Low Priced Scrip

HERE IS WHY

Dalal Street Investment Journal - - CONTENTS -

Ex­pan­sion in health­care ver­ti­cal Strong fi­nan­cial per­for­mance At­trac­tive valu­a­tions

Head­quar­tered in Hyderabad, Vir­inchi is an in­for­ma­tion tech­nol­ogy (IT) prod­ucts and ser­vices com­pany. The com­pany is en­gaged in soft­ware de­vel­op­ment and re­search. Its seg­ments in­clude soft­ware prod­ucts and ser­vices, It-en­abled ser­vices and in­fra­struc­ture and real es­tate ser­vices. Vir­inchi of­fers var­i­ous ser­vices, in­clud­ing ap­pli­ca­tion de­vel­op­ment, data ware­hous­ing, web ser­vices, en­ter­prise ap­pli­ca­tion in­te­gra­tion prac­tice (EAI), test­ing ser­vices, main­te­nance and sup­port prac­tice, pack­aged de­vel­op­ment ser­vices, man­aged ser­vices and data cen­tre ser­vices.

Vir­inchi Health­care, a 100 per cent sub­sidiary of Vir­inchi, ex­panded its foot­print into health­care sec­tor by set­ting up a 600-bed su­per spe­cialty hos­pi­tal in the up­mar­ket Ban­jara

Hills in Hyderabad at an in­vest­ment of ₹ 300 crore. The com­pany has raised

₹ 70 crore from Ca­nara Bank-led con­sor­tium of lenders, while the re­main­ing funds for the project were raised in­ter­nally.

The con­cen­trated ef­forts and in­vest­ments made to move up the value chain in its cho­sen mar­ket au­gurs well for the stock. Vir­inchi is wit­ness­ing sig­nif­i­cant trac­tion from its ex­ist­ing cus­tomers and is able to gen­er­ate healthy ‘new leads’ in the same mar­ket.

As the rev­enues come from dif­fer­ent ge­ogra­phies and in dif­fer­ent cur­ren­cies, cur­rency risk re­mains high for the com­pany.

Look­ing at the at­trac­tive valu­a­tions and the op­por­tu­ni­ties ahead for the com­pany backed by ro­bust fi­nan­cial per­for­mance, the stock is a good buy in the cur­rent mar­ket sit­u­a­tion.

On the fi­nan­cial front, Vir­inchi Lim­ited’s rev­enue in­creased 53.93 per cent to

₹ 38.76 crore in Q4FY17, as com­pared to the same pe­riod in the pre­vi­ous fis­cal. The com­pany’s PBIDT too in­creased 144.76 per cent to ₹ 5.14 crore in Q4FY17 on a yearly ba­sis. How­ever, the com­pany’s net profit de­clined mas­sively by 94.04 per cent to ₹ 0.05 crore in Q4FY17 on a yearly ba­sis.

On an an­nual ba­sis, the com­pany’s rev­enue in­creased by 39.04 per cent to ₹ 137.15 crore in FY17 from

₹ 98.64 crore in the pre­vi­ous fis­cal.

The com­pany’s PBIDT stood at

₹ 21.28 crore in FY17, an in­crease of 158.56 per cent from ₹ 8.23 crore in the pre­vi­ous fis­cal. The com­pany’s net profit stood at ₹ 11.42 crore, up by over 173 per cent in FY17 from ₹ 4.18 crore in FY16.

On the val­u­a­tion front, the share price of Vir­inchi Lim­ited is trad­ing at a PE mul­ti­ple of 9.94x as against its peers such as NIIT Tech­nolo­gies (13.24x), Polaris Con­sult­ing & Ser­vices (15.46x). The com­pany’s PE mul­ti­ple is higher as com­pared to in­dus­try PE mul­ti­ple of 16.13x. The com­pany’s ROE stood at 13.10 per cent and ROA at 6.12 per cent in FY17, while its to­tal debt-to-eq­uity ra­tio stood at 0.89x in FY17.

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