What is your view of Xelpmoc Design & Tech?

Xelpmoc Design and Tech is an interesting, unique company. The name itself is a palindrome of the word “complex” (spelt backwards).

Xelpmoc was promoted by the co-founders of Justdial.com. It is an IT company which has invested in a few interesting tech startups in India and abroad. The business model of Xelpmoc is woven around startups – invest in startups, and also offer services to startups, so that both – startups and Xelpmoc – benefit.

Xelpmoc might be one of the very few listed companies in India to have invested in startups. (Info Edge India Ltd. has stakes in Zomato and a few other startups).

The revenue size of Xelpmoc is currently quite small and it’s into losses currently. However, its investments in startups constitute the real juice in the business. 3 of the investee startups (Fortigo Network Logistics, Snaphunt and Mihup Communications) are particularly promising.

If the valuation of these startups increases, so will the market value of Xelpmoc’s investments in them. Accordingly, the stock price of Xelpmoc might eventually capture the market valuation of its investments. However, this could only happen over a period of time, provided the startups scale up and become profitable, or have fund- raising rounds at better valuations.

The key risks are:

Xelpmoc is a small cap with market cap of just Rs 86Cr as of date. Such stocks performs well when the general sentiment for small caps is positive.

More importantly, Xelpmoc’s financial performance needs to scale and the company needs to report a healthy profit for the stock to perform. However, for an investor, its startup investment portfolio provides a cushion.

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