Route Mobile Ltd
NSE:ROUTE

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Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
Operator

Good evening, ladies and gentlemen. I'm Yashashree, the moderator for this conference. Welcome to the conference call of Route Mobile Limited arranged by Concept Investor Relations to discuss its Q1 and FY '24 results.

We have with us today, Mr. Rajdip Kumar Gupta, Managing Director and Group CEO; Mr. Gautam Badalia, Group Chief Strategy Officer and Chief Investor Relations Officer; and Mr. Suresh Jankar, Chief Financial Officer. [Operator Instructions] Before we begin, I would like to remind you that some of the statements made in today's earnings call may be forward-looking in nature and may involve certain risks and uncertainties. Kindly refer to Slide #2 of the presentation for the detailed disclaimer. Please note that this conference is being recorded.

I now hand the conference over to Mr. Rajdip Kumar Gupta, Managing Director and Group CEO from Route Mobile. Thank you, and over to you, sir.

R
Rajdip Kumar Gupta
executive

Thank you, moderator. Good evening, everyone. Wishing all of you good health and prosperity. Despite Q1 being a seasonally weak quarter, we had an excellent start of financial year FY '24 with an exceptional 33% Y-o-Y growth in Q1 FY '24. We are well on track to achieve our revenue growth guidance of -- for year '24. The following are some of the key highlights of quarter gone by.

We have signed a direct contract with 1 of the world's largest e-commerce and cloud computing companies for offering CPaaS services across 10 countries, including India. We are in advanced discussion for a few large firewall contracts and sell upgrade during this quarter once such contracts are executed. We continue to gain significant market share in India and our NLD volumes have picked up significantly during the quarter gone by. The proposed NLD price increase from 1st August should result well for us. We have yet again been ranked as Tier 1 vendor in Rocco's A2P market impact report '23 MNO and enterprise category.

In terms of recent developments, the promoters and member of promoters group of Route Mobile Limited have entered into a share purchase agreement dated July 17, 2023 with Proximus Opal and Proximus SA, pursuant to which Proximus will acquire the entire promoter and promoter group shareholding in the company representing 57.56% of the expanded voting shares capital.

The consumption of [ SPA ] could result in Proximus Opal acquiring control over the company and shall attract an obligation on Proximus Opal to make an open offer as required under SEBI regulation. The acquisition of this majority stake in Route Mobile and the mandatory offer will followed by a reinvestment of EUR 299.6 million by some of the founding shareholders of Route Mobile for up to 14.5% of the shares of Proximus Opal.

This reinvestment implicitly values Telesign at EUR 1.4 billion. Proximus is a major mobile network operator based out of Belgium and owns 100% of Telesign, a leading CPaaS company based in U.S.A., and [indiscernible] players in Belgium. I know you may have several questions on the Proximus news. So let me deep dive right away with the strategic rationale.

When Proximus expressed their interest in acquiring a majority 58.75% stake in Route Mobile, a mandatory requirement for their investment, I affirmed our confidence in Route Mobile immense growth potential, especially in high opportunity emerging markets. While I was reluctant for the -- giving the majority control, we negotiated an optimal deal structure wherein EUR 299.6 million of the promoted cash consideration will be reinvested into the parent Proximus Opal entity, enabling the Route Mobile founding family to hold 14.5% share in Proximus Opal with Proximus holding the remaining 85.5%. This aligns interest and allows us to participate in the value creation upside through the majority stake -- minority stake while maintaining operational control of Route Mobile to pursue our global growth vision.

I'm pleased we could agree on the constructive structure that balances both parties' objectivity. I'm thrilled to detail how the Proximus partnership strategically positions Route Mobile for immense growth across multiple high potential market. Firstly, it provides instant access to top enterprise in the U.S. market through Telesign's blue chip customer base, which has been challenging for us to penetrate alone in that market. Telesign's strong relationship with these customers are the perfect synergy to unlock this opportunity. These clients generate significant ILDO traffic in India. And this ILDO business currently amounts around INR 3,000 crores. With the recent price increase in India -- for India termination, together we can attract substantial new messaging traffic by cross-selling our omichannel and identity verification capability to their customer base, particularly in ILDO market side.

Secondly, Route Mobile's unparalleled direct connection with over 280 operators across high-growth regions, such as Asia, Middle East, Africa and Latin America gives Telesign a new opportunity to expand their services into these markets. Our emerging market footprint amplifies their reach and serves the same top customer in other markets. Additionally, by collaborating closely on new products like Route Mobile's TruSense digital fraud platform and Telesign's identity solution, we benefit immensely from shared innovation to build market-leading capabilities faster.

This product addresses the significant issues of digital fraud in emerging market. Route Mobile has developed strong in-house capability across omnichannel messaging, with conversational API for emerging channels like [ RCS watcher ] for business and Viber. Our partnership provides Telesign's immense access to onboard their U.S. enterprise customer on to Route Mobile's risk communication stack. This presents a sizable U.S. revenue opportunity for Route Mobile by leveraging Telesign's customer relationship.

Additionally, our recent acquisition of Sendclean e-mail delivery capability complements Telesign's portfolio nicely. It allows them to expand their product scope to e-mail services for their U.S. customer on top of existing test messaging and identity verification offering. The large U.S. e-mail solution market presents another avenue for revenue growth through this partnership.

