Route Mobile's Rs 600 crore IPO kicks off: Should you subscribe?

Analysts are positive on the issue and believe the IPO can offer listing pop as well as long-term gains.

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The issue would comprise of a fresh issue of up to Rs 240 crore. In addition, existing promoters would offer shares aggregating up to Rs 360 crore in an offer for sale (OFS).
NEW DELHI: The Rs 600 crore initial public offering (IPO) by Route Mobile kicked off on Wednesday. The price band for the issue has been fixed at Rs 345-350 per share.

At the higher end of the price band, the company is seeking 29 times PE on FY20 basis. Analysts said the company has no listed peers. The proxy peers, which have a small presence in services offered by Route Mobile, are Tanla Solutions and Tata Communications. Analysts are positive on the issue and believe the IPO can offer listing pop as well as long-term gains.

The cloud communications service provider on Tuesday said it has garnered Rs 180 crore from 15 anchor investors including Goldman Sachs, Franklin Templeton Mutual Fund and SBI Life Insurance ahead of its initial share-sale offer that opens for public subscription on Wednesday.


The issue would comprise of a fresh issue of up to Rs 240 crore. In addition, existing promoters would offer shares aggregating up to Rs 360 crore in an offer for sale (OFS). This would include shares of up to Rs 180 crore by Sandipkumar Gupta and up to Rs 180 crore by Rajdipkumar Gupta. Investors could bid for a minimum bid lot of 40 shares and in multiples of 40 shares, thereafter. The issue will close on September 11, Friday.

Here's what brokerages said on the issue:


Motilal Oswal Securities: Subscribe
The brokerage said the issue is valued at 29 times FY20 P/E (fully diluted), which is comparable to mid-sized IT firms. It has recommended 'Subscribe' to the IPO given the company's strong presence in niche CPaaS market with high entry barrier and healthy financials. "Given the small offer size and presence in niche IT space, one may get listing gains too," it said.
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The brokerage said Route Mobile's balance sheet is lean with negligible debt and healthy return ratios. Its working capital is also negligible as it has a large pre-paid client base that pays upfront, Motilal noted.

Angel Broking: Subscribe
This brokerage noted that the company management has till now infused only Rs 6 lakh capital in the company, and it will command a market cap of Rs 1,990 crore at the higher price band.

"This shows that it is a scalable business model, which can grow without capital infusion. Unlike many other businesses, Covid-19 has led to better growth prospects for the company given increased adoption of digital technologies," the brokerage said.

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The brokerage finds the valuations quite reasonable, considering the future prospects of the company. As we are positive on the future outlook for the industry as well as the company, we would recommend to “Subscribe” to the issue for long term as well as for listing gains," it said.

Choice Broking: Subscribe
This brokerage noted that the company has reported a short financial history with mixed set of performance. Over FY18-20, the company’s business has grown organically and inorganically, but profitability declined, Choice Broking said. During the period, it made a couple of acquisitions to boost its product offerings, it noted.
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The company has no listed domestic peers, whose business operations are comparable to Route Mobile.

"Most of its international peers are loss-making. At the higher price band, the demanded P/E valuation is 28.8 times, which we believe is attractive for a company engaged in mobile technology services. A2P messaging services are most widely used by the enterprise and post-Covid world, migration to the digital world will accelerate. Route Mobile has certain business moat-like scale, collaboration with MNOs etc., which may act as an entry barrier for a new player," Choice Broking said.

Hem Securities: Subscribe
Astha Jain of Hem Securities said the valuations for the IPO comes in at 19 times post issue on Q1FY21 EPS basis. She noted that the company has diversified service offerings for an enterprise client base across a broad range of industries including social media companies, banks, financial institutions, e-commerce entities and has strong distribution reach.

The analyst has a 'Subscribe' rating on the issue as she sees both listing and long term gains.

Ashika Institutional Equities: Subscribe
Being in to category of services known as software as a service (SaaS), is a win-win combination both for companies like Route Mobile as well it’s clients since they don’t have to invest in maintenance of servers and connections apart from uploading different kinds of content or doing all of the administrative work involved in keeping a communications platform functional, Ashika said.

"Overall, the company has a history of stable financials, strong return ratios and positive operating cashflows. Besides, being the only player to be listed in this space, it will garner interest," the brokerage said.

