ROUTE MOBILE IPO – OUR VIEW

Introduction:

You must be remembering now the audio clip which is run firstly while calling anybody regarding COVID-19 precautions and care to be taken.

You must have experienced while calling to any of the customer care service departments that pre-recorded an automated response system and then you get a chance to talk to the customer care officer.

A lot of things regarding such automation enabled with communication platforms and day by day it’s increasing.

This blog covers a company that is there in this business area and opened up today with an IPO with a vision to expand and live in the competitive pressures. It’s Route Mobile Limited.

Company Background:

Route Mobile Limited was incorporated in 2004. This is the leading “Communications Platform as a Service” [CPaaS] Provider and a Tier-One Application to Peer [A2P] service provider. Communication services include Messaging, Voice, Email, and SMS Filtering, Analytics, and Monetization. The Company situated across 18 locations out of the world. The company has 6 strategically located data centers and 4 Short message service centers. The company has served around 30150+ clients globally.

Business Verticals & Top Business Products:

There are mainly 3 business verticals in which the company is involved:

1.Enterprise: Cloud communication platform as a service to enterprises and mobile network operators around the world.

2. Mobile Operator: SMS Analytics, firewall, filtering, monetization solutions.

3. BPO Services: Client technical solutions support

Top business products include:

The company has certain specialized messaging products like “Route OTP Service” that generates, delivers, and authenticates OTP automatically and no complicated backend setups required.

Another special product is “Acculync” – which shorten, brand, and track real-time Long and indistinct URLs.

For Voice solutions – there is “Outbound Dialer” which enables scheduling the dialing automatically to play any promotional message to a predefined global audience

Route IVR – This efficiently delivers voice messages and captures customer inputs through response options

Route Mailer - For running Email campaigns, this is the robust and secured hosting platform without being spammed

Route Hub and Route Shield help mobile network operators to connect to a large customer base across the globe.

Financial Overview:

Last 3 Years & Q1-FY 2021 Financial Overview:

Based on the above financial information, the total assets, revenue, and PAT all 3 parameters show a good amount of growth along with the indication of improvement in the profit margin in Q1 of FY 2021.

Observations in other financial information YoY [Mar 20 vs. Mar 19]:

1. A decrease in PBT margin is due to an increase in depreciation on PPE resulted due to investment in fixed assets and one exceptional item relates to Service Tax demand reported with Rs. 15 Cr. in Statement of P&L. This was recorded by the entity for 50% of the demand raised by the department using the benefit under “Sabka Vishwas Legacy Dispute Resolution Scheme, 2019”.

2. Increase in Days Sales Outstanding from 62 to 77 is due to growth in India and the Middle East, where customers have stretched payment cycles. [Based on the disclosure as per the annual report].

3. The increase in current assets overweighed the increase in current liabilities so the current ratio tends to increase.

Top Positives & Negatives:

Positives:
1. Leading cloud communications service provider offering CPaaS with global and local customization expertise.
2. The positive and increasing trend of financial performance from last 3 years with positive performance in Q1 of FY 2021 in spite of the COVID situation considering the nature of the business.
3.The lower debt involved financials and decrease in debt as compared to the prior year, so no pressure of finance cost [in financials there is an impact of Ind AS 116 which has resulted in the finance cost].

Negatives:
1. The company operates in a highly evolving market with greater competitive risks and pressures
2. Greater dependency on the 3rd parties mobile network operators and considering the volatile operational telecom market, high risk of the same.
3. Revenues depend on the limited number of clients, so future growth of the business may be impacted due to such high concentration.
4. The risk from potential claims resulting from the client's misuse of its platform to send unauthorized text messages in violation of TRAI regulations.
5. The financial risk with an increase in current assets with receivables which can also be seen from an increase in days sales outstanding from 62 to 77.
6. Exceptional item as impacted financial of March 2020 by 15 Cr. And considering the commitments and contingent liabilities disclosed in financials there might be an impact in the future with such exceptional items.