In summary, this partnership strategically aligns with Route Mobile's vision to become a leading international CPaaS player. By combining complementary strength, we can scale faster, enter high potential new market together and build better product through collaboration. I'm optimistic that this transformational union will unlock immense shareholder value as we embark on the next stage of our hyper growth journey. Thank you once again for your faith in Route Mobile.

Finally, based on our good performance in Q1 FY '24, the Board of Directors has recommended an interim dividend of INR 3 per share.

With this, I will now turn it over to Gautam to take us through the financials. Thank you for your time.

G
Gautam Badalia
executive

Thank you, Rajdip. Good evening, everyone. We have already uploaded our quarterly earnings presentation on our website as well as on the stock exchanges website. Hope you had a chance to go through the presentation. I'll quickly summarize our financial and operating performance during the quarter gone by and the recent development thereafter before opening the floor for Q&A.

The key takeaway from our financial performance in Q1 FY '24 has been the strong revenue growth momentum. Revenue growth of 33% and EBITDA grew by 43.8% on a Y-o-Y basis, coupled with expansion of margins. EBITDA margin expanded by 100 basis points on a Y-o-Y basis.

As highlighted earlier, Q1 is traditionally not our strongest quarter, and yet we have delivered an industry-leading growth. In volume terms, we processed over 29.5 billion transactions in Q1, which is again the highest quarterly billable volumes processed by us till date. Such exemplary financial performance in Q1 FY '24, a large global deal will across 10 geographies and a few large firewall deals in the pipeline is a very strong foundation for a superlative FY '24. With the recent announcement regarding Proximus, I want to highlight a few key aspects besides what Rajdip just spoke about.

This transaction is intended to create value for both Route Mobile and Telesign, and for all stakeholders, be it existing and future shareholders of Route Mobile as well as for Proximus shareholders. Synergies will be derived on both revenues based on expanding geographical footprint and complementary product capabilities and cost. By cost, I'm alluding to direct costs and the operating costs as well.

The transaction will allow Route Mobile to have access to market outside of its current main geographical footprint and to benefit from the digital identity expertise of Telesign. Rajdip will run the overarching CPaaS business on a large scale with the scale benefits coming along with it. As we speak, we are already working out the synergy blueprint with the transition team made of representatives of Telesign, Route Mobile, and Proximus Group, along with an esteemed global consulting firm.

With respect to geographical alignment between Route Mobile and Telesign, the transaction has just been announced, and we are already working through in terms of the [ GTM ]. However, we expect both companies to operate in the global marketplace and further capitalize on the growing CPaaS and digital identity markets. However, we expect there to be meaningful synergies on both revenue and cost. We do not have an exact view of what revenues will flow through which platforms, but plans to take advantage of the complementary geographies capabilities and unique platforms of both companies, which will allow us to deliver accelerated top line growth across both businesses.

With respect to the cost synergies, it was announced that approximately 75% of synergies will come from reducing costs. This will be achieved by optimizing the joint cost base of both companies, including taking advantage of steel cost benefits as well as geographical labor consolidation. These synergies are an estimate based on a preliminary assessment performed during the due [indiscernible] phase conducted by both the parties, and we will further elaborate the exact nature in due course.

With respect to the commercial licensing agreements for digital identity and CPaaS products, we expect to take advantage of the unique platforms that Route Mobile and Telesign have, to deliver on a global growth strategy. But at this point in time, we have not reached that point of -- or level of planning, but again, we'll elaborate in due course. In the event that commercial agreements or licensing agreements would be put in place. This will be done at arm's length, and we will aim at optimizing the cross-selling of DI, which is digital identity, and CPaaS solutions in their respective geographies where each company has a leading footprint.

With this backdrop, let me walk you through our financial performance. In terms of Q1 FY '24 performance, revenue from operations grew by 33% on a Y-o-Y basis. There was a sequential degrowth of 4%, largely accountable due to sharp devaluation of naira as a currency in Nigeria and decline in traffic of few CPaaS players, which were acquired during the last quarter.

In terms of certain KPIs, billable transactions increased from 24.8 billion in Q1 FY '23 and 27.4 billion in Q4 FY '23 to 29.5 billion in Q1 FY '24. This increase in billable transactions was largely on account of our increased penetration in the domestic market in India. Our domestic volumes in India witnessed a double-digit growth on a sequential basis. Average realization per billable transaction reduced to INR 0.33 compared to INR 0.37 last quarter, again, owing to increase in domestic enterprise business, which is apparently at a lower -- much lower realization.

We had a net revenue retention of 122%. We added over 100 new customers in Q1 FY '24 across all products. Gross profit margin expanded marginally from 21.3% in Q4 FY '23 to 21.4% in Q1 FY '24. EBITDA for the quarter increased by 44% Y-o-Y to INR 1,237 billion. EBITDA margin improved from 11.8% in Q1 FY '23 to 12.8% in Q1 FY '24. Effective tax rate for the quarter was 16.82%. Adjusted profit for tax grew by 23% on a Y-o-Y basis, and PAT margin stood at 11.1%.

So with this, we open the floor for Q&A.

Operator

We will now begin the question-and-answer session. [Operator Instructions] We'll take our first question from the line of Vikas Jain from Financial Quotient.

V
Vikas Jain
analyst

Congratulations for a good set of numbers on a Y-o-Y basis at least. I have 2 questions. One in relation to our upcoming merger with Telesign. So what kind of margin profile would Route Mobile shareholders will have post merger with Telesign? Currently, we are in kind of 12%, 13%. How does that impact our operating profit margins once the financials get merged along with...

