Gone are the days when you used to use Nokia phones, and life was so simple back then! 🙂
Fast forward to today, and we are moving towards a digital age with rapid advancements in technologies creating disruption.
We have seen the emergence of various tech companies. Some of the prominent names in the Indian markets are zomato, swiggy, paytm, spotify etc, to name a few. Some of them are listed and you can invest in them by simply buying equity shares of them.
THE PROBLEM
But there is one problem with these new age companies. These are extremely risky and volatile in nature, therefore retail investors’ wealth preservation becomes an important parameter to consider. We all know what is happening with Paytm, Zomato, CarTrade, Policybazaar, etc.
THE SOLUTION
One alternative to the above problem can be investing in companies that provide their services to these new age companies. Therefore you can get exposure to the umbrella of new age tech based companies by investing in this service provider.
LISTED COMPANY IN INDIA
Well yes 🙂
There is one such listed company that provides its services to a hell lot of these companies. Just have a look at its client list 😉
So without waiting much, we’ll talk about the company name Affle India.
Last 3 Year returns have been phenomenal 661%.
WHAT AFFLE INDIA DOES?
It helps its client in consumer acquisitions, engagements, and transactions through relevant mobile advertising. Yes you are thinking on the right path! Those ads of various products you see on the mobile applications, are all done by Affle India.
(source: Investor Presentation)
BUSINESS SEGMENTS
Affle India mainly has 2 prominent business divisions:
- Consumer service (99% of revenue in FY22) : This comprises majority of the revenue, and as discussed above, under this affle india helps brands in acquiring customers through targeted ads. And Affle is pretty good with it 😉
They basically follow a simple 3 step model for this:
- Discover and identify target audience
- Acquire and engage target audience
- Re-engage and transact
- Enterprise service (1% of revenue in FY22): This comprises the miniscule proportion of the revenues, and includes helping offline businesses in building mobile applications and data analytics.
This is all done through usage of artificial intelligence, machine learning and deep learning. All this has helped the company in achieving a leading market position in India with a profitable business model.
WHAT MAKES THEM DIFFERENT FROM COMPETITORS?
Its Business model – CPCU [Cost Per Converted Users]
While the rest of the marketing companies charge companies on the basis of views, clicks and impressions of ads, Affle India plays the real game here! Rather than charging on views and impressions, they charge the companies on the basis of converted users only! Yes you read that right, Affle India goes to companies out there and simply says – hey only if the user converts and buys your product, then only you pay me, else nothing .
And here are the numbers for the same:
(source: Investor Presentation)
As clearly visible, the revenue has been consistently improving. As of FY22, CPCU model comprises 90.8% of the overall consumer revenue.
OTHER HIGHLIGHTS
- The business is not concentrated domestically (34.7% of total revenue) and the company provides its services globally too (65.3% of total revenue).
- The company is known for its proprietary predictive and recommendations algorithm, which is very efficient. They have inhouse cloud computing infrastructure, which helps them to generate unique insights from terabytes and terabytes of data! Thus not dependent on others to store the data. ( as they say, data is the new oil 😀 )
- It’s an asset light business model and therefore highly scalable.
- It’s operating in the market with substantial barriers to entry.
FINANCIALS OF THE COMPANY
- Profitability:
(source: Investor Presentation)
As clearly visible, the growth in profitability of the business has been phenomenal. Between FY18-22, revenue has grown at 59.5% CAGR, EBITDA at 47.2% CAGR and net profit at a whopping 60.2% CAGR. Simply crazy 🙂
- Return ratios:
(source: Investor Presentation)
In terms of efficiency, ROE is greater than 25% and ROCE greater than 15%. And the icing on the cake is its low debt to equity ratio of jst 0.20x.
- Valuations:
Well this is one aspect that usually worries inventors. The P/E ratio of the company is around 75! Of Course this comes with no surprise as the growth is very high for the company. If you find this high, then just to mention it was once trading at a P/E of 165!!!
SOME ACHIEVEMENTS TO MENTION
Just to mention some of the recent clients achievements –
- Apollo 24/7
- 214% increase in monthly conversions
- 61% Growth in marketing ROI
- 201% Boost in App Engagement
- Byju’s
- 83% Increase in Monthly Conversions
- 55% Registration ratio amongst newly onboarded users
- 3X+ ROI on ad spend
- Fossil
- 87% online leads converted to in-store sales
- 23X Return on Investment
- Double-digit growth in offline sales from online channels
And these are just a few of the achievements out of the many!
So this was all about Affle India. Do let us know what are your thoughts on the company 🙂
