Route Mobile Ltd IPO

Full stack of communication channels and scale

A larger portion of RML’s overall revenues are from Enterprise vertical where it offers enterprise clients cloud communications platform that can be deployed and integrated with their existing business applications and systems. Enterprises use this platform to send communications like OTP, transaction confirmation, updates, etc. Its platform has evolved from traditional A2P SMS or text message solution to other various channel of communications like email, OTT or IP based messaging channel, RCS, enterprise voice application service, interactive voice response, Click2Call, missed call facility, among others. This can be integrated with RML’s super network of 240 Mobile Network Operator (MNOs) which provides its enterprise clients with access to over 800 mobile networks across various geographies. This plays a valuable role as it provides direct and indirect assess to global customers and flexibility to route it in a cost efficient manner. Full stack and scale coupled with growth in cloud-communication space is likely to aid RML in attracting new enterprise customers and drive overall revenue growth.

Solid track record; strong cash generation to aid growth initiatives

By leveraging on its full stack and scale, RML has been able to post a solid revenue CAGR of ~38% over FY18-20. Apart from newer clients, it has been able to successfully scale up its client base (Rs10-25Cr and Rs25Cr+ clients up by 8 and 5 respectively over FY18-20). We believe that steady cross selling and up-selling can provide support to revenue growth going ahead. RML has ~15.5% of its clients on a pre-paid business model while it collects payments from other clients within 30 – 60 days. At the same time, RML pays its MNOs within 45-60 days. This results in negative working capital cycle. Its CFO to EBITDA has improved to 84% level in FY20 from ~35% level during FY18 and FY19. The company has been able to mostly grow organically via internal accruals; a trend we believe is likely to sustain.

Key Risk Factors:

The sectors in which RML operates globally are heavily regulated:

 RML operates in 18 countries and provides services to clients across the world. It is subject to numerous, and sometimes conflicting, legal requirements which may be diverse and vary across geographies.

Client concentration risk:  

The 10 largest clients of RML accounted for approximately 36.1%, 46.0%, 52.5% and 63.7% of revenue from operations in Fiscal 2018, 2019 and 2020 and in the three months ended June 30, 2020, respectively.  Loss of a key client and lower quantum of repeat business from existing clients can impact the revenue and earnings growth.