Business Analysis 22: InfoBeans Technology
With a vision to become a global leader in digital engineering, AI and value creation, InfoBeans is poised to take advantage of the tailwinds
It's a global AI led software engineering company. They design, build, and manage digital application for other companies. Their clients include ALM, Coadvantage, SMBC, and many more.
No of total clients - 185 with 1400+ employees servicing 32 large enterprises. 95% of their business comes from existing clients. With a vision to become a global leader in digital engineering, AI and value creation, InfoBeans is poised to take advantage of the tailwinds.
Let's understand revenue mix.
Geographical mix
USA - 61% + Europe - 23% + UAE - 10% + India(APAC) - 6%
Segment mix
Digital transformation - 48% + Product engineering - 52%
Business mix
InfoBeans - 86% + InfoBeans Cloud Tech - 14%
Partners include some big names like Salesforce, ServiceNow, Microsoft, and agenio. Recently, they were awarded an IT park project from MP Govt. Also, they received Great place to work award for the 8th consecutive year. This makes InfoBeans a promising player in the Indian IT industry.
The company is expanding their business through organic and inorganic means. It's notable to include that they grew their revenue from 4 cr in FY2007 to 43 cr in FY15 to 400 cr cr in FY23 - 10x every 8 year. This is a great achievement in the company's history.
I will value this business in a little different way, not in a traditionally projected cash flow based way. Let's look at it in the following way.
The whole IT industry average PE - 27. InfoBeans is currently trading at 20. So, it looks cheaper than the broader index, right? There are a lot more to decide. They have been constantly increasing their revenue over the past 10 yr except FY24 but net profit is quite dwindling.
We need to ask some questions..
1. Can they maintain the same growth? As they are expanding their business through inorganic and organic means, it seems like they can achieve but in the near term, as you know the IT industry is growing through a tough phase. One needs to be aware of that.
2. Over the past 10 years, they have maintained a net margin bandwidth of 10-16%. Can they repeat the same? Even if they maintain the lowest level of margin which is 10% along with min 10% growth, then the stock looks quite cheap.
3. Capable management, dividend paying company, positive cash flow, good ROE, ROCE, ROIC over the long years, debt free status, and also bright future prospects as you know the future is digital. All make this company a promising bet.
4. No doubt, they are doing a fantastic job. But if the industry they are in slows down or breaks down because of AI craze and tariff, the company could be at risk. Yet, InfoBeans in this tough situation they are amazingly navigating such issues.
5. Can they show similar growth trajectory is the ultimate question. Because their base has become a little bigger. Yet there are huge tailwinds in their industry going forward.
6. How do you look at the IT industry shaping going forward?
A lot of factors should be in place before betting on such a company. One needs to bet on such companies in a staggered manner like betting on every 5-10% fall or betting on good results.
Thanks for reading
Take care
Rabi
You can go through last 02 yrs concall and improve this post.