Ebix – Goodwill Hunting

The Alchemy of Creating Profits

Ebix Presentation – Download Link

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.

 

Author: Viceroy Research

A group of individuals that see the world differently.

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