Route Mobile's Rs 600-crore IPO subscribed 4.15 times on day 2

The Rs 600 crore initial public offering (IPO) by Route Mobile received 4.15 times bids so far on Day 2 of the bidding process on Thursday.

As per data available with NSE, the issue received bids for 5,05,09,920 shares by the end of the day, which was 4.15 times the total issue size of 1,21,73,912 shares.

The IPO, which is being sold at Rs 345-Rs 350 per share, is seeking a valuation of 29 times PE on FY20 basis on a fully diluted basis. Analysts are positive on the issue and believe the IPO can offer listing pop as well as long-term gains.

"The issue appears to be reasonable, given the healthy growth being witnessed by the firm, its strong clients relationships across the board including with enterprises, MNOs and OTT operators, diverse client base across industry verticals, good financial track record and highly experienced promoter team," said KR Choksey's India Equity Institutional Research.

The company has no listed peers. The proxy peers, which have small presence in services offered by Route Mobile, are Tanla Solutions and Tata Communications.

Being in the category of services known as software as a service (SaaS), is a win-win combination both for companies like Route Mobile as well it’s clients since they don’t have to invest in maintenance of servers and connections apart from uploading different kinds of content or doing all of the administrative work involved in keeping a communications platform functional, said Ashika Institutional Equities.

"Overall, the company has a history of stable financials, strong return ratios and positive operating cashflows. Besides, being the only player to be listed in this space, it will garner interest," the brokerage said.

Angel Broking said that the company management has till now infused only Rs 6 lakh capital in the company, and it will command a market cap of Rs 1,990 crore at the higher price band.

"This shows that it is a scalable business model, which can grow without capital infusion. Unlike many other businesses, Covid-19 has led to better growth prospects for the company given increased adoption of digital technologies," the brokerage said.

The brokerage finds the valuations quite reasonable, considering the future prospects of the company. "As we are positive on the future outlook for the industry as well as the company, we would recommend to “Subscribe” to the issue for long term as well as for listing gains," it said.

Motilal Oswal Securities said that the issue is valued at 29 times FY20 P/E, which is comparable to mid-sized IT firms. It has recommended 'Subscribe' to the IPO given the company's strong presence in the niche CPaaS market with high entry barriers and healthy financials. "Given the small offer size and presence in niche IT space, one may get listing gains too," the brokerage said.