True. There are specific hours on some days that I am on OTP duty. Unlike HDFC and IDFC, for Yes Bank, I need an OTP even to log-in. Its flooding.
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Starting 1st Oct all demat account holders need to use two factor authentication to login. It is confusing which two factors but traditional OTP through sms and email is one option given. Every month around 13 lakh demat accounts are being opened since April 2020 and the total account crossed 10 crores. This new login rule could increase cpaas volume growth.
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Even Eway bills for every business will have 2 factor authenticationā¦
that is a much bigger trigger than Dmat accounts tooā¦
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In Truecaller - April - June - Business Update
Truecaller continues to explore innovative use cases and develop more value-added services in addition to its core business
offering in parallel. The exclusive reseller partnership for business messaging with Tanla was commercially launched in the
second quarter. Within one month of commercial launch, the
partnership has successfully facilitated the delivery of millions
of business instant messages and is expected to ramp up significantly in volume over the year. The Early Access Program, a new
initiative launched in the first quarter that provides participating
customers the opportunity to test offerings in early stages of
development, has demonstrated strong potential as an incubator for new commercial opportunities. Following the strong traction seen in end user adoption of Video Caller ID, this feature
was piloted for business customer use cases within the Early Access Program in the first quarter and has progressed with over
50 business customers onboarded on beta. Other relevant offerings continue to be tested through the Early Access Program,
and this initiative has already demonstrated substantial added
value to both the customer experience and the product development process
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We have become an OTP nation. 
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Truecaller continues to explore innovative use cases and develop more value-added services in addition to its core business
offering in parallel. The exclusive reseller partnership for business messaging with Tanla was commercially launched in the
second quarter. Within one month of commercial launch, the
partnership has successfully facilitated the delivery of millions
of business instant messages and is expected to ramp up significantly in volume over the year.
I think only this much is relevant to Tanla. The rest is Truecallerās standalone offerings where they donāt have any tie-ups with Tanla.
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Being underwater, the words āvolumes expected to ramp significantlyā¦ā sure sounding like music.
Nirvana, Anna,ā¦ What is your opinion on tendering now at 1200 (my base is 1060), and then loading from the market to rebase at low 800 levelsā¦ I know market timing is a sin, but the temptation is quite strong. On the flip side, any positive note in Q2 and this may be hard to catch. What are the chances that
a tender offer gets accepted, never done that ye so curiousā¦
DISC - Invested, underwater, Rank amateur and confirmed idiot, definitely not a recoā¦
1.8% of every investorās shares are bound to get accepted if tendered as promoters arenāt participating in the BB. Practically, an investor might be able to tender 2.5-3% also depending on how many others participate. I think Institutional investors may not participate.
In any case buy back window will be open post Q2 results, so there is no hurry to take this call. You can take the call looking at price action post Q2 results.
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When buyback is announced at almost 100% premium to current price and even after the BB driven run up if the stock is providing 50% gain, one should tender even the most valuable stock and replace it through market purchase. Moreover acceptance ratio will be mere 3% best case so oneās long term holding is not going out in significant number of shares.
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Decide after Q2 results. They will come in before the buyback tendering probably starts and definitely before it ends. In most likelyhood you would want to tender. Whether you backfill it from market or not will be an easier call to make then.
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Latest Report from Gartner:-
There are tons of players in this space with differentiated and overlapping offerings while the opportunities are huge and varied too - a long term play.
However, one has to be wary of the competition from the likes of AWS/MS who can trigger a price war.
The 2 largest domestic institutional holders - Premjiās AIFs and SBI Life - both seem to have exited. That 40% dump post Q1 results must have been caused by this.
In terms of institutional confidence, the stock seems to be back where it was in 2020 or early 2021.
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I like the recent flex about Wisely. Slowly it appears wisely is crawling now.
Enterprise still in bed, sick. But, glad that they did not see further slide.
Look forward to hear from thread regs and wise men.
