Broker’s call: Route Mobile (Buy)

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Target: ₹2,100

CMP: ₹1,580.65

Route Mobile is set to witness a growth uptick after the completion of the strategic acquisition by Proximus Opal. The growth recovery (~20% in FY25E vs 13 per cent in FY24) is underpinned by a recovery in messaging volume (ILD & NLD), a net new firewall deal, WhatsApp/RCS opportunities, and expansion in mature markets.

Proximus Opal acquired an 83.1% stake in Route Mobile, which positions Route+Telesign as the third largest global CPaaS player in terms of volumes. Route is expected to unlock synergies with TeleSign (owned by Proximus), enhance product offerings, and expand reach in mature markets like the US and Europe. The announcement of a five-year strategic partnership between Proximus and Microsoft showcases the potential for revenue synergies.

Route management has guided for revenue growth of 18-22 per cent y-o-y, EBITDA margin of about 13 per cent and improvement in cash flows.

We estimate a 20 per cent y–y growth in FY25 which assumes about 10 per cent from the firewall deal and around 10 per cent from the base business, which is in line with the global CPaaS industry growth.

The company has invested ₹380 crore in the firewall deal, which has impacted its cash flows in FY24; we expect cash generation to improve gradually.