Route Mobile IPO subscribed 4 times on Day 2: Key things to know2 min read . Updated: 10 Sep 2020, 05:34 PM IST
- Route Mobile is offering shares at a price band of ₹345-350 apiece.
- The ₹600 crore offer will conclude on September 11.
The IPO of Route Mobile, a cloud communications service provider, which opened on Wednesday, was subscribed over 4 times at the end of Day 2. Ahead of the IPO, Route Mobile had raised ₹180 crore from 15 anchor investors, including Goldman Sachs, SBI Life Insurance, and SBI Mutual Fund. Route Mobile is offering 1.71 crore shares at a price band of ₹345-350 apiece. The ₹600 crore offer will conclude on September 11.
Route Mobile IPO comprises fresh issue of shares worth ₹240 crore and an offer for sale (OFS) of ₹360 crore by promoters which would result in promoter’s stake reducing from 96.0% pre-IPO to 66.3% post-IPO.
Lot Size and Probable Listing Date
The lot size of Route Mobile IPO is 40 which means investors have to bid for a minimum of 40 shares or in multiples thereof. According to brokerages, Route Mobile shares are likely to get listed on 21st September. KFintech Pvt Ltd is the registrar of the issue. ICICI Securities, Axis Capital, Edelweiss Financial Services and IDBI Capital Markets & Securities are the managers to the issue.
About the company
Route Mobile Limited provides cloud-communication platform as a service ("CPaaS") to enterprises, over-the-top ("OTT") players and mobile network operators. Incorporated in 2004, It services clients across sectors such as social media, banking and financial services, retail, logistics etc.
Its revenue from operations increased at a CAGR of 37.61% from ₹504.9 in fiscal 2018 to ₹956.2 crore in Fiscal 2020. In Q1FY21, Route Mobile reported a profit of ₹27 crore on revenue of ₹310 crore. The company had posted profit of ₹69 crore in FY20, up 26% from the previous year.
The funds raised from fresh issue will be utilized to repay debt, make strategic acquisition, purchase office premises in Mumbai and balance for general corporate purpose.
Key risks, according to Geojit Financial Services
Dependent on third parties and mobile network operators
Top 5% of client accounted for 51% of revenue from operations in June, 2020.
The risk from potential claims resulting from client’s misuse of its platform to send unauthorized text messages in violation of TRAI regulations.
Foreign exchange risk as significant portion of business transactions are done in several foreign currencies.
What analysts say
Many brokerages have recommended subscribe for Route Mobile issue.
"At the higher end of the price band, the issue is valued at 29x FY20 P/E (fully diluted), which is comparable to mid-sized IT firms (no listed peers available). We recommend Subscribe to the IPO given Route Mobile’s strong presence in niche CPaaS market with high entry barrier and healthy financials. Further given the small offer size and presence in niche IT space, one may get listing gains too," domestic brokerage Motilal Oswal said.
Geojit Financial Services also has a subscribe rating to Route Mobile IPO.
"At the upper price band of Rs.350, Route Mobile is available at a P/E of 28.8x and when we annualize Q1FY21 numbers we arrive at a P/E of 18.5x for FY21E on a post issue basis. Given that there is no listed peer to compare, and based on stable financial performance and niche business model, we assign a subscribe rating on this IPO," Geojit Financial Services said in a note.