G
Gautam Badalia
executive

Sure, Vikas. So I think in terms of a presentation that was already uploaded post the consummation or signing of the deal, the aspiration is to kind of have an EBITDA margin profile of between 13% to 15%.

V
Vikas Jain
analyst

Okay. And how about the revenue sharing that we have with Telesign. Does Telesign overpower the Route Mobile financials or we are net to net with them.

R
Rajdip Kumar Gupta
executive

So as I said, I think some of these fine prints are I think being worked upon through our transition period, and once we have more clarity in terms of the entire work stream, I think we'll be able to kind of give you a more clearer perspective on this. But as I said, I think both businesses will tend to benefit because of the complementarity in terms of geographies and the product capabilities.

V
Vikas Jain
analyst

I wish Route Mobile and the shareholders all the best along with management. To conclude, I just have 1 feedback. As a shareholder of Route Mobile, I would, and I think other shareholders would expect the same, to -- for the Route Mobile to be a little more proactive in terms of communication. I think we as shareholders got an update and more insights from Proximus CEO before my management team could have responded. And in today's media and social platform era, I don't think that reaching out to shareholders is that much difficult. It just brings in more confidence and transparency in the management and shareholder relationship.

Operator

We have our next question from the line of Sanjay Ganesh from Banyan Tree Advisors Private Limited.

U
Unknown Analyst

I wanted to understand by when would we see the synergy start flowing into Route Mobile from the transaction itself?

R
Rajdip Kumar Gupta
executive

Gautam, do you want to start with this? And then I can...

G
Gautam Badalia
executive

Yes. Sorry, Sanjay, you -- are you alluding to by when will it start to flow?

U
Unknown Analyst

Yes.

G
Gautam Badalia
executive

Okay. So I think, as I said, I think we already have a transition team kind of working on this closely. Some of these things, I think, will kind of be -- we'll be able to kind of give you a clearer picture once we have a little more in-depth kind of review of the work streams. But I mean just to kind of share from a conservative standpoint, I think from the time of closing, I think we would be in an action mode where a lot of these synergies will start to kind of flow immediately from closing.

U
Unknown Analyst

And that would be in 6 to 9 months?

G
Gautam Badalia
executive

Yes, you are right.

U
Unknown Analyst

Okay. Great. One more question I have for Rajdip, sir. In your transaction with Proximus Opal, are there any conditions on which you may have to sell your stake back to Proximus or you -- or Proximus may have a right to buy your stake once the second stage of the transaction is done. Are there any put options or call options that are there?

R
Rajdip Kumar Gupta
executive

Gautam, you want to answer that?

G
Gautam Badalia
executive

Yes, yes, sure. So Sanjay, the way the deal structures, as Rajdip said, he wants to be associated with this business and drive the CPaaS leg of the business. So he is committed to this business for 5 years. So there is a contractual lock-in of the shares for up to 4 years. And at the -- only at the end of 5th year, either the shares are kind of swapped back into Route Mobile or swapped into Proximus or they are kind of cashed out at the fair market value then. So the fair market value would be completed at the end of 5th year, and basis that it could be either of the 3 options or a mix and match of the 3.

R
Rajdip Kumar Gupta
executive

Sanjay, just to add another point out here, like I'm also going to head the combined CPaaS business of both the companies. And -- but my experience of last 20 years in this domain, and I think for the next 5 years what I'm going to build as of 2 companies is 1 large force together and the potential of the emerging market, which I see in CPaaS is going to grow multiple in next 5 years, for sure. And that is the reason I think I want to highlight out here about why I wanted to have this deal, because the potential what Telesign can bring or as a Proximus Group can bring to Route Mobile is immense. And end of the day, I believe that it will create more value for Route Mobile's shareholders.

Operator

We have our next question from the line of Nikhil Choudhary from Nuvama.

N
Nikhil Choudhary
analyst

This is the question for Rajdip. So Rajdip, while I understand the logic of Telesign or Proximus in acquiring Route Mobile, they are a fast-growing company in a developing economy, which itself is growing very fast. Also 1 of the most profitable company in CPaaS universe. I want to understand what was your thinking in selling the stake in Route Mobile, even though you will be investing half of the proceeds in the combined holding company, but ultimately, the diluted holding in Route Mobile will be a fraction of what you had in terms of your current ownership. So I just wanted to understand what was your thinking behind it.

R
Rajdip Kumar Gupta
executive

It was very clear, Nikhil, like when -- see, any CPaaS company in this current scenario who want to grow bigger and give -- for the next 5 years, they should have the U.S. market as their 1 of the large markets. In last so many years, I have tried to establish a base in U.S., almost 6 years, we hired multiple people. We had -- and all operated in those markets for the last 6 years. We failed miserably in like every single attempt we tried to, because that is a market where once you are already having an enterprise customer, somebody coming from out is very tough to crack those kind of customers, right?

And for my future growth of Route Mobile, I need to have some partner who has that base of enterprise customer in that market. That was the 1 trigger point which was very critical for me to -- if I really want to be a large global CPaaS player and U.S. is not just being a part of my portfolio, I'm not going to grow as the market is going to grow, especially the U.S. based companies in CPaaS. I really need to be net to net with those companies and to bring Route Mobile on a global map. That was the main trigger point for me to have the deal.