Gone are the double digit top line heydays, how the āmightyā have fallenā¦
Disclosure - invested avg price of 1060ā¦ Under waterā¦quite deep, a tough hold for sure
I am a layperson, a novice and Franky bit of a dunce, so not a recommendation
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My views post Q2 results. There is lot of estimation involved in absense of clear data. If anyone sees any mistake, or something that doesnt make sense, pl do call out. No recommendation either way, DYOR.
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Tanla reported flat revenues on YoY basis in Enterprise business. This is despite a ~30% hike in ILD A2P SMS rates effective from July (lets say July end). What this basically means is that they have lost business of approx 500-600 crore on annualized basis to competitors/price erosion. This should translate into a fall of 5-6% value market share (or even more). Thus, if they had 40% market share in enterprise business at FY22 exit, it would be below 35% now. I believe, they could possibly claw some of it back over next 2 quarters - however, they will still end FY23 with lower market share. I also suspect some industry slowdown happening with the global crisis raging and Indiaās growth rate being reduced. Industry wide growth is likely to be somewhat lesser than earlier years.
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To me this was the bottoming out of the loss in real gross margins (not accounting for one timers, which happened in Q1). So that is in some way a positive thing on looking forward basis. There will still be some more loss on account of Euro - but lesser than Q2 due to (a) shifting of billing to USD from Euro and (b) hope of lesser slide in Euro, relatively speaking, in Q3 over Q2. This impact is likely to be minimal by Q4. Further, increasing volumes of WhatsApp and Truecaller messaging would help give a minor boost to margins (minor because base is very low). I think it is unlikely that Tanla will revert to 20%+ EBITDA levels as promised by management in Q1 concall (and no mention in Q2 concall - further solidifies this). A 18% is more realistic number given facts in front of us.
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They have possibly lost DLT market share too (and no one has talked about it yet) over last 2 qtr. March exit was at 1.06bn messages on daily basis. Q2 they are below 1bn on daily basis (85bn for the qtr), whereas assuming even 10% growth it should have been more like 1.15bn daily basis. To me, it indicates at least a 15% erosion. That possibly explains a rather modest 20% YoY increase in platform revenues despite revenues from Wisely picking up. What could be the reasons or whether the slide is over or not, I have no basis to judge, besides the fact that Vi is losing market share continuously and some slide was likely. However, the magnitude is far more than what can be explained by Vi market share losses. This is a huge -ve. How they claim 64% share in Q2FY23 vs 63% in Q4FY22, beats me (maybe blockchain has different arithmetic rules).
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Truecaller volume callout at 700mn is good show (if it is not a typo). This effectively could mean a likely exit run rate of 2bn messages by Q4 (quarterly) - which is more than 1% of the total messaging volume in the industry. This however, means much lesser in value terms as ILD possibly accounts for a third of the value market share with less than 5% of the volume market share. Assuming they have a 50% higher gross margin in Truecaller messaging over SMS, this would add to margins. Moreover, if they can use it to penetrate new accounts (40-50% accounts where they are not present) it will be more beneficial than mere minor margin additions.
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Wisely communicate (Which was the actual exposition of wisely platform - Omni channel, encryption, real time settlements etc) hasnāt clearly taken off. In absense of Data protection bill, it is actually a very hard sell and that reflects in lukewarm performance. As an when data protection bill comes up and becomes an Act, only then I expect it to rapidly accelerate. Hence, this is a regulatory dependent item and in absence of regulation I donāt think there will be significant ramp-up to make a meaningful difference to overall numbers (topline/bottomline). Donāt count anything substantial for FY23 from this.
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Kore.ai - is some time away from getting revenues. Donāt count anything in FY23. What can materialize in FY24, is to be seen as management gives further commentary on wins and expected volumes.
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WhatsApp is taking off. They have SBI WhatsApp account. If that takes off well, it can bring decent amount of revenues and margins. SBI has reportedly ~50mn customers using mobile banking and overall ~100mn customers using internet banking. Difficult to quantity topline/bottomline impact as usage patterns and adoption ratios are not known to me.
