The Alchemy of Creating Profits
Viceroy’s presented Ebix at the Kase Learning Conference on December 3, 2018. We will shortly release a full report into our findings.
Summary red flags:
- Change in business model (IT providers to insurance v. finance sector) without visible synergies or management experience.
- Accounting discrepancies suggests EBIX is booking external revenues on transactions between its subsidiaries: this occurred in 2014, 2015, 2016, 2017 across multiple geographies (UK, Singapore, India, Dubai, Mauritius).
- The company has a growing unbilled receivables balance:
- 50% from by EBIX’s India JV (Ebix Vayam Technologies) whose only customer is the JV partner (Vayam): it appears to have no other customers, and 446 days of receivables.
- Rapid change of company auditors, most recently the replacement of Cherry Bekaert with T.R. Chadha, an Indian auditor with no history of auditing a major US-listed entity.
- Unnecessarily intricate and opaque subsidiary structure, with very little insight provided to investors. Many assets are being held in opaque geographies and have been transferred with no disclosure or justification.
- The CEO has financially engineered an >US$825m “poison pill” to prevent any takeover by mandating a large payout to himself in the case of such a takeover.