Route Mobile IPO subscribed 73 times on final day, HNI bids at 193 times

NEW DELHI: Route Mobile's Rs 600 crore IPO drew 73 times bids on the final day of bidding process. After Happiest Minds' solid 151 times subscription, IPO by this cloud communications service provider -- opened for bidding on Wednesday -- attracted 89,23,41,080 bids . This was 73.29 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. NII bids stood at 101 times the quota size while QIB quota was subscribed over 53 times. Retail portion was subscribed 12 times

Ahead of hitting the primary market, the unlisted shares of Route Mobile were trading at a premium of Rs 170-175 per share in the grey market. Analysts are positive on the issue and believe the IPO can offer listing pop as well as long-term gains.

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 to 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.

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.

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.