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Dual engines to drive revenue

Tanla Platforms Ltd. is the largest Communication Platform as a Service (CPaaS) player in India. Tanla has two major businesses: Enterprise and Platform, both using blockchain technology to reduce spam and fraud activities and make it easy to integrate with enterprise applications.

* The revenue grew by 20.6% YoY, reaching 1,005.5cr, primarily fuelled by OTT channels.

* EBITDA declined by 3.4% to Rs.160.4cr in Q4FY24 on a YoY basis, due to the loss of volumes of Wisely network deals with VI & slowed growth in international ILD business.

* We expect improved revenue in FY25 owing to the growth in UPI and OTT transactions, realisation of revenue from new & existing customers.

* The new deals from Google and Vodafone in rich content messages could improve revenue visibility in FY25.

* Therefore, we retain our Accumulate rating with a revised target price of Rs. 1,046 at a PE of 19x FY26E adj. EPS.

Valuefirst & OTT business propelled the top line

Despite the seasonally weak quarter, revenue in Q4FY24 saw a robust growth of 20.6% YoY, reaching 1005.5cr, primarily fuelled by OTT channels. Segment-wise, the enterprise business, which accounts for 91% of revenue, grew (22% YoY), led by the growth of UPI transactions and OTT Whatsapp channels. Domestic SMS business grew sequentially, while international SMS business continued to remain soft due to a higher rate. Simultaneously, the digital platform reported a steady growth of 10.5% YoY, driven by the Trubloq and Wisely OTT platforms. In Q4FY24, the company began to earn revenue from Wisely ATP, but at a slower rate. In FY24, revenue grew by 17.1% YoY to 3,928 cr, led by inorganic growth from Valuefirst and OTT businesses. The company plans to complete the acquisition of Valuefirst’s international business in Q1 FY25. The full impact of the Vodafone Idea (Vi) exit will be witnessed until Q1FY25.

Improved margins in FY24

During the year, Tanla onboarded 404 new customers and established a direct contract with over a third of them on OTT channels. However, the EBITDA declined by 3.4% to Rs.160.4cr in Q4FY24 on a YoY basis due to the loss of volumes of Wisely network with Vi and slowed growth in international ILD business, along with a one-time expense incurred for the cost of the Mobile World Congress exhibition. Similarly, the EBITDA margin shrank to 16% in Q4FY24. However, bottom line PAT improved by 8.3% on a YoY basis to Rs.130.2cr. Annually, the company showcased a decent 24.5% growth in EBITDA and a 111- bps improvement in EBITDA margin.

Strategic move to bolster Tanla's Digital business

The company is strategically shifting its focus towards OTT channels, capitalizing on their higher margins as opposed to the SMS business. The company has extended its exclusive partnership with True Caller for two years. Tanla tied up with Whatsapp in the integration of ONDC seller application for small and medium sized business. The company launched a new MaaP (Messaging as a Platform) product for Google Rich Content Service (RCS) and signed a deal with Vodafone Idea (Vi) to deploy the MaaP platform in India, shaping revenue visibility in FY25.

Valuation

We expect revenue to grow at a CAGR of 15% in FY24–26E, relying on new client additions, increased realisation from new and existing customers, an increase in UPI transactions, and an improvement in volume from OTT business. The increasing adoption of the Wisely platform is expected to drive revenue and margin growth. The new deals from Google and Vodafone in RCS could improve revenue visibility in FY25. Therefore, we retain our Accumulate rating with a revised target price of Rs. 1,046 at a PE of 19x FY26E adj. EPS.

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