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Communications Platform as a Service (CPaaS)

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 30 January 2023 Initiating Coverage

Route Mobile
En’Route’ growth spiral BUY
Route Mobile (Route) is a leading player in the fast-growing CPaaS market
CMP (as on 27 Jan 2023) INR 1,216
(~27% CAGR), which is being driven by the rise in online activity and digital
transactions. Route is a global Application-to-Person (A2P) aggregator that Target Price INR 1,700
commands a ~40% share of the ILD market and works with major Big Tech NIFTY 17,604
players (GAF). It has increased its focus on domestic terminations, has added
marquee logos and expanded the NLD market share to ~10%. Route is a prime KEY STOCK DATA
beneficiary of the surge in transactional A2P messages (+46% CAGR powered
Bloomberg code ROUTE IN
by UPI, authentication, e-commerce etc.) and ILD price increase by telcos.
Expansion into fast-growing areas like OTT (WhatsApp), RCS, network No. of Shares (mn) 63

firewalls, analytics, video, and email will create additional growth MCap (INR bn) / ($ mn) 75/924
opportunities and aid margin expansion. The company has clocked a healthy 6m avg traded value (INR mn) 82
34% revenue CAGR over FY17-22 (organic ~28%), driven by a 25% volume
52 Week high / low INR 1,889/1,052
growth, acquisitions, price hikes (ILD ~3x increase) and client mining (>USD
15mn+ clients ~54% CAGR).
STOCK PERFORMANCE (%)
Route’s growth will be supported by (1) continued growth in messaging
volume; (2) global expansion with several MNO tie-ups (A2P and firewall); (3) 3M 6M 12M
traction in new growth areas like OTT and RCS; and (4) up-selling and client Absolute (%) (8.7) (0.7) (19.4)
mining. Over FY22-25E, we project revenue/EBITDA/EPS CAGRs of
Relative (%) (8.3) (8.1) (22.0)
+36/43/29%. We initiate coverage on Route with a BUY rating and TP of INR
1,700, valuing it at 25x Dec-24E EPS, supported by its top quartile growth
SHAREHOLDING PATTERN (%)
profile, RoE of ~20%, strong cash generation, and net cash of INR 10.4bn (~14%
of market cap). Sep-22 Dec-22

 Expanding CPaaS market: The global CPaaS market size is ~USD 11bn and it Promoter 58.56 58.44
has clocked a CAGR of ~34%. It is expected to grow at ~20% CAGR over the FIs & Local MFs 7.17 7.22
next five years to reach USD 26bn in FY27E. Enterprises spend ~85% of CPaaS
FPIs 21.32 21.10
budgets on foundational services like SMS (A2P), bulk SMS and 2FA, while
~15% is towards next-gen platforms like OTT and RCS. India's CPaaS market Public & Others 12.94 13.24
size is ~USD 1.1bn, growing at 27% CAGR, and two large players Route and Pledged Shares 0.00 0.00
Tanla hold ~60% market share.
Source : BSE
 Digital transactions driving volume while OTT will boost margins: India
processes ~1.5bn A2P messages daily (~2 SMS/device/day). Transactional
messages (~60% of the total messages) are driving volume growth. Route
processed ~52bn messages in FY22 (~25% CAGR), which doubled in FY23E,
led by acquisition. The normalised volume growth assumption for FY23-25E
is ~20%, supported by rising digital penetration. The pricing of ILD/OTT is
~24/3x better than NLD. Growth in OTT, international A2P and RCS will lead
to growth and margin expansion (~160bps margin expansion over FY22-25E).
 Valuation at a comfortable level: Route share price is down ~20% YoY and
trading at a P/S of 1.8x FY24E, ~30% discount to Twilio (global CPaaS P/S is
down ~60% YoY). The bear case indicates only a 14% downside and the base
case provides an upside of 40%. The stock is trading at a P/E of 21/17x
FY24/25x, a ~50% discount to its three-year average.
Amit Chandra
Financial summary (consolidated)
amit.chandra@hdfcsec.com
YE March (INR bn) FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Net Sales 8.45 9.56 14.06 20.02 35.51 43.15 50.63
+91-22-6171-7345
EBITDA 0.86 1.00 1.74 2.19 4.34 5.31 6.33
APAT 0.57 0.73 1.33 2.05 3.61 3.66 4.41
Diluted EPS (INR) 9.2 11.8 21.4 32.9 58.0 58.9 70.9 Vivek Sethia
P/E (x) 132.8 103.4 56.7 37.0 21.0 20.7 17.2 vivek.sethia@hdfcsec.com
P/S (x) 9.0 7.9 5.4 3.8 2.1 1.8 1.5
+91-22-6171-7339
EV / EBITDA (x) 87.3 74.9 40.7 29.8 15.0 11.9 9.7
RoE (%) 28.9 29.7 28.9 17.6 20.8 19.1 20.2
Source: Company, HSIE Research

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Route Mobile: Initiating Coverage

Focus Charts
Global CPaaS players’ FY23E revenue (USD mn) and CPaaS players to clock 18% CAGRs over FY22-25E:
market share (%) Route leading the pack
Tanla Platforms, Kaleyra,
Route Mobile, 333, 2%
422, 3% Twilio, Verint Systems 5.5%
444, 3%
3,802, 29% Link Mobility 7.2%
Link Mobility, 8X8 9.7%
518, 4% Bandwidth 11.7%
Bandwidth, Tanla Platforms 13.1%
563, 4% Kaleyra 14.0%
Total CPaaS 18.3%
8X8, 751, 6%
Ringcentral 19.3%
Five9 20.6%
Five9, 775, 6%
Sinch 21.3%
S inch, 2,771, Twilio 22.4%
Verint S ystems, 21% Route Mobile*
Ringcentral, 24.0%
907, 7%
1,991, 15% 0% 10% 20% 30%

Source: Company, Bloomberg, HSIE Research, FY23=CY22E for global Source: Bloomberg, HSIE Research, *organic, Route and Tanla are
players, assumed USD INR of 80 for Route and Tanla based on HSIE estimates

India CPaaS market is USD 1.1bn growing at 27% CAGR Strong revenue growth for Route over last five years
ILD Market FY23E NLD Market FY23E Route Mobile revenue (INR bn)
Messages per month
1.20 Messages per month (bn) 45 60
(bn) 50.63
ILD messages Annual NLD messages Annual 50 43.15
14.40 540
(bn) (bn) 35.51
ILD realisation/SMS NLD realisation/SMS
40
2.40 0.10
@3cents (INR) @10paisa 30
20.02
ILD market size (INR NLD market size (INR 14.06
34.56 54.00 20
bn) bn) 8.45 9.56
ILD Market NLD Market 10 3.64 4.58 5.05
Share % Share % 0
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY25E
FY23E

FY24E
*Route 40% *Route 10%

Tanla 27% Tanla 40%

Source: Company, HSIE Research, * NLD and ILD volume and market Source: Company, HSIE Research, FY23E revenue growth of 77%
share are estimates implies 35% organic growth

Transactional A2P messages account for ~60% of the Strong client addition across buckets: >$10mn
total traffic and has registered 3Y CAGR of ~46% and >$15mn customers driving growth
No of transactional SMS/day (bn) FY19 FY20 FY21 FY22 3QFY23
Nos
1.00 0.90
70
60
0.80 60
0.55
0.60 50
41
40
0.40 31
0.22 30
19 21
0.20 15
0.20 20
5 7 7 9
0.00 10 4 5 3 4
1 2 2 1 2 3
Sep-19

Sep-20

Sep-21

Sep-22
Jan-19

May-19

Jan-20

May-20

Jan-21

May-21

Jan-22

May-22
Nov-19

Nov-20

Nov-21
Mar-19

Mar-20

Mar-21

Mar-22
Jul-19

Jul-20

Jul-21

Jul-22

0
>$15 mn >$10 mn >$5 mn >$1 mn

Source: RBI, UIDAI, NSE, BSE, HSIE research Source: Company, HSIE Research

Page | 2
Route Mobile: Initiating Coverage

Contents
CPaaS ecosystem: niche and thriving .................................................................. 4
India CPaaS landscape .......................................................................................... 7
Route Mobile: the rising star ............................................................................... 11
Multiple tailwinds to boost growth, margins .................................................. 18
Route vs Tanla ...................................................................................................... 21
Profitability and return ratios ........................................................................... 23
Company description .......................................................................................... 24
Valuation and recommendation .......................................................................... 26
Financials................................................................................................................. 30

Page | 3
Route Mobile: Initiating Coverage

CPaaS ecosystem: niche and thriving

A Communications Platform as a Service (or CPaaS) is a cloud-based delivery model
(Platform) that enables enterprises to embed real-time communication capabilities
such as audio, video, and messaging into their existing core business applications. The
CPaaS industry is gaining significant traction as enterprises globally are seeking to
deepen digital engagement with their customers. According to Gartner, ~90% of global
enterprises would be using CPaaS solutions by 2026, compared to ~30% in 2022.
The CPaaS market has clocked a strong ~34% CAGR over FY17-22 to reach USD 10.4bn
in FY22 (~49% growth in FY22). As per industry experts, the CPaaS industry is set to
clock ~20% CAGR over the next five years to reach ~USD 26bn in FY27E. The growth
will be led by higher usage of CPaaS for enhanced customer engagement, driving
business efficiencies and cross-sell opportunities. CPaaS is generally adopted by a
single business unit for a particular use case like OTP, notifications, etc., and it further
spreads to other business units like marketing campaigns and customer service.
As per Gartner, enterprises spend ~85% of CPaaS budgets on foundational services like
SMS (A2P), bulk SMS and 2FA, while ~15% is towards next-gen communications
applications like OTT (Whatsapp, WeChat, etc.), RCS (iMessage, Truecaller, etc.). As
per Juniper Research, SMS (A2P business messaging) is a dominant part of the CPaaS
spend (~95%) while emerging technologies like RCS and OTT are in nascent stages
(contribute <5%). The growth and investments in OTT and RCS will be much higher
and will be ~20% of the CPaaS market over the next five years. Most of the CPaaS
vendors are investing/acquiring companies to build OTT and RCS capabilities.
Global CPaaS players clocked robust growth of 34% over FY17-22
USD bn Global CPaaS (USD bn)

30.0 25.5
25.0 20.9
20.0 17.1
15.0
13.2
15.0 10.4
10.0 5.6 7.0
3.4 4.3
5.0 2.3 2.4
0.0
FY18

FY19
FY16

FY17

FY20

FY21

FY22

FY23E

FY24E

FY25E

FY26E

FY27E
Source: HSIE Research, Bloomberg, companies include Twilio, Ringcentral, Sinch, Five9, Verint Systems,
8x8, Bandwidth, Route Mobile, Tanla Platforms, Link Mobility and Kaleyra. Bloomberg estimates except
for Tanla and Route

