The sixth-largest IAAS (Infrastructure as a Service) IT Company in India is E2E Networks. Being a contractless computing company focusing on the valueconscious market, particularly startups the largest NSE-listed cloud infrastructure provider at the moment, E2E Networks has served more than 15,000 clients and has thousands of ongoing customers.

Tarun Dua is Director of E2E and it was started operation in 2009. Many scaled-up startups that were successful utilized the E2E Networks Cloud. When growing up from the startup stage to multi-million DAUs, a significant portion of unicorn firms employed E2E Networks ( Daily Active Users). E2E is largest NSE-listed provider of accelerated cloud computing in India. The major customers include Jabong, CarDekho, Clovia etc.

By their partnership with NVIDIA Cloud GPUs, they was able to significantly contribute to clients workload pipelines for data science, NLP, computer vision, and AI/ML training and inference

 POSITIVES

• • Enterprise IT Public Cloud Computing spending to overtake Traditional IT spending by 2025 as per Gartner Inc. This provides ample growth opportunity for E2E Networks

• • E2E differentiates with competitors with Competitive Pricing, Contractless Agreements, Energy Efficient latest Intel Xeon & AMD CPUs, NVIDIA GPUs, High Speed NVME SSDs

• • Company recent investment on Nvidia GPU enabled Cloud Servers for AI & Image Processing, Partnership with Telangana AI Mission (T-AIM) for AI to Startups would enable further 30% growth average of Revenue & Profits in subsequent years

• • • Company is Zero-Debt with Promoter Holding Increase and Trading around 30% discount from the Peaks.
    • E2E exceeded the Indian IT Industry Which returned 16.8% over the past year.
    • E2E’s weekly volatility (8%) has been stable over the past year, but is still higher than 75% of Indian stocks. 
    • E2E Networks has been growing earnings at an average annual rate of 68.4%, while the IT industry saw earnings growing earnings at 24.8% annually. 
    • Revenues have been growing at an average rate of 31.8% per year.E2E Network’s return on equity is 6.4%, and it has net margins of 22.1%.
    • E2E has become profitable over the past 5 years, growing earnings by 68.4% per year.
    • E2E’s earnings growth over the past year (79.5%) exceeds its 5-year average (68.4% per year)
    • E2E earnings growth over the past year (79.5%) exceeded the IT industry’s 15.4%
    • E2E has more cash than its total debt.

Value Investing parameters are good at:

• • Zero Debt company

• • Positive Cash Flows

• • ROE at 20% & ROCE above 15%

• • Intrinsic Value Discount is 60%

• • Reserves Increasing

• • High Promoter Holdings of 60%

• • Promoter Holding 1.33% Increase

Negatives

•  Capital Requirement is High for Cloud based businesses where Ramping up of customer need Ramping up of hardware.
• Currently IT-Sector is undergoing Recession. If the situations worsens it can negatively impact the revenue & profitability of the company as it is on No-Contract agreements. 
•  High economy dependent company. Covid 2020 slowdowns displayed considerable impact in revenue & profits. 
• Attraction & Retention of Skilled Talents is a challenge for E2E when the bigger players like Microsoft & Amazon exists in same arena.
•  Adapting to Changing Government Regulations & Technological Upgradations, Increasing hardware costs & energy are challenges for the company.
• E2E’s share price has been volatile over the past 3 months compared to the Indian market

SUMMARY

The company is having Multibagger Properties and could give 500-2500% returns in 5-10 Years holding
period.

UPDATE

Already 30X achieved in Nov 2024