Route Mobile’s maiden public offer has opened today and it has garnered strong response from anchor investors. The cloud-communication platform provider has roped in a long list of investors including SBI Mutual Fund, Nippon India, ICICI Prudential, Goldman Sachs, Franklin Templeton, Kuwait Investment, and Vantage Equity. The offer, priced in the range of INR345 – 350 per share, aims to mobilize INR600 crore (INR6 billion) and commands strong premium in the informal grey market. Meanwhile, several brokerage houses have come up with Route Mobile IPO recommendations. Here is a brief snapshot of analyst views:
Angel Broking highlighted the company’s scalable business model and reasonable valuations as the factors behind its Subscribe call for long term gains. “Management has till now infused only RS.6 lakhs capital in the Company, and it will command a market cap of Rs.1990 crores 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. At the upper end of the price band, Company demands PE multiple of 25.3x on F.Y.20 EPS, which we believe is 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,” noted the brokerage house’s report.
Choice Broking noted that the company has profitable business operations and long standing collaborations with clients. “At the higher price band of Rs. 350 per share, RML’s share is valued at a P/E multiple of 28.8x (to its restated FY20 EPS of Rs. 12.2).There are no listed domestic peers, whose business operations are comparable to RML. Above peers are the proxy peers and have small presence in the services offered by RML. Most of its international peers are loss making. At the higher price band, the demanded P/E valuation is 28.8x, 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 digital world will accelerate. RML has certain business moat like scale, collaboration with MNOs etc., which may act as an entry barrier for a new player. Considering the above observations, we assign a SUBSCRIBE rating for the issue,” said its research note.
Arihant Capital also has a subscribe rating on the IPO. “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. 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. Thus we recommend Investors to subscribe for issue,” said the firm adding to positive Route Mobile IPO recommendations.
Another positive word came from Ashika Institutional Equities which has a Subscribe call for the IPO. “In terms of the valuations, on the higher price band, if we annualize Q1FY21 EPS and attribute it to fully diluted equity post IPO, then asking price is at a P/E of around 18.5x,” said its report.
Route Mobile IPO recommendations: Not everybody is convinced
SMC Global offered the IPO 3 stars out of 5 while highlighting some downsides. “Route mobile is a niche player that provides cloud-communication platform as a service to enterprises, over-the-top players and mobile network operators. However, its business depends on the success of their relationship with mobile network operations. It relies on 3rd party technology systems and Infrastructure where defects, delays and failures can adversely affect its business. Its revenues come through a limited number of clients. A high risk investor may opt the issue,” opined the brokerage house.
Samco Securities’ Nirali Shah also has a negative view on the IPO on the back of high trade receivables and current liabilities. “This along with a low current ratio of 1.17 compared to the peer average of around 2 puts it in a weak spot. Additionally, Route Mobile has witnessed sharp growth in trade receivables which is growing faster than the revenues of the company,” added the analyst justifying her Avoid rating. Despite the couple of cautious and negative ratings, analysts are largely positive in recommendations for Route Mobile IPO.