As per Juniper Research, SMS business messaging will continue to dominate the CpaaS market while emerging
technologies like RCS and OTT will be ~20% of the CpaaS market over the next five years
FY22 FY27E
Voice services SMS Business
3% Voice services messaging
8% 71%
Push
notifications
0%

OTT Business Push

messaging notifications
1% 0%

RCS Business OTT Business

messaging messaging
1% 8%
SMS Business
messaging
RCS Business
95%
messaging
13%
Source: HSIE Research, Juniper Research

Page | 4
Route Mobile: Initiating Coverage

The Gartner five-layer CPaaS architecture captures the solutions that can be offered to
enterprises. The foundational pillars are the communication APIs and the Networking
layer. This includes traditional A2P messages, two-factor authentication messages, and
security messages and the latest entrant is the messaging app WhatsApp. The next
layer is the emerging modules, such as advanced messaging options (RCS), voice and
messaging bots, video, integration of NLP (natural language processing), and chatbots.
These technologies are yet to hit the mainstream, and most of the spending is on L1-L2
services.
CPaaS five-layer architecture

The L1 and L2 layer

accounts for ~85% of the
Enterprise CPaaS spend

Source: Gartner

Vendor-wise capabilities in new areas

Company Country Area of Operation Advanced messaging capabilities
WhatsApp, Meta (Messenger), WeChat, Viber, Kakao, Zalo, Google (Verified SMS),
8x8 US Asia/Pacific
mobile verification, voice messaging services
Europe, North America,
RCS, GBM, Apple Messages for Business, WhatsApp, Meta (Messenger), Telegram,
Infobip UK Asia/Pacific, India, Latin
Viber, LINE, Kakao, Instagram, Twitter, others and email
America, Middle East
Europe, India, North
Kaleyra US RCS and Google RBM (in some countries), push notifications, WhatsApp and email
America, Middle East
RCS, Google RCS, WhatsApp, Meta (Messenger), Telegram, Viber, Instagram,
LINK Mobility Norway Europe, North America
Discord, Microsoft Teams, Slack, email

RCS (in trial), Google Business Messages (GBM), WhatsApp, Apple Business Chat (in
Asia/Pacific, EMEA, North
MessageBird Netherlands trial), Meta (Messenger), WeChat, Telegram, LINE, Instagram, Twitter, email
America
(SparkPost)

RCS, Google RBM, WhatsApp, Meta (Messenger), Telegram, Viber, Instagram,

Route Mobile India Asia/Pacific, Middle East
email
North America, Europe,
RCS, Google RCS, Apple Business Chat, WhatsApp, Meta (Messenger), WeChat,
Sinch Sweden Asia/Pacific, India, followed
Telegram, Viber, Kakao, Instagram, email (Mailjet, Mailgun, Email on Acid)
by Latin America
RCS, Google RCS, WhatsApp, Meta (Messenger), WeChat, Telegram, Viber, LINE,
Tanla Platforms India Asia/Pacific Kakao, Instagram, TikTok, Twitter, Snapchat, email, and partner with Truecaller for
business channel messaging
Telesign US North America RCS, Google RBM, WhatsApp, Viber, MMS and SMS
WhatsApp, email (Twilio SendGrid), RCS (trial or via ValueFirst), Google RBM,
North America, followed by
Twilio US Facebook Messenger, Apple Business Chat can be added via Conversations API;
other regions
TikTok support, Twitter and Snapchat (via Segment destinations)
Europe, North America and RCS, Google RBM, Apple Business Chat (ABC), WhatsApp, Meta (Messenger), Viber,
Vonage US
APAC LINE, Instagram, Twitter DMs, email, SMS/MMS failover
Source: Gartner

Page | 5
Route Mobile: Initiating Coverage
FY22 revenue of major CPaaS players globally (USD mn) FY17-22 revenue CAGR for global CPaaS players

Kaleyra 0.268
8X8 20.3%
Route Mobile 0.250
Bandwidth 26.4%
Tanla Platforms 0.401
Total CpaaS 33.8%
Bandwidth 0.491
Five9 30.3%
Link Mobility Group Holding 0.513
Route Mobile 34.3%
Five9 0.610
Ringcentral 33.2%
8X8 0.638
Verint Systems Link Mobility 34.6%
0.875
Ringcentral 1.595 Tanla Platforms 40.8%
Sinch 1.886 Sinch 51.5%
Twilio 2.842 Twilio 59.3%

0.00 0.50 1.00 1.50 2.00 2.50 3.00 0% 10% 20% 30% 40% 50% 60% 70%

Source: HSIE Research, Bloomberg, FY22=CY21 Source: HSIE Research, Bloomberg, Tanla and Route based on HSIE
estimates, Twilio's organic revenue CAGR is 49%

Global CPaaS at a glance

Revenue
Market Revenue EBITDA EBITDA FY24E
CAGR % FY24E
CPaaS Player Country Cap CAGR % Margin Margin EV/EBITDA
(FY22- P/S (x)
(USD bn) (FY17-22) FY22 % FY24E % (x)
25E)
Twilio US 11.0 59.3% 22.4% -21.0% 8.6% 21.0 2.5
Ringcentral US 3.7 33.2% 19.3% -8.1% 21.2% 10.7 1.6
Sinch Sweden 3.9 51.5% 21.3% 5.0% 11.9% 13.1 1.3
Five9 US 5.5 30.3% 20.6% 0.2% 17.8% 35.8 6.1
Verint Systems US 2.5 -3.8% 5.5% 16.5% 28.1% 11.6 2.6
8X8 US 0.5 20.3% 9.7% -14.4% 10.3% 12.3 0.7
Bandwidth US 0.6 26.4% 11.7% 8.3% 6.6% 22.6 0.9
Route Mobile India 1.0 34.3% 36.2% 10.9% 12.3% 11.9 1.8
Tanla Platforms India 1.1 40.8% 13.1% 21.8% 18.1% 9.9 2.2
Link Mobility Norway 0.3 34.6% 7.2% 6.9% 12.9% 7.5 0.5
Kaleyra Italy 0.1 NM 14.0% -6.7% 6.3% 8.1 0.1
Aggregate
Global 30.0 34.4% 18.0% -3.9% 13.6% 11.9 1.6
(USD bn)
Source: Company, Bloomberg, HSIE Research, Route and Tanla Platforms on HSIE estimates, assumed
USD INR of 80

Page | 6
Route Mobile: Initiating Coverage

India CPaaS landscape

The Indian CPaaS market grew at a CAGR of 27% over FY17-22, which is in line with
a global CAGR of 34%. The size of seven major CPaaS players moved from USD 280
mn in FY16 to USD 1.1 bn in FY22. The Indian CPaaS industry is divided into two major
segments: (1) international long distance (ILD) and (2) national long distance (NLD)
A2P messages. We have mapped the Indian CPaaS market in terms of ILD and NLD
A2P messages. The total size of the industry is estimated to be ~INR 89bn (~USD 1.1bn),
driven by ~554bn A2P messages sent in a year. As per industry experts, ~1.5bn A2P
messages are sent in India every day, of which ~97% is NLD and ~3% is ILD. This
translates to ~2 messages/device/day (considering ~800mn mobile users). Messaging
volume in India is way less than the US, which has a volume of ~9
messages/device/day.
ILD messages originate from servers located outside India and terminate in India. The
major contributors to ILD messages are global players like Amazon, Meta (WhatsApp)
and Google. ILD is just 3% of the volume but contributes ~40% to value, driven by the
higher realisation (~24x of NLD). The total size of the ILD market is ~INR 35bn and its
growth is largely driven by price hikes by telcos (three increases in the last three years).
This rate increase has led to some decline in volumes, but we estimate that it's not very
significant, as SMS remains the cheapest and safest mode of communication and
alternative channels like push and in-app notifications have limited reach. Amazon
sends ~3.6bn messages annually (~0.01bn messages daily) and accounts for ~25% of the
ILD market.
NLD messages originate from servers in India and terminate locally. NLD is 97% of
the volume and contributes ~60% of the value. The total size of the NLD market is ~INR
54bn and its growth is largely driven by a steep increase in transactional A2P volume
(UPI and mobile banking) while realisations have remained stable.
India CPaaS market mapping
A2P messages per year (bn) Value
ILD 14.4
NLD 540.0
Total volume 554.4

Volume mix % % Share

ILD 3%
NLD 97%

Industry size (INR bn) Value

ILD 34.56
NLD 54.00
Total A2P messaging industry (approximately) 88.56

Value mix % % Share

ILD 39%
NLD 61%
Source: Company, HSIE research, * HSIE estimates

Page | 7
Route Mobile: Initiating Coverage
Indian CPaaS companies have registered a CAGR of 27% Route has become the largest CPaaS player in India
Indian CPaaS revenue (USD bn) Growth YoY % (RHS) USD mn FY22 FY23E

1.31 500 444 422

1.40 40%
401
1.11 400
1.20
1.00 30% 300 250
0.85
0.73
0.80 200
0.56 20% 122
0.60 79 90 77 92 76 98 106
0.41 100 36 41
0.28 0.33
0.40 10% 0
0.20

Netcore
ACL Mobile

Route
Infobip

Tanla
Valuefirst

Gupshup
0.00 0%

FY23E
FY16

FY17

FY18

FY19

FY20

FY21

FY22
Source: HSIE Research, VCCEdge, companies include Tanla Platforms,
Route Mobile, ACL Mobile, Gupshup, Valuefirst, Infobip and Netcore
Source: HSIE Research, VCCEdge, FY23E revenue numbers are
estimates based on the previous growth rate, Route and Tanla are
HSIE estimates. Route numbers also include international revenues,
~50% of revenue is from India termination

Domestic A2P messages register robust growth (3Y CAGR of

46%)
India has witnessed a surge in transactional messages, led by UPI, mobile banking
transactions, and Aadhaar-linked authentication messages. UPI is the single-largest
contributor to A2P messages and accounts for ~32% of the total messages. Based on
our calculations, ~1.5n messages are sent every day and ~0.49bn messages originate
from UPI-linked transactions (considering two messages for every UPI transaction).
The UPI-triggered messages have increased at a CAGR of 76% over the last three years.
We have considered transaction messages originating from various sources (UPI,
mobile banking, Aadhar, market trades, etc.), which is ~0.93bn messages/day (~62% of
the total A2P messages). Based on industry experts, ~60% of the A2P messages are
transactional and the rest 40% are promotional (mostly banks, corporates, e-commerce
companies, etc.). The growth in the Indian CPaaS market is led by the surge in
transactional messages, which registered a strong CAGR of ~46% in the last three years.
A2P message contributors
Transactional messages SMS Triggered per day (bn)
UPI^ 0.49
Debit + Credit# 0.07
Mobile + Internet banking transactions^^ 0.25
Aadhar authentication^^ 0.06
No of Trades^^^ 0.05
Transactional SMS/Day 0.93
Total SMS/Day (Transactional + Promotional) 1.50
Transactional as % of total messages 62%
Source: RBI, UIDAI, NSE, BSE, HSIE research, * considering 2 messages per UPI transaction, # considering
~1.5 messages/transaction, ^^ considering 1 message per instance, ^^^ ~0.5 messages per trade on NSE

