Virinchi's Q4 profit jumps 3.5-fold

Virinchi (formerly known as Virinchi Technologies), a market leader in IT solutions in the short term lending industry, has hit 20 per cent upper circuit due to reported over three-and-half-fold increase in consolidated net profit at Rs 8.79 crore for the quarter ended March 31, 2016 as against Rs 2.46 crore in the corresponding quarter of the previous year. Current fourth quarter of FY16 net profit is equivalent to full year net profit of previous year FY15.    

The company’s consolidated revenue has grown by 33.72 per cent at Rs 54.91 crore in Q4FY16. Its consolidated operating profit (EBITDA) has grown by 113.6 per cent at Rs 1123.34 crore along with operating profit margin expanding by 765 bps for the current quarter, i.e. at 20.46 per cent.

For the entire period of FY16, it has reported consolidated net profit growth of 95.52 per cent at Rs 16.21 crore, while its revenue has grown by 57.38 per cent at Rs 218.34 crore. Its consolidated operating profit (EBITDA) has grown by 40.60 per cent at Rs 311.22 crore; while operating profit margin has contracted by 170 bps for the current year at 14.25 per cent.

The company has posted for the first time a segment-wise financial performance. Software service weighted segments contribute around 56.2 per cent at 118.16 crore towards the total income; followed by software product which contribute 40.95 per cent at Rs 86.11 crore in FY16. EBIT level, Software service has reported profit of Rs 13 crore along with margin of 11 per cent whereas software product has posted profit of Rs 5.56 crore along with 6.45.

On balance sheet front, total debt has increased to Rs 110.5 crore in FY16 from Rs 31.07 crore in FY15 due to Virinchi Health Care, a 100 per cent subsidiary of Virinchi raising Rs 100 crore loans for its multispecialty hospital with a capacity of 500 beds at Banjara Hills in Hyderabad.

The company is also in the process of merging with Bristlecone Hospitals Pvt. Ltd., a chain of hospitals with an aggregate bed capacity of 180 beds operating at two locations in the city of Hyderabad. After the merging of group hospitals, promoter stake shall be 50.74 per cent.

In terms of valuation, Virinchi is trading at 5.9x its FY16 earnings of Rs 9.01 per share and on the price to book value it trades at 0.78x its FY16 book value of Rs 68.74 per share. Therefore it will not be surprising to see more buying activity in this counter.