Dealmoney Securities: Subscribe
The brokerage said the company has diverse service offerings for the enterprise client base and has a strong distribution network. Besides, the company has established a presence in all major geographies, which provides it an opportunity to leverage the growth in the cloud communications space, it added.

"The company has been working towards expanding major mobile communication channels, including messaging, email, OTT and voice. The future prospects of the company look stronger. Hence, we give a 'Subscribe' rating to Route Mobile for the long-term horizon," it said.

Geojit Financial Services: Subscribe
Geojit said that the IPO demands a P/E of 18.5 times for FY21 on a post issue basis, based on annualised Q1FY21 numbers. "Given that there is no listed peer to compare, and based on stable financial performance and niche business model, we assign a subscribe rating on this IPO," it said.

Arihant Capital: Subscribe
Considering increasing internet penetration and more and more cloud communication services used by enterprise, the size of global A2P market is expected to grow at a healthy rate in the coming years, said the brokerage.

" Route Mobile being ranked 2nd globally in tier 1 A2P service provider is likely to benefit. Diversified and global client base across industries, scalable delivery platform supported by good Infrastructure, robust business model with consistent financial track record are the key positive factors which augur well for the company," the brokerage said.


Route Mobile IPO: Everything you must know before hitting 'subcribe'
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The Rs 600 crore Route Mobile initial public offer (IPO) is all set to hit the primary market on Wednesday. The omnichannel cloud communication service provider has fixed the price band for the issue at Rs 345-Rs 350 per share. At the higher end of the price band, the company is seeking 25.3 times PE on FY20 basis.



The issue would comprise of a fresh issue of up to Rs 240 crore. In addition, existing promoters would offer shares aggregating up to Rs 360 crore in an offer for sale (OFS). This would include shares of up to Rs 180 crore by Sandipkumar Gupta and up to Rs 180 crore by Rajdipkumar Gupta.



Investors could bid for a minimum bid lot of 40 shares and in multiples of 40 shares, thereafter. The issue will close on September 11, Friday.



Here is what you need to know about the issue:

The Rs 600 crore Route Mobile initial public offer (IPO) is all set to hit the primary market on Wednesday. The omnichannel cloud communication service provider has fixed the price band for the issue..
Read More

Incorporated in 2004, the Mumbai-headquartered company carries on mainly three operations: Enterprise, mobile operator and business process outsourcing. The enterprise vertical primarily provides cloud-based communication platform to enterprises. The mobile operations include services such as SMS analytics, firewall, filtering, monetisation and CPaaS (cloud-communication platform as a service) and hubbing solutions. In April 2017, the company acquired a BPO Call2Connect, through which the company integrates the BPO capabilities with its enterprise voice platform. Over 80 per cent of the revenues that the company generates is in foreign currency. According to the ROCCO Report 2020, the company was ranked as a tier I application-to-peer service provider internationally.

Incorporated in 2004, the Mumbai-headquartered company carries on mainly three operations: Enterprise, mobile operator and business process outsourcing. The enterprise vertical primarily provides clo..
Read More

As of June 30, the company had served more than 30,150 clients since its inception. The company has direct relationships with over 240 mobile network operators (MNOs). It provides its enterprise clients from Africa, Asia Pacific, Europe, Middle East and North America access to over 800 mobile networks. Top 10 clients account for about 64 per cent of the company's revenues, with the top client contributing 15.45 per cent to FY20 revenues.

As of June 30, the company had served more than 30,150 clients since its inception. The company has direct relationships with over 240 mobile network operators (MNOs). It provides its enterprise clie..
Read More

Route Mobile, which has six strategically-located data centres, said its profit stood at Rs 79.60 crore in FY20 against Rs 74.8 crore in FY19 and Rs 58.10 crore in FY18. Return on equity (RoE) stood at 30 per cent for FY20 against 36 per cent each in FY19 and FY18. In terms of PAT margins, the company reported a margin of 8 per cent in FY20, down from 9 per cent in FY19 and 11 per cent in FY18.


In FY20, the company's platform managed more than 30.31 billion billable transactions from its clients and was used by more than 2,700 clients. It managed 24.74 billion billable transactions in FY19. Total billable transactions for the company rose 38 per cent compounded annually, the company said in a presentation. The company has a total of 291 employees (including the ones in subsidiaries). Besides, it has 27 employees working outside India.