A2P message frequency—Indian mobile users receive ~2 messages/mobile/day

Parameter Value
Total messages per day (bn) 1.5
Total messages per year (bn) - A 540
Number of mobile users (mn) - B 800
Number of messages per mobile user per year (Nos) - A/B 675
Number of messages per mobile user per month (Nos) 56.3
Number of messages per mobile user per day (Nos) 1.9
Source: HSIE research

Page | 8
Route Mobile: Initiating Coverage
UPI-triggered SMS account for ~32% of total A2P traffic Mobile and internet banking transactions on the rise
and has registered 76% CAGR over the last three years led by digital adoption: ~5x in three years
UPI triggered SMS/day (bn) Mobile +Internet Banking Triggered SMS/Day
0.60 (bn)
0.28 0.25
0.50
0.23
0.40
0.18
0.30 0.13
0.13
0.20
0.07

0.08 0.05

0.39

0.49
0.00

0.01

0.03

0.12

0.25

0.37

0.40

0.42

0.44

0.45
0.10

0.00 0.03

Nov-20

Nov-21
Sep-20

Sep-21

Sep-22
May-20

May-21

May-22
Jan-20

Jan-21

Jan-22
Mar-21
Mar-20

Jul-20

Jul-21

Mar-22

Jul-22
Apr-22
FY17

FY18

FY19

FY20

FY21

FY22

Jun-22

Sep-22
Aug-22
May-22

Jul-22

Oct-22
Source: RBI, HSIE research Source: RBI, HSIE research

Debit and credit card POS/ATM transactions stable: Market trades linked messages have registered strong
Account for ~4% of the volume growth led by retail participation
Debit+Credit+NEFT Triggered SMS/day (bn) Market Trade Triggered SMS/day (bn)
0.10

0.07
0.09 0.07
0.09

0.06

0.05
0.05
0.05

0.05
0.08 0.06
0.08

0.04
0.05
0.07 0.07

0.03
0.04
0.06
0.03

0.02
0.05
0.01
0.02
0.01
0.005

0.01

0.04 0.01
0.04
0.03 0.00
Sep-19

Sep-20

Sep-21

Sep-22
Jan-19

May-19

Jan-20

May-20

Jan-21

May-21

Jan-22

May-22
Mar-19

Nov-19

Mar-20

Nov-20

Nov-21
Mar-21

Mar-22
Jul-19

Jul-20

Jul-21

Jul-22

Apr-22
FY17

FY18

FY19

FY20

FY21

FY22

Sep-22
Jun-22

Aug-22
May-22

Jul-22

Oct-22
Source: RBI, HSIE research Source: NSE, BSE, HSIE research

Aadhaar-based KYC + authentication messages on the Transactional A2P messages account for ~60% of the
rise total traffic and has registered 3Y CAGR of ~46%
Aadhaar triggered SMS/day (bn) No of transactional SMS/day (bn)
1.00 0.90
0.07

0.08
0.07

0.06

0.06

0.06
0.06

0.07 0.80
0.06
0.05

0.06 0.55
0.05

0.60
0.04

0.05
0.04

0.03

0.04 0.40
0.22
0.03 0.20
0.01

0.20
0.02
0.00
0.01
Jul-21

Jul-22
Jul-19
Sep-19

Jul-20
Sep-20

Sep-21

Sep-22
Jan-19

Jan-22
May-19

Jan-20

May-20

Jan-21

May-21

May-22
Nov-19

Nov-20

Nov-21
Mar-19

Mar-20

Mar-21

Mar-22
May-22
FY21

Jun-22

Sep-22
FY17

FY18

FY19

FY20

Aug-22
FY22

Apr-22

Jul-22

Oct-22

Source: UIDAI, HSIE research Source: RBI, UIDAI, NSE, BSE, HSIE research

Page | 9
Route Mobile: Initiating Coverage

India is ~60% lower than the global average in terms of A2P SMS activity
No of SMS/smartphone/day

Indian Subcontinent 1.9

Rest of Asia Pacific 2.5

Far East and China 2.4

Europe 2.6

Latin America 3.3

North America 9.8

0 2 4 6 8 10 12

Source: RHP, Juniper Research, HSIE research

Page | 10
Route Mobile: Initiating Coverage

Route Mobile: the rising star

Route Mobile is a global CPaaS player but has gained market share in the Indian
market led by the addition of large accounts. India is the key focus market for Route as
it derives 50-55% of its revenue from India termination. Within India, Route is a market
leader in the ILD space with a ~40% market share. It has been able to win large accounts
and is the preferred CPaaS vendor (L1&L2) for some of the large Indian BFSI players
and global tech/e-commerce giants. However, in the NLD market, Route has only ~10%
market share—this space is dominated by Tanla Platforms. The estimated total size of
the Indian CPaaS market is INR 88bn and if we consider only ILD and NLD India
termination revenue, Route has a market share of ~22% while Tanla is the leader with
~40% share. These two players together command a sizeable market share of ~60%,
while the rest constitute players like ACL Mobile (acquired by Sinch), Valuefirst
(acquired by Twilio), Gupshup, etc.
India CPaaS market split: NLD and ILD
ILD market NLD market
Messages per month (bn) 1.20 Messages per month (bn) 45
ILD messages Annual (bn) 14.40 NLD messages Annual (bn) 540
ILD realisation/SMS @3cents (INR) 2.40 NLD realisation/SMS @10paisa 0.10
ILD market size (INR bn) 34.56 NLD market size (INR bn) 54.00

ILD market share % NLD market share %

Route 40% Route 10%
Tanla 27% Tanla 40%

Route India revenue—calculated (INR bn) Value

ILD 13.82
NLD 5.40
Route (ILD + NLD) Revenue 19.22
Route India Market Share* % 22%

Tanla revenue (ex Platform)—calculated (INR bn) Value

ILD 9.18
NLD 21.60
Tanla (ILD + NLD) Revenue 30.78
Market Share* % 35%
Source: Company, HSIE research, * HSIE estimates
Route has registered a strong revenue CAGR of 34% over FY17-22, driven by volume
growth, market share gains, ILD price hikes and acquisitions. The organic CAGR over
the last five years has been impressive at ~28% and is a function of ILD price hikes by
telcos, volume growth in domestic A2P volume, additions of new accounts,
partnerships with top telecom operators globally, and foray into new areas like SMS
firewall, RBM and OTT messaging.
Route derives ~50% of its revenue from India termination and the other major markets
of operations are Asia (ex –India), Africa and the Middle East. The company has tie-
ups with ~280 global MNOs, 19 virtualized data centers, 18 hubs, and nine firewall
deployments. The company derives ~75% of its revenue from digital native, fintech, e-
commerce, global CPaaS partners, and travel and retail clients. The company has
signed a contract with Uganda Telecommunications to provide AI/Machine Learning-
based A2P SMS firewall solutions and managed services. Route has also been selected
by Telenor global services as a preferred partner for A2P messaging services in Europe
and Asia Pacific.

Page | 11
Route Mobile: Initiating Coverage
Growth over the last 12 quarters (~12% CQGR) is impressive and organic growth of
~9% is driven by volume growth and ILD price increases. The billable volumes have
risen at a CAGR of 25% over FY18-22 and 39% over FY18-23E, led by a rise in A2P
volumes. The volume surge in FY23E is largely due to the acquisition of MR messaging.
The blended realisations have increased over the last five years (CAGR of 12% over
FY18-22), driven by ILD price hikes, higher revenue from OTT offset by a higher mix
of emails (lower realisation).
Route revenue (INR bn) FY23E Tanla revenue (INR bn) FY23E
ILD 13.82 ILD 9.18
NLD 5.40 NLD 21.60
Route India Revenue (INR mn) (A) 19.22 Tanla Enterprise Revenue (A) 30.78
Route India Revenue# (%) 58% Tanla Enterprise Revenue (%) 91%

International A2P + non-SMS revenue (B) 16.29 Others

MR Messaging 7.49 Platform (Trubloq) (B) 3.01
Masivian 2.25 Platform revenue % 9%
356squared 0.47
New Product Sales (WhatsApp + FB 1.57
Messenger
Total + RCS + Viber
Route Revenue (A+B)etc.) 35.51 Total Tanla Revenue (A+B) 33.78

Route Volume Split (bn) FY23E Tanla Volume Split (bn) FY23E
ILD 5.8 ILD 3.8
NLD 54.0 NLD 216.0
International + non-SMS revenue* 47.8 Others (DLT Platform)* 334.0
Total Volume 107.5 Total Volume 553.8

Route Realisation (INR) Tanla Realisation (INR)

ILD 2.40 ILD 2.40
NLD 0.10 NLD 0.10
International + non-SMS revenue# 0.34 Others (DLT Platform)# 0.01
Blended Realisation 0.33 Blended Realisation 0.06
Source: Company, HSIE research, *# HSIE estimates

Route has registered a strong 5Y revenue CAGR of 34% Strong and consistent growth: revenue up ~3.7x in last
(organic ~28%), FY23E growth is 77% (organic 35%) 12 quarters, clocking organic CQGR of 9%
Route Mobile revenue (INR bn) Growth % INR bn
40 90% 12.00
35.51 9.86
35 5Y revenue CAGR of 34%, organic 28% 80%
8.46

10.00
70%
7.29

30
6.26

60% 8.00
5.63

25
20.02 50%
4.36

20 6.00
3.85

3.78
3.62
3.49

14.06 40%
3.10
2.66
2.64

15
2.30

4.00
1.97

9.56 30%
8.45
10 20%
4.58 5.05 2.00
5 10%
0.00
0 0%
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
FY17

FY18

FY19

FY20

FY21

FY22

FY23E

Source: Company, HSIE research Source: Company, HSIE research

Page | 12
Route Mobile: Initiating Coverage
Route revenue mix based on terminations: FY22 Route revenue mix based on industries: FY22
Digital
Americas, 6%
Others, 26% Native, 20%
Europe, 5%

Middle
East, 8% India, 52%
Travel, 1%

Africa, 11%
Retail, 4%
Ecommerce, 17%
Telecom,
Asia excl.India, 7% Financial
18% Services, Tier-1
11% CpaaS, 14%