N
Nikhil Choudhary
analyst

Sure. Understood. Second thing about the valuation of Telesign, which you mentioned as EUR 1.4 billion. So if you do simple math in terms of valuation based on [ past ] sales, it is valued more than 3x of its last year sales, which is even higher than Twilio, higher than Route Mobile, right? They tried to list about 1.5 years back through NACC, right? At that time, they were valued at $1.3 billion. That was at the height of where the valuation of most of the CPaaS companies were much higher. So what was the logic of giving much higher valuation to Telesign compared to those.

G
Gautam Badalia
executive

Yes, yes Nikhil, I think, honestly, there is 2 way to see it, right? First of all, I always knew they're going to demand high valuation based on their sticky customer base, especially large OTT players and most of -- Telesign is completely enterprise-focused company. They don't work like other CPaaS players in the market where they do trading between each other. These -- I think Telesign is the only CPaaS company in entire world who just operate with -- work with enterprise and they don't buy from aggregators like a trader, okay? The first point, I think they definitely won't have asked for a higher valuation, which I agreed to for a betterment of Route Mobile because of the future growth. See that is 1 answer I can give, which I thought about. Okay?

I may not have any rationale of giving that valuation and aggregate total valuation. My only option is to like, I need to have this partnership and they demanded higher valuation and we agreed to that.

N
Nikhil Choudhary
analyst

Sure, sir. Very helpful. Just last question to Gautam. Gautam, just the deal which you signed with Amazon or the largest e-commerce or database product company. Just want to understand what would be the dynamics -- change in dynamics, the impact on our financial. And is the overall volume will start to flow right away? Or will it take a quarter or so?

G
Gautam Badalia
executive

You can expect this revenue in this quarter. That's what I can -- so we are in the stage of integration as of now. And we hope to start getting volume and revenue from month of August.

Operator

We have our next question from the line of Swapnil Potdukhe from JM Financial.

S
Swapnil Potdukhe
analyst

Just pushing you on the previous participant's question. So the compression that you had to get into this deal appears a bit -- so the way I look at it is like the potential in India is significantly high, right, a growth opportunity. You're growing at a significantly higher rate, gaining market share. The operating performance has been robust in the past. Stock valuations are also decent. I mean, what was -- so what I'm trying to say is, what was the compelling reason end of the day? You did...

R
Rajdip Kumar Gupta
executive

Swapnil, sorry to cut you. I'm here for next -- I need to build a story of vision for Route Mobile for next 5 to 10 years, right? Okay. Let's talk about markets like India or less of market like Africa, we are very well established in this market. Okay. If I really want to give a guidance to my shareholders for next 5 years that I will grow by 25% or 20% year-on-year basis and I can be a $1 billion revenue as a stand-alone, that is 1 vision you cannot achieve in this market, because the margin mix is also very critical for us, because U.S.-based customer, I think U.S.-based CPaaS is a higher margin as compared to emerging country markets.

So this -- I think I can answer you with this only because this is the only trigger point I had in my mind. I need to build Route Mobile for future. I need to make Route Mobile ready for the future by increasing the guidance which I have given to my shareholders and to make sure I create higher EBITDA margin along with the GP margin.

And there is a lot of cross-sell, upsell opportunity within both the organizations and which will create value for with the shareholder of Route Mobile.

S
Swapnil Potdukhe
analyst

Got it. And in the press release of Proximus, there was a quote from you saying that Route's revenue would get accelerated -- so Route will become a $1 billion revenue company in an accelerated mode versus your previous guidance following this deal. Can you elaborate more on that? Like what would be the levers for that acceleration?

R
Rajdip Kumar Gupta
executive

So some of the deals I've just shared with you, right? I'm talking about India market growth...

S
Swapnil Potdukhe
analyst

Can you please quantify in some form or the other?

R
Rajdip Kumar Gupta
executive

I mean, how will I quantify? I can only share with you some of the contracts I can win. I'm talking about large firewall deals in some markets, which is more than $100 million kind of a deal, but I cannot quantify in this call. Probably as and when it comes in, definitely, we're the first person to announce in public domain.

G
Gautam Badalia
executive

So Swapnil, if I can just add here. I think if you look at -- so I think the way to look at Telesign is that they are -- I mean the quality of revenue that they do, it comes from all large U.S. or large enterprises, where we believe, I mean, most of those enterprises are hyperscalers. And if they were to kind of scale that businesses into the emerging markets, Route Mobile should become the de facto or the preferred partner. So we believe, I think from that perspective, if a lot of those customers were to use Telesign, where Route Mobile is not directly kind of partnered with such enterprises, Route Mobile will be the support arm for Telesign for all that traffic that will terminate into emerging markets. And that is what will accelerate the growth for Route Mobile and hence that statement of achieving that $1 billion revenue, I mean, sooner than what we had guided earlier.

S
Swapnil Potdukhe
analyst

Got it, Gautam. And is there a possibility there that there will be some shift in some of your business to the competition because of the hangover of the deal that is there during the -- there could be a period of uncertainty in between.

G
Gautam Badalia
executive

So most of our agreements are service level agreements. As long as the customers are not impacted because of the service quality, I don't think there would be because of deal overhang or switch from 1 service provider to another.

R
Rajdip Kumar Gupta
executive

In fact, we have seen a higher volume from the customer post this deal.

S
Swapnil Potdukhe
analyst

Okay. Just the last one. You did allude to the fact that because of some M&As in this space, you had some revenue loss in this particular quarter -- or opportunity loss, let's put it that way, not revenue loss, but opportunity loss. Will it be the same for your competition going ahead once this deal is concluded?

