Started in 2005, Affle (India) Limited is a Mumbai based global technology company with a proprietary consumer intelligence platform that delivers consumer acquisitions, engagements and transactions through relevant mobile advertising (the 'Consumer Platform'). Company's Consumer Platform aims to enhance returns on marketing spend through delivering contextual mobile ads and reducing digital ad fraud, while proactively addressing consumer privacy expectations. As at March 31, 2019 Affle Consumer Platform had approximately 2.02 billion consumer profiles and they accumulated over 300 billion data points, which power their prediction and recommendation algorithm. The 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. Company utilises user-intent indicators derived from behavioural signals, marketing attribution and transactional data, which are received in real time and accumulated over time, which increases its ability to predict a user's likely interests. The accuracy of the prediction and recommendation algorithm improves with every advertisement they deliver, as the system incorporates new data, while continuing to learn from previous data. In addition, they enhance the customers' ad content with rich media experiences, including interactive videos, games and augmented reality. This paired with data-centric scientific targeting and retargeting enables a higher likelihood of consumer engagement, such as downloading an App or completing a transaction. Affle 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 messaging system. They have also filed seven patent applications in India covering various algorithms in the area of digital fraud detection. For Fiscal 2019 on a Proforma Basis, the revenue from the Consumer Platform represented 97.2% of total revenue from operations. They primarily earn revenue from the Consumer Platform on a cost per converted user ('CPCU') basis, which comprises user conversions based on consumer acquisition and transaction models. The consumer acquisition model focuses on acquiring new consumers for businesses, which is usually in the form of a targeted user downloading and opening an App or engaging with an App after seeing an advertisement delivered by them. The transaction model is usually in the form of a targeted user submitting a lead acquisition form or purchasing a product or service after seeing an advertisement delivered by them. They also earn revenue from the 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. These models are relevant for brand advertisers who want to build awareness and recall and engage users online to transact with them offline/online. Company 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'). For Fiscal 2019 on a Proforma Basis, revenue from the Enterprise Platform was 2.8% of total revenue from operations. Company's solutions are sold through the sales and marketing team, which as at May 31, 2019 comprised 51 persons across its six offices, one sales agent in Malaysia and through referrals from existing customers. The customers include the companies for which they undertake a mobile ad campaign as well as the advertising agencies acting for such companies. As at May 31, 2019, Company had 236 employees of which 209 were in India. As per financial performance, Affle (India) Limited has posted total income/net profits of Rs. 14.94 cr. / Rs. 1.29 cr. (FY14), Rs. 39.46 cr. / Rs. 2.26 cr. (FY15), Rs. 88.85 cr. / Rs. 2.56 cr. (FY16), Rs. 66.80 cr. / Rs. 0.64 cr. (FY17), Rs. 84.88 cr. / Rs. 8.82 cr. (FY18) and Rs. 121.45 cr. / Rs. 97.90 cr. So company has posted consistent growth over last couple of years except FY17. Trade receivables as per consolidated account is Rs 47.88 Cr which is around 19.17% of total FY19 consolidated revenue. Affle has posted an average EPS of Rs. 4.67 and average RoNW of 28% for last three fiscals. Issue is priced at a P/BV of 39.11 as per unconsolidated NAV of 19.05 on 31.03.19 and P/BV of 25 as per consolidated NAV of 29.81 on 31.03.19. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 114. As per FY19 consolidated earnings, the P/E is 39.17. As per RHP, there is no peers available in local market. With this much P/E, issue looks very fully or highly priced in current market. On BRLM's front, two merchant bankers associated with this issue and have handled 23 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 3 issues opened below their offer price and 7 opened above issue price on listing dates. As of now from last 10 IPOs, 5 are trading above issue price and remaining below issue price. As per financials, company's growth is consistent and very good except FY17, RoNW is 28% for last three fiscals and issue is priced at P/E of around 114 as per latest earnings. Company is a technology company with principal lines of business, namely mobile advertisement and this segment looks very promising, but there are some big players like Google and Facebook. So we give NEUTRAL rating to this IPO.
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