Source: Company, HSIE research Source: Company, HSIE research, Digital Native is Social/Internet,
Edtech, Tier-1 CPaaS partners across the globe, Finserv is BFSI and
payment gateways, Telecom is MNOs and OEMs, Retail includes
Travel and Hospitality

Strong growth in billable transactions Realisation increase due to ILD, expected to be stable
Billable Transactions (bn) Blended Realisations (INR)
0.50
160 152 0.44
129 0.39
140 0.40
0.34 0.33 0.33 0.33
108 0.32
120
100 0.30 0.24
80
52 0.20
60
30 32
40 21 25 0.10
20
0 0.00 FY21
FY18

FY19

FY20

FY22

FY23E

FY24E

FY25E
FY18

FY19

FY20

FY21

FY22

FY25E
FY23E

FY24E

Source: Company, HSIE research Source: Company, HSIE research

Page | 13
Route Mobile: Initiating Coverage

India’s ILD pricing is on the rise, but still one of the lowest
ILD prices in India have increased four times in the last three years. The Indian telcos
at first charged ~INR 0.6 (USD 0.007); then it was increased to INR 1 (USD 0.013) and
further increased to INR 2 (USD 0.026) in 2021. In 2022, the rate has been further
increased to INR 3 (USD 0.038). Adjusted for the new rates, Indonesia is still ~4x India's
ILD rate. The consistent increase in ILD rates has forced large players like Amazon,
Meta, and Google to search for alternatives, but the options are limited. Amazon has
reduced the number of SMSs per order and Google has switched to the in-app
notifications method but SMS remains the prime mode of communication.
Telcos are using ILD as a tool to improve their profitability in an environment where
APRUs are falling and spectrum costs are rising. The impact of higher prices is lower
ILD volume but from an SMS aggregator point of view, while the absolute gross
margin increases, the GM% remains the same. Route mobile has been a prime
beneficiary of the price increase as it commands ~40% market share in ILD.
India's ILD rate is ~57% lower than the average of SE Asia despite three hikes
Bulk SMS charges (US$)
0.16 0.150

0.14
0.12
0.100
0.10
0.08
0.06
0.040 0.040
0.04 0.026
0.02 0.007
0.00
India Thailand Singapore Indonesia Malaysia Philippines

Source: The Ken, HSIE research

Acquisitions are a key part of the growth strategy

Route has made four acquisitions in FY23E and a total of around eight acquisitions
over the last five years. Acquisitions have been a key strategy; these acquisitions were
to foray into new geographies (like LATAM-Masivian, Kuwait-InterTeleco and Malta-
M.R Messaging), acquire new capabilities (DLT blockchain -Teledgers) and expand
product line (Email - SendClean). The estimated growth of 66% for FY23E factors in
organic growth of 28% and an inorganic contribution of 38%.
Acquisitions: A key strategy for global expansion and enhancing capabilities
Date Company Revenue (INR mn) P/S Description Geography
Sep-16 Start Corp 45 2.5 A2P messaging India
A2P messaging and
Sep-16 Cellent Technologies 132 1.3 India
voice API
Apr-17 Call2Connect 320 NA BPO India
Oct-17 365squared 467 2.4 SMS Firewall Malta - Europe
Jun-20 TeleDNA 75 1.6 SMSC Firewall India
Jul-21 Sendclean 53 NA Email Platform India
Enterprise CPaaS
Oct-21 Masivian 2,246# 2.1 LATAM
(OTT)
Oct-21 Interteleco 390# 1.1 Enterprise CPaaS ME - Kuwait
Feb-22 M.R Messaging 7,493* 0.7 A2P Messaging Malta - Europe
May-22 Teledgers^ NA NA DLT Platform India
Source: Company, HSIE research, * 9MFY23 annualized revenue, # annualized based on FY22 contribution,
all other revenue is based on latest year available, ^currently not closed (under arbitration)

Page | 14
Route Mobile: Initiating Coverage
Acquisition bridge for Route: FY23E organic growth is at 35%
Acquisition Bridge FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E
Route Revenues (INR mn) 562 1,061 1,318 3,640 4,576 5,049 8,447 9,563 14,062 20,020 35,510
Revenue Growth% 89% 24% 176% 26% 10% 67% 13% 47% 42% 77%
Inorganic (INR mn)
Sendclean 40 13
Masivian 640 1,378
Intertelco 130 260
MRM (MR Messaging) 530 6,868
365squared 508 635
Call2Connect 153
Cellent Technologies 73 39
Start Corp 25 14
Inorganic (INR mn) 98 714 635 - - 1,340 8,520
Organic Revenue (INR mn) 562 1,061 1,318 3,640 4,478 4,336 7,812 9,563 14,062 18,680 26,990
Organic Revenue Growth% 24% 176% 23% -5% 55% 13% 47% 33% 35%
Inorganic contribution % 0% 0% 3% 16% 13% 0% 0% 10% 43%
Source: Company, HSIE research, Sendclean contribution of 9/3 months for FY22/23E, Intertelco contribution of 4/8 months for FY22/23E, Masivian
contribution of 8/4 months for FY22/23E, MR Messaging contribution of 1/11 months for FY22/23E.

Growing client base with impressive mining capability

From FY19 to Q3FY23, the number of clients in the >USD 15mn, >USD10 mn and >USD
5mn revenue buckets increased significantly, demonstrating Route’s strong client
mining/hunting capabilities. With rising use cases and volume, a client would typically
start with lesser contributions and progressively upgrade to higher contributions.
The number of clients generating >USD 5mn in sales has climbed from 3 in FY19 to 19
as of Q3FY23 (CAGR of 65%), demonstrating Route’s solutions are increasingly being
employed by enterprises for consumer engagement. Top clients are driving growth,
with CAGRs of 23/55/39% (over FY19-TTM ended Q3FY23) for top 1/top 2-5/top 10
clients, confirming Route's excellent positioning/offerings to enterprise customers.

Customer concentration: a blessing in disguise?

Route’s top 1/2-5/6-10 clients generated INR 4.28/8.71/2.79bn in sales in accounting for
13/27/9% of total TTM revenues. Top 5/10/50 customers account for 41/50/78% of
revenue in Q3FY23. The top 1/ 2-5 customers generated ~INR 4.28/2.18bn per customer
(TTM). This high client concentration may appear to be a risk, but the fact is that most
of these top clients are sticky and it is difficult for enterprises to shift CPaaS vendors.
In our view, Route’s future performance is assured by the stickiness of its top clients,
new customer additions, and other revenue sources via other communication
mediums like WhatsApp. Aside from that, global expansion and bolt-on acquisitions
are two other factors that could boost revenue growth even further.
Client addition healthy across buckets: >$10mn and >$15mn clients driving growth
FY19 FY20 FY21 FY22 3QFY23
Nos

70
60
60
50
41
40
31
30
19 21
20 15
7 7 9
10 4 5 3 5 3 4
1 2 2 1 2
0
>$15 mn >$10 mn >$5 mn >$1 mn

Source: Company, HSIE research

Page | 15
Route Mobile: Initiating Coverage
Revenue concentration is high, top-50 clients out of ~3,000 Top 2-5 customers driving growth, all other buckets
billable clients contribute ~77% of revenue growth in line with the company average
Client concentration- TTM ended Dec 2022 4Y Revenue CAGR across client category
100%
60% 55%
77% 50%
80%
50% 43%
40% 39% 41%
60% 50% 40% 34%
41%
40% 27% 28% 30% 23%
23%
20% 13% 20%
9%

0% 10%

Top 2-5

Top 6-10

Non Top 50
Top 1

Top 5

Top 10

Top 50
Top 11-50
Top 1

Top 2-5

Top 5

Non Top 50
Top 6-10

Top 10

Top 50
Top 11-50

Source: Company, HSIE Research Source: Company, HSIE Research, 4Y CAGR is based on FY19-TTM
ended Dec 2022

Average revenue per client is higher than peers, Tanla Revenue concentration of top customers is gradually
generates ~0.74bn/top-20 customers coming down
Average revenue/client (INR bn) Top 1 Top 5 Top 10
5.10
4.28 70%
59%
4.10 60% 54% 54% 52%
50%
50%
3.10 2.60
2.18 40%
43% 44% 45%
2.10 1.58 42% 41%
30%
1.10 0.70 20%
0.49
0.22 23%
0.10 10% 19%
15% 13% 13%
Top 2-5

Top 6-10
Top 1

Top 5

Top 10

Top 50
Top 11-50

0%

TTM
FY19

FY20

FY21

FY22
Source: Company, HSIE Research Source: Company, HSIE Research

Page | 16
Route Mobile: Initiating Coverage

New areas to drive growth

Route mobile has a robust portfolio of new products. The contribution from these new
services stands at ~4.3% of total revenue and is growing at 50-60% YoY. Within the new
areas, WhatsApp is the most promising channel with a lot of enterprises shifting to the
WhatsApp business platform. New services like mobile identity, email analytics, and
network firewall deployments are also gaining traction across global enterprises and
MNOs. As per Juniper Research, SMS (A2P business messaging) is going to be a
dominant part of CPaaS spending but emerging technologies like RCS and OTT will
be the focus areas. The growth and investments in OTT and RCS will be much higher,
contributing ~20% of the CPaaS market over the next five years (currently at ~5%). Most
of the CPaaS vendors in India and globally are investing/acquiring companies to build
OTT and RCS capabilities.
New product portfolio
Enhanced Business Messaging Identity & Verification Voice Email
CCaaS (Contact Center-as-
RCS Business Messaging Brandi5 SendClean
a-Service Solution)
Mobile Identity as a
WhatsApp Business Platform Voice Broadcasting
Service
Viber Business Messages Verified Messages Flash Call (India)
Google Business Messages Verified Calls
Truecaller Verified
Facebook Messenger for Business Business Identity
Solution
Telegram for Business
Messenger API for Instagram
Messenger API for Instagram
Source: Company, HSIE Research

Revenue from new areas is witnessing >60% YoY growth New customer additions healthy, land and expand
the strategy to drive growth
New product Sales (INR mn) % of revenue
Nos New customers onboarded
450 4.9% 4.3% 6.0% 400
350
400 350
5.0%
350
3.6% 300
300 4.0% 250 250
250
250 200
3.0% 200 180
200 150 150
1.6% 150
150 2.0%
100 67 74
100
1.0%
166

