Thread by @TheCaptain182

Studied #routemobile over the weekend and sharing some notes...

I hope it is helpful. Pls correct and/or add if I missed out on something crucial.

Thank you. 🙏

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1. Founded in 2004 & founders still at the helm which is always a great sign. Started with an initial investment of just 1 lakh rupees and the founders raised no more money until the IPO.

2. About 8-9 companies globally in the CPaaS industry; Twilio (D: I'm also invested in it) in US is the leader with mcap of $50B & expected revenue of $1.6B in FY'21. It's growing its revenues at 50% yoy with gross margins above 50%, and so market is pricing it acc'ly.

3. Route Mobile is the biggest in Asia and it has grown its revenues from 1.4L to 950 cr in FY'20. It should be around 1400cr in FY'21, and management is confident of maintaining these growth rates in the near future. Their aim is to grow to a billion dollar in revenues.

4. As per a recent Gartner study, 90% of global enterprises will rely on cPaaS offerings in 2023, up from 20% in 2020, and the industry should grow at 33% CAGR. I believe it is safe to assume that the company has a great TAM and should scale up reasonably well.

5. As per Twilio CEO Jeff Lawson, coronavirus has sped up digital transformation of companies by 6 years, and thus there are massive tailwinds for companies like #routemobile. @RouteSms (MD/CEO) in a recent interview with @BloombergQuint with @_nirajshah had a similar opinion.

6. Limited number of competitors and no public listed rivals in India. Their business model & network (built over 15 years) is certainly hard to replicate for a new entrant, and they do enjoy certain level of stickiness with their customers & network effects.

7. Some marquee customers include Facebook, Google, Samsung, ICICI Bank, SBI & few other Fortune 500 companies. They added 67 customers in Q3, FY'21. They have 3,000 monthly billable clients across the world.

8. There was 0 churn in top 50 customers in H1 FY'21 & 60% growth in recurring revenues which contributed 99% of their total revenues. Strong net revenue retention of 139% of top 150 customers b/w H1 FY'21 & FY'20. As a reference point, Twilio's NRR was 136% in FY'20.

9. Strong balance sheet with 450cr in cash & minor debt. This can be used for acquisitions as management has hinted in a recent interview. There should be an announcement in the coming weeks on a big acquisition.
Excellent cash flows & PBT/CFO was 145% in FY'20.

10. Their gross margins are pretty low at around 20% for a tech business, but management is confident of increasing it to 30% in the next 2 years aided by acquisitions and better product mix. I will definitely keep an eye on it.

11. Customer concentration is a concern with top 5 customers contributing 48% & top 10 customers 59%. But this is spread across geographies & offerings.

12. Promoters hold almost 66% of the business with some great funds like @AbakkusInvest @SunilBSinghania and @VQIndia @ravidharamshi77 invested in it.

Always a huge positive to have stalwarts invested alongside. Adds credibility to the conviction.

13. #routemobile has a beautiful looking chart. Price action is in a definite uptrend since IPO. It has made a base of 3 months and stock has taken a beating after Q3 results due to profit booking. I want to see how it behaves around its 50 dma & trendline before initiating ...

14. ... a position and will gradually add over time.

Over all, a good company in a high growth industry with tailwinds. Definitely worth monitoring over the next few quarters & years.

But I might be wrong. Please do your own DD.

Thank you!