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Sunil Singhania loves this stock. Is it right for you?

After a stellar FY23 show, Route Mobile had an even better start to the first quarter of FY24 with a 33% growth in revenue. (Stock image)
After a stellar FY23 show, Route Mobile had an even better start to the first quarter of FY24 with a 33% growth in revenue. (Stock image)

Summary

  • Sunil Singhania is the founder of Abakkus Asset Manager, and has a track record of over two decades in equity markets

Indian share markets faced a turbulence last week as benchmark indices Sensex and Nifty hit a stop to their record momentum run.

Rising bond yields, Fed’s signal to markets that high interest rates may be the new normal, diplomatic tensions with Canada, among other reasons, have got investors worried.

Investors opted to panic sell equities as markets are expected to remain under pressure until they digest all these implications.

When everyone else runs away, the best investors step in. They understand the difference between price and value.

These investors realise data is more important than narratives and most importantly, they realize that panic selling is a fool’s game.

That is why it pays off to keep track of their activities and which stocks they’re leaning on aggressively right now.

In recent editorials we highlighted stocks that super investors of India recently bought.

Apart from this, we also recently covered detailed prospects of the top stocks of Vijay Kedia and Ashish Kacholia.

Vijay Kedia Loves this Stock. Is it Right for You?

Ashish Kacholia Loves this Stock. Is it Right for You?

Today, let’s look at the top portfolio stock of Sunil Singhania.

Sunil Singhania is the founder of Abakkus Asset Manager, an investment management company.

He has a track record of over two decades in equity markets, and he played a significant role in building Reliance-Nippon MF into one of India's largestasset management companies (AMCs).

In July 2023, the ace investor’s PMS fund topped the list according to reports.

According to data available on exchanges, Route Mobile remains one of his top stock picks.

As of June 2023, he holds a 2.6% stake (1.6 million shares) in the company worth 2.5 billion (bn).

Here's how his holding has fared over the past couple of quarters.

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The growth story of Route Mobile

Sunil Singhania initially bought 1.9 m shares or 3.5% stake of Route Mobile in September 2020 through theIPO route.

His bet came in during the high demand phase for the cloud platform. He picked up a 1.41% stake in the company through Abakkus Emerging Opportunities Fund and the rest 2.08% stake through Abakkus Growth Fund-1.

Since his initial investment, he has steadily reduced stake in the company and currently holds a 2.6% stake in the cloud communication platform provider.

Coming to Route Mobile’s growth story…

One time passwords or OTPs have become synonymous with authentication in the digital world.

From banking transactions, to deliveries, to authenticating e-mail and social media accounts, one needs an OTP.

But have you ever wondered what is the technology behind the ubiquitous OTPs?

It's called CPaaS.

CPaaS is an acronym for communications platform as a service.It offers cloud solutions that enable businesses to add real-time communication features to their own business applications.

Quite simply, this technology involves being the middleman between a mobile operator and an enterprise. It helps companies deliver messages or other communication services to their end user.

Route Mobile is one such company which provides the interface between the enterprise and operator, via its application programming interface (API).

It is the go-to person in between, who has tied up with the operator and delivers those messages to the end customer.

The company boasts of reputed clients that includes Google, Facebook, Emirates, Samsung India, State Bank of India, ICICI Bank, Paytm, Allahabad Bank, and Flipkart, among others.

That's quite an achievement for a venture which was set up with 100,000 in 2004, and no external funding.

A major part of the company’s achievement could be attributed to the Covid 19 pandemic, which accelerated digital communication.

As digitisation took over, enterprises across the globe implemented the tech that Route provides.

The growth in the past five years is nothing short of what a company could dream of.

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What Next?

After a stellar FY23 show, Route Mobile had an even better start to the first quarter of FY24 with a 33% growth in revenue.

While net profit came in at 920 m compared to 710 m in the year ago quarter.

Route Mobile has set a target to become a billion-dollar revenue company over the next 3-4 years.

it recently entered into an exclusive partnership withVodafone Ideato deploy and implement its suite of end-to-end A2P monetisation solutions for all A2P SMS traffic on the VIL network.

The company's unique positioning in the Indian CPaaS ecosystem has also attracted global attention.

Belgium based Proximus group, a provider of digital services and communications through its subsidiary Proximus Opal entered into an agreement to acquire 58% stake in Route Mobile.

This partnership paves the way for Route Mobile to become one of the global CPaaS leaders and achieve a billion-dollar annual revenue run-rate much sooner than the anticipated 3-4 years’ timeframe.

According to the company’s management, Proximus group has a dominant position in the US market, and it generates consistent revenue from large US enterprises.

This will allow Route Mobile to scale its business into emerging markets.

In fact, the management said this deal is expected to generate revenue for Route Mobile starting from the second quarter.

Apart from this, the company is also working on new product developments which includes an anti-phishing platform and generative AI and conversational bot platforms.

Since the company is heavily exposed to global markets, it derives more than 50% of revenue from the top-10 clients.

Global spending cuts and uncertainties in those regions could impact margins but that’s not the case right now it seems.

Valuations

At the current price of 1,577, the company trades at a PE multiple of 28x and a price to book value multiple of 5.2x.

Its 3-year median PE stands at 58.2x and its 3-year average P/BV multiple comes to 11.3x.

Here's a table showing historical valuations of Route Mobile.

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You can also compare Route Mobile with its peers.

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Share Price Performance

In 2023 so far, shares of Route Mobile have gained 30%.

In the past one month, the stock has been down marginally by 2%.

Whereas since listing exactly three years ago today, Route Mobile shares have surged 141%.

Route Mobile Share Price Since Listing.
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Route Mobile Share Price Since Listing.

The company touched its 52-week high of 1,760 on 17 July 2023 and its 52-week low of 1,131 on 23 January 2023.

Shareholding

Foreign investors have added exposure to the company in the most recent June 2023 quarter. Their total stake in Route Mobile went up to 21.34% from 20.3% in March 2023.

Meanwhile, the category of financial institution/banks/insurance also saw a sharp increase in the past two quarters.

Mutual funds on the other hand, have reduced stake in the company to 1.3% in June 2023 from 3.35% in March 2023.

The promoter holding in the company stands at 58.3%.

To know more, check out Route Mobile’s detailed shareholding pattern.

Conclusion

So there you go...we've shared all the facts and given reading and analysis of the whole situation. Now it is up to you to come up with your own estimates.

Whatever you do, please do not base your decision on emotions or sentiments or what other investors think.

Have a proper, independent rationale irrespective of whether it turns out to be right or wrong.

This way, you will develop a sound framework which would hold you in good stead over the long term.

Happy Investing!

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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