425
108

130

113

277

296

321

358
89

50 50
49

- 0.0% -
Q2FY22

Q3FY23
Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23

Q3FY22

Q4FY22
Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q1FY23

Q2FY23

Q3FY23

Source: Company, HSIE Research Source: Company, HSIE Research

Page | 17
Route Mobile: Initiating Coverage

Multiple tailwinds to boost growth, margins

ILD and NLD volume growth, market share gains, new growth areas like OTT & RCS,
new customer additions, tie-ups with global MNOs, and higher net revenue retention
to power growth
Route Mobile’s growth will be driven by multiple factors such as (1) an increase in ILD
and NLD A2P messaging volume—supported by UPI volume, increasing smartphone
usage, shift towards online transactions, two-factor authentication, OTPs for app
logins/trades/mobile banking, Aadhaar-based authentication, etc.; (2) increase in India
market share, led by new client additions; (3) investments in new growth areas like
WhatsApp, RCS, Network Firewalls, email/SMS analytics, mobile identity, etc.; (4)
recurring additions of a new customer in the USD 5/10mn bucket; (5) investments in
new geographies and tie-ups (Telenor-A2P and Uganda Telecom-AI); (6) impressive
net revenue retention of 128%, reflecting customer stickiness; and (7) acquisitions (MR
Messaging—Europe), new technologies (DLT blockchain -Teledgers) and product line
expansion (Email - SendClean). The ILD and NLD pricing will remain stable and
growth will be volume-led. We expect Route to clock organic revenue CAGR of 25%
for FY22-25E, led by an increase in volume, stable pricing, and higher contribution
from new growth areas and entry into new geographies/partnerships.
The company operates in the gross margin range of 20-22%, which is in line with the
industry average. Route bills ~10paise/SMS to enterprises for A2P messages and earns
a gross profit of ~2paise/SMS, resulting in a gross margin of ~20%. The margins are
higher in promotional messages and clubbing of value-added services like marketing
campaigns management, analytics, etc., result in higher gross margins. The margins in
OTT services like WhatsApp and business messaging are higher; thus, the blended
gross margin for Route stands at ~22%. The gross margin for Route expanded ~260bps
over the last two years, led by a hike in ILD rates and higher revenue contribution from
OTT and RCS (new areas ~4% of revenue).
There have been instances where large telecom players have entered the CPaaS space
(SMS aggregation) and got contracts on price wars. One of the largest telecom
operators in India bid for a large PSU bank contract at almost half the rate. This led to
some disruption in the market but it was a one-off event and industry experts are not
expecting price wars in this space. SMS is a cash cow for telcos and they will constantly
take price hikes whenever required to protect the profitability from the A2P segment.
We do not believe that lower price will be a tool for telcos to gain traffic, as it will hurt
them much more than the SMS aggregators. We are expecting A2P gross margins to
remain at ~20% and the cream will come from OTT and new areas of growth. We are
assuming gross margins of ~22.2% for FY23-25E.
Route expects adjusted EBITDA margin to expand ~150bps in FY23E vs FY22 exit. The
adjusted EBITDA for Q4FY22 stood at 11.1% (adjusted for forex and ESOP cost) and
we are expecting the margin to expand to 12.2% in FY23E. The EBITDA-to-GP
conversion is also stable at 55-58%.

Page | 18
Route Mobile: Initiating Coverage
Organic revenue growth of 28/24% over FY17-22/FY22- Gross profit CAGR of 26% over FY17-22: operating
25E: driven by volume growth leverage to accelerate GP growth over FY22-25E
Route Mobile revenue (INR bn) Gross profit (INR bn) GM %

60 12.00 11.24 35.0%

50.63
9.49 30.0%
50 43.15 10.00
7.90 25.0%
40 35.51 8.00
20.0%
30 6.00
20.02 4.20 15.0%
20 14.06 4.00 2.77
8.45 9.56 10.0%
1.78 1.92
10 3.64 4.58 5.05 2.00 1.20 1.32 1.64
5.0%
0 0.00 0.0%
FY23E

FY24E

FY25E
FY20
FY16

FY17

FY18

FY19

FY21

FY22

FY22
FY16

FY17

FY18

FY19

FY20

FY21

FY23E

FY24E

FY25E
Source: Company, HSIE Research Source: Company, HSIE Research

EBITDA CAGR of 22%: EBITDA growth to accelerate EBITDA per transaction of ~4.2 paise: better than pre-
led by margin expansion COVID level
EBITDA (INR bn) EBITDA % Realisation (Paise) EBITDA per transaction (Paise)
50.0 6.0
43.5
7.00 6.33 25.0% 45.0
38.5 5.5
6.00 5.31 40.0
20.0% 33.8 33.4 33.3
5.00 31.9 33.0 5.0
4.34 35.0
15.0% 5.4
4.00 30.0 4.5
24.0
3.00 2.19 10.0% 25.0
1.74 4.0
2.00 20.0 4.2 4.1 4.2
0.78 0.80 0.71 0.86 1.00 5.0% 4.0
3.5
1.00 15.0
3.4 3.5 3.3
0.00 0.0% 10.0 3.0
FY17

FY21
FY16

FY18

FY19

FY20

FY22

FY25E
FY23E

FY24E

FY18

FY19

FY20

FY21

FY22

FY24E

FY25E
FY23E
Source: Company, HSIE Research Source: Company, HSIE Research

GM to expand ~125bps over FY22-25E and EBITDA EBITDA conversion healthy: 5Y average at ~55%
margin to expand ~158bps over the same period
GP % EBITDA % EBITDA/GP%
70%
24.0% 22.3% 22.0% 22.2% 65%
21.0% 21.0%
22.0% 20.1% 65% 63%
19.7% 61%
20.0%
60% 56% 56%
18.0% 55%
16.0% 55% 52%
49%
14.0%
50% 52%
12.0%
12.4% 12.2% 12.3% 12.5% 45%
10.0%
10.2% 10.5% 10.9% 44%
8.0%
40%
FY23E

FY24E

FY25E
FY19

FY20

FY21

FY22

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E

Source: Company, HSIE Research Source: Company, HSIE Research

Page | 19
Route Mobile: Initiating Coverage
Gross profit 12-quarter CQGR of 11%: almost GM expansion over the last four quarters: the operating
mirroring revenue growth historically range is ~21-22%
INR bn
24.0%

2.20
2.50 23.1%
22.4%

1.89
23.0% 22.0%

1.63
2.00
22.0% 21.1%

1.32
21.2% 22.4%

1.19
1.50 21.0% 20.1%
19.5%

0.92
0.80
20.4%

0.77
0.69 20.0% 21.1%
0.68

1.00
0.61

0.60
0.47
0.44
0.40

19.0%
19.3%
0.50 19.4%
18.0%
18.0%
17.0% 17.7%
0.00

Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q4FY20

Q1FY22
Q1FY20
Q2FY20
Q3FY20

Q1FY21
Q2FY21
Q3FY21
Q4FY21

Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Source: Company, HSIE Research Source: Company, HSIE Research

EBITDA growth trend: crossed INR 1bn milestone EBITDA margin volatile: improvement expected
INR bn EBITDA (INR bn) EBITDA %
1.25

1.40 15.0% 13.8%

14.0%
1.03

1.20 14.0% 12.6%

12.2%
0.85

1.00 13.0% 12.0% 12.9%

0.61

0.80 12.0% 10.8%

0.56
0.56

12.1%
0.50
0.46
0.45
0.42

0.60 11.0%
0.38
0.37

11.6%
11.6%
0.25

12.2%
0.21

0.40 10.0%
0.17

9.0% 8.7%
0.20 9.0%
9.5%
0.00 8.0% 9.0%
Q3FY20

Q3FY22
Q1FY20
Q2FY20

Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22

Q4FY22
Q1FY23
Q2FY23
Q3FY23

Q2FY20
Q1FY20

Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Source: Company, HSIE Research Source: Company, HSIE Research

Page | 20
Route Mobile: Initiating Coverage

Route vs Tanla
Route and Tanla command ~60% of India’s A2P market. Route is an international
player (~50% of its revenue comes from India) while Tanla is a domestic player. Route
has made multiple acquisitions (five companies in 2021-22), while Tanla has made
small tuck-in acquisitions (Tanla’s major acquisition was Karix in 2019). Both
companies have demonstrated strong growth over the last five years, thanks to the
surge in A2P traffic, adoption of CPaaS by enterprises, ILD price hikes, and rise of new
channels like WhatsApp and business messaging OTT applications.
Route margins are lower than Tanla’s because of less exposure to Platforms. Tanla
generates ~10% of revenue from the platform segment (DLT-Trubloq), which is a
higher-margin segment (~90% GM); apart from this, the EBITDA/GP conversion for
Tanla is better, resulting in better margins. Route is also entering the platform business
(acquired Teledgers, which is a blockchain-based DLT platform company), which will
help boost its margins. The gross margin for Route is ~2.1% lower than Tanla’s, while
the EBITDA margin is ~5% lower. The gross margin has expanded for Route in the last
few quarters while Tanla’s GM has declined due to client-specific issues and pricing
impact from one large client. Route has a diversified client base and the top-10 client
concentration is lower than Tanla’s but is still elevated. This is the nature of the
business, where a few large enterprise clients generate the bulk of the A2P message
volume.
Route vs Tanla
Parameters (FY23E) Route Tanla
Revenue (INR mn) 35,510 33,783
5Y CAGR % (FY18-23E) 47.7% 33.7%
GP (INR mn) 7,902 8,219
GP % 22.3% 24.3%
GP % expansion FY23E (bps) 130 (399)
GP % expansion FY20-23E (bps) 216 420
EBITDA (INR mn) 4,335 5,751
EBITDA % 12.2% 17.0%
EBITDA/GP (%) 55% 70%
EBITDA % expansion FY23E (bps) 129 (482)
EBITDA % expansion FY20-23E (bps) 176 750
APAT 3,606 4,454
APAT Margin % 10.2% 13.2%
5Y APAT CAGR % (FY18-23E) 49.3% 87.7%
No of Employees (3QFY23) 729 610
Cost/Employee 2.5 2.2
Domestic Rev % 50% 98%
OCF/EBITDA (5Y average) 72% 69%
Client concentration (Q3FY23)* 50% 60%
DSO Days 85 62
Mcap (INR bn) 75.62 87.90
RoE % 20.8 28.4
P/E x (FY24E) 21 16
Source: Company, HSIE Research *Route: Top 10, Tanla: Top 20.

