Thread by @Finstor85

We will look at the 4th company in this series today. It is a smallcap companies named #Zensar that has one hidden gem called ZenLabs! Read on.

https://twitter.com/Finstor85/status/1474816289176702980

* Industries & Domains - Hi-Tech & Manufacturing, BFSI, Retail & Consumer. Focused on industries they have been operating since long. Not trying to diversify.

* Services - Experience Service(Unique), Advance Engineering, Data Engineering & Analytics, Application Services, Foundation Services

Very neat & clean categorization of the services. Not trying to over do. Very straightforward to show what they offer.

* Products - Does not have any specific product offering. #Zensar is more of a service company.

* Cloud/Digital? #Zensar has partnered with Adobe cloud, Oracle, Google, Azure, SAP, Salesforce etc. But mainly into infra enablement segment

Digital services are offered under their "Foundation Services" & "Digital Engineering" service lines.

* USP - I find their "Experience Services" to be stand out of the lot. Highly focused on entire value chain of the experience - "Customer, User, Application" experience are bundled & offered as services

* Client Profile - Top 5 clients contribute 35%, Top 10 contribute 47%. Also they have three $20m customers! Not even Happiest Minds has. So for their size, Zensar has deep customer connect in existing accounts. This is very good

* Revenue Profile - US contributes 70%, EU 17% and Africa 12%. Hi-Tech contributes ~40% to rev. Consumer 15.5%, Banking 12%, Mfg 11% and others ~4%

Cloud contributes only 9.5% so far. However, total digital revenues are 71%.

Majority of Zensar's contracts are fixed price. Very little margin for slippage. 61% fixed, 40% TM contracts means something.

Higher % of fixed contracts means co isn't able to get value added contracts. Mainly outsourcing work dominates the contract profile

* Scale Profile - Scale is very limited. Though they are recognized as leader in managed services segment, this itself is a saturated space

Recent acquisition of M3bi will provide scale via new age technology & also helps ZenLabs which is their initiative for Data & AI

Beyond this, there is really nothing much to talk about. The major flow of large value contracts are driven to big names. Only those value contracts percolate down to small players which are passed by big players since they don't have enough capacity to deliver

This is the true picture of small & midcap IT space - Value accrues at the top with top 5-6 players. Whatever they pass gets down to midcaps and small caps either do very niche work or do majority of the fixed price work

It would take a herculean work for such small cos to standout & break into big league. Right now digital is driving the work & it will drive for 2-3yrs further. Play these names until then.

Remember, fixed price contracts dry up first - that's the first sign of plateau. Value in such companies is the price you get at. Also, since % growth nos will be very high due to small base, market gives them higher multiple.

Things to watch out for further growth - ZenLabs & Value Accrual through M3bi. M3bi seems value accretive since it improves many service lines, diversifies, and strengthens existing offerings

ZenLabs operates & innovates in IoT, AR/VR, Distributed ledger, and AI mainly. This is one space which will generate Zensar's product offerings. Right from deep learning, to NLP & Cognitive Communication, ZenLabs is the thing to look out for.

ZenSmartBlox is one such solution that can be blown into a full fledged product based on blockchain. The 1st solution is already live across 183 countries. This is in payments & claims management segment.

ZenSmartBlox mainly bridges enterprise systems & existing blockchain platforms by providing an interface that helps enterprise consume the existing blockchain platform for smart contract execution.

Enterprise AI offering of ZenLabs covers RPA, Conversational AI, Process Automation segments & already have 30+ algorithms available as a framework to be deployed. This is where value exist.

Finally, the computer vision segment of ZenLabs covers AR/Image processing & video surveillance solutions.

What I like the most is WhitePaper space on ZenLab's website. Have a look here:

dev.zensar.com/insights/white…

To sum up, ZenLabs is service line that can offer exponential scale to existing work that's dominated by fixed contracts. New wins in this segment will be extremely value accretive for the company. I have my eyes on this one for sure! Very promising

One grey area in this new age tech is it is very difficult to find out whether work done by the co is core or edge. You can simply deploy a chat bot & call it a conversational AI or Intelligent RPA. Nobody can know if you really have the capability or only trying to get eye balls