BackTanla Platforms rises 5% on ₹170 cr share buyback plan. Should you buy?
Tanla Platforms share price: Investors gave thumbs up to the company's share buyback proposal to the tune of ₹170 crore. In this week's trading sessions, Tanla Platforms has risen by more than 18%.
PremiumTanla Platforms share price: Cloud communications company, Tanla Platforms on Friday hit a 5% upper circuit before settling at ₹872.50 apiece. Investors gave thumbs up to the company's share buyback proposal to the tune of ₹170 crore. In this week's trading sessions, Tanla Platforms has risen by more than 18%. The company still has potential for further upside as it has a credible play on the rising demand for CPaaS solutions across industries.
On BSE, Tanla Platforms' share rose by ₹38.15 or 4.57% to end at ₹872.50 apiece. The shares clocked a 5% upper circuit of ₹876.05 apiece during the trading hours.
The company's market cap is around ₹11,843.80 crore.
From September 2, the shares have climbed 18.07% in this week's 5 trading sessions.
Tanla Platforms share buyback
On Thursday, Tanla Platforms board of directors approved the proposal of share buyback aggregating to ₹170 crore. The company will buyback 14,16,666 equity shares at an offer price of ₹1,200 per equity share.
The buyback is subject to the approval of the shareholders by way of a special resolution through postal ballot by remote electronic voting only and all other applicable statutory approvals.
Should you buy Tanla Platforms shares?
In a research note dated September 5, Piyush Pandey Lead Analyst at Yes Securities on Tanla Platforms said, "a credible play on the rising demand for CPaaS solutions across industries for achieving enhanced customer engagement. Also, an increase in smartphone penetration and greater regulatory push towards mandatory SMS alerts would drive CPaaS market. As per industry reports, the Global CPaaS market is expected to grow at CAGR of 29% from CY20 to CY25E, led by faster adoption of multichannel communication."
Pandey added, "the adoption of CPaaS-based A2P messaging across industries continues to drive volume growth for both enterprise and platform segments of Tanla. Rising share of higher margin platform segment would drive EBITDA margin of the company."
On the enterprise segment, Pandey highlighted that it is expected to grow at 20%+ over FY22‐FY24E led by rising demand for A2P(Application to Person) messaging for OTPs, real-time alerts, transaction alerts from e‐commerce companies, banks, and other enterprises. The growth will be primarily volume-led at 18‐20% CAGR, mainly SMS-based A2P, with around marginal contribution from price hikes.
Meanwhile, the analyst expects platform segment to continue to have a higher growth rate than the enterprise segment over FY22‐FY24E led by increasing number of use cases given the TRAI mandate that all commercial messages should be filtered through the Blockchain based platform. It also offers SMSC services to VIL, whereby it helps in the routing of messages to end clients. The end‐to‐end encrypted platform, The Wisely platform (recently developed in partnership with Microsoft) provides improved data encryption and has seen initial
traction from prospective clients and it would help to drive global expansion for Tanla.
Pandey expects the company's EBITDA margin to rise going forward, led by a change in revenue mix in favour of platform business(faster-growing segment), which has higher gross margin compared to the Enterprise segment.
Notably, the enterprise business has around 20% gross margin; the platform segment has around 90% gross margin for Tanla.
On valuation, Pandey said, "Revenue/EBITDA/PAT are expected to grow at CAGR of 21.8%/24.9%/21.2% over FY22‐FY24E. We maintain BUY rating with target price of ₹1,218, valuing it at PE of 22x on FY24EPS."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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