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    Grey market trends suggest Route Mobile may repeat Happiest show on debut

    Synopsis

    There is a buzz that UTI AMC will could also announce its IPO shortly. The AMC received Sebi nod in June. This issue could be bigger in size at Rs 3,500 crore and may see a price band of Rs 850-900 per share.

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    Over 80 per cent of the revenues of the is in foreign currency.
    NEW DELHI: After Happiest Minds' stellar 111 per cent listing gains, Route Mobile is likely to follow suit, with grey market trends suggesting a strong debut on Monday.

    The issue, which was sold in the price band of Rs 345-350 between September 9 and 11, is commanding a premium of Rs 310-312 in the grey market. At the upper limit of this grey market premium (GMP), it would mean a 89 per cent listing pop for Route Mobile.

    Analysts said a strong debut for Route, which had been subscribed 73.3 times, would set IPO market on fire.
    On Monday, two offerings by CAMS (Rs 2,242 crore) and Chemcon Speciality Chemicals (Rs 318 crore) will hit the market. On Tuesday, Angel Broking will come up with its Rs 600 crore issue.


    There is a buzz that UTI AMC will could also announce its initial public offering (IPO) shortly. The AMC received Sebi nod in June. This issue could be bigger in size at Rs 3,500 crore and may see a price band of Rs 850-900 per share.

    Sandip Ginodia of Abishek Securities says Route's premium stood at Rs 310 on Saturday. Dinesh Gupta of Unlisted Zone, which also deals in unlisted securities, pegged Route's premium at Rs 312. At the issue price of Rs 350, the stocks commands a valuation of 29 times P/E on FY20 on a fully diluted basis.

    Pre-IPO, the cloud communications service provider raised Rs 180 crore from 15 anchor investors, including Goldman Sachs, Franklin Templeton Mutual Fund and SBI Life Insurance.

    Analysts said the company's strong presence in niche CPaaS market, which has high entry barrier, and healthy financials have been a big draw. It is IPO report, Motilal Oswal Securities said the company has a lean balance sheet with negligible debt and healthy return ratios. "Its working capital is also negligible, as it has a large pre-paid client base that pays upfront," Motilal noted.

    Angel Broking said Route 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," the brokerage said.

    Incorporated in 2004, the Mumbai-headquartered company has mainly three verticals: Enterprise, mobile operator and business process outsourcing. The enterprise vertical provides cloud-based communication platform to enterprises.


    The mobile operations include services such as SMS analytics, firewall, filtering, monetisation and CPaaS (cloud-communication platform as a service) and hubbing solutions. In April 2017, the company acquired a BPO Call2Connect, through which the company integrates the BPO capabilities with its enterprise voice platform.

    Over 80 per cent of the revenues of the is in foreign currency. The ROCCO Report 2020 ranked the company as a tier I application-to-peer service provider internationally. As of June 30, the company had served more than 30,150 clients since its inception.

    It has direct relationships with over 240 mobile network operators (MNOs) and serves enterprise clients in Africa, Asia Pacific, Europe, West Asia and North America access to over 800 mobile networks. Top 10 clients account for about 64 per cent of the company's revenues, with the top client contributing 15.45 per cent to FY20 revenues.

    Route Mobile, which has six strategically-located data centres, said its profit stood at Rs 79.60 crore in FY20 against Rs 74.8 crore in FY19 and Rs 58.10 crore in FY18. Return on equity (RoE) stood at 30 per cent for FY20 against 36 per cent each in FY19 and FY18. In terms of PAT margins, the company reported a margin of 8 per cent in FY20, down from 9 per cent in FY19 and 11 per cent in FY18.


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