Route Mobile, which has six strategically-located data centres, said its profit stood at Rs 79.60 crore in FY20 against Rs 74.8 crore in FY19 and Rs 58.10 crore in FY18. Return on equity (RoE) stood ..
Read More

The company said it responded swiftly to Covid-19 by implementing various processes to ensure its operations and services to its customers continue seamlessly. It said it has maintained a robust VPN infrastructure, which has enabled and equipped its employees to work from home to ensure no service disruptions and provide support to its customers.



"This meant that almost its entire team was able to work from home from March 23, 2020 when a national lockdown came into force in India. The company has also deployed security systems to safeguard assets and customer data as well as issued detailed work from home protocols to enable secure usage," Kotak Securities said in a note.



In the three months ended June 30, the company processed more than 6.95 billion billable transactions.



The company's servers are maintained in Tier III datacenters and all components are managed remotely by authorised personnel only and through secured connections.

The company said it responded swiftly to Covid-19 by implementing various processes to ensure its operations and services to its customers continue seamlessly. It said it has maintained a robust VPN ..
Read More

Astha Jain of Hem Securities said the valuations for the IPO comes in at 19 times post issue on Q1FY21 EPS basis. She noted that the company has diversified service offerings for an enterprise client base across a broad range of industries including social media companies, banks, financial institutions, e-commerce entities and has strong distribution reach.



The analyst has a 'Subscribe' rating on the issue as she sees both listing and long term gains.

Astha Jain of Hem Securities said the valuations for the IPO comes in at 19 times post issue on Q1FY21 EPS basis. She noted that the company has diversified service offerings for an enterprise client..
Read More

Company details
Incorporated in 2004, the Mumbai-headquartered company carries on mainly three operations: Enterprise, mobile operator and business process outsourcing. The enterprise vertical primarily provides a cloud-based communication platform to enterprises. The mobile operations include services such as SMS analytics, firewall, filtering, monetisation and CPaaS (cloud-communication platform as a service) and hubbing solutions. In April 2017, the company acquired a BPO Call2Connect, through which the company integrates the BPO capabilities with its enterprise voice platform. Over 80 per cent of the revenues that the company generates is in foreign currency. According to the ROCCO Report 2020, the company was ranked as a tier I application-to-peer service provider internationally.

Customer base
As of June 30, the company had served more than 30,150 clients since its inception. The company has direct relationships with over 240 mobile network operators (MNOs). It provides its enterprise clients from Africa, Asia Pacific, Europe, the Middle East and North America access to over 800 mobile networks. Top 10 clients account for about 64 per cent of the company's revenues, with the top client contributing 15.45 per cent to FY20 revenues.

Financials
Route Mobile, which has six strategically-located data centres, said its profit stood at Rs 79.60 crore in FY20 against Rs 74.8 crore in FY19 and Rs 58.10 crore in FY18. Return on equity (RoE) stood at 30 per cent for FY20 against 36 per cent each in FY19 and FY18. In terms of PAT margins, the company reported a margin of 8 per cent in FY20, down from 9 per cent in FY19 and 11 per cent in FY18.

In FY20, the company's platform managed more than 30.31 billion billable transactions from its clients and was used by more than 2,700 clients. It managed 24.74 billion billable transactions in FY19. Total billable transactions for the company rose 38 per cent compounded annually, the company said in a presentation. The company has a total of 291 employees (including the ones in subsidiaries). Besides, it has 27 employees working outside India.

Covid-19 response
The company said it responded swiftly to coronavirus by implementing various processes to ensure its operations and services to its customers continue seamlessly. It said it has maintained a robust VPN infrastructure, which has enabled and equipped its employees to work from home to ensure no service disruptions and provide support to its customers.

"This meant that almost its entire team was able to work from home from March 23, 2020 when a national lockdown came into force in India. The company has also deployed security systems to safeguard assets and customer data as well as issued detailed work from home protocols to enable secure usage," Kotak Securities said in a note.

In the three months ended June 30, the company processed more than 6.95 billion billable transactions.

The company's servers are maintained in Tier III datacenters and all components are managed remotely by authorised personnel only and through secured connections.
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