Technical Analysis

Route Mobile IPO Subscribe: On a profitable path

Vivek Ananth BL Research Bureau | Updated on September 08, 2020

The firm reported strong revenue growth and its future prospects seem sound

Route Mobile is a technology service provider specialising in communication services to enterprises. It operates as a CPaaS company that provides ‘Communication Platform as a Service’ to enterprise clients.

Route Mobile’s platform helps companies communicate with their customers through text messages on mobile phones, IVR calls, and messaging on over-the-top or OTT platforms such as WhatsApp, Viber and Telegram.

The company’s initial public offer (IPO) consists of an offer-for-sale of shares of up to ₹360 crore by the promoters and a fresh issue of up to ₹240 crore. The promoters will hold about 67 per cent stake in the company after the IPO.

The price band is ₹345-350 a share. This values the company at around 25 times its 2019-20 earnings per share.

The IPO opens on September 9 and closes on September 11. Retail investors’ portion is up to 35 per cent of the issue size.

The valuation seems at par with that of mid-tier Indian technology services companies such as Coforge and Mindtree but higher than that of Hexaware and Mphasis, among others. In terms of similar sized listed global peers in the CPaaS space, companies such as Sinch at 141 times its trailing 12-month earnings, and IMMI Mobile at nearly 160 times, are richly valued compared to Route Mobile.

The ₹240 crore proceeds from the fresh issue of shares will be used to repay certain loans, fund future acquisitions till 2021-22, purchase office space in Mumbai and for general corporate purposes.

Investors with a time-horizon of 3-5 years can subscribe to Route Mobile’s IPO.



Route Mobile is among Asia’s largest CPaaS players, and primarily has two services - messaging services and call centre services.

It charges for these services on a cost-plus basis. Based on the number of messages, emails, IVR calls etc processed, the company gets paid for every such transaction by the enterprise clients it serves.

The number of billable transactions of the company has risen at a compounded annual growth rate (CAGR) of nearly 20 per cent from 2017-18 to 2019-20 to 30 billion transactions. With the increasing use by businesses to communicate with their customers through digital modes, Route Mobile is should post good growth in the future.

In terms of collections from clients, Route Mobile allows its customers two payment options for its services— prepaid and postpaid.

The company says it has many clients who opt for the prepaid option which means they pay in advance for the company’s services. This arrangement allows Route Mobile to largely cover its working capital needs.

The company also provides services to mobile network operators or telcos.

This service entails identifying messages that are not authorised by the telco on its network. This helps the telco to identify the revenues it has lost in terms of marketing text messages. The company has also put its set of application programming interfaces or APIs on a public repository where new startups and other businesses can use the APIs that power Route Mobile’s businesses off the rack to plug them into their business needs.



Route Mobile’s revenues from 2017-18 to 2019-20 have grown at a CAGR of nearly 38 per cent from 505 crore to ₹956 core.

Nearly 82 per cent of these revenues come from exports. The company has not given the geography-wise break up of revenues.

The company served over 2,700 clients in 2019-20. In terms of client concentration, its 10 largest clients made up for about 52.5 per cent and 64 per cent of revenues in FY 2020 and in the quarter ended June 2020, respectively.

Its largest client accounted for 15.5 per cent of its revenue for the quarter ended June 2020.

The net profit of the company grew at a CAGR of about 20 per cent from about ₹48 crore in 2017-18 to ₹69 crore in 2019-20. For the quarter ended June 2020, the company reported a net profit of about ₹27 crore on revenues of about ₹310 crore.

The company reported operating margin of 15.3 per cent for 2017-18, 11.5 per cent for 2018-19 and 2019-20, and about 13 per cent for the three months ended June 2020.

Route Mobile says that its margins dipped in the last two financial years due to investments the company has made in expansion initiatives.

The company’s debt-to-equity ratio was comfortable at 0.2 times at the end of 2019-20.

The company generates good cash from its operations, some of which it reinvests in the business. Cash from operations was about ₹93 crore in 2019-20. It has not needed any fund infusion after the promoters invested around ₹7 lakh more than a decade ago.

Published on September 08, 2020

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