Page | 21
Route Mobile: Initiating Coverage

Route expenses break-up: FY23E Tanla expenses break-up FY23E

Employee Cost,
Employee Cost,
5.1%
4.0%
Auditor + Legal &
Prof Expenses, 1.0% Auditor + Legal &
Purchases of Prof Expenses, 0.9%
Cost of
messaging Services,
services, 77.7% Communication charges 75.7% Communication
+Travel + Business
charges +Travel +
Promotion, 0.7%
Business Promotion,
0.1%
Other Expenses,
3.2% Other Expenses,
2.3%

Source: Company, HSIE Research Source: Company, HSIE Research

Gross margin: Route vs Tanla EBITDA margin: Route vs Tanla

Route Tanla Route Tanla
35.0% 32.5% 25.0%
33.0%
21.8%
28.3% 21.4%
30.0% 25.4%
20.0% 18.5% 18.5%
24.7% 24.3% 17.0%
26.6%
25.0% 15.2%
14.2%
15.0%
20.0% 22.3%
21.0% 22.2%
14.3% 19.7% 12.4%
10.0% 12.2% 12.5%
15.0%
12.1% 8.2% 10.9%
9.6%
10.0% 5.0%
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E

Source: Company, HSIE Research Source: Company, HSIE Research

Route’s 77% of the employees are engaged in Attrition remains at elevated levels: Q3FY23 attrition
technology and sales, and ~60% are in India stood at 8%
Employee breakup 3QFY23 (Total 729) Attrition Rate
Tech and 45.0% 40.3%
Firewall, 28
Support, 293 40.0%
35.0%
28.4%
30.0% 24.8%
General &
25.0% 21.0%
Admin, 64 18.9%
20.0%
15.0% 11.0%
Finance & 10.0%
Accounting, 61 5.0%
0.0%
FY20
FY18

FY19

FY21

FY22

9MFY23

Sales, 261
Corporate,
22

Source: Company, HSIE Research Source: Company, HSIE Research

Page | 22
Route Mobile: Initiating Coverage

Profitability and return ratios

We expect Route to deliver a PAT CAGR of 29% over FY22-25E, led by growth and
margin improvement. The company has a track record of delivering strong growth; it
delivered ~28% PAT CAGR over the last five years along with healthy cash flows. The
average OCF/EBITDA is ~72%, resulting in a 4Y OCF CAGR of 48%. The company
expects to generate healthy cash and OCF/EBITDA target is ~50-75%; we have
estimated the OCF/EBITDA to be in the 60-70% range. The RoE came down from 29%
in FY21 to ~18% in FY22 due to acquisitions and fundraising (QIP in 2021). The
company raised ~INR 9bn via QIP in Nov-21 post the IPO to fund the acquisitions. The
total amount spent on acquisitions in the last three years is ~INR 5.3bn. The net cash in
the company stands at ~INR 10bn, which is ~14% of market capitalisation. The RoE
excluding net cash is >40%, which is healthy.
Route has rewarded its shareholders with dividends and a share buyback. The
company has given guidance to distribute ~40% of its FCF to shareholders. In FY22, it
paid INR 304mn as dividends and completed the first buyback of INR 1.2bn in H1FY23.
The buyback was done via open market transactions and the company bought ~0.9mn
shares at an average price of ~INR 1,394 (~15% premium to CMP). The total size of the
buyback was INR 1.2bn (INR 1.5bn including taxes).
APAT CAGR of 29% over FY22-25E: delivered CAGR Improving cash flow: target of 50-75% OCF/EBITDA in
of 28% over the last five years FY23E
APAT (INR bn) APAT % OCF (INR bn) OCF/EBITDA %
5.00 18.0% 5.00 140.0%
4.41
16.0%
120.0%
4.00 3.61 3.66 14.0% 4.00 73.1%
98.5% 100.0%
12.0%
3.00 3.00 62% 62%
10.0% 80.0%
2.05
8.0% 60.0%
2.00 2.00
1.33 6.0% 39.3%
40.0%
1.00 0.61 0.60 0.49 0.57 0.73 4.0% 1.00
0.28

2.70
0.23

0.98

2.29

1.35

3.56

4.63
20.0%
2.0%
0.00 0.0% 0.00 0.0%
FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E
FY20
FY16

FY17

FY18

FY19

FY21

FY22

FY24E
FY23E

FY25E

Source: Company, HSIE Research, FY20 PAT is adjusted for Source: Company, HSIE Research
accelerated depreciation of INR 2,908mn

RoE of ~20% and RoE excluding cash is >40% Cash & cash equivalents is ~60% of net worth
RoE% RoE% (ex-cash) Cash & Cash Eq (INR bn) % of Net worth
95.0% 16.0 14.44 80.0%
81.7%
85.0% 14.0 70.0%
12.22
75.0% 61.6% 12.0 60.0%
52.1% 10.40 10.62
65.0%
10.0 50.0%
55.0% 42.9% 47.4%
45.3% 8.0 40.0%
45.0%
28.5% 6.0 4.80 30.0%
35.0%
19.1% 20.2% 4.0 20.0%
25.0%
29.7% 1.15
15.0% 2.0 1.03 1.06 10.0%
20.8%
5.0% 0.0 0.0%
FY19
FY18

FY20

FY21

FY22

FY23E

FY24E

FY25E

FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E

Source: Company, HSIE Research Source: Company, HSIE Research

Page | 23
Route Mobile: Initiating Coverage
Company timeline

Source: Company presentation

Route - CPaaS Platform

Source: RHP

Page | 24
Route Mobile: Initiating Coverage

Board of directors
Name Designation Qualification Experience Description
Before incorporating Route Mobile, he worked with PwC and Covansys
Sandipkumar Promoter, Chartered (India) Private Limited. He has over 20 years of experience in audit and
20+ years
Gupta Chairman Accountant accounts, business analysis, SAP configuration, and software system
consulting.
Rajdipkumar MD, Group B.Sc (Physics), Co-founder of Route Mobile, Rajdip has more than 20 years of experience in
20+ years
Gupta CEO Software engineering the field of software designing and development.
He was Route Mobile’s immediate past Chairman, and has been a Director
Chandrakant Independent on the Board since 2007. He is a seasoned entrepreneur, business strategist,
NA NA
Gupta Director and Investor in early-stage tech and hospitality businesses spread across
India and abroad.
He is an independent consultant in the private equity, M&A and business
development space. He has >28 years of experience in Investment Banking,
Independent Post graduate-
Arun Gupta 28+ years Media, Gaming, Animation, Education, Internet & Technology companies.
Director (Mumbai University)
In the past, he has held senior management positions at Yahoo, STAR, MTV,
Mauj Mobile, Equirus Capital, Future Group and Cnet.
She is currently a partner in M/s. Pravin R. Navandar & Co., with main focus
Chartered
on audits, company law cases, income leakage and corporate advisory
Sudha Independent Accountant, CPA
~34 years services.
Navandar Director (US), Insolvency
She is also an Independent Director on the board of Goa Glass Fibre Limited
Professional
and Tribhovandas Bhimji Zaveri Limited.
Has >14 years of experience in Investment Banking
Chartered
Independent Previously worked with Ladderup Corporate Advisory Pvt Ltd, Mape
Nimesh Salot Accountant, Cost ~14 years
Director Advisory Group Pvt Ltd, Rabo Finance Ltd, Ernst and Young, India, DSJ
Accountant
Communications Ltd and Kayjay Financial Research Services Pvt Ltd.
He was on the Executive Committee of NASSCOM, the National Committee
Bhaskar Independent B.Tech, EEE- IIT of CII and AMCHAM. Recently retired from the Central Board of SBI. He
~50 years
Pramanik Director Kanpur retired as Chairman of Microsoft India in Sep 2017 after a successful 45 years
career in the Tech industry
Source: Company, HSIE Research

Key management team

Name Designation Qualification Experience Description
Over 14 years of experience handling functions across strategy, investment
Chief Strategy banking, mergers and acquisitions and structured finance. Responsible for
Gautam
Officer, Chief IR B.E, MBA - Finance 14+ years formulating and executing corporate strategies and leading various other
Badalia
Officer strategic initiatives (M&A, transformation and cost reduction) to support
long term growth. Prior experience with YES Bank
Has 25 years of experience in domestic and international markets with
Milind Chief Business BE, MBA Finance-
25 years OnlineSales.ai, where he was the Chief Revenue Officer. Also worked with
Pathak Officer JBIMS
Paytm / Madhouse Mobile (GroupM), Comviva, Buongiorno etc.
Leads the finance and accounts team and is responsible for activities
Suresh Chartered
CFO 25 years pertaining to the accounts of our Company in India. Prior experience with
Jankar Accountant
Capricorn Lifestyle Pvt ltd
Has a knowledge base spanning Linux, virtualization, SAN technologies
Mujahid
CTO NA 20 years and routing. Has designed and implemented solutions for companies like
Rupani
CEAT, Bayer Pharma, Poonawalla Group, amongst others.
Over 30 years of international senior executive leadership experience in
John CEO (Europe, MBA - Stanford
30 years leading global organizations. Prior to Route, John held senior executive roles
Owen Americas) University
in organizations like Mastek, Serco, HP, Sycamore Networks and Nortel
Responsible for driving sales and operations for the India market. Prior
Tushar Executive VP MBA - Bundelkhand experience with Tata Teleservices (Maharashtra) Ltd, Reliance JioInfocom
25 years
Agnihotri (india and APAC) University Ltd, Arvind Mills Ltd, Kodak India Ltd, Reliance Infocomm Ltd and
Blowplast Ltd
Leads RML’s Middle East region and responsible for building up Middle
Sharad Executive VP and BE (ECE)- University
East and Operations and expanding further into Africa market. Prior
Kumar Business Head of Mumbai, MBA- 17+ years
experience with Bharti Airtel Ltd, Reliance Communications Ltd and the
Thukral (Middle East) XLRI, Jamshedpur
United Nations
Heads RML’s global Operations, and is responsible for day-to-day
Sammy Executive VP- MBA- University of
18+ years management and coordination between worldwide offices Prior experience
Mamdani Global Operations Central Florida
with Protiviti, Cellent Technologies
Source: Company, HSIE Research

