Thread by @Finstor85

So I have been studying this entire communication layer as its relevance is ever growing with more devices coming online, staying connected, and relying on real-time communication. Not that this domain under penetrated, but there is a change underway.

I tweeted this yester -

https://twitter.com/Finstor85/status/1359086701155659779?s=20

As per many publicly available research, The Communications Platform-as-a-Service (CPaaS) Market was valued at USD 4.54 billion in 2020 and is expected to reach USD 26.03 billion by 2026 and register a CAGR of 34.3% during the forecast period (2021 - 2026).

CPaaS 1.0 was all about SMS/Text, CPaaS 2.0 is about IP based communication. IP calls, messages etc. CPassS 3.0 is where cream is. That's where RCS, Video, Voice will be part of.

Companies are rapidly moving away from the earlier single point of interaction to omnichannel interactions. This will enhance the need for seamless communication experience across all channels. See it this way:

You speak with an executive over email. And now you want to connect over chat. The context is lost & has to be re-established. Remember those customer support days when any disruption in service would mean you have to explain your issue from scratch all over again?

You can take the context of your communication with you, on the devices of your choice - desktop, mobile, PDAs, tablets, emails, chats, voice, video, whatever your need is. That is the real deal maker.

Staples use CPaaS in smart ordering platform, leverages IOT driven virtual assistant that helps organize office supplies for various needs. With Slack integration, employees carry their context anywhere they go.

The fraud & privacy protection is another area that will witness tremendous growth. With RCS messaging adopted by #airtel & #JIO, payment safety grows significantly.

See that advert. of #airtel where fraudster try to dupe a senior citizen, but Airtel paysafe protects farudulent payment? That is enabled by companies offering CPaaS services. #routemobile is leading on tech innovation here.

Juniper Research has found that RCS (Rich Communication Services) business messaging traffic will reach 415 billion messages by 2025; rising from 160 million messages in 2020. This represents a growth of 2,500%.

Technology giants Google, Facebook & Samsung and large enterprises like SBI, ICICI Bank, Bank of Baroda, amongst others, are Route’s customers. HDFC Life will join too. Even Twilio & Route work together on some small parts of the services.

#routemobile's product mix is set to mature significantly over next 3 yrs. From low margin product mix to high 25-30% gross is the target. Note: These companies are valued on gross margins and not net margins.

Twilio's gross margins are 60%+ but yet, net margin is negative. Route can achieve 20% net margin in next 3 yrs. Despite lower margins, ROCE of 38%, and ROE of 26% will see humongous jump in 3 yrs.

Margin drivers:
1. A2P gross margins are ~20%, New product mix will offer ~50% gross.
2. New products revenue share right now is only 2%, set to grow 10 15%
3. Operation leverage will kick in with nearly zero cash burn

Management emphasizing that they will move to CXaaS( customer experience as a service), from Current CPaaS. Huge opportunity leverage comes in!

MIDaaS - Mobile Identity as a Service & Google Business Communication are set in the new offerings with more companies adopting RCS. There could be acquisition in the offing for this LoB.

Some red flags: promoters own some non-related businesses in travel/hotel segment that are loss making. Also some IT related issues were there, not sure if those are resolved.

Company is almost debt free, has about 450-500cr cash in books. With 5G becoming new normal, the importance of communication reliability will grow even more. More things will come online, leading to more integral need of communication service

Often asked - No entry barrier, anyone can disrupt. Agree, but question is, will anybody do that? Sure, Google can do, but will it spend the time & money establishing relationships with 240+ MNOs, 800 networks, and different governments? No! That's the moat.

I think we will witness some amazing growth in this segment. Twilio has been a 10x in 2 yrs, still making negative margins. Tanla margins are good, but Route's are set to become better. Let's see how we playout this theme. Watching closely, have some investments already.