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International Rollout - they donāt seem to have any real concrete plans or aggression on this. Goal posts are continuously being shifted. I wonāt count on anything in FY23 definitely. As of now even FY24 seems dicey. I wonder why they took 5 market exclusivity for Kore.ai and definitely all the GTM post Vi case study talks have vanished (Which were earlier promised on consultantās GTM recommendation sometime in Q4FY22, before goal post was shifted to Vi case study and then to focus on domestic deployment before going international).
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Literally, all Indian/Domestic institutional investors are now out of Tanla. They have been the real investors in face of sustained FII selling in 2022 at a macro level. Their money is not being put in Tanla. FII has also reduced, as have corporates and large holders. Retail is the sole new investor - some 90K shareholders added with average holding of 70 odd shares. This explains the freefall in July and doesnāt help the PE ratio at all.
In summary:
a. FY23 is a year lost for Tanla in many ways (it doesnāt mean there is no acheivement though). Bottomline wise, we have gone back 5-6 quarters and topline wise - 4 quarters. Worse, management credibility has eroded significantly. Ditto for share price.
b. 2022 was promised as year of Wisely. I think we should add 2-3 quarters to any dates given by Tanla (they have tended to over-promise and under deliver on this in the near past). Wisely Communicate has value if Data protection mandating encryption comes thru, else it is a hard sell. Whether Vi kind of deals is replicable elsewhere in the world, is an open question at this point of time. No Trubloq (DLT) kind of deals have materialized in the last 4 quarters. Huge regulatory dependency.
c. On positive side, worst may be over. Key is how quickly then can claw back to regain some credibility. Truecalller volumes are a good show and Kore.ai integration and trials can bring some positivity in FY24. Notwithstanding likely slow down in short term, growth in this industry is exciting.
d. Strategically, the absolute ham-headedness not to address geographical risk on Enterprise business is crazy. Right now is a good time to do acquisitions (with VC funding dried up and low valuations). They have enough cash in hand and despite poor show are still generating 100Crore on quarterly basis. The board needs to deliberate this better.
e. Tanla Investor Relation needs to woo the DIIās like their life depends upon it. At least their jobs should.
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I recently read through concalls of Route, Tanla and below are few notes on the business landscape:
- Both operate on very similar businesses in CPaaS . The domestic industry might grow around 20-35% for the next 5 years.
- Route wants to expand it offering globally whereas Tanla wants to maximize on the domestic opportunity.
- They provide APIs to clients that facilitate them to provide communication services like SMS, Whatsapp Business, Video Call Support integration etc. Bulk of the revenue still comes from SMS, voice.
- They do so by being an interface between client apps and operators(mainly telecom companies but also companies like Meta etc)
- Twilio has a global lionās share however itās not much penetrated with domestic Indian clients as its plans are expensive.
- The competitive scope is very intense(more so globally) which can lead to both companies having margin pressure.
- Recently telecom companies have started poaching clients from these CPaaS companies by directly offering them their new CPaaS products. For Example, Airtel IQ has already launched and Jio will also come up with a similar offering. For a client this saves them money by directly integrating with telecom operators rather than Route/Tanla as the middle layer. However, the integration and customer support etc might be handled much better by Route/Tanla as itās their niche focus area.
- Significant expense still goes to telecom operators. Margins can get impacted if thereās cost pressure from operators.
- Both companies still generate a significant revenue from SMS business however that might be at risk if RBI gives permission for push notifications etc to app providers. However cost of SMS is still very cheap in India and push notifications canāt replace OTPs etc in the near future as it is more secure way of authenticating.
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Agree. SMS are still cheapest, if you havenāt built your own notification tech, sending sms is cheaper than sending in app notification also. Same goes for WhatsApp messages which are more than twice costly than sms.
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I am a small business owner and I use SMS for various promotional campaign for my business.
I have been using SMS services for almost 8 years now. Recently, while using MTNL dashboard, I came across a small logo and name Tanla.
From a user perspective, I found MTNL dashboard to be very clumsy and there was nothing unique about it.