Page | 25
Route Mobile: Initiating Coverage

Valuation and recommendation

We expect a 24% organic revenue CAGR over FY22-25E, led by (1) the adoption of
CPaaS platform by enterprises; (2) an increase in transactional and promotional A2P
messages across industries like banking (UPI & mobile banking), e-commerce,
banking, healthcare and travel, a surge in OTT business messaging (WhatsApp); (3)
new client additions and global MNO tie-ups; and (4) market share gains in the
domestic market. The acquisition of four companies will lead to a revenue CAGR of
36% over FY22-25E with ~77% growth in FY23E. We expect margins to be stable over
FY23-25E (~130 bps expansion in FY23E) and expansion will be a function of a price
hike and an increase in OTT and RCS volume (which is higher-margin). The EBITDA
margin is expected to increase from 10.9% in FY22 to 12.5% in FY25E, led by GM
expansion of 120bps. Over FY22-25E, we project revenue/EBITDA/EPS CAGRs of
+36/43/29%. We initiate coverage on Route Mobile with a BUY rating and target price
of INR 1,700, based on 25x Dec-24E EPS. The target price factors DCF-based
revenue/EBITDA/FCF CAGR of 18/19/22% over FY23-32E. At CMP the implied
revenue/EBITDA/FCF CAGR over FY23-32E is 13/13/16%.
The globally listed CPaaS player's valuation has crashed in the last year due to the
global recession fear. The P/S multiples for global CPaaS players are down ~60% YoY
and ~75% from their peak valuations. The global stocks are now trading at an average
P/S of ~1.6x FY24E. Some of the largest players like Twilio/Ringcentral/Sinch/Five9
trade at a P/S of ~2.5/1.6/1.3/6.1x (~40% premium to median valuations). The global
CPaaS industry is expected to clock a revenue CAGR of ~18% FY22-25E following a
35% CAGR over FY17-22 CAGR. With a greater focus on profitability, the CPaaS
aggregate EBITDA margin is expected to improve from -3.9% in FY22 to 13.6% in
FY24E. Route is trading at a P/S of 1.8x FY24E, which is a ~30% discount to Twilio but
a ~10% premium to the global median.
Valuation Scenario
Parameters Bear Base Bull
Volume CAGR % (FY23-25E) 13.8% 18.8% 22.1%
Pricing CAGR % (FY23-25E) -0.2% 0.6% 0.9%
Revenue growth % (FY23-25E) 13.7% 19.4% 23.0%
GM % FY24E 21.0% 22.0% 22.5%
EBITDA % FY24E 11.3% 12.3% 12.8%
EPS Dec-24 (INR) 52.5 67.9 78.7
Target P/E (x) 20 25 28
TP (INR) 1,050 1,700 2,200
CMP 1,216 1,216 1,216
Upside % -14% 40% 81%
Source: HSIE Research

Page | 26
Route Mobile: Initiating Coverage
Global valuation multiples
EV/EBITDA (x) P/E (x) P/S (x) ROE (%) $ Rev
Mcap
Company CAGR%
Country (USD
Name FY22 FY23E FY24E FY25E FY22-
bn) FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E
25E
Twilio US 11.0 NM 34.2 21.0 15.1 NM NM 535.3 85.3 3.9 2.9 2.5 2.1 (9.8) (0.8) 0.1 0.8 22.4
Ringcentral US 3.7 NM 14.6 10.7 9.0 NM 19.4 13.6 11.1 2.3 1.9 1.6 1.4 (115.6) (6.8) 188.9 49.2 19.3
Sinch Sweden 3.9 50.9 17.2 13.1 11.1 30.6 NM 28.4 20.0 2.0 1.4 1.3 1.1 4.4 (13.9) 2.4 3.8 21.3
Five9 US 5.5 NM 43.1 35.8 27.3 NM 57.4 50.0 38.1 9.1 7.1 6.1 5.2 (21.6) 38.3 18.1 20.3 20.6
Verint Systems US 2.5 21.3 12.9 11.6 10.7 NM 15.2 14.0 12.5 2.9 2.8 2.6 2.4 (0.4) 17.2 18.1 18.1 5.5
8X8 US 0.5 NM 19.2 12.3 10.6 NM 21.7 12.4 8.2 0.8 0.7 0.7 0.6 (102.3) (29.2) (49.5) 32.4 9.7
Bandwidth US 0.6 22.6 28.1 22.6 14.0 NM 61.4 43.0 19.9 1.2 1.0 0.9 0.9 (6.5) 3.8 11.0 18.6 11.7
Link Mobility Norway 0.3 15.6 8.8 7.5 6.5 NM 20.0 12.9 9.1 0.5 0.5 0.5 0.4 (1.7) 2.9 1.9 3.6 7.2
Kaleyra Italy 0.1 NM 9.0 8.1 6.2 NM 22.6 NM NM 0.2 0.2 0.1 0.1 NA NA NA NA 14.0
Median 22.6 17.2 12.3 10.7 30.6 20.7 21.2 16.2 2.0 1.4 1.3 1.1 (8.1) 1.1 6.7 18.4 14.0
Source: Bloomberg, HSIE Research

India internet valuations

Rev EPS
MCap EPS (INR) P/E (x) RoE (%) P/S (x)
CMP TP CAGR% CAGR%
Company (INR
(INR) (INR) RECO FY22- FY22-
bn) FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E 25E 25E
InfoEdge 471 3,663 4,525 BUY 40.4 52.1 60.2 73.4 90.6 70.4 60.9 49.9 10.3 11.4 11.9 13.0 30.2 21.9 19.6 17.3 20.4 22.0
Affle India 140 1,050 NA NR 16.1 18.6 24.9 32.8 65.2 56.3 42.2 32.0 27.8 18.5 20.1 21.6 12.9 9.4 7.4 5.8 30.9 26.7
Indiamart 137 4,446 5,500 BUY 96.7 78.9 101.4 131.5 46.0 56.4 43.8 33.8 17.0 12.1 13.8 15.9 18.1 14.0 11.5 9.6 23.6 10.8
Tanla 88 649 990 BUY 39.8 32.9 40.9 49.3 16.3 19.7 15.9 13.2 48.0 28.4 27.0 25.3 2.7 2.6 2.2 1.9 13.1 7.4
Easy Trip 85 49 NA NR 0.6 0.9 1.1 1.4 80.5 56.0 43.6 35.0 53.2 47.6 43.9 42.0 36.2 20.3 13.0 13.3 39.5 32.0
Route 76 1,216 1,700 BUY 32.9 58.0 58.9 70.9 37.0 21.0 20.7 17.2 17.6 20.8 19.1 20.2 3.8 2.1 1.8 1.5 36.2 29.1
MapMyIndia 61 1,129 NA NR 16.3 21.2 30.1 40.4 69.1 53.2 37.5 28.0 21.7 22.8 25.6 27.0 30.2 21.1 15.1 10.7 41.4 35.2
Just Dial 52 619 NA NR 9.5 11.0 31.1 36.9 65.2 56.3 19.9 16.8 3.0 2.6 7.3 8.4 8.1 6.2 5.0 4.2 24.3 57.3
Nazara 39 593 NA NR 4.5 8.9 11.3 14.7 NM 66.7 52.6 40.3 3.3 5.3 6.5 7.7 6.3 3.6 2.8 2.2 41.3 48.0
eMudhra 22 281 NA NR 5.9 9.4 14.0 20.5 47.6 29.9 20.1 13.7 31.9 26.9 27.0 35.4 12.0 8.6 6.1 4.3 40.6 51.5
Matrimony 12 550 NA NR 23.4 22.4 29.5 35.8 23.5 24.6 18.7 15.4 18.7 15.0 16.4 15.2 2.8 2.6 2.3 2.0 11.5 15.1
Internet Avg 61.0 46.4 34.2 26.8 23.0 19.2 19.9 21.1 14.9 10.2 7.9 6.6 29.3 30.5
Internet
65.2 56.0 37.5 28.0 18.7 18.5 19.1 20.2 12.0 8.6 6.1 4.3 30.9 29.1
Median
Source: Bloomberg, HSIE Research, *IndiaMart, Infoedge, Tanla, Route are HSIE estimates

Global CPaaS at a glance

Revenue
Market Revenue EBITDA EBITDA FY24E
CAGR % FY24E P/S
CPaaS Player Country Cap CAGR % Margin Margin EV/EBITDA
(FY22- (x)
(USD bn) (FY17-22) FY22 % FY24E % (x)
25E)
Twilio US 11.0 59.3% 22.4% -21.0% 8.6% 21.0 2.5
Ringcentral US 3.7 33.2% 19.3% -8.1% 21.2% 10.7 1.6
Sinch Sweden 3.9 51.5% 21.3% 5.0% 11.9% 13.1 1.3
Five9 US 5.5 30.3% 20.6% 0.2% 17.8% 35.8 6.1
Verint Systems US 2.5 -3.8% 5.5% 16.5% 28.1% 11.6 2.6
8X8 US 0.5 20.3% 9.7% -14.4% 10.3% 12.3 0.7
Bandwidth US 0.6 26.4% 11.7% 8.3% 6.6% 22.6 0.9
Route Mobile India 1.0 34.3% 36.2% 10.9% 12.3% 11.9 1.8
Tanla Platforms India 1.1 40.8% 13.1% 21.8% 18.1% 9.9 2.2
Link Mobility Norway 0.3 34.6% 7.2% 6.9% 12.9% 7.5 0.5
Kaleyra Italy 0.1 NM 14.0% -6.7% 6.3% 8.1 0.1
Aggregate
Global 30.0 34.4% 18.0% -3.9% 13.6% 11.9 1.6
(USD bn)
Source: Company, Bloomberg, HSIE Research, Route and Tanla Platforms on HSIE estimates, assumed
USD INR of 80

Page | 27
Route Mobile: Initiating Coverage
Valuation charts

Route Mobile- P/E 1-yr fwd Route Mobile- EV/EBITDA 1-yr fwd
P/E (1-yr fwd) PE Mean 1SD + EV/EBITDA (1-yr fwd) EV/EBITDA mean
1SD + 1SD -
1SD - 2SD + 2SD - 2SD + 2SD -
75.0 55.0
65.0 45.0
55.0
35.0
45.0
25.0
35.0
25.0 15.0

15.0 5.0
Apr-21

Apr-22
Jan-21

Jan-22

Jan-23
Jul-21

Oct-21

Jul-22

Oct-22

Apr-21

Apr-22
Jan-21

Jan-22

Jan-23
Oct-21

Oct-22
Jul-21

Jul-22
Tanla Platforms- P/E 1-yr fwd Tanla Platforms- EV/EBITDA 1-yr fwd
P/E (1-yr fwd) PE Mean 1SD +
EV/EBITDA (1-yr fwd) EV/EBITDA mean
1SD - 2SD + 2SD - 1SD + 1SD -
2SD + 2SD -
35.0
40.0

30.0 25.0

20.0 15.0

10.0
5.0
Oct-21

Oct-22
Apr-21
Jan-21

Jan-22

Apr-22

Jan-23
Jul-21

Jul-22

Apr-21

Apr-22
Jan-21

Jan-22

Jan-23
Jul-21

Oct-21

Jul-22

Oct-22
Source: Bloomberg, HSIE Research

Page | 28
 Route Mobile: Initiating Coverage
Valuation- Global Peers

Twilio- P/S 1-yr fwd Ringcentral- P/S 1-yr fwd

P/S (1-yr fwd) 3 Yr Mean 1SD + P/S (1-yr fwd) 3 Yr Mean 1SD +
1SD - 2SD + 2SD - 1SD - 2SD + 2SD -
35 35

25 25

15 15

5 5

-5 Apr-22 -5
Apr-20

Apr-21
Jan-20

Jan-21

Jan-22

Jan-23

Jan-20

Apr-20

Apr-21

Apr-22
Jul-20

Jan-21

Jan-22

Jan-23
Oct-20

Jul-21

Oct-21

Jul-22

Oct-22

Jul-20

Oct-20

Jul-21

Oct-21

Jul-22

Oct-22
Sinch- P/S 1-yr fwd Five9- P/S 1-yr fwd
P/S (1-yr fwd) 3 Yr Mean 1SD + P/S (1-yr fwd) 3 Yr Mean 1SD +
1SD - 2SD + 2SD - 1SD - 2SD + 2SD -
10 30
8 25
6 20
4 15
2 10
0 5
-2 0
Apr-20

