Mar FY15 FY16 FY17 FY18E FY19E
EBITDA Margin (%) 26.0 25.8 23.6 21.5 18.4
EBIT Margin (%) 20.3 20.8 21.9 20.9 18.0
Net Prot Margin (%) 11.6 12.4 13.3 13.5 11.7
Dividend Payout Ratio (%) 3.9 3.3 19.9 16.9 16.8
Net Debt/Equity (x) 0.4 0.2 (0.1) (0.3) (0.4)
RoE (%) 39.4 31.1 29.2 32.6 29.9
RoCE (%) 45.0 40.9 42.9 49.0 46.1
Source: Company, Karvy Research
Exhibit 7: Valuation Parameters
YE Mar FY15 FY16 FY17 FY18E FY19E
EPS (Rs.) 6.4 7.6 10.0 14.8 17.9
DPS (Rs.) 0.3 0.3 2.0 2.5 3.0
BVPS (Rs.) 19.0 29.9 38.8 52.0 67.9
PE (x) 27.3 36.0 41.7 31.3 25.8
P/BV (x) 9.2 9.1 10.8 8.9 6.8
EV/EBITDA (x) 12.6 17.9 23.5 19.5 15.9
EV/Sales (x) 3.3 4.6 5.6 4.2 2.9
Source: Company, Karvy Research; *Represents multiples for FY15, FY16 & FY17 are based on historic market price
5
Aug 07, 2017
Vakrangee Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
Connect & Discuss More at
1800 425 8283 (Toll Free) research@karvy.com Live Chat
f
in
You
Tube
Disclaimer
Analyst certication: The following analyst(s), Prasanth Victor, who is (are) primarily responsible for this report and whose name(s) is/are mentioned
therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no
part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation(s) or views contained in this research report.
Disclaimer: Karvy Stock Broking Limited [KSBL] is registered as a research analyst with SEBI (Registration No INH200003265). KSBL is also a SEBI
registered Stock Broker, Depository Participant, Portfolio Manager and also distributes nancial products. The subsidiaries and group companies including
associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and
underwriter, Investment Advisory services, insurance repository services, nancial consultancy and advisory services, realty services, data management,
data analytics, market research, solar power, lm distribution and production, proling and related services. Therefore associates of KSBL are likely to have
business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are
prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources , the
respective corporate under coverage and sources believed to be reliable, but no independent verication has been made nor is its accuracy or completeness
guaranteed. The report and information contained herein is strictly condential and meant solely for the selected recipient and may not be altered in any
way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary
because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and
shall not be used or considered as an oer document or solicitation of oer to buy or sell or subscribe for securities or other nancial instruments. Though
disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by
virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or
strategy is suitable or appropriate to your specic circumstances. This material is for personal information and we are not responsible for any loss incurred
based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment
decisions based on their specic investment objectives and nancial position and using such independent advice, as they believe necessary. While acting
upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any
liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements
are not predictions and may be subject to change without notice. Actual results may dier materially from those set forth in projections.
Associates of KSBL might have managed or co-managed public oering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from
the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services
rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory
services, insurance repository services, consultancy and advisory services, realty services, data processing, proling and related services or in any other
capacity.
KSBL encourages independence in research report preparation and strives to minimize conict in preparation of research report.
Compensation of KSBL’s Research Analyst(s) is not based on any specic merchant banking, investment banking or brokerage service transactions.
KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a nancial interest in the securities or derivatives of
any companies that the analysts cover.
KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the
last day of the month preceding the publication of the research report.
KSBL or its analysts did not receive any compensation or other benets from the companies mentioned in the report or third party in connection with
preparation of the research report and have no nancial interest in the subject company mentioned in this report.
Accordingly, neither KSBL nor Research Analysts have any material conict of interest at the time of publication of this report.
It is conrmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not
received any compensation from the subject company mentioned in the report in the preceding twelve months.
It is conrmed that Prasanth Victor, Research Analyst did not serve as an ocer, director or employee of the companies mentioned in the report.
KSBL may have issued other reports that are inconsistent with and reach dierent conclusion from the information presented in this report.
Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.
Karvy Stock Broking Limited
Plot No.31, 6th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, 500 032, India
Tel: 91-40-2331 2454; Fax: 91-40-2331 1968
For More updates & Stock Research, visit www.karvyonline.com