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12 Jul 2018

SHARE MARKET--What is the best stock of the IT sector for a long-term investment in India?


Incorporated in 1993 as VMF Soft Tech, Kellton Tech Solutions (KTS) is a CMMi Level 5 and ISO 9001:2008 certified global leader in digital transformation, propelling businesses into their future by transforming the way they operate.
The US-based serial entrepreneurs Niranjan Chintam and Krishna Chintam took over city-based VMF Soft Tech Ltd. in 2009 and renamed it to Kellton Tech.
Kellton Tech has, since then, expanded their business portfolio following an organic and inorganic path by making acquisitions in the US and India
Kellton Tech Solutions Ltd. (KTSL) an an Indian information technology and outsourcing company headquartered in Hyderabad, India with offices in United States and Europe.The company reported net revenues of 7.8 billion and has more than 1400 employees with 350 clients with around 278 in USA, 6 in EU, 58 in India and rest in others spread across verticals such as BFSI, travel, e-commerce, manufacturing, logistics, healthcare and others.

The company provides end-to-end IT solutions, strategic technology consulting, and offshore product development services. It has forayed into newer technologies like Big Data, Cloud Computing and Internet of Things. It infuses unprecedented levels of business agility and synergy into organizations through the power of disruptive technologies like I-SMAC (Internet of Things (IoT), Social, Mobility, Analytics, Cloud),Artificial Intelligence, BigData, Chatbots & Blockchain among others. Its sharp focus on I-SMAC has enabled it to consolidate its hold in this market. Its core services include defining initial strategy, providing customer research analytics, integrated marketing support, and agile innovation for the enterprise.
It ranked number 23 among the fastest growing technology company on the Deloitte Technology Fast50 India 2017.
IT has been listed among the 56 most highly recommended companies in the world by Clutch.
Kellton Tech Solutions Ltd has made 9 Acquisitions in 7 years.
·         In Aug 2011, acquired Tekriti Software Pvt. Ltd., a software services company focusing on web/open source.
·         In Dec 2012 acquired SKAN DbyDx Software Pvt. Ltd, a mobility solutions company. SKAN Dbydx was competent in mobilityIn Dec 2011, acquired MCS global which is into IT consulting.
·         In Oct 2013 acquired Supremesoft Global Inc., a US-based IT consulting company. It strengthened their expertise in cloud computing and data analytics.
·         In April 2014 acquired eVantage Solutions Inc., a US-based IT consulting company. eVantage Technologies is a leading IT solutions provider and VIVOS is focused in offerings related to IT and life-sciences space.
·         In Oct 2014, acquired Vivos Professional Services LLC, a USA based focusing on life-sciences & healthcare space.
·         In May 2015 acquired ProSoft Technology Group Inc., a US-based ERP, EAI Solutions company.
·         In Jan 2016 acquired Bokanyi Group, leading US-based cloud and analytics service provider that is specialized in Hana implementation and cloud services.
·         In Mar 17, it acquired Lenmar Consulting, US-based global IT services & solutions company with strong presence in banking and financial services (BFSI sector). It has 100 employees and serves 20 clients including 3 Fortune 500 clients.
Business Overview -:
In 2017, Kellton Tech acquired and has successfully integrated the US-based Lenmar Group of Companies with the Kellton Tech’s operations. Lenmar is a IT services and solutions group with a commanding presence in banking and financial services space. The acquisition has honed the Kellton’s focus on the next digital frontier of financial technologies. Lenmar will enhance the company’s BFSI capability and global footprint to expand its technological and geographical reach. It is well-positioned to tap into synergies emerging from expanded digital technologies arsenal to provide cutting-edge solutions to its new and existing clients. In 2016, Kellton Tech entered into Europe market and expanded its reach by establishing EMEA headquarter in Ireland. The company is seeing lot of traction in Europe, especially in Ireland and UK. This is the first time where company has ventured into a new geography organically and added few customers here, which include Hawk Safety, Foxtons, Allied Irish Bank, National Health Service (NHS) and Studio Graphene.
SECTORIAL OUTLOOK (Abstract from the company Annual Report)-:
According to NASSCOM, the Indian IT-BPM industry witnessed a growth of 8% in FY 2017 to $154 billion from $143 billion in FY 2016. For FY 2017, it has projected the industry to grow at 10-11% for domestic market and 7.8% in the export market in FY2018. Improving financial services and high potential in digital business are cited as a key driver for growth. It is estimated that the sector will clock in export revenue of ~$125 billion and domestic revenue of ~$26.5 billion in FY 2018. According to the guidance, India will continue to gain market share – 7% of global software and IT services and 56% of global sourcing. The Indian IT-BPM industry will receive 14% revenues from digital solutions – four times growth since 2014. Software and IT services globally is set to grow at a healthy pace of 7.2% and 4.4% respectively in FY17. By FY2020, India’s IT-BPM sector is projected to reach approximately $200-$225 billion revenue and $350-$400 billion by FY2025.
According to Gartner, worldwide IT spending is projected to total $3.5 trillion in 2017, a 2.7% increase from 2016. However, this growth rate is down from earlier projections of 3%. The worldwide IT services market is forecast to grow 4.2% in 2017. Investments in IoT (Internet of Things), digitization, cloud technologies, intelligent automation, and services optimization and innovation continue to drive growth in the market, but cautioned step fueled by broad economic challenges remains a counter-balance to faster growth.
·         Digital Transformation Solutions/ ISMAC
·         Digital Transformation Reimaging and reinventing the way enterprises operate, helping them embrace their digital future.
·         Digital Commerce eCommerce Portal Development, mCommerce Application Development.
·         Web and Mobile Applications Maintenance and Support.
·         Enterprise Mobility Strategic mobility consulting, User Experience (UI/UX) Design, Mobile Application development, maintenance and support, mobile device management.
·         Digital Governance mHealth applications development, security and surveillance applications development, RFID Solutions.
·         IoT, Big Data and Analytics IoT applications development, location based services (LBS) application development, analytics and reporting.
·         Software R&D Labs Proof of concept, minimum viable product, application development, maintenance and support.
·         Outsourced Product Development Application Development, Maintenance and Support .
·         Digital Marketing Internet Marketing, SEO, SEM/PPC, SMM, Analytics and Reporting.
In the Enterprise applications (EA) business, a shift is clearly visible from traditional SAP, ERP towards Cloud solutions such as Hybris and S/4 Hana etc. In EA, KTS provides an end-to-end analytics platform using technologies like Big Data, IoT to improve business performance and operational efficiency. An in-depth analysis of structured as well as unstructured data is done through the following process: data collection from multiple sources, storage of data in servers using Hadoop MapReduce, Cloudera, HortonWorks etc, process the collected data to gain insights using technologies like Hive and utilize trending data visualization technologies like Tableau, Splunk etc. to improve business reporting and monitoring activities
Management is expecting large opportunities with companies looking for enterprise digital transformation deals, given its expectation of mass adoption in the near future. It has technology partners such as Mulesoft, Software AG, Microsoft Azure, SAP, IBM and IBM Watson.
KTS is a technology partner for a number of Unicorns for everything digital. The company has been empowering its digital technologies and services to companies like MAKEMYTRIP, FLIPKART, INDIGO, PAYTM, SNAPDEAL, UBER, PVR CINEMAS, THE TIMES GROUP, INDIA TODAY, GROUPON, POLICY BAZAAR, HIKE MESSENGER, JABONG, CLUB MAHINDRA, AEGON LIFE ETC. The recent Transformational project executed by Kellton Tech was for Indias Leading Digital payments and wallet provider, Indias largest airline, and a multinational insurance giant, helping them usher a revolution in digital payments scenario.
Due to continuous inorganic growth the company consolidated sales grew from just Rs 48.61 crore in year ended June 2013 to Rs 615.75 crore in year ended 783 crore (TTM) in March 2018. Net profit grew from just Rs 3.72 crore to Rs 68 crore during the same period.

·         Sales have Grown at 73% CAGR and 66% CAGR YOY Basis over the Period of 5 and 3 years Respectively.
·         Company has been Maintaining steady Operating Profit Margins Since Past 4 Years.
·         Net Profit Margin is Steady Since Past 4 Years.

Cash Flow from Operating Activites Is in synergy with the Net Profit For the Respective Years , which Means the Profit is Received By the Company On Time.

At current market price of Rs 48, the scrip trades at around 7 times its FY 19 projected earnings. Debt of around Rs 93.57 crore, unamortised goodwill of Rs 212.85 crore (including contingent earn-outs of Rs 48.81 crore) and 10% of promoter stake is pledged are key irritants.

As Seen From Above Image Kellton Tech Solutions Was Recommended in the Darkhorsestocks Group on 11th February and since Than the KTSL Has made A high of About 160Rs and Later The Bonus Was Announced By the Company.

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