R
Rajdip Kumar Gupta
executive

It should be. Yes. It should be 100%.

Operator

We have our next question from the line of Mohit Motwani from Nuvama.

M
Mohit Motwani
analyst

Two questions from my end. One is, can you talk about the growth that you're seeing in your top client base? Has there been any slowness because the top client revenue seems to be -- growth seems to be tapering down. So is there -- because as you can see the contribution has come down. So is it because India volumes have increased or there is some reduced spending by the top clients? Can you give some color on that?

G
Gautam Badalia
executive

So Mohit, the way to look at this business, I mean, so I think there is some seasonality to the business as well, right? So on a Q-on-Q basis if you were to compare it, I think Q4 versus Q1 may not necessarily reflect the kind of throughput from clients, right? I mean that is not an apples-to-apples comparison, so to say. And if you look at it on a Y-o-Y basis, I think we have demonstrated a 33% growth -- and that, I think, should be the right way. And here again, I mean, we are talking apples-to-apples because all the acquisitions were accounted for in Q1 FY '23 as well.

So on that front, I think we are pretty comfortable with the way each of our clients are ramping up. There was some impact because of, as I said, some of the acquisitions that have played out in the space, some clients were impacted. -- some CpaaS clients were impacted. But other than that, I don't think there is any cause for concern for any of our large clients, I mean, in terms of the volume that's been serviced by all.

M
Mohit Motwani
analyst

Yes, exactly. Actually, I was pointing out to that only. So have you seen any wallet share loss in our top client account sales. That's what I just wanted to understand.

G
Gautam Badalia
executive

Nothing. Nothing, I mean, that warrants kind of any attention. I mean. So as I said, we are comfortable with the way each of our clients are shaping up. And earlier some of these clients or rather 1 of our large clients we're servicing indirectly, but now we have contracts across 10 countries. So we believe the throughput and the margins should improve for that particular client.

M
Mohit Motwani
analyst

Sure. And can you just -- one bookkeeping question. Can you let us know what was the contribution of Masivian and Mr Messaging for the quarter?

G
Gautam Badalia
executive

Sure. So Masivian was, in INR terms, it was about INR 57-odd crores for the quarter. And Mr messaging was about INR 146-odd crores for the quarter. So 1 of the CPaaS clients that got impacted was, I mean, a client of Mr messaging.

Operator

We have our next question from the line of Amit Chandra from HDFC Securities.

A
Amit Chandra
analyst

So my question is on how the whole scheme will work post the like merger with Telesign. Also, if you can throw some light in terms of how the revenue is structured for Telesign in terms of how much of around $500 million revenue that they have, how much is CPaaS and how much is products, and how the revenue flow will happen from Telesign to Route, because these 2 will be like separate companies, right? They like they will operate as a separate company. But in terms of saying the terminations, what Telesign is giving to other players, those terminations will shift from other players of Route Mobile. So how it's going to work and how fast this can happen? Or it will happen immediately or post the that merger is complete?

R
Rajdip Kumar Gupta
executive

So Amit, at this point in time, I think some of these things are being worked upon. I think as I said, I mean, there is already a transition team already working on this, along with and very esteemed large global consulting firm. So some of these things, I think once we have a little more color once things are kind of formalized, we will definitely come back and give you a comprehensive perspective of how things will pan out. But having said that, from whatever I think we've kind of discussed in principle between all the parties, everything will happen at arm's length, and to that extent, I think both companies should benefit by this construct while they are separate legal entities.

A
Amit Chandra
analyst

So what I'm trying to understand is that, as you mentioned that the CPaaS business of both Telesign and Route will be looked by a single CEO. So how that anyway functions? Is he going to be CEO for both the companies? Or is the CPaaS business will be carved out from Telesign and a margin to Route Mobile or something of that sort? So how that will function and...

G
Gautam Badalia
executive

This is premature for us to comment at this point in time, but we kind of have major note of this, and we'll definitely come back to you once we have a concrete answer on this.

R
Rajdip Kumar Gupta
executive

So Amit, just to add out here, I think the combined revenue of CPaaS business between Telesign and Route Mobile is about $950 million. And I think about $50 million comes from the DI business, which is digital identity, if I'm not wrong.

A
Amit Chandra
analyst

Okay. Okay. And sir, also, the whole premise last 2 years for Route Mobile has been based on -- and obviously, the organic growth has been there, but also we have been aggressive on acquisitions, right? And we have been seeing a lot of consolidation happening in the CPaaS space. So how do we see the acquisition strategy panning out post the whole change in structure? So is it going to be more organic growth from here on? Or is it...

R
Rajdip Kumar Gupta
executive

It is definitely -- see, there's no change in DNA, right? And I'm going to be the CEO of Route Mobile. So my vision and road map is the same. As I said, we will look for a company for tuck-in investment. And as we speak, we might have some companies to acquire in some product space. So there's nothing changed from our vision and DNA for this.

A
Amit Chandra
analyst

Okay. And sir, just 1 last clarification that last year, we have been aggressive on the India strategy and we have been focusing a lot on the ILD, NLD business in India. Also, we have done some acquisitions to expand our global reach. But now it seems that we are focusing more on the international part of the business rather than India. So is that the correct way to...

R
Rajdip Kumar Gupta
executive

Not at all. Not at all, Amit. Our India focus is definitely going to be more aggressive and more focused. As I said if -- in last quarter, our volume and revenue increased in India market, And there are some announcements which we are going to make very soon. Probably you will come to know our focus in India market and emerging markets are going to be the same. And we believe that emerging market and especially India market has a huge potential -- and if we are definitely going to define a strategy to make sure our international growth along with India growth goes hand in hand.

