Route Mobile IPO – Details, Price and Valuations – Review
When stock markets are bullish, there are half a dozen of IPOs that are lined up now. Route Mobile IPO would open for subscription on September 9, 2020. Route mobile is a niche player that provides cloud-communication platform as a service to enterprises, over-the-top players and mobile network operators. Should you invest in Route Mobile IPO? What are the risk factors you should consider before investing in this Route Mobile IPO? Is this IPO good or bad? We would review all these aspects in this article.
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About the company
Route mobile provides cloud-communication platform as a service to enterprises, over-the-top players and mobile network operators (MNO). According to the ROCCO Report 2020, they have ranked as a tier one application-to-peer service provider internationally. Further, they were ranked second globally as a tier one A2P service provider in 2017.
Route mobiles operate in 3 business verticals as indicated below:
1) Enterprise: Company provides a cloud-communication platform as a service to enterprises, over-the-top players, and mobile network operators (MNO) around the world.
2) Mobile Operator: company provides services in this segment that include SMS analytics, firewall, filtering, monetization, and hubbing solutions.
3) Business Process Outsourcing (BPO): It provides a range of BPO services including client support, technical support, booking, and collection services.
The company’s clients include some of the world’s largest organizations, including several Fortune Global 500 companies.
Route Mobile IPO Details
Here are the IPO details.
| IPO Date | Sep 9, 2020 to Sep 11, 2020 |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 345 to Rs 350 per equity share |
| Issue Size | Total of Rs 600 Crores |
| Fresh issue | Rs 240 Crores |
| Offer for sale | Rs 360 Crores |
| IPO Lot Size | 40 shares |
| Lead Managers | ICICI Direct, Axis Capital, Edelweiss Financial Services and IDBI Capital markets |
| Listing at | BSE / NSE |
Download Route Mobile IPO Prospectus / DRHP
Objects of the IPO
Here are the objects of the IPO issue.
A) Offer for Sale (OFS) for Rs 240 Crores: The object of the Offer for Sale is to allow the selling shareholders to sell equity shares held by them. The company will not receive any proceeds from OFS.
B) Fresh Issue of Rs 360 Crores: Gross proceeds of the fresh issue less the Offer Expenses apportioned to Company i.e. Net Proceeds are proposed to be utilized in the following manner:
- Repayment or pre-payment, in full or part, of certain borrowings
- Acquisitions and other strategic initiatives
- Purchase of office premises in Mumbai
- General corporate purposes
Who are the Company Promoters?
Mr Sandipkumar Gupta and Mr Rajdipkumar Gupta are the promoters of Route mobile.
Company Financial Performance
Here is the financial performance of the company in the last few years.
| Fin. Year ending | Total Revenues (Rs in Crores) | Profits after tax (Rs in Crores) | Profit % |
|---|---|---|---|
| Mar-2018 | 509.4 | 46.6 | 9.1% |
| Mar-2019 | 852.3 | 54.5 | 6.4% |
| Mar-2020 | 968.1 | 59.1 | 6.1% |
Its average EPS in the last 3 years is Rs 12.24 and FY2020 is Rs 13.83. Its EPS for the 3 months ended June, 2020 is Rs 5.42.
Route Mobile IPO – Reasons to Invest
Here are a few reasons to invest.
1) Route mobile is a niche player that provides cloud-communication platform as a service to enterprises, over-the-top players and mobile network operators. Route Mobile provides these unique services and there are no comparable peers in this market (as per DRHP).
2) Company revenues shown consistent growth in the last 3 years.
Route Mobile IPO – Reasons why NOT to Invest
1) Route mobiles profits are on declining mode. It earned 9.1% margins in FY2018 Vs 6.1% in FY2020.
2) Its business depends on the success of their relationship with mobile network operations.
3) Its revenues come through a limited number of clients.
4) It relies on 3rd party technology systems and Infrastructure where defects, delays and failures can adversely affect its business.
5) Its clients can misuse its platform and send unauthorized SMS messages in violation of TRAI regulations.
6) For complete internal and external risk factors, you can refer the DRHP of the company.
Route Mobile IPO Tentative Table / Schedule
| Offer Open | 09-Sep-20 |
| Offer close | 11-Sep-20 |
| Finalization of Basis of Allotment | 16-Sep-20 |
| Unblocking of ABSA and Initiation of Refunds | 17-Sep-20 |
| Credit of shares to Demat Accounts | 18-Sep-20 |
| IPO Shares Listing Date | 21-Sep-20 |
Also Read: Want to invest in fund that generated 22% returns in 1 year, try this fund
Route Mobile IPO Valuation
On the upper price band of Rs 350 and EPS of Rs 13.8 for FY20, the P/E ratio works out to be 25.3x. For last 3 years EPS of Rs 12.2, P/E ratio is 28.5x. For the 3 months ended June, 2020, the EPS of Rs 5.42, P/E works to be around 16.1x. Means company is asking the issue price in the range of 16x to 28x. There are no listed peers to compare whether the Route Mobile IPO Price is under priced or overpriced. However, considering latest nos of FY20 and June-20, P/E at 16x to 25x can be considered as fully priced.
Route Mobile IPO – Invest for short term to long term
Route Mobile revenues are consistently growing. Its issue price is fully priced. However, its margins are on declining mode. Considering NICHE player in the segment, high risk investors can invest in such IPOs for short term to long term. One can expect listing gains too.
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Thanks for Review.
I will avoid it.