So the 2nd co we're going to study today is a small base, very aggressive, well positioned one. This one is going to be a long thread. Have a patient read! Here is - #Birlasoft

* Industries & Domains - Auto, Banking, High Tech, Manufacturing, Capital Markets, Insurance, Media & Ent, Energy, Life Sciences, Healthcare, Utilities

I clearly see some segments that can easily create a drag on rest of the business - Mfg, Energy, Utilities are some of those segments. However, in capex friendly scenario, this can generate Alpha

* Services - Digital & Enterprise Tech. #Birlasoft categorizes their services business only in 2 segments. Which is very wise. Keep things simple. Don't over categorize. Digital Services include CX, Analytics, Connected products, Automation, Cloud & Blockchain

Enterprise Services include very enriched & diverse offerings. Right from JD Edwards (I don't know who uses it now), Oracle, MS Dynamics, PTC to SAP, they offer enterprise services in every leading ERP platform

Services further include CRM, Supply Chain, Prod. Lifecycle, IT transformation, Application Management, Testing, and Cloud Infra.

* Products - Very rich product/solutions portfolio. intelliOpen intelliAsset TruView CLM TruServ FSM TruLens iLink Supplier Risk Radar Akoya Producer Workspace Submission Automation ZeROTechDebt KwickPick iSight WMX Smart Street Lighting Smart Meters TruRPA TruCommerce Cont..

Customer 360 Dealer Portal TruCX ConnectedBI Infor CloudSuite ClickRecovery Phew!! Such a long list of tools & products. Mostly these are accelerators & not a fully blown products. Kind of Rapid Deployment Solutions & Tools. But still, significantly large number.

* Cloud/Digital? - Co includes cloud/Digital business in digital vertical. Just like LTI does! * USP - Very aggressive management in enterprise space. This is one major USP that even some larger cos miss. For e.g. Persistent does not have any significant enterprise practice

Enterprise practice opens up doors to large accounts, large TCVs, better possibility to grow solution offering. Despite being a small company, #Birlasoft is aggressively chasing enterprise deals

* Client Profile - Dependance on US has grown even futher. Nearly 82% revenue comes from the US clients. EU/India client contribution has fallen. Contract type split is steady between T&M & Fixed. 43% comes from T&M, rest from fixed.

Note the more the T&M contracts, the lesser is impact on margins in unforeseen situations. Higher the % of fixed contracts, projects has to be managed very tightly, there is no margin for error or a miss because it impacts margins severely otherwise.

Surprisingly, total clients has fallen from 310 in Q2FY21 to 280 in Q2FY22. It has steadily came done over all quarters but total rev. has gone up, showing co is able to gain pocket share of existing clients

But co is losing clients. Not sure why. Need more digging. Perhaps, answer is in the concall. I haven't listened to any yet. Top 5 clients contributes 29%, Top 10 45% and Top 20 61%. So reliance on top 5 isn't major drag IMHO.

* Revenue Profile - Cloud rev. is growing steadily which is an industry wide trend. Enterprise rev. has fallen slightly, while digital transformation rev has grown slightly as well. Rev by industry is pretty stable. Manufacturing contributes significant rev ~44%.

* Scale Profile - This is my personal view. #Birlasoft is only 14k cr mcap co so the growth nos will be very high. This is obvious given present trend in IT. Do not look at % numbers as we're on small base. Look at contract type split, TCV growth, Growth in enterprise trx

A lot depends on how fast co gets back on track in enterprise segment as that's where the long, sticky accounts belong to. This is also potential case to gain more pocket share We will not take a deep dive on services & products. Let's try to assess how different.

Services - Digital One USP is #Birlasoft bases everything on business advisory services (kind of consulting) & then percolates down the individual services. Very good portfolio of services in Smart Eng/Mfg, Connected Products, Supply Chain, CX, Cloud, DevOps and Microservices

Co is also providing services in PLM, MES, IoT, Wearables, AR/VR, Automation, Collaboration, Big Data & AI. All the services have a common layer of Cust. Experience, Cloud enablement, DevOps based operations, Microservices based design.

I find this very good. No matter the customer profile, you offer a standardized services that perfectly fit to operate in today's rapidly changing tech paradigm

Their blockchain services is also OK. Nothing major, just the std. consulting, design, architecture, testing, deploy. But at least they have defined solutions they cover very clearly. No illogical stuff such as - prevent genesis block tempering and all which does not happen now

Let's now move to individual solutions intelliOPEN - Smart, touchless, contactless screen & monitoring solution that provides EHS solution in COVID times. Helps business open safely. Automate screening, comply social distancing norms, contact tracing & thermal screening etc.

intelliAsset - Asset monitoring solution that enables remote asset visualization, analysis & enable diagnosis, maintenance activities. Product has integrated analytics, diagnostic engine & predictive intelligence.

TueView CLM - Contract lifecycle management. Enables guided customer onboarding, contract management, tracking & payments. This covers aspects related to deal management, negotiations, licensing, track payments, rights & options etc.

TruServ FMS - Cloud solution built on top of Salesforce to provide automated field service management, IoT integrations for touchless processes. Covers entire value chain of this business from service anticipation to delivery, scheduling & conflict management to cust. feedback

TruLens is a tool built to expedite salesforce implementation so this is a very product specific tool. So I am not spending more time on this one.

iLink is very manufacturing specific product that brings harmonization in a lot of segments. And this is very business specific - BOM, Item & Revisions, Change order & demand planning etc. It is very specific to certain industries.

But there is a beauty here. 43% rev comes from MFG & naturally, products are also positioned perfectly to enable speed of delivery.

I always say this - in the era of cloud/digital, you can't wait for a perfect launch. Your speed of going to market matter a lot more than anything else. You can pick 2-3 key challenges, offer sol for it, go to market, keep improving & launching more features.

Akoya helps cos manage parts specifications & stay compliant to industry standards. Help them plan new products, find parts that can be re-used and so on. It helps predict supply chain changes, build What-IF scenarios for alternate parts & suppliers

Submission Automation brings AI based automation & collaboration to underwriting business. It has OCR module that extracts data from various sources, sort the documents based on priority, and led to decision making

Smart Meter - Regardless of the hardware/infra, you need a very strong software that enables you to deploy smart meter tech to any kind of meter, any kind of region, any manufacturer & build a platform through which you can monitor, handle data etc

KwickPick - Automated warehouse picking solution that uses smart glasses to live stream the order picking via AR Object Identification. This is kind of an extension of another solution called WMX. But I won't get into more detail unless asked specifically

In sum, I'd say there are a few things that matter for small base co - Larger portion of T&M Contracts W/ increasing TCV & then larger share of enterprise accounts. Since enterprise accounts are sticky, it provides a doorway to grow small account into much bigger strategic acct.

Gain more pocket share. That's how you grow from a small co to mid to large co. I think for #Birlasoft, don't look at % numbers but look at absolute growth numbers. I have given enough hints on what to track.

I think management is aggressive & if they execute well, 7-8y down the line, they would be where LTI is today.

Again, there is only so much one can know about a co. If there any gaps in my study, pl be so kind to call them out politely. Happy to learn together. PS: I am not covering valuation aspect here. You all are much better at doing valuations so I leave that you.

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