AFAIK, sms is commodity and one will always go with someone who is cheaper.
For Corporate, customer service matter but for smaller guys like us, cost is more important.
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Quite informative concall:-
If one join the dots with details posted above by @anna, @nirvana_laha and @lazy_investor taking into consideration my given business strategy (refer above posts) one should be able to understand which is a better business/investment between Route Mobile and Tanla.
P.S. This is not to be construed as a buy/sell recommendation.
I would appreciate it if you could spell out your comparison points in detail. Also, you seem to be conflating better company with better investment. Just want to sound out my thesis and see if I am not thinking correctly.
From the persistently higher PE, market is loud and clear in its love for Route. Route seems to be more consistent in its growth. Tanla has better long term growth metrics, but higher swings. OPM for TA la has been much higher longer term. Quarter sales run rates are now comparable for the two.
Route management appears more trustworthy and capable than Tanla. Tanla management comes off a bit immature, overpromising, under delivering etc.
While Route may be a better biz, itās stocks are priced very richly compared to Tanla (always have been). Thus from a return perspective, higher chance of turnaround jump in Tanla. Unless of course, there is a bigger risk of revenue collapse for Tanla compared to Route.
Market may be wrong, there is a chance that it may have misjudged Tanla, there is a chance that it may have overrated Route. If we consider the huge TAM for CPaaS, then a dramatic revenue slowdown would be surprise to me. Thus, TANLA is a better stock than Route, IMHO.
Both tapes have been on a rapid downslope since Dec 2021. But Q1 flopshow of Tanla clearly shows up against continued Q1 growth for Route.
Incidentally, any idea why dead cat bounced 15% today?
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Since my post was flagged, it appears that itās still not clear to many fellow VPers. Hence the below: -
While the numbers for both Route and Tanla have been talked about at length, here is my perspective on the industry trends and Route and Tanlaās postioning that should help clarify.
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There are too many players (globally) catering to the current set of use cases (overlapping offerings) and hence consolidation in terms of M&A is inevitable
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The core CPaaS offerings hitherto has largely been a commodity service and is transitioning into a value play along the lines of innovation ā this is where the tailwind is seen. Contact centre automation is one such.
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The heavy competition in the commodity nature of offerings has led to aggregators such as Route, which in itself is a result of M&A
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Tanla realized that the global industry is getting squeezed much earlier in the game and hence opted for an ecosystem play (compete on value by collaborating with other players) and not being a mere aggregator (collaborate to compete on commodity)
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When a business competes on value, it has some moat and has both volume and value (price) as levers to protect margins whereas a commodity business has no moat and only has volume as lever. Thereby it is prone to competition and price disruptions ā cheapest takes it all
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Tanlaās focus on capturing marketshare first in developing economies aligns well with the macro trends where Route is likely to face margin pressures. The overall strategy for any business, given the macro headwinds, should be to focus on developed economies for value (helps garner price appreciations) while focus on developing economies for volume (helps garner volume at current price if not more) keeping the low costs (personnel, infrastructure etc.) of the business in developing economies.
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Itās no surprise that the aggregator model of Route helps it maintain revenue growth (unfortunately at the cost of profitablility) while Tanlaās focus is to earn on every rupee sold.
This is in line with Tanlaās strategy of being asset light helping it command better ROCE and ROA -
Even from a risk perspective, Tanla is better positioned through an ecosystem play by not only being at the fore front of technological innovations (a major trigger for disruption) but also showing its conservativeness by distributing risk among many players who together serve the market.
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Without getting too much into the valuations, it appears that the market (including institutional players) do not have an understanding of the above and hence the lopsided valutions for Tanla and Route.
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As investors, while numbers need to be tracked on quarterly basis, 1 or 2 quarters here and there should not be seen as a major blip and is quite normal for any business, especially given the current macro headwinds. One needs to see the larger picture emanating from the concalls and the numbers to guage the performance of the business in the backdrop.
Hope this helps!
Regards,
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