Subex - reviving like phoenix

Company Profile - 

Subex Limited is a leading global provider of Business and Operations Support Systems (B/OSS) that empowers communications service providers (CSPs) to achieve competitive advantage through Business and Capex Optimisation - thereby enabling them to improve their operational efficiency to deliver enhanced service experiences to subscribers.

The company pioneered the concept of a Revenue Operations Center (ROC®) – a centralized approach that sustains pro fitable growth and financial health through coordinated operational control. Subex's product portfolio powers the ROC and its best-in-class solutions such as revenue assurance, fraud management, asset assurance, capacity management, data integrity management, credit risk management, cost management, route optimization and partner settlement. Subex also offers a scalable Managed Services program with 30 + customers.

Subex has continued to innovate with customers and have been jointly awarded the Global Telecoms Business Innovation Award 2015 along with Mobily; in 2014 with Telstra Global; in 2012 with Idea Cellular for Managed Services and in 2011 with Swisscom for Fraud Management. Subex has been awarded the Global Market Share Leader in Financial Assurance 2012 by Frost & Sullivan and has been the winner of Pipeline Innovation Award 2013 in Business Intelligence & Analytics; Capacity Magazine Best Product/ Service 2013.

Subex's customers include 29 of top 50 operators* and 33 of the world’s 50 biggest telecommunications service providers worldwide. The company has more than 300 installations across 70 countries.

What went wrong in past - 

Subash Menon—entrepreneur, risk-taker, history buff and socialist-communist started a company with a loan of Rs 20,000 from an ex-employer in 1992. He built Rs 477-crore Subex out of it. In the 1990s and 2000s, Subex challenged the conventional wisdom about creating software in India. It sold branded software licences instead of selling code by the kilo (or KLOC—kilo lines of code), ploughed back cash and equity liberally for growth instead of hoarding every penny of profit, and aggressively acquired foreign companies. From 2000, its revenues grew at a compounded annual rate of 33 percent to reach $54.8 million by 2007. 

Then, in January 2007, Subex bought Canadian telecom software company Syndesis, its seventh acquisition, for $165 million in cash. For the same reason, Subex  raise all $180 million through the foreign currency convertible bonds (FCCB) route and piled up huge debt on the book. As it happens with many other companies, 2008 market crash put company into a difficult time. From almost 700 in 2007, its shares fell by more than half to Rs 350 in 2008, and to just around Rs 26 in 2009 which made the company sick.

Turn around - 

In 2011, Anil Singhvi, a former CEO of cement maker Gujarat Ambuja and founder of investment advisory firm Institutional Investor Advisory Services (IIAS), and Sanjeev Aga, former managing director of Idea Cellular, joined the board in April 2011 as independent directors. On October 5,Surjeet Singh, who played a significant role in buy out of IGate Patni (Patni Computers) was elected as Subex’s new CEO. It is when a new inning for Subex has started.

Here are some current developments -

• Company has cut down losses and for  the first time after couple of quarters, posted profit in March 2015 quarter. On the consolidated basis company has posted profit from last 3 quarters.
• Sales are rising which is a sign that company is on the positive track.
• Two tranches of FCCB conversion in the last 12 months indicates the confidence of the bond holders.
• Subex bags order from reliance jio and this can really a big opportunity for subex as reliance jio is in final phases of roll-out more details can be found here.
• The CEO has indicated that Subex intends to become a USD 100 million revenue business with a operating margin of approx 25%; stock at current market cap is available very cheap.
• After such a rough period, the executive leadership, most notably, Vinod Kumar, Ashwin Chalapathy, Shankar Roddam, Ganesh and Sekharan stayed with the company.  
• Most of the clients stayed on with the company which believes they are firm believer in company's products and solutions. 

We believe subex's second inning, if played well can be augur as the master stroke for the investor in the company. For risk takers and long term investors- this could be a bigger opportunity to invest. Hence, we provide our positive coverage on the company.