ValuePickr Forum

Affle India - India Mobile Internet Advertising Leader

New IPO with current market capitalization of Rs2816crs. Promoter holding is 68.38%. Main public shareholders as below.

Affle India Limited is a Mumbai based company engaged in the business of mobile marketing with its digital platforms. The company offers a consumer and an enterprise platforms to its clients. With these products company tries to improve the ROI on digital marketing campaigns for clients, reduce the ad frauds, maintaining consumer privacy and more.

Affle India was initially incorporated as “Tejus Securities Private Limited” in 1994. It was then subsequently converted to a public limited company on July 13th 2018 and the name was changed to ‘Affle (India) Limited’

Affle Consumer Platform’s had approximately 2.02 billion consumer profiles as at March 31, 2019 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, the Affle Consumer Platform accumulated over 300 billion data points, which power their prediction and recommendation algorithm.

New IPO which listed on August 8, 2019

Promoters of the company
Anuj Khanna Sohum and Affle Holdings are the joint promoters of the company

How They Earn Revenue?
a) They Primarily earn revenue from their Consumer Platform on a cost per converted user (“ CPCU ”) basis, which comprises user conversions based on consumer acquisition and transaction models. 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 the Affle .

b) They also earn revenue from their 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.

Industry they serve
Their products are used in e-commerce, fin-tech , telecom , media , retail and FMCG companies, both directly and indirectly through their advertising agencies

Asset Light Model
Their Consumer Platform business is asset-light and scalable as shown by the fact that company’s employee benefit expenses, depreciation and amortization expenses, and other expenses have remained relatively unchanged despite significant changes in our revenue in the last three fiscal years.

Other facts
The company has acquired two subsidiaries in 2018-19 that is why Consolidated Financials have been prepared for this year.
The Company unlike tech startups not burning investors money but generating free cash which is a healthy sign for the business

Key Risks
If our ability to collect significant amounts of data from various sources is restricted by consumer choice, restrictions imposed by customers, publishers and browsers or other software developers, or changes in technology it may have a material adverse effect on our business, results of operations, cash flows and financial condition.

Regulatory, legislative or self-regulatory developments regarding data protection could adversely affect our ability to conduct our business.

If we fail to predict an engagement by consumers with mobile ads with a sufficient degree of accuracy, it could have a material adverse effect on business, results of operations, cash flows and financial condition.

The market in which we participate is intensely competitive and we may not be able to compete successfully with our current or future competitors. Although it is dominated by digital giants such as Google and Facebook, there are over a hundred companies around the world who offer one or more components of this solution. However, only a few companies/groups operate internationally, including, among others, us, InMobi, Criteo,
Tradedesk, Freakout, Mobvista and YouAppi.

If we are unable to protect our proprietary information or other intellectual property, our business, results of operations, cash flows and financial condition could be adversely affected.

Affle IPO RHP https://d2un9pqbzgw43g.cloudfront.net/main/Affle-India-Limited-Red-Herring.pdf

Financials Consolidated for FY19

DISCLOSURE: INVESTED

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India is famous for window shopping

My main worry is scalability of business as in India internet surfers really buying that frequently and that too big amount ?

Here is from company’s DRHP

Capturing India : India with its rapidly growing Internet user base has become an attractive destination for international ad tech vendors, including Criteo, Mobvista, FreakOut – who have set up recently, alongside existing companies such as Affle, RevX, InMobi, among others.
However, India presents its unique set of challenges such as a disjointed demographic which is just getting habituated to digital applications (such as use of e-commerce, digital payments, etc.). Only 10% of Internet users are active (i.e., making a purchase at least once per month) e-commerce customers. Frost & Sullivan believes that this makes it a more challenging landscape for marketing tech to be able to discern the users who have the highest propensity to transact online. It can be a hard market to sustain, even for market participants who are globally successful.
With an average CPC at USD 0.1 to 0.3, the price points are quite low compared to the global market.
Frost & Sullivan believes that achieving profitability in such a price-sensitive market is possible only for companies that are familiar with the dynamics of consumer profiles and have a track-record of working alongside brands locally for years. Ad tech, while being extremely attractive, hinges on the success of data acquisition and several vendors globally have demonstrated low profitability or losses even in high CPC markets. Frost & Sullivan believes that India, with its constraints of low CPC, inadequate availability of data and technology will pose significant challenges for scalability and growth, even for established international companies. "

Thanks
Ashit

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While the company has a good line of business of selling online inventory to advertisers, it needs to be seen if they can sustain and thrive. Currently most of the online ad market is dominated by Google, Facebook/IG, and smaller players like Bing/Yahoo, Flipkart, Times Internet etc. The competition in the market is cut throat, and there’s hardly any differentiation between different offerings except pricing. Another company, Vertoz Advertising, in similar space listed in 2017. After the initial volumes, liquidity has all but dried up. Discl. Not invested.

Story looks good from many perspectives.
But according to me there is a 10:1 risk to reward ratio in favour of risk.
It has all to do with technology and tech giants google facebook microsoft amazon and others why let affle to grow at any larger scale.??
Upto some extent they will let it to play but when they see any large value they will easily kill this puppy.
I dont find any moat to the business.

If they find value in Affle they might chose to buy out the business in which the minority investor would also benefit.

Why do you assume everyone wants to do everything. For example with its money Reliance Industries can kill companies across the board in all SME industries. Why does it go after a few selected businesses only?

Going by your logic no entrepreneur should set up any business because some big business will anyway kill it right.

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If you see business model of Affle, they work with free App players to run the advertisements from their Ad inventory on the app(This app can be like Moneycontrol like app who do not charge for their free service) as it gives revenue generation opportunity to the app player. When the user clicks and does the intended action( e.g. if the advertise is for downloading a particular application like Alt-Balaji- They did run campaign for Alt-Balaji-Source DRHP) then Affle will receive the revenue from that transaction if and only if the user clicks and downloads the app(Alt-Balaji)

Here many players in the mobile advertising try to focus on user clicks wherein Affle gives a model where the Advertiser(Monecontrol) will get be benefited as well as the Ad owner(Alt-Balaji) along with Affle. Here the main point is how the Affle shows the relevant advertise on the mobile device, as they should have correct profiling of the owner of that mobile so that they can showcase a more relevant advertise to him that catches his attention and he does the necessary action.

Here players like Google/Youtube are more acting as a partners and not competitors.

Disc: Have a tracking position

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@vnktshb sir
In affles case it has to work on this tech giants platform. It has to use facebook google and amazons services at every point.
So you have to give an example where any SME which is using RIL’S by products or services and creat huge profit from it.
As per my knowledge non of the company grown.

Disc.:- not invested

One of the biggest clients of Affles India is Amazon India btw. One of the larger investors in Affles Holdings which is holding company of Affles India is Microsoft.

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Folks need not worry about it being a commoditised business yet. Please wait and watch for the next few quarters at least. It provides highly customised solution and recognises revenue when clients benefit. It is not just another plain vanilla programmatic online ad company. Meanwhile retail holding decline substantially. As per the latest SHP small holders declined from 31k to 7.6k.

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