Capgemini Technology Services India Limited Unlisted Share

Overview

Capgemini Technology Investment Thesis

Strong Sales Growth: Look for companies that have a track record of consistent and strong sales growth, ideally around 16% or more in the past fiscal year (FY21) and over the three-year period from FY18 to FY21. This indicates that the company is effectively expanding its market and generating increasing revenue.

Valuation: A respectable valuation at 47x implies that you are willing to pay 47 times the company’s earnings (P/E ratio). Ensure that the valuation is reasonable relative to the company’s growth prospects, industry standards, and peer comparisons. A high valuation may be justified if the company has strong growth potential.

IPO Potential: If you believe the company has the potential to go public (IPO), this could be an opportunity to unlock value. Companies that go public often experience increased visibility and liquidity, potentially leading to a higher stock price.

Return Expectations: To achieve a 100% return in 5 years, you’ll need an annual growth rate of about 15%. Consider the historical growth rate, industry trends, and the company’s growth strategy to assess if this is achievable with little risk.

Steady Pricing Trend: Review the stock’s price chart for the previous six months to identify trends. Generally steady pricing can be a positive sign, indicating that the stock isn’t experiencing extreme volatility. However, past performance is not a guarantee of future performance.

Risk Assessment: Always consider the risks associated with your investment. Factors like market conditions, competition, management quality, and external events can impact the stock’s performance.

Research and Due Diligence: Conduct thorough research on the company, its financials, competitive positioning, and management team. Consider consulting with a financial advisor or analyst who specializes in the relevant industry.

Company Overview:

Geographical Presence: The company has a global presence with subsidiaries in multiple countries, including India, Singapore, the United States of America, China, and the United Kingdom. This indicates that it has a significant international footprint and serves clients on a global scale.

Offshore Centers: CTSPL operates offshore centers in various cities in India, such as Bangalore, Bhubaneshwar, Hyderabad, Chennai, Noida, Mumbai, Pune, Gurugram, Kolkata, Trichy, Salem, and Gandhinagar. These offshore centers are where a substantial portion of the company’s IT services and IT-enabled operations are delivered.

With the goal of revolutionising retail in India, Reliance Retail was established. It is currently India’s largest, most lucrative, and fastest-growing retail firm, offering a diverse omni-channel presence via integrated store formats and internet commerce platforms. It is the only retailer from India that is listed in “Global Powers of Retailing.”

Global Industry Structure and Development:

Indian Artificial Intelligence Market: As of 2020, the Indian Artificial Intelligence market is estimated to be worth $6.4 billion.

Global Analytics as a Service Market: The global analytics as a service market is projected to grow from $4.3 billion in 2019 to $12.1 billion by 2024, with a compound annual growth rate (CAGR) of 23.2% during the forecast period.

Analytics, Data Science, and Big Data Industry in India: The annual revenues of the Analytics, Data Science, and Big Data industry in India stand at $2.71 billion. In 2019, this industry expanded to $3.03 billion in size and is expected to double by 2025.

Indian Cloud Computing Market: The current valuation of the Indian cloud computing market is $2.2 billion, and it is anticipated to grow at a year-on-year rate of 30% to reach $7.1 billion by 2022.

Global Cloud and Private Cloud Market: The total addressable market for cloud and private cloud services worldwide is $213 billion.

Financials of Capgemini Technology Services India Limited Unlisted Shares:

KEY STRENGTH:

• Capgemini is a global industry leader when it comes to collaborating with businesses in their journey to modernize and manage operations using cutting-edge technology. In Q3 year-to-date 2021, the company reported revenues of INR 17,648 Crores. During the same period, they acquired a 100% stake in Liquid hub India Private Limited, Liquid hub Analytics Private Limited, and Solcen Technologies Private Limited.
• Capgemini demonstrated substantial growth in 2021, with a 16.3% increase in operating revenue and an 11.3% rise in EBITDA. Furthermore, they announced the establishment of a 5G Lab in Mumbai, in partnership with Ericsson, to expedite the implementation of 5G solutions for their client base.
• The company remains dedicated to environmental sustainability, with a commitment to becoming a net-zero business and achieving carbon neutrality by 2025. Notably, they have already reduced their carbon footprint per employee by 30% between 2016 and 2020.
• Capgemini has also made significant strides in promoting diversity and inclusion, with the proportion of women in their workforce increasing from 29.5% in 2015 to 33.7% in 2020. In addition, 30% of vice president promotions and new hires are now women.
• For the ninth consecutive year, Capgemini received recognition from Ethisphere as one of the World’s Most Ethical Companies. Furthermore, in October 2021, Capgemini India signed a Memorandum of Understanding (MoU) with The Energy and Resources Institute in India to further support the sustainability and ESG (Environmental, Social, and Governance) goals of both their Indian and global clients.