A
Amit Chandra
analyst

Okay. And sir, also in terms of the India market, the NLD business, so we have seen price hikes also in NLD, price hikes have been there in ILD. And also there has been a lot of talks about the anti-phishing platform. So how do you view that? So we have also launched a platform for anti-phishing. So what is the progress on that part? So a competitor seems to be...

R
Rajdip Kumar Gupta
executive

The only thing I can share with you right now, we are on track. We are in talks with operators as soon as there is some kind of material information we agree from operators, we will definitely share in public domain. But yes, we are working towards some -- we are working with some operators, and I think very soon we might announce something on that.

Operator

We have our next question from the line of Dipesh Mehta from Emkay Global.

D
Dipesh Mehta
analyst

Congrats for the transaction. A couple of questions. First, about FY '24 outlook. I think if you can give what now we are expecting for full year, considering we are now having benefits from...

R
Rajdip Kumar Gupta
executive

Dipesh, your voice is not very clear.

D
Dipesh Mehta
analyst

Is it better now?

R
Rajdip Kumar Gupta
executive

Yes.

D
Dipesh Mehta
analyst

So considering the -- I just want to get an update about FY '24 outlook. Considering 2, 3 things. First, about the NLD rate hike, which is imminent. One second thing is potential synergy benefit from the relationship or partnership with Proximus Group now. If you can provide how we expect FY '24 to play out? Second question is about the contract which we suggested with leading e-commerce company. about 10 country kind of presence. So where we are today and how this is incremental. If you can give some sense because I think that is yet not clear. Third thing is about the new product. If I look, let's say, last 2, 3 years, change listing, new product was 1 of the key things which we always used to highlight, and we expected it to be, let's say, 10 percentage of revenue and significant faster growth. But if we look at last few quarters, it is growing slower than the company. Even this quarter, their growth is 20% versus 30 [ percentage ] plus.

If you can provide some sense where -- what is hindering the growth? And last is OCF, if you can provide the operating cash generated during the quarter.

R
Rajdip Kumar Gupta
executive

Dipesh, I think the deal closure is about 8 to 9 months long, right? And what I can tell you, whatever guidance we have given at the beginning of the year, I think we want to stick with the same thing. I think the 20% growth guidance what we have given already, we want to stick with the same thing. With the certain deals, which we are going to sign, I think in past also, I have revised my guidance 2 times last year and probably this year, also, we might revise our guidance based on the certain deals when it is materialized. But as of now, we want to stick with 20% growth guidance, what we have already given to the market. But I can assure my shareholders, this is definitely going to be revised based on certain deals which we have signed and some of the deals which we are signing very soon.

Gautam, to you.

G
Gautam Badalia
executive

Yes. So in terms of -- Rajdip, do you want to take that, the new contract that we signed...

R
Rajdip Kumar Gupta
executive

Yes, yes. Sure. Can you just repeat the question, Dipesh? What exactly...

D
Dipesh Mehta
analyst

So we mentioned about 10 country kind of presence with a leading e-comm company. So just want to get where we are today. How this will expand our relationship...

R
Rajdip Kumar Gupta
executive

Yes, I've already shared, but we are at the last stage of integration, and we are hoping to start receiving volume on these countries from the month of August.

D
Dipesh Mehta
analyst

No, the question, Rajdip, is right now we are in how many countries? Whether we are in 1 country, 6 countries, we don't know. So if you can give...

R
Rajdip Kumar Gupta
executive

Right now we are only for India through a third partner. Okay. And these 9 countries, these are totally new additions to our portfolio.

D
Dipesh Mehta
analyst

And can you give some sense about what will be the potential revenue maybe in 2, 3 year time period?

R
Rajdip Kumar Gupta
executive

Probably next quarter, I can give you that. Let the integration to be done and let the volume to flow through our platform because it has 1, 2 months' time of testing, like so it is not that we will start getting the entire traffic on day 1. Probably the next quarter or end of this quarter, next earning call, I might give you some brief on that.

D
Dipesh Mehta
analyst

Another 2 questions?

G
Gautam Badalia
executive

Yes, Dipesh, on new products, I think we're making some progress. I think some of the -- I mean, if you look at the entire IT messaging construct, right, as with this generative AI, a lot of things are now getting revolutionized and some of those work things are being worked upon. And I believe once those things are formalized, made more enterprise-ready, we will be able to kind of garner good traction. We've already deployed the -- a robot, which is a conversational bot platform with some element of generative AI with whatever the client. And now we're doing that with a lot of other clients. So we believe I think the traction will pick up there. I agree with your point. I think the growth rate has kind of [indiscernible] muted than the portfolio growth rate, but we are fairly confident.

I think in this year, as I said, I think in the previous call as well, I think will be the inflection point where I think of these new products will achieve scale and that will necessarily take us, I mean, towards that 10% revenue contribution. I think this year, I think, will be a very important year from the new product standpoint and there are incentives to be [ rolled ] out to the employees to hard prime focus on this new product work stream. So I think the impetus on the management continues to be very high on new products. And I think this year, definitely, we'll have some degree of traction, I think, which we'll be able to demonstrate towards the end of the year.

