Tanla Solutions - a niche player in m-commerce space and a turn around story?


(hiral) #1

Introduction:
Tanla Solutions founded in the year 1999, a Hyderabad based Indian company is a leading provider of telecom solutions to Mobile Operators, Hand set Manufacturers, Content aggregators, ISVs and Media companies globally. With over 100 customers in 32 countries, Tanla provides solutions in the areas of Voice, Video, Messaging, Application/ Content Licensing and Mobile Payments and is the first company to launch 3G VAS services in India.
Tanla’s Mobile Payment Gateway is connected with more than 100 mobile operators and processes mobile payments in over 160 countries through operator, credit/ debit card billing. Leading content aggregators, ISVs and hand set manufacturers including Nokia use Tanla mobile payment gateway to market their applications/ content globally. Its License Manager product is embedded in more than 300 million Nokia handsets globally. Located in 9 countries, Tanla employees more than 300 telecom professionals

Key Numbers
Market Cap.: ₹ 320.23 Cr.
Current Price: ₹ 32.90
Book Value: ₹ 61.91
Stock P/E: 22.01

Highlights of Q2 FY16

  • International A2P messaging hub is operational from Oct 2015. 2 large international clients have been boarded in Q2 and they have started commercial traffic in October 2015, which will ramp up over the coming quarters.
  • Delay in commercial launch of the Singapore hub was a result of implementing the changed regulations for International messaging outlined by TRAI.
  • Domestic - Total volume processed in Q2FY16 is 11.75 billion messages as compared to 11.64 billion messages in Q1FY16, an increase of 156% over Q2 FY15 and 1% over Q1 FY16.
  • India A2P messaging hub recognized as the preferred platform for delivering mission critical transactional messages like OTP’s, transaction, delivery and security alerts due to its industry leading processing times.
  • M-Payments - 45.4 Mn transactions were processed during Q2 FY2016 compared to 47 Mn Transactions in Q1 FY2016.

Turn around story
In FY14, the management decided to move away from a high capex and long gestation businesses to a more B2C transactional one. They decided to derisk from lumpy concentrated revenue sources to a more diversified and margin enhancing clientele. The renewed focus started paying off and company partnered some major telecom players like Vodafone to provide messaging services. Tanla currently has a 60% market share in A2P messaging.

Disclosure – Not invested


(hrfacebuk) #2

Any insights on why the promoter holding has been coming down?

Thanks.


(hiral) #3

promoter holding has always been low in 35-36 region even 9 years ago. It has come down by 3 % over past 2 years which is definitely a red flag.


(aojha) #4

A2P messaging just requires bulk messaging infra, which is there with many players, unlisted ones. secondly, basically, this model is reselling bulk sms, so cost of sales is sms cost from telcos. why is gross margin on basis of cost of sms falling in last one year? finally, the mobile payment and vas thing was there in 2010 i guess, but then it fell through, how do we know even the current model will not fall through, so more understanding to ascertain competitive advantages, business rationale etc


(hiral) #5

The following blog may throw some light on your points

http://blog.mahindracomviva.com/a2p-aiming-2-profit/

  • I book a radio cab, i receive booking & driver details via sms.
  • I make a purchase online, i receive regular order status via sms
  • its same for air tickets, movie tickets, credit card, bill payment, etc.
  • 2 step authentication where you receive OTP has added to the traffic
  • i receive 4 sms for a single trade from my broker / cdsl :slight_smile:
  • Even my doctor has started sending sms confirmation for appointment bookings

I see this surge to continue further with emphasis on digital india.


(Anil jain) #6

Firstly the disclosure - holding from lower level - 5% of pf
I would supplement few observations:

  1. The company has successfully made a turnaround on the back of new strategy of m-messaging.
  2. Company has spent large capex over last 4 years in creating infrastructure to support the new strategy
  3. The capex spent cycle is complete, so no further capex need immediately.
  4. The company never gave guidance on quantum of revenue it may add from the capex?
  5. Revenue from overseas Capex spent is at least 2-3 quarter late? Now that the Singapore center is finally operational in Oct-15- more important thing is how much of the revenue materializes now in Q3?
  6. It is zero debt, cash surplus company. History indicate that the Management is not debt savvy. A good indicator.
  7. m-payment has not grown while management continues to focus on that space.
  8. The company is already market leader in India in m-messaging and is aiming to further grow its share.
  9. m-messaging seem to have significant growth potential at least for 2 years. Must be on watch for emergence of any disruptive technology to this model.
  10. All in all it is a very interesting play at very reasonable valuations at present. The real growth is yet to come!
    Thanks

(Akbar Khan) #7

It has been a debt free company since its IPO. they have squandered all the funds that were raised. Learnt a hard lesson as I had invested in this company long time back on the debt free premise.
Not tracking the current business situation, however would advise a big caution.


(Paddy) #9

This company is in turnaround with promoter issued warrant for 1cr shares at 35rs. The Reddy family is also have added 10% stake and at 35rs it gives a good entry point.I am holding since it was at Rs5/- and A2P will be high potential area.The company also expanding its foot print in Singapore.Post Q1 result you can make a decision

Disclosure:Invested at low price since 2011


(hiral) #10

Q2 results announced yesterday -

  • Revenue grew to 135.5 Crores from 99.3 Crores in Q1, a growth of 36%
  • EBIDTA grew to 13.7 Crores from 11.1 Crores in Q1, a growth of 23%
  • Profit after tax grew to 9.7 Crores from 4.05 Crores in Q1, a growth of 140%

Business highlights -

  • First phase of Tanla’s Cloud Communications platform, in partnership with a leading Mobile Operator in India, went live on Oct 19th 2016. The second phase with advanced features is planned for launch in Q4 FY2017.
  • Contract signed with LinkedIn for terminating International messages into India from the Singapore hub.
  • Signed up with a leading telecom operator in India for deployment of A2P Messaging Platform. This will be deployed during Q3 FY2017.
  • Deployed a dedicated SMSC for OTP traffic with Vodafone, the first of its kind in India, for delivery of mission critical messages.

There is inverstor call at 4.30pm today. Will try to attend to get more insights.


(vij) #11

Interested. What are the growth prospects? What is the management guidance for next 2 years? How does Jio affect this?


#12

Some red flags:

  1. Stock crash (50 to 27) just before allotting warrants to promoters. If the company is really in need of cash preferential allotment of shares or QIP is more transparent and better treatment to minority shareholders than warrants with 25% paid upfront and later within 18 months where odds in favor of promoter to make quick gains
  2. Huge CWIP of 502.17cr
  3. Promoter salary hiked 3X in 2 years
  4. cash flow statement does not reflect tax payment.

(ankitmittal1991) #13

Can someone please help me with the below queries?

  1. Who are the competitors of Tanla
  2. What is the market share of Tanla and its competitors in A2P messaging
  3. What were the specific reasons for fall of Tanla share price earlier in 2008-09

(Rudra Chowdhury) #14

Would advise caution to anyone looking at this company as an investment bet.

Lots of red flags pointed here
https://www.quora.com/Why-is-Tanla-Solutions’-share-price-going-down-Is-it-good-to-hold-for-the-long-term/answer/Amit-Jeswani-2?share=4d12bea6


(Kumar Saurabh) #15

Businesses may turnaround but character, very hard . Have learnt this hard way. So, do take caution for your hard earned money.


(spvk1) #16

https://tanla.com/smshubpr.html

Tanla Announcement - SMS hub deployment