Review By Dilip Davda on July 24, 2019
Affle (India) Ltd. (AIL) is a global technology business company. It has two business segments: Consumer Platform; and Enterprise Platform. Consumer Platform primarily provides the services i.e. (1) new consumer conversions acquisitions, engagements and transactions) through relevant mobile advertising; (2) retargeting existing consumers to complete transactions for e-commerce companies through relevant mobile advertising; and (3) an online to offline ('O2O') platform that converts online consumer engagement into in-store walk-ins. AIL's Enterprise Platform primarily provides end-to-end solutions for enterprises to enhance their engagement with mobile users.
Company's Consumer Platform comprises the followings:
As of March 31, 2019, company's Affle Consumer Platform had approximately 2.02 billion consumer profiles, of which approximately 571 million were in India, 582 million were in Other Emerging Markets (which comprises Southeast Asia, the Middle East, Africa and others) and 867 million were in Developed Markets (which comprises North America, Europe, Japan, Korea and Australia). During Fiscal 2019, AIL's Affle Consumer Platform accumulated over 300 billion data points, which power its prediction and recommendation algorithm for Affle Consumer Platform. The company is in the process of integrating the consumer profiles and the related consumer data points of the Vizury Commerce Business, the RevX Platform and the Shoffr Platform with Affle Consumer Platform.
AIL's Consumer Platform is used by business to consumer ('B2C') companies across industries, including e-commerce, fin-tech, telecom, media, retail and FMCG companies, both directly and indirectly through their advertising agencies. For Fiscal 2019 on a Proforma basis, the company's revenue from Consumer Platform contributed 97.2% of revenue from contracts with customers. For Fiscal 2019 on a consolidated basis, revenue from Consumer Platform contributed 97.0% of revenue from contracts with customers. AIL primarily earn revenues from Consumer Platform on a cost per converted user ('CPCU') basis, which comprises user conversions based on consumer acquisition and transaction models.
The company also earns revenue from its Consumer Platform through awareness and engagement type advertising, which comprises cost per thousand impressions ('CPM'), cost per view ('CPV') and cost per click ('CPC') models. AIL also provides end-to-end solutions for enterprises to enhance their engagement with mobile users, such as developing Apps, enabling offline to online commerce for offline businesses with e-commerce aspirations and providing enterprise-grade data analytics for online and offline companies (collectively, the 'Enterprise Platform'). AIL is working on an asset-light business model having ample scope of scalability going forward.
As at May 31, 2019, it had 236 full-time employees across our six offices located in Gurugram (India), Mumbai (India), Bengaluru (India), Singapore, Jakarta (Indonesia) and Dubai (UAE). The company has three registered patents in the United States with multiple patent claims in areas of advertising via data communication clients, online search system, method and computer programme and method and system for extending the use and/or application of the messaging system.
AIL is targeting today's tech-savvy younger generation that prefers mobile marketing. According to management, over the periods, it has developed a technology that is almost full proof of any malware/spam apps and also takes care of safety and security.
To part finance its working capital and general corpus fund needs and listing benefits, AIL is coming out with a maiden IPO of approx. xxx shares via book building issue. It has fixed the price band of Rs. 740-745 per share and mulls mobilization of Rs. 459 crore on the basis of the higher price band. The issue opens for subscription on 29.07.19 and will close on 31.07.19. For Anchor Investors, the issue is open only for a day i.e. 26.07.19. Minimum application is to be made for 20 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. AIL has allocated 75% for QIBs (including Anchor Investors), 15% for HNIs and 10% for retail investors. It is a combo offer of primary as well as a secondary issue. AIL is issuing approximately 1208060 fresh equity shares (at the upper price band) to mobilize Rs. 90 cr. Existing stakeholders are offloading 4953020 shares under offer for sale. Thus the total size of the issue will be Rs. 459 cr. and the shares to be issued at the upper price band will be 6161080 shares (approx). Issue constitutes 24.16% of the post issue paid-up capital of the company.
The issue is jointly lead managed by ICICI Securities Ltd. and Nomura Financial Advisory & Securities (India) Pvt. Ltd. while Karvy Fintech Pvt. Ltd. is the registrar to the issue.
Since inception till March 2015, AIL issued entire equity at par. In February 2017 it issued further equity under Scheme 2017 at mutually agreed consideration. The average cost of acquisition of shares by the selling stakeholders is Rs. 11.43 per share. AIL promoters have sold 285214 shares at Rs. 711.20 per shares to Malabar Value Fund and 1616214 shares at Rs. 720.51 per share to Malabar India Fund Ltd. in July 2018. Post issue, AIL's current paid-up equity capital of Rs. 24.29 cr. will stand enhanced to Rs. 25.5 cr.
Affle Holding, the Singapore headquartered parent entity is holding sizeable stake in the company with other equity partners i.e. Microsoft, D2C, Itochu, Centurion Investment Management and Bennett Coleman & Co. Ltd. Post issue along with Malabar group, their combined shareholding will be around 75%.
On the financial performance front, the company has realigned its global and Indian business and hence the financial data is stated on a proforma basis. As per the proforma consolidated financial statement, it has reported a net profit of Rs. 51.79 cr. on a turnover of Rs. 269.40 cr. For the fiscal ended on 31.03.19, on a consolidated basis, it has earned a net profit of Rs. 48.82 cr. on a turnover of Rs. 249.79 cr. and on a standalone basis, it has posted turnover /net profits of Rs. 121.45 cr. / Rs. 16.68 cr. (FY19), Rs. 84.88 cr. / Rs. 8.83 cr. (FY18) and Rs. 66.80 cr. / Rs. 0.33 cr. (FY17).
For the last three fiscals, on a standalone basis, AIL has posted an average EPS of Rs. 4.67 and an average RoNW of 28%. On a standalone basis, AIL has posted 32.4% CAGR in revenues and 311% CAGR in EBITDA for last three fiscals.
The issue is priced at a P/BV of 39.11 on the basis of unconsolidated NAV of Rs. 19.05 as on 31.03.19 and at a P/BV of 25 on the basis of consolidated NAV of Rs. 29.81 as on 31.03.19. If we attribute FY19 standalone earnings on fully diluted equity post issue, then the issue is priced at a P/E of around 114 and on consolidated earnings, it is priced at a P/E of around 39 and on the proforma basis, it comes to 36.7 P/E. Thus prima facie, the issue is fully priced.
As per offer documents, AIL has no listed peers to compare with.
Two BRLMs associated with the offer have handled 21 public issues in the three financial years (including the ongoing one), out of which 6 closed below the issue price on listing date.
Review By Dilip Davda on July 24, 2019
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Affle (India) Ltd. offers an early investment opportunity in Affle (India) Ltd.. A stock market investor can buy Affle IPO shares by applying in IPO before Affle (India) Ltd. shares get listed at the stock exchanges. An investor could invest in Affle IPO for short term listing gain or a long term.
Read the Affle IPO recommendations by the leading analyst and leading stock brokers.
Affle IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Affle IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Affle IPO?"
Our recommendation for Affle IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Affle IPO.
The Affle IPO allotment status will be available on or around August 5, 2019. The allotted shares will be credited in demat account by August 7, 2019. Visit Affle IPO allotment status to check.