R
Rajdip Kumar Gupta
executive

Dipesh, just to add, we have onboarded some of large customers whose integration on these new channels are finished now. And probably we can start seeing traffic from those customers very soon. So maybe where we can see some kind of jump in our revenue in this new channel of communication probably in this quarter.

D
Dipesh Mehta
analyst

And last is OCF, if you can give some data.

Operator

Mr. Mehta, can I request you to join back the queue, please? We have our next question from the line of Kshitij Saraf from Tusk Investments.

K
Kshitij Saraf
analyst

I wanted to know, after the merger with Telesign, how are Route Mobile and Telesign combined thinking about new product offering. So we have CPaaS and we have digital identity, and there have been mentions of moving up the value chain in terms of focusing more on the services side of things. So could you share some light on how you plan to share these responsibilities? Where the R&D engine would be across the 2 companies? And are you thinking about any other service lines apart from digital identity and CPaaS, so to say.

R
Rajdip Kumar Gupta
executive

So Kshitij, I think probably we will try to focus most of the R&D from India, probably from Bangalore and Mumbai. And there are certainly definitely some of the products which we are working right now on customer experience platform, which we are launching on 9th of August in Mumbai. So I think as a Route Mobile we are working towards give a better insight to our customer using our platform. And I think the customer experience platform, which we are building is directly going to help Telesign also to give more insight about different channels they use. Probably on 9th August, we can see more detail about this product. But on 9th of August, we are launching this product in Mumbai. And what was your second question?

K
Kshitij Saraf
analyst

Yes. I think broadly, this was it in terms of new products basis, whatever you could share, yes.

R
Rajdip Kumar Gupta
executive

Yes. So on R&D side, I just mentioned, I think, probably R&D will be completely focused from Bangalore and Mumbai for both the companies.

Operator

We have our next question from the line of Rajiv Malhotra from HCPL Parts Company.

U
Unknown Attendee

Great results. I'm a new investor. But there is 1 question. The question is everybody on the call is terming the transaction as a merger. What we understand is, it is buy out, right? And so the question which arise is, is the Route Mobile going to stay a listed company in India?

R
Rajdip Kumar Gupta
executive

Yes.

U
Unknown Attendee

Now what's going to happen is based on the acquisition of the shares of the promoters and the open offer, a technical situation will arise where the acquirer will most probably cross 75%. So are they wanting to delist or sell back or...

R
Rajdip Kumar Gupta
executive

Sure. So at this point in time, I think the DPS is already out. The intent is not to delist. So if in an eventual scenario where the open offer is completely subscribed, the shareholding will, as you rightly said, will surpass the minimum public shareholding threshold. And I think then the regulation warrants that we have to reduce it back to the minimum public shareholding threshold within a year's time frame. So that is what I think will be complied with if we happen to get complete subscription in the open offer.

U
Unknown Attendee

Okay. So that's the first thought. The thought is that within a year, you will stay listed. So that's the idea.

R
Rajdip Kumar Gupta
executive

Right. That's correct. That's correct. We'll stay listed, right.

U
Unknown Attendee

And secondly, my observation about why is everybody calling this a merger.

R
Rajdip Kumar Gupta
executive

No. So you're right. I mean, while -- I mean, the offtake of this will look like a merger, but it's not essentially a merger, it's a buyout, and then an investment into the holding company of Telesign and Route Mobile by some of the founding members of Route Mobile.

Operator

We have our next question from the line of Anil Nahata, an Individual Investor.

U
Unknown Shareholder

Rajdip, a very bold move, if I may say so. Most of us shareholders are probably not able to grasp why Route bid in the first place. Your explanation of being present in the U.S. market makes a lot of sense to me. Definitely, that is our largest market by far. China market is not accessible to most. So if you leave out the China market, U.S. is the biggest market and probably accounts for as much as many, many markets put together. So that makes a lot of sense to me. However, my question is how does Route by -- at a group level, definitely, you will have a play in the U.S. market. But Route as an entity, how does this U.S. presence now help Route? Possibly you will be able to give some platform by using your platform out [indiscernible]. But otherwise, how does it help you?

R
Rajdip Kumar Gupta
executive

Good question, Anil. Okay. Let me just answer this question. As I mentioned in my commentary also, that -- let's talk about India as a market, especially ILDO right? Most of the ILDO traffic is originating from companies based out of U.S., and a company like Telesign has a direct access of all those customers based out of U.S. So that routing directly coming to our platform from Telesign to Route Mobile will directly benefit Route Mobile.

Apart from that, if you see most of the tech giants based out of U.S., their main market is emerging countries, whether it's Africa, India or Asia or the Middle East, including LatAm, right? So we are a champion of emerging markets where we already established a direct partnership with operators. And this connectivity can be directly used by Telesign whatever right now, if this is -- they were using third aggregators, maybe some based in India, some based of India or in U.S. That whole traffic can be routed through Route Mobile platform because we are very much aligned with having the connectivity all across the globe now.

So indirectly, that routing would let us move to Route Mobile and Route Mobile will definitely get a benefit out of that. So that is what I can answer.

U
Unknown Shareholder

Yes. So that makes a lot of sense, Rajdip, in fact, because it increases the profile of Route without having to go [indiscernible] the transformation.

R
Rajdip Kumar Gupta
executive

Your voice is breaking, Anil.

U
Unknown Shareholder

I'm sorry. What is the typical termination that is available in the market place?

R
Rajdip Kumar Gupta
executive

I'll just give you a simple example of India. Like my idea is [indiscernible] ILDO India traffic. And there are various markets in emerging countries like India, Bangladesh, where termination cost is about $0.16, countries like Indonesia, $0.23, country like Sri Lanka, $0.23. So it's a very high-margin market.

