The next multibagger: Kellton Tech

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Company Overview

Kellton Tech is a CMMI Level 5 company and operated in Information services sector. The company build expertise in disruptive technologies like Artificial Intelligence, Cognitive Solutions, Blockchain, Big Data, Analytics, Cloud, Chatbots and Internet of Things among others. Recently, the company acquired Lenmar which will add banking and finance sector under the company hood.

The company has won various awards and accords in the past.

Forbes Asia’s ‘Best under a Billion’, a list of top 200 public-traded companies in Asia-Pacific.
Kellton Tech’s employee-centric work culture, The CEO Magazine has named the organization among “Best Places to Work”.
Kellton Tech wins ‘Best e-Governance Initiative of the Year’ at Digital India Summit 2017.
Kellton Tech ranked 19th & 193rd fastest growing tech company in India & Asia-Pacific.

With more than 1400 people across the globe, of which a significant number comes from the US and Europe, Kellton Tech is fast spreading its presence in Asia-Pacific region. The Lenmar acquisition has afforded the company a deeper presence in Indian
and US markets. This acquisition will deepen Kellton Tech’s BFSI IT capabilities and support its next phase of growth in existing markets of US, India and Europe and new markets in APAC region.

Management

Mr Krishna Chintam(MD) graduated from Andhra University with a bachelor’s in Electrical and Electronics Engineering. He holds a master’s in Electrical Engineering from Virginia Tech, Virginia, US. He pursued MBA from Kellogg School of Business, Northwestern University, Chicago. Krishna is a seasoned serial entrepreneur with over two decades of experience in information technology, marketing, finance, strategy and operational management.

Mr Karanjit Singh (CEO) has an experience of working with large enterprises and small and medium-sized enterprises on enterprise and consumer internet applications, product development, engineering management, delivery, product management, pre-sales & implementation support and has been responsible for developing and delivering complex, enterprise-class software application.

Mr Niranjan Chintam (CFO, Chairman & Whole time director) Graduated from Wharton Business School with an MBA.
Holds an engineering degree in India. Niranjan spearheaded the expansion drive of Kellton Tech and oversaw a series of acquisitions and capacity- building measures that put Kellton Tech on the global IT map. Under his leadership, Kellton Tech became around 1000 member strong organization and earned a place in top 50 fastest growing IT companies in India.

Renemuration to the directors

Details of remuneration to the directors (Rs. in Lakhs)
Particu lars	Executive Directors	Non-executive
	Mr. Niranjan Chintam	Mr. Krishna Chin tam	Mr Karan jit Singh
Salary	30	30	54.71
Total	30	30	54.71

The salary structure of directors is near industry levels.

Global presence of Kellton

Promoter Holding

Institutional Holdings

Currently, no Mutual fund hold Kellton tech.

Credit Ratings

ICRA has assigned long-term credit rating of ICRA A- with a stable outlook and a short-term rating of ICRA A2+ to Kellton Tech Solutions Ltd.

Valuations

Kellton tech trades at extremely low P/E of 8 whereas it peers trades at 25+ levels. The main issue is with the debt of Kellton. Current Debt/Equity ratio is 0.24. Kellton has recently increased its long-term borrowing which is causing an increase in interest and adding a dent in its profit. Its peer does not hold any debt but Kellton does.

Another important thing, Kellton is unable to collect cash from its debtors. Trade receivables have been decreasing in last 2 years but still very high.

The company has done too many acquisitions in past 6years (around 9+). The number of acquisitions puts a bad indication on the ability of the company to grow organically. These Acquisitions also adding debt to the company which will finally eat away profits.

Again last year the company has added debt for recent Lenmar acquisition. For the same reason, promoters have pledged their shares.

Pros

Sales growth is quite significant and regularly showing a good trend.
Management is very competitive and experienced.
Company work in very disruptive areas and have heavily invested in the same. It is visible from their Goodwill and IP expenditure mentioned in the annual sheet.
Company recent acquisition will open new markets for it. It is supposed to bring new clients in banking and finance sector.
The company is providing ESOP to its employees. It is a very good initiative to retain talented and hard-working employees.

Kellton could be a good bet for long-term investing. It is provided that long-term borrowing should come down in future. The company should also decrease it trade receivable which is causing a decrease in free cash flow. If all works well then the stock could shoot up to 150 levels very easily in near future.

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