KR Choksey's IPO report on Route Mobile
Route Mobile Limited (“Route”) provides cloud-communication platform as a service (CPaaS) to enterprises, over-the-top (OTT) players and mobile network operators (MNOs). The company was ranked 2 nd globally as a tier 1 application-to-peer (A2P) service provider, and ranked 1 st for value added services, implementation process and uptime performance in 2017. Its Enterprise solution comprises 2 primary components – the front-end that provides an interface for enterprises to integrate with, and a back-end, which is directly integrated with over 240 MNOs, and provides access to over 800 MNOs across the globe, as of June 30, 2020 enabling them to leverage their SMS and voice channels for digital communication. The backend is also integrated with OTT business messaging solution providers, and is capable of supporting Rich Communication Services business messaging, offering multiple channels of communication to enterprises. Its range of enterprise communication services includes application-to-peer (A2P)/peerto-application (P2A)/2-Way Messaging, RCS, OTT business messaging, voice, email, and omni-channel communication. Its clients include some of the world’s largest and well-known organisations, including Fortune/Global 500 companies. As of June 30, 2020, Route Mobile has serviced over 30,150 clients, cumulatively since inception, across sectors including social media, banking and financial services, aviation, retail, internet / e-commerce, logistics, healthcare, hospitality, media and entertainment, pharmaceuticals and telecom. Its global operations include 9 direct and 12 step-down subsidiaries serving its clients through 18 locations across Africa, Asia Pacific, Europe, Middle East and North America. For FY20 and 1QFY21, Route recorded revenue of INR 9.56 bn and INR 3.1 bn, respectively, EBITDA of INR 1.12 bn and INR 403 mn, respectively, and PAT of INR 691 mn and INR 269 mn, respectively. The company’s IPO includes an offer for sale of INR 3.6 bn and fresh issue of INR 2.4 bn, with a post-issue market capitalisation of INR 19.65 bn to INR 19.90 bn.
Valuation and Outlook
At the price band of Rs345-350, the Route Mobile issue comes priced at a PE of 18.2x-18.5x annualised 1QFY21 EPS. This appears to be reasonable, given the healthy growth being witnessed by the firm, its strong clients relationships across the board including with enterprises, MNOs and OTT operators, diverse client base across industry verticals, good financial track record and highly experienced promoter team. Given the impressive performance in 1QFY21, we believe there is a high probability of the company continuing to record impressive growth. We this recommend a SUBSCRIBE to the issue, with the potential for healthy listing gains.
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