Ramco Systems Limited: Focus on Digital Transformation and Diversified Revenue Base Should Accelerate Growth

Summary

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• In Q3, logistics emerged as growth enabler because e-commerce and change in distribution patterns sparked market demand.
• Diversified revenue base and various sectoral dynamics should act as principal growth accelerators.
• Leading business conglomerates choose Ramco ERP to go for digital transformation.

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Overview of Ramco Systems Limited

Ramco Systems Limited is growing enterprise software player, focused on disrupting market with its multi-tenant cloud and mobile-based enterprise software in area of global payroll and HR, ERP, Logistics and M&E MRO for aviation. The company focuses on innovation and culture to differentiate in marketplace. Key differentiator is the company’s innovative approach to develop products through revolutionary enterprise application assembly and delivery platform. With 1900+ employees and 1000+ customers, the company has presence in 35+ countries and has 24 global offices. The company’s suite of enterprise applications helps drive enterprise-wide business transformation and drive down cost of core IT spend.

Growth Enablers of Ramco Systems Limited

• Sound Growth Seen in Revenues and Order Booking: For quarter ended Dec 2020, global consolidated income of Ramco Systems Limited was USD23.73 million. Net profit after tax for 3Q21 was USD2.44 million. This compares to net profit of USD0.82 million in same period of previous year. Quarterly order bookings were USD38.40 million, 45% growth in comparison to 2Q21. The company saw healthy EBITDA growth of 32% in 3Q21. Pandemic has stepped up need for organizations to go digital if they want to survive and grow. It has helped speed up transformation agenda for companies. Organizations should relook at their existing processes and they should adopt newer ways to see exponential savings in time, cost and effort. Ramco Aviation signed off 3Q21 on a high note, with Iberia Maintenance choosing to digitally transform business operations on unified platform. Ramco ERP announced digital transformational program at DLF Limited. This enhances customer journey with end-to-end digital experience. Logistics business saw strong revenue as there was onboarding of large clients during FY 2021. Positivity in pipeline got a further push with surge in e-Commerce.
• Strong Track Record and Diversified Revenue Base: Ramco Systems Limited developed considerable expertise in catering to aviation sector. Overall growth prospects for both domestic and global cloud-based ERP segment are favourable because of increasing demand from SMEs and large corporate entities. Geographical revenue spread of the company is a healthy mix, with 80% of revenue coming from markets outside India. Net profit after tax of FY20 was INR101.74 million. Though there were some impacts because of pandemic, the company’s revenue saw 5% growth in INR terms. Overall revenue was USD81.03 million for FY20.

In FY20, Asia region was highest contributor, both in terms of booking and revenue. This region saw outstanding performance by adding significant logos across all business units right from ERP, Aviation, Payroll to Logistics.

As second largest contributor, India region saw addition of some marquee logos. Interestingly, FY20 saw existing clients and large business conglomerates deeping dive into how digital transformation can play an important role in growth. Home turf should see some exciting action that should build up on digital transformation-led enterprise deals.

Having critical focus on Defense, MROs and Heli-Operators, Americas stepped up technological stacks of leading aviation players in region.

Middle East and North Africa saw wins and important customer go-lives, setting pace for growth. With addition of Classic Fashion Apparel Industry Ltd. Co., Halliburton, Herfy Food Services Co. and region’s largest restaurant franchise, Americana, Ramco HR & Global Payroll solution was a preferred choice of enterprises.

• Capitalising on Sectoral Dynamics: Global enterprise application market should see sound growth, with much of this growth stemming from increasing need among organisations for single data access point. As a result of COVID-19, some projects could become more urgent, with more critical business needs requiring faster delivery-or they might be less important and can be potentially abandoned. Given that remote working should be new normal, focus is on adapting agile implementation methodology. Once economic recovery gets visible, enterprises carrying out operations with lower workforces can increase outsourcing. This is expected because building scale will be imperative to meet rising demand. Spending on growth and transformation initiatives should start picking up. Digital transformation was on agenda of organisations since years. Leaders should plan for and implement it across industries. Amongst various organisations, there is widespread recognition that role of digital technology is shifting. This shift is from seeing marginal efficiency to being enabler of innovation and disruption. If we go by one recent study, ~85% of key decision makers think they have 2 years to get to grips with digital transformation. True digital transformation should be focused on de-layering of decision making and work processes. Assets should be digitalised and enhanced to see better management of depreciation. Digital transformation of business processes should be offering improved efficiencies, more cost-effective ways to use technology and better customer engagement.  

Exponential Returns Delivered in One Year

For most, principal idea behind making investments into stock markets is to pocket exponential gains. And this seems fair as investors do commit to a certain level of risk when they decide to invest in equities. For risk averse investors, there are other options for investments. These options are fixed-deposits, gold, etc. When an investor finds a multi-bagger stock, it actually makes a big difference in portfolio. Finding a multi-bagger stock is a tedious task and involves a lot of analysis work. Once found, it can make up for losses in some stocks in portfolio. Investors who look for growth in their portfolio of shares should consider future prospects over anything before they decide to go long. Then again, there are other measures like market size, product offerings and quality of management. One point investors should not ignore is how much does the company’s management hold? This means analysing how much stake promoters hold in the company investors are planning to buy. Higher stake means management is confident about growth prospects. Tracking of holdings should be done regularly.

One stock that has seen a significant rally and has delivered exponential gains is Ramco Systems. Investors in this stock have seen their capital grow in past one year. Stock has rallied ~547.47% over Apr 23, 2020- Apr 23, 2021. This sort of return in just one year is something every investor dreams of. Investors should not forget that during this time Indian economy has gone through a rough patch because of COVID-19. Where some companies were actually struggling to be in market, this stock has shown excellent performance.

An investor who was lucky enough to invest INR1,00,000 back on Apr 23, 2020 would have seen capital grow to INR6,47,469.58. In comparison to this, NIFTY IT delivered only ~95.07% return. While most investors were optimistic about performance of IT stocks during COVID-19 lockdown, selecting a right stock matters.  

Conclusion

Ramco Systems Limited has a total market cap of ~INR1,55,720.40 lakhs and free float market cap of ~INR69,825.03 lakhs.

Logistics has a huge impact on global economy. Imagining a world where there is no virtual buying, storing, shipping, transportation or delivery is not possible. The company focuses on one of its most powerful ERP solutions, Ramco Logistics Suite, for this dynamic sector. In FY20, the company introduced interesting and power-packed innovations to it. Some of them include:

1. AI/ML capabilities in areas of order management and invoice validations for transportation management. This should eliminate error-prone and time-consuming manual effort in these areas, principally in high-volume set-ups of courier, express and parcel industry and e-commerce logistics.
2. In-memory planning and optimization capabilities were added as important component to Ramco Transportation Management System.

Businesses in aviation industry including airlines, heli operators, MROs, charters, defense sector players and OEMs should go beyond process automation. Ramco Aviation Suite gears up to accelerate digital transformation for these players. There are plans to do this by leveraging technologies including Mobility and AI/ML and by working closely with customers.   

Conversation about sustainable digital transformation strategy should commence with strong ERP solution. Meaning of digital transformation is to be adaptable and responsive to dynamic market. ERP is categorised as one of most powerful ways of accelerating transformation. In FY20, the company introduced several product innovations to Ramco ERP Suite to help businesses think about digital transformation.

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This Article represents the Author's own personal views. The Author did not receive any compensation and do not have any business relationship with any of the companies mentioned in the Article.