Route Mobile Ltd.’s initial public offering (IPO) was fully subscribed on the very first day of bidding as it attracted a large influx of retail investors oversubscribing their portion.
Route Mobile Ltd.’s initial public offering (IPO) was fully subscribed on the very first day of bidding as it attracted a large influx of retail investors oversubscribing their portion. The Rs 600-crore issue includes a fresh issue of Rs 240 crore and an Offer For Sale (OFS) of up to Rs 360 crore. It enters the market at a time when liquidity is abundant and IPOs are being welcomed with an overwhelming response, as is evident from the Happiest Minds Technologies issue which was subscribed 151 times. Route Mobile has already managed to collect Rs 180 crore from anchor 15 investors, before the issue opened yesterday.
The cloud communications service provider looks like an attractive bet according to analysts. “Route Mobile is well diversified globally/across industries, with presence in high potential markets,” said brokerage and research firm Motilal Oswal in a note. Route Mobile has a strong network of clients which provides the company with access to over 800 mobile networks. The A2P SMS market, where Route Mobile offers its services, is currently the largest segment; expected to grow at 4.4% CAGR over FY18-FY23.
Retail investors have so far subscribed their portion 1.81 times while Non-Institutional Investors have subscribed 47% of their issue and Qualified Institutional Buyers have only bid for 12% of their quota. However, interest from QIBs and NIIs comes largely on the last day of bidding. The issue is open for subscription till tomorrow. “We expect the traction is going to be good for the IPO as a lot is left on the table for the investors. We also expect the IPO to be subscribed manifold. As we are positive on the future outlook for the industry as well as the company,” said Keshav Lahoti – Associate Equity Analyst, Angel Broking. The price bad for the issue is Rs 345-350 per share.
Diversified and global client base across industries, experienced promoters and management team, strong return ratios i.e. above 25% ROE and RoCE coupled with negative working capital cycle, and a scalable delivery platform supported by robust infrastructure are some of the key strengths of the company. The Financials of Route Mobile have also been strong. Over Fiscal year 2018-2020, the company’s revenue/EBITDA/PAT grew at a CAGR of 38%/15%/22%, according to Motilal Oswal. The balance sheet is lean with negligible debt and healthy return ratios (RoE/RoCE at 29%/24%).
The IPO will help Route Mobile gain the first mover advantage, as it will be the only company to be listed in this space. “In terms of the valuations, on the higher price band, if we annualize Q1FY21 EPS and attribute it on a fully diluted equity post IPO, then asking price is at a P/E of around 18.5x,” said Ashika Institutional Equities in a note. Ashika Institutional Equities, Motilal Oswal, and Angel Broking all recommend subscribing to the issue.