Imagine leaving a high-flying career in US and returning to India to build software. In the 90s. Building digital maps for a complicated nation when no one uses them. Competing with Google. Almost winding up a few times. Finally succeeding.
A thread on MapmyIndia (MMI).
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Maps are synonymous with Google Maps, so what’s special about MMI?
For one, they chose their battles carefully. When Google Maps entered India in 2005, MMI made a choice - to focus on the enterprise segment (B2B and B2B2C) instead of taking on the tech giant & burning cash.
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Over two decades, MMI has mapped over 98% of India's road network, 10.5 mn locations at street level across 7.5 lakh+ cities & villages.
They claim their mapping is deeper & more accurate than Google, which shows in their growing & profitable B2B clientele.
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The Indian Geospatial industry got a big boost in Feb 2021 - with the new Geospatial Rules:
Liberalized mapping policy for domestic players
Foreign players can’t store data on servers & have to license it via a local partner.
Read more here:
mosaic51.com/featured/india…
5.
Why IPO now?
Developments in 2021 - policy change, partnership with ISRO, Drone regulations, launch of Indian Space Association, launch pf Gati Shakti, etc.
As per Niti Ayog, map data is integral for Digital India - urban planning, navigation, logistics, or infrastructure.
5/n
MapMyIndia seems poised to gain significantly here. With over 25 year of dense licensed data, it gives them a big headstart and network effect (more on this later).
They are now moving into new tech 4D/ high res. mapping & analytics on existing data. Edge over new players.
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Business model: MMI operates as SaaS - has own API stack & mapping app which it licenses to enterprises across industries to build use cases.
Subscription and royalty contributed 90% of sales in FY21, making it scalable and profitable & earns them a valuation premium.
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MMI shows potential for rapid revenue growth.
By charges fees on per vehicle, per asset, per transaction, or per user case, it becomes a platform play on growth in end use industries.
Interestingly, orderbook growth of 3.3x b/w FY19 and FY21 was before new regulations.
8/n
Some proven use cases in Govt/ public utility:
1. Integrated with Cowin: Pan India Covid centres in 2 days
2. Live tracking of covid emergencies during second wave
3. Integrated with GoI Umang App
4. Mapped Indian airspace for drone operations
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Drones usage will grow. In Aug '21, new Drone rules & PLI scheme was passed.
MMI enables 2D-3D visualization, surveillance of Drones. This will help many industries like Agriculture, Infrastructure, Real estate, logistics etc. Sample:
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Important: Non-govt revenue is at 90%. MMI works with global national & international B2B & B2B2C clients such as HDFC Bank, Apple, Amazon Alexa, Facebook.
Extract from FY21 annual report of Dabur shows usage in retail business:
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Why do companies partner with MapMyIndia?
Locational data is underutilized and a growing field. Some use cases below:
Financials:
Seeing good traction. One of the few recent IPOs with strong profitability (H1FY22 - Contribution margin of 85% and EBITDA/ PAT margins > 45%). Can this be sustainable?
Operating leverage is visible - Direct cost (% of sales) trend declining when revenue is growing.
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Dependency on Auto sector is seen declining - revenue from the automotive sector reduced to 52.5% in FY21 from 80.4% in FY19.
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Management claims the business can have strong network effect. Explained in slide below:
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Some key risk observations:
1. IPO is 100% OFS - all of 1000 cr is secondary. (spoils some excitement for us). Selling shareholders are promoters, Qualcomm & Japanese mapmaker Zenrin.
They do have a strong B/S with 340 cr cash, 100%+ ROCE and high cash flow conversion.
16/n
We recommend anyone keen on MMI to read the risk section of prospectus.
investmentbank.kotak.com/downloads/ce-i…
Some other key risks as per us:
1. Regulatory: SaaS business partially dependent on regulation not work with global funds.
2. Increasing competition post liberalization
17/n
Trivia: PhonePe owns 36% of @MapmyIndia
! As per the DRHP there is a share transfer to promoter, their shareholding will be ~20%.
So while PhonePe may not be profitable in core business, they are poised to make big gains here.
Data via @entrackr
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To understand more about the history of Geospatial and cartography, watch this fantastic episode "License to Map" with @sanjeevsanyal @ @_rohanverma
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