Apr-21

Apr-22
Apr-20

Apr-21

Jan-20
Apr-22

Jan-21

Jan-22

Jan-23
Jan-20

Jan-21
Jul-20

Jul-21

Jan-22

Jul-22

Jan-23

Jul-20

Oct-20

Jul-21

Oct-21

Jul-22

Oct-22
Oct-20

Oct-21

Oct-22

Verint- P/S 1-yr fwd 8x8- P/S 1-yr fwd

P/S (1-yr fwd) 3 Yr Mean 1SD + P/S (1-yr fwd) 3 Yr Mean 1SD +
1SD - 2SD + 2SD - 1SD - 2SD + 2SD -
5 8
7
4 6
5
3 4
3
2 2
1
1 0
Jan-20

Apr-20

Apr-21

Apr-22
Jan-21

Jan-22

Jan-23

Apr-20

Apr-21
Jan-20

Jan-21

Apr-22
Jul-20

Oct-20

Jul-21

Oct-21

Jul-22

Oct-22

Jul-20

Jul-21

Jan-22

Jul-22

Jan-23
Oct-20

Oct-21

Oct-22

Source: Bloomberg, HSIE Research

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Financials
Consolidated Income Statement
YE March (INR mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Net Revenues 5,049 8,447 9,563 14,062 20,020 35,510 43,147 50,631
Growth (%) 10.4 67.3 13.2 47.1 42.4 77.4 21.5 17.3
Cost of services 505 554 582 615 1,261 1,806 2,022 2,378
Connectivity and related expenses 3,407 6,670 7,642 11,291 15,825 27,609 33,655 39,391
Other operating Expenses 423 359 339 416 747 1,761 2,157 2,532
EBITDA 715 863 1,000 1,741 2,187 4,335 5,313 6,331
EBITDA Margin (%) 14.2 10.2 10.5 12.4 10.9 12.2 12.3 12.5
EBITDA Growth (%) (11.1) 20.8 15.8 74.2 25.6 98.2 22.6 19.1
Depreciation 125 172 227 258 383 824 961 1,072
EBIT 590 691 773 1,483 1,804 3,511 4,352 5,258
Other Income (Including EO Items) 45 77 (30) 160 201 333 409 417
Interest 61 116 49 28 52 227 260 262
PBT 575 652 694 1,615 1,953 3,617 4,502 5,414
Tax (Incl Deferred) 99 97 112 288 251 497 810 974
Minority Interest (12) (14) (1) (6) 39 27 30 33
Share of profit / (Loss) of associate 0 0 0 0 0 0 0 0
RPAT 487 569 583 1,333 1,662 3,093 3,661 4,406
EO (Loss) / Profit 0 0 (149) 0 (384) (513) 0 0
APAT 487 569 732 1,333 2,046 3,606 3,661 4,406
APAT Growth (%) (19.4) 16.9 28.5 82.2 53.5 76.2 1.5 20.3
Adjusted EPS (INR) 7.8 9.2 11.8 21.4 32.9 58.0 58.9 70.9
EPS Growth (%) (19.4) 16.9 28.5 82.2 53.5 76.2 1.5 20.3
Source: Company, HSIE Research

Consolidated Balance Sheet

YE March (INR mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
SOURCES OF FUNDS
Share Capital - Equity 500 500 500 577 629 622 622 622
Reserves 1,209 1,728 2,194 5,944 16,097 17,325 19,743 22,594
Total Shareholders’ Funds 1,709 2,228 2,694 6,521 16,726 17,947 20,364 23,216
Minority Interest (7) (19) (22) (27) 21 48 78 111
Total Debt 830 777 411 40 0 0 0 0
Net Deferred Taxes (Net) (20) (35) (33) (44) 596 596 596 596
Long Term Provisions & Others 18 22 79 139 163 195 211 226
TOTAL SOURCES OF FUNDS 2,531 2,974 3,128 6,630 17,505 18,786 21,249 24,149
APPLICATION OF FUNDS
Net Block 989 878 912 1,026 4,512 4,398 4,300 4,240
CWIP 0 21 0 11 0 0 0 0
Goodwill 831 821 845 903 5,011 5,011 5,011 5,011
Investments 0 0 0 0 0 0 0 0
LT Loans & Advances & Others 196 299 420 538 323 994 1,208 1,418
Total Non-current Assets 2,016 2,020 2,176 2,477 9,845 10,403 10,519 10,669
Inventories 0 0 0 0 0 0 0 0
Debtors 973 1,447 2,037 2,173 4,871 8,270 9,812 11,097
Other Current Assets 197 307 859 720 1,421 2,415 2,934 3,443
Cash & Equivalents 1,026 1,063 1,145 4,805 10,396 10,622 12,224 14,441
Total Current Assets 2,196 2,817 4,041 7,697 16,687 21,306 24,969 28,981
Creditors 561 597 1,812 2,385 3,851 6,330 7,099 7,636
Other Current Liabilities & Provns 1,121 1,265 1,277 1,160 5,176 6,594 7,140 7,866
Total Current Liabilities 1,682 1,862 3,089 3,544 9,027 12,924 14,239 15,501
Net Current Assets 515 955 952 4,153 7,660 8,383 10,730 13,480
TOTAL APPLICATION OF FUNDS 2,531 2,974 3,128 6,630 17,505 18,786 21,249 24,149
Source: Company, HSIE Research

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Consolidated Cash Flow
YE March (INR mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Reported PBT 575 652 694 1,615 1,952 3,617 4,502 5,414
Non-operating & EO items (4) (48) (58) (59) 66 (333) (409) (417)
Interest expenses 58 112 43 26 51 227 260 262
Depreciation 125 172 227 258 383 824 961 1,072
Working Capital Change (388) (594) 259 627 (658) (1,136) (944) (727)
Tax Paid (84) (66) (179) (173) (450) (497) (810) (974)
OPERATING CASH FLOW (a) 281 228 985 2,294 1,346 2,702 3,559 4,629
Capex (877) (105) (269) (722) (4,301) (710) (863) (1,013)
Free cash flow (FCF) (596) 123 716 1,572 (2,956) 1,992 2,696 3,616
Investments 0 0 0 0 0 0 0 0
Non-operating Income 36 27 21 52 115 333 409 417
INVESTING CASH FLOW (b) (841) (78) (249) (671) (4,187) (377) (454) (595)
Debt Issuance/(Repaid) 549 (60) (416) (439) (86) 0 0 0
Interest Expenses (10) (20) (42) (28) (19) (227) (260) (262)
FCFE (56) 42 258 1,104 (3,061) 1,765 2,436 3,354
Share Capital Issuance/QIP/ESOPS 0 0 (50) 2,578 8,646 (7) 0 0
Dividend + Buyback (75) (90) (165) 0 (304) (1,865) (1,244) (1,555)
FINANCING CASH FLOW (c) 464 (171) (674) 2,110 8,237 (2,099) (1,503) (1,817)
NET CASH FLOW ((a) + (b) + (c)) (95) (21) 63 3,733 5,396 226 1,602 2,217
EO Items, Others 12 58 20 (74) 195 0 0 0
Closing Cash & Equivalents 1,026 1,063 1,145 4,805 10,396 10,622 12,224 14,441
Source: Company, HSIE Research

Key Ratios
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
PROFITABILITY (%)
GPM 90.0 93.4 93.9 95.6 93.7 94.9 95.3 95.3
EBITDA Margin 14.2 10.2 10.5 12.4 10.9 12.2 12.3 12.5
APAT Margin 9.6 6.7 7.7 9.5 10.2 10.2 8.5 8.7
RoE 28.5 28.9 29.7 28.9 17.6 20.8 19.1 20.2
RoIC (or Core RoCE) 52.8 34.4 33.3 64.0 35.2 39.7 41.5 46.0
RoCE 27.0 24.3 25.3 27.8 17.3 21.0 19.4 20.4
EFFICIENCY
Tax Rate (%) 17.3 14.9 16.1 17.8 12.9 13.7 18.0 18.0
Fixed Asset Turnover (x) 0.5 0.6 0.8 1.3 0.5 0.8 0.9 1.0
Inventory (days) 0 0 0 0 0 0 0 0
Debtors (days) 70 63 78 56 89 85 83 80
Other Current Assets (days) 14 13 33 19 26 25 25 25
Payables (days) 41 26 69 77 70 65 60 55
Other Current Liab & Provns (days) 81 55 49 30 94 68 60 57
Cash Conversion Cycle (days) -37 -5 -7 -32 -50 -23 -13 -7
Debt/EBITDA (x) 1.2 0.9 0.4 0.0 0.0 0.0 0.0 0.0
Net D/E (x) -0.1 -0.1 -0.3 -0.7 -0.6 -0.6 -0.6 -0.6
Interest Coverage (x) 10 6 16 54 35 15 17 20
PER SHARE DATA (INR)
EPS 7.8 9.2 11.8 21.4 32.9 58.0 58.9 70.9
CEPS 9.8 11.9 15.4 25.6 39.1 71.2 74.3 88.1
Dividend 1.5 1.5 3.5 3.5 4.0 6.0 20.0 25.0
Book Value 27.5 35.8 43.3 104.9 269.0 288.6 327.5 373.4
VALUATION
P/E (x) 155.3 132.8 103.4 56.7 37.0 21.0 20.7 17.2
P/BV (x) 44.2 33.9 28.1 11.6 4.5 4.2 3.7 3.3
EV/Revenue (x) 14.9 8.9 7.8 5.0 3.3 1.8 1.5 1.2
EV/EBITDA (x) 105.5 87.3 74.9 40.7 29.8 15.0 11.9 9.7
OCF/EV (%) 0.4 0.3 1.3 3.2 2.1 4.2 5.6 7.6
FCF/EV (%) (0.8) 0.2 1.0 2.2 (4.5) 3.1 4.3 5.9
FCFE/Mkt Cap (%) (0.1) 0.1 0.3 1.5 (4.0) 2.3 3.2 4.4
Dividend Yield (%) 0.1 0.1 0.3 0.3 0.3 0.5 1.6 2.1
Source: Company, HSIE Research

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1 Yr Price movement

Route Mobile
2500

2000

1500

1000

500

0
Aug-22

Sep-22

Dec-22
Apr-22

Jun-22
Jan-22

May-22

Jan-23
Mar-22

Nov-22
Oct-22
Feb-22

Jul-22

Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential

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