Affle (India) IPO – Should you Invest or Avoid?

Affle India Limited IPO ReviewAffle (India) IPO – Should you Invest or Avoid?


Affle (India) IPO would open for subscription on 29th July, 2019. This is global technology business providing consumer platform for B2C. Affle India IPO Size is Rs 459 Crores. This company’s revenue has grown by 3x in the last 5 years. What are the various positive factors an investor should consider before investing in Affle (India) IPO? Should you invest in the Affle (India) Ltd IPO or avoid? In this article, let me do Affle IPO Review.

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About Affle (India) Limited


They are a global technology business. They have two business segments: their Consumer Platform; and their Enterprise Platform. Their Consumer Platform primarily provides the following services: (1) new consumer conversions (acquisitions, engagements and transactions) through relevant mobile advertising; (2) retargeting existing consumers to complete transactions for e-commerce companies through relevant mobile advertising; and (3) an online to offline platform that converts online consumer engagement into in-store walk-ins. Their Enterprise Platform primarily provides end-to-end solutions for enterprises to enhance their engagement with mobile users.

Its Consumer Platform comprises the following:

1) Its “Affle” branded consumer intelligence platform that delivers consumer acquisitions, engagements and transactions through relevant mobile advertising (the “Affle Consumer Platform”);  56

2) Its “RevX” branded mobile only self-serve programmatic platform that delivers consumer acquisitions, engagements and transactions through relevant mobile advertising (the “RevX Platform”);

3) Its “Vizury” branded retargeting media business for e-commerce companies and our push notifications offerings for e-commerce companies on a software as a service model (the “Vizury Commerce Business”); and

4) Its “Shoffr” branded online to offline platform that converts online consumer engagement into in-store walk-ins and transactions (the “Shoffr Platform”).

Its Consumer Platform aims to enhance returns on marketing spend through delivering contextual mobile ads and reducing digital ad fraud, while proactively addressing consumer privacy expectations.

Affle (India) IPO Issue details


Affle India Limited IPO Issue Details

Affle (India) IPO RHP Prospectus can be downloaded at this link

What are the Objects of the Affle IPO?


Here are the objects of the IPO issue.

1) Offer for the sale (OFS) of 4.95 Mn equity shares by the Selling Shareholders totaling to approx. Rs 349 Crores. The company will not receive any proceeds from the Offer and the entire proceeds from the Offer will go to the Selling Shareholders.

2)  Funding and working capital requirements of the company.

3) General corporate purposes.

Who are the Company Promoters?


The promoters of the Company are Anuj Khanna Sohum and Affle Holdings. Affle Holding, the Singapore headquartered parent entity is holding a sizeable stake in the company with other equity partners, i.e. Microsoft, D2C, Itochu, Centurion Investment Management and Bennett Coleman & Co. Ltd. Post issue along with Malabar group, their combined shareholding will be around 75%.

How is the company doing in terms of Financial Performance (Reinstated-Unconsolidated)?


1) Company revenues increased from Rs 39.45 Crores for the year ended Mar-15 to Rs 121.4 Crores for the year ended Mar-19.

2) Company profits increased from Rs 2.25 Crores for the year ended Mar-15 to Rs 16.6 Crores for the year ended Mar-19.

3) Its EPS for FY2019 is Rs 6.87 and 3 years average EPS is at Rs 4.67.

4) Its consolidated EPS for FY2019 is Rs 20.1.

How is the company doing in terms of financial performance – Consolidated basis?


Due to restatement of nos, company has published proforma nos for FY2019 consolidated basis.

Affle India Limited IPO - Consolidated Financials - FY2015 to FY2019

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What is the of Affle (India) Credit Rating?


Credit rating is not required for issue of equity shares, hence, they have not approached any credit rating agency for credit rating.

What is the Affle IPO GMP now?


Currently there is no GMP available for Affle (India) Limited IPO GMP.

What is the allocation portion in this Affle India IPO?


Here is how the allocation would be done

1) QIB (Incl Anchor investors) – 75%

2) HNIs – 15%

3) Retail Investors – 10%

What are the key strengths of Affle (India) Limited?


Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.

1) Their Consumer Platform has a leading position in India; a high growth market with substantial barriers to entry.

2) Proven international track record.

3) Profitable, low-cost business model built on an asset light, automated and scalable platform.