U
Unknown Shareholder

No, my question was on the gross margin. [indiscernible].

R
Rajdip Kumar Gupta
executive

Anil, your voice is breaking.

U
Unknown Shareholder

I'm sorry for that. My question is, is this margin higher than 15% on this transaction?

R
Rajdip Kumar Gupta
executive

Yes, there are high-margin customer base in the U.S. and the combined, as Gautam has already mentioned. I can give a guidance of EBITDA margin around 13% to 15% in coming years down the line, and that is the kind of thing we believe. As far as the U.S. customer is concerned, I think the gross profit on the U.S. customer base is around 25% to 35% range as compared to the emerging markets, where it is between 18% to 22%.

U
Unknown Shareholder

My next question. We have been reading commentaries across all players market report that Indian market is going to go at a CAGR of 30%, 35% something. But somehow over the past couple of years, I see somehow that at an industry level, that growth is not materialized in business size increases. So Rajdip, what is your view that how will India achieve this 30% kind of a CAGR?

R
Rajdip Kumar Gupta
executive

So India is definitely a very large market, Anil. I'll just give you a classic example of UPI usage, right? Even as of today, people pay INR 5 also using the UPI wallet, whether it's a Google Pay or Amazon Pay or you name it. That transaction is growing multifold every single quarter, right? So I think the potential of India in coming days the moment this kind of channel is available for Tier 3, Tier 4 cities, we will see more traction and more volume generation on these kind of application. And based on that, because the Internet quality is getting better in India, thanks to operator like Jio, we can have more access of digital platforms in remote Tier 3, Tier 4 cities, which will lead to more transaction over digital platform.

And I believe in the next 2 to 3 years down the line India is a very large market in usage of CPaaS usage of -- channel to be used.

G
Gautam Badalia
executive

And Anil, just to add, with this consolidation that's playing out, I think, in the industry right now, a lot of traffic will move from the unfragmented or fragmented players to now [ evolve ] players, and that's where all large players will benefit.

Operator

We have our next question from the line of Mohan Kumar, an investor.

M
Mohan Kumar

Congrats on a good set of numbers. I just have a couple of questions largely to do with the deal. As expected, should not be coming as a surprise right now now given the number of questions we've had today. So the first question was, with one of the public interviews that the Proximus CEO had done, he mentioned that. that is a possibility that you might take -- delist Route after the [indiscernible].

R
Rajdip Kumar Gupta
executive

No, no, no. I think we just need to go through this interview once again. It is very clear that he has no intent of delisting Route Mobile.

M
Mohan Kumar

Okay. And the second question was with respect to the tender price. So the tender price was about INR 1,620-ish and you're expecting the deal to close 9 months down the line,. Are there any odds of that number getting revised given that it's still very far away from that and there's a good chance that the share price may not be anywhere close to that number when the deal closes.

R
Rajdip Kumar Gupta
executive

No. So the MTO price is INR 1,626, and that's again, governed by the SEBI regulations. So at this point in time, that's [indiscernible] and the 6 to 9 month time frame is largely because of some of these regulatory approvals that are warranted for this transaction. And once those regulatory approvals are in place, it can be sooner than the 6 to 9 months as well. Once they are in place, I think the MTO should go through, and we should be able to achieve a closure of the transaction.

M
Mohan Kumar

Got it. The non-deal related question that I have is, this time the revenues were a little softer and you've addressed that to a large extent during the opening remarks itself. I'm just trying to get a sense of are we expecting a lot of this to flow back in the next quarter? Or is this something that's going to take a little longer to kind of come through with the new deals that you have acquired?

G
Gautam Badalia
executive

Yes. So from our perspective, we are not changing our guidance 1 bit. I think as Rajdip said, we are reasonably confident of 20%. And maybe at a point in time, we will come and revise the guidance of course. So I think there is nothing -- I mean, it is making us nervous right now. And so I think we're fairly confident of meeting our revenue guidance behind the -- maybe at a point in time, subject to some of these deals that Rajdip talked about, if they were to fructify, we will definitely come up to revise the guidance.

M
Mohan Kumar

Is the guidance to current [indiscernible] if you just maintain the Q4 revenue of last year, given that Q1 and Q2 numbers are pretty soft. Without any effort you kind of get to that 20%, right. So I'm just trying to figure out is there any quarterly cadence that we can expect? Because 20% seems like really low, it seems like a number like if you just maintain the Q4 numbers, given Q1, Q2 last year was soft, you'd hit that without any quarterly growth.

G
Gautam Badalia
executive

But I think teams also see our last year's guidance, right. We started 40% and we ended with 70%. So you need to just believe in us, and I think we are very much committed, and as I said, happy to come again and revise our guidance upwards.

M
Mohan Kumar

Got it. Got it. Sounds good. And as we mentioned earlier, you would be giving probably more clarity regarding how in the structure of the new company and how things are likely to flow once the deal has been inked out, right?

R
Rajdip Kumar Gupta
executive

Right.

Operator

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Gautam Badalia for closing comments. Over to you.

G
Gautam Badalia
executive

Thank you, everyone, for joining the call. Please feel free to reach out to us for any further information clarification. We'd be more than happy to answer your queries. Thank you.

R
Rajdip Kumar Gupta
executive

Thank you.

Operator

On behalf of Route Mobile Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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