Initial euphoria for Route Mobile Ltd shares fizzled a bit. The stock however closed at 86.08% premium over its issue price of ₹350, after it made a stellar stock markets debut on Monday. The stock was listed at ₹717, a gain of 105% over its issue price. It ended at ₹651.30 on the NSE.
The ₹600 crore issue was subscribed 73.3 times with a price band of of ₹345- ₹350 per share. The initial public offering (IPO) was open for subscription during 9-11 September.
“At the higher end of the price band, the issue is valued at 29 times FY20 price-to-earnings, which is comparable to mid-sized IT firms," Sneha Poddar, Research Analyst, Motilal Oswal Financial Services Ltd said. Poddar added that Route Mobile’s strong presence in niche CPaaS market with high entry barrier and healthy financials make it favourable.
Net proceeds of the issue will be utilised towards funding for repayment or pre-payment, in full or part, of certain borrowings of the company, acquisitions and other strategic initiatives, purchase of office premises in Mumbai and general corporate purposes.
The company operates through prepaid and postpaid business models with high operating margins and low cost base. The indigenously developed CPaaS platform is scalable with limited capital expenditure requirements.
The company depends in part on the success of its strategic relationship with third parties, particularly direct relationships with mobile network operations. “Inability to enter into or maintain such relationships, particularly with MNOs may adversely affect the business, financial condition and results of operations," said analysts at HDFC Securities.
Around 80.8% of Route Mobile’s revenues comes from exports and 19.2% from domestic clients. Route Mobile’s CPaaS platform facilitates omni channel communication for multiple industries across small, medium and large enterprises , mobile network operators and OTT players , resulting in enhanced engagement, customer retention and brand loyalty.
In FY20, Route Mobile processed more than 30.31 billion billable transactions and three months ended 2020, it processed more than 6.95 billion billable transactions. The company generated revenue from operations ₹504.9 crore, ₹844.6 crore, ₹9,56.2 crore and ₹309.6 crore in fiscal 2018, 2019 and 2020, and in the three months ended June 30, 2020, respectively.
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