Route Mobile IPO: Open for subscription on September 9; Details of public issue

Route Mobile Ltd's initial public offer (IPO) will open tomorrow, i.e. September 9, 2020. The issue will remain open for three days on September 9 to September 11. The anchor investors' book has closed on September 8, a day ahead of issue opening.

The company seeks to raise around Rs 600 crore from the public issues, which consists of a fresh issue of up to Rs 240 crore and an offer for sale (OFS) of up to Rs 360 crore by promoters. Route Mobile has fixed a public offer price at Rs 345-350 per share and one can bid for a minimum of 40 equity shares and in multiples of 40 equity shares thereafter.

Promoters Rajdipkumar Gupta, Managing Director, and Sandipkumar Gupta, Non-Executive Director are going to sell Rs 180 crore worth of shares each via offer for sale.

ICICI Securities, Axis Capital, Edelweiss Financial Services and IDBI Capital Markets & Securities are the book running lead managers to a public issue, while KFin Technologies Private Limited is the registrar to the offer.

Equity shares are proposed to be listed on National Stock Exchange of India and BSE Limited.

Important things that one should know about the IPO

• Issue Dates: September 9, 2020, to September 11, 2020.
• Price Band: Rs 345 to Rs 350 per share.
• Lot Size: 40 shares and in multiples thereafter.
• Issue Size: Rs 600 crore.

Route Mobile Limited

Incorporated in 2004, Route Mobile Limited provides a cloud-communication platform as a service ("CPaaS") to enterprises, over-the-top ("OTT") players and mobile network operators ("MNOs"). According to the ROCCO Report 2020, it was ranked as a tier one application-to-peer ("A2P") service provider internationally. Its operations are internally aligned into the following business verticals:

• Enterprise
• Mobile operator
• Business process outsourcing ("BPO").

As of June 30, 2020, it has served over 30,150 clients, cumulatively since inception, globally through its offices across Africa, Asia Pacific, Europe, the Middle East and North America. It services clients across sectors such as social media, banking and financial services, retail, logistics etc.

Objectives of the Issue

Route Mobile seeks to use the proceeds of the public issue for repayment or pre-payment of certain borrowings. The proceeds will also be used in the purchase of office premises in Mumbai, acquisitions and other strategic initiatives and general corporate purposes.

The proceeds from the offer for sale will be received by the selling shareholders and Company will not receive any proceeds from the offer for sale.

Competitive Strengths according to ICICI Direct Research

• Robust business model and consistent financial track record: Its revenue from operations increased at a CAGR of 37.61 per cent from Rs 5,049.48 million in Fiscal 2018 to Rs 9,562.52 million in Fiscal 2020 and was Rs 3,096.14 million in the three months ended June 30, 2020.
• Global connectivity through established relationships with MNOs: As of June 30, 2020, it had direct relationships with over 240 MNOs ("Super Network") and provided its enterprise clients with access to over 800 mobile networks.
• MNO focused suite of products: Globally, telecom providers lost over $11 billion in revenues in 2018 due to the delivery of messages through "grey routes" (Source: Juniper Reports). With the use of its analytics-based SMS firewall, it assists MNOs in identifying and plugging revenue leakages due to grey routes, driving additional revenues for them, and for itself.

Key risk & concerns as per ICIC Direct Research

• The company is dependent on a limited number of clients for a substantial portion of revenues. A reduction in the services performed for such a limited number of clients or the loss of a major client could result in a significant reduction in its revenue. Its 10 largest clients accounted for ~36.08 per cent, 46.00 per cent, 52.50 per cent and 63.65 per cent of RML's revenue from operations in FY18, FY19 and FY20 and in the three months ended June 30, 2020, respectively
• RML may, in the future, continue to make strategic acquisitions to grow its business and further diversify service offerings. An inability to identify, complete and successfully integrate such acquisitions could adversely affect its business prospects, results of operations, financial conditions.
• Failures, defects, delays and other problems involving technology systems and infrastructure on which it relies for providing services and solutions to its clients may adversely affect business, financial condition and results of operations.