Stock Review: SmartLink Network

We are very positive on SmartLink Network. When the company has sold off its main business Digilink, eyebrows were raised wondering as to why the company never demerged its business and never sold its whole entity and made an open offer to the shareholders. At the end, the promoter Naik has not charged any non-compete fee. The brand of Digilink was in his name which he sold for Rs 1 to the company. The company has sold the entire Digilink business to Schneider for Rs 503 crore and on a post tax basis it works out to Rs 400 crore. The company was already sitting on cash of Rs 50 crore. With not much of businesses, the company is sitting on Rs 450 crore cash, yet with five units there.

Now, the company has a Digisol and Digicare business. Right now, nothing is happening in the Digicare business, but the company intends to do certain things by tying up with certain vendors. As far as Digisol business is concerned, the company will make it grow over the next one-two years. Coming back to the company's financials, its of Rs 3 crore shares, each share is of Rs 2, Rs 6 crore equity and cash of Rs 450 crore, that means the cash is of around Rs 150 per share.

The company is in such a business that it won't require much of capital. For Rs 150 per share cash, the company has declared a special interim dividend of Rs 30 per share. If one looks at the companies past track record, I am quite confident that this Rs 150 per share will ultimately be distributed to shareholders over the next one-three years. Rs 30 per share has already been distributed.

At a present price of Rs 100, you are getting Rs 30 dividend. If the share goes down on an ex-dividend basis which it will, then some further dividend will come in over the next three-six months. The company will distribute this Rs 150 per share ultimately in the form of dividends over the next one-three years because it doesn't require too much of capital.