4) As at March 31, 2019, Affle Consumer Platform had approximately 2.02 billion consumer profiles. For Fiscal 2019, their Affle Consumer Platform accumulated over 300 billion data points. This gives us a deep data-driven understanding of consumer intent and behavior.

5) Growth driven, global customer base.

6) Addressing digital fraud and data safety issues that are prevalent in the industry.

7) Experienced and dedicated Key Management Personnel, who are ably supported by their other employees.

What are the various strategies of Affle (India) Ltd?


Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.

1) Enhance their Affle Consumer Platform’s revenue from existing and new customers in India and acquire new.

2) Consumer profiles beyond Tier 1 cities.

3) Expand their international business through local business development efforts and through referrals from their existing customers.

4) Drive further penetration in their top customers and deliver more converted users for large e-commerce companies.

5) Continue to invest in and develop their technological capabilities.

6) Continue to develop their award-winning fraudulent data detection and prevention platform.

7) Continue to selectively pursue acquisitions.

8) Cross-sell their solutions.

Positive Factors in Affle (India) IPO


1) Its revenues have increased by 3x in the last 5 years.

2) Its profits have improved in the last 3 years, i.e. 0.5% for FY2017 Vs 13.7% for FY2019. Improved margins would always reward investors by share price appreciation and by way of dividends.

3) The company is first mover in the business segment in India, where there are no listed peers in India.

Major risk Factors to consider before investing in Affle (India) Limited IPO


These risk factors can impact company revenue and margins which would affect its share price. Investors should go through and understand these risk factors before investing.

1) There are outstanding litigations against company, their corporate Promoter, their individual Promoter and certain of their Directors and any adverse outcome in any of these litigations could have an adverse impact on their business, results of operations, cash flows and financial condition.

2) They had negative cash flow generated from investing activities for Fiscal 2019 on a consolidated basis. They had negative cash flow generated from investing and financing activities for Fiscal 2019, 2018 and 2017 on an unconsolidated basis and they may experience negative cash flows in the future.

3) They do not own any of the properties from which they operate. If they are unable to renew their current leases or if they renew them on terms which are detrimental to company, they may suffer a disruption in their operations or increased relocating costs, or both, which could adversely affect their business, results of operations, cash flows and financial condition.

4) Their Statutory Auditors have included an emphasis of matter and certain modifications to the information required to be disclosed pursuant to the Companies (Auditor’s Report) Order, 2015.

5) If their ability to collect significant amounts of data from various sources is restricted by consumer choice, restrictions imposed by customers, publishers and browsers or other software developers, or changes in technology it may have a material adverse effect on their business, results of operations, cash flows and financial condition.

6) A significant amount of their business is conducted through advertising agencies. If they cannot maintain their relationships with these advertising agencies, or if these relationships cease to be effective, it may have a material adverse effect on their business, results of operations, cash flows and financial condition.

7) Their business depends on their ability to maintain the quality of content for their customers and publishers.

8) For complete internal and external risk factors, you can refer the IPO RHP of the company.

Affle India Limited IPO Schedule


Offer Opens – 29-July-2019

Offer Closes – 31-July-2019

Finalization of Basis of Allotment – 5-August-2019

Unblocking of ABSA and Initiation of Refunds – 8-August-2019

Credit of shares to Demat Accounts – 7-August-2019

IPO Shares Listing Date – 8-August-2019

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Is the issue price of Affle (India) IPO reasonably priced or over priced?


If we consider its consolidated EPS for last year FY2019 of Rs 20.1 on the higher price band of Rs 745 the P/E works out to be 37x. There are no listed peers to compare, hence we cannot say whether the issue price is under priced or overpriced.

Affle (India) IPO – Should you Invest or Avoid?


Company revenues have grown by 3x in the last 5 years. Company’s margins have improved in the last 3 years. Company issue price cannot be ascertained whether it is under priced or overpriced. I would have been excited if the company would have grown in terms of revenues. Considering some of these positive factors and first mover in business segment in India, High Risk Investors can invest in this IPO with a time frame of 3-5 years. Investors may or may not get listing gains.

Disclaimer: The information in this article is for information only. This is not a recommendation to invest in this IPO. Please consult your investment advisor before you invest in such high risk IPOs.

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Suresh

Affle (India) IPO – Should you Invest or Avoid

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