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Route Mobile Ltd
Earnings Call Analysis
Q3-2024 Analysis
Route Mobile Ltd
During the recently concluded quarter, the company demonstrated solid fiscal health. The EBITDA grew by 15.7%, representing an operating leverage where EBITDA stood at 59% of gross profit. Meanwhile, Profit After Tax (PAT) marginally improved, ticking up from 9% to 9.3%. This positive trend in profitability metrics reflects a responsible and robust operational approach, with the normalization of the Chief Financial Officer’s (CFO) conversion rate ranging from 50% to 75%. Additionally, the net cash position as of December 31, 2023, was recorded at a healthy INR 4,654 million.
The company has cautiously revised its revenue growth guidance for the fiscal year 2024, adjusting from the originally projected 20-25% down to a more conservative figure of 15-17%. This adjustment represents a realistic appraisal of market conditions and internal targets. The leadership expressed confidence in achieving this revised forecast, assuring investors of the potential to recoup any growth deficits from preceding quarters.
The company maintains a disciplined approach to managing its working capital, as reflected in average receivable days of 73, which remained consistent in the nine months of FY '24. Concurrently, there's a slight improvement in average payable days, marginally decreasing from 64 to 59 days. This indicates a steady cash inflow and a potential for increased liquidity to fund future growth or to manage sudden financial requirements.
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Good evening, ladies and gentlemen. I am Davin, the moderator for this conference. Welcome to the conference call of Route Mobile Limited arranged by Concept Investor Relations to discuss its Q3 and 9 months 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, this conference is being recorded.
I now hand the conference over to Mr. Rajdip Kumar Gupta. Thank you, and over to you, sir.
Thank you, Davin. Good evening, everyone. In light of the recent global trend of workforce rationalization and cost optimization among large global companies, the [ broadened ] CPaaS industry has encountered some headwinds, especially in the last 2 months of the previous quarter. I want to take this opportunity to provide you with a transparent overview of the current situation as well as our strategic response to these events.
While we have registered our best quarterly revenue during the quarter gone by, it was yet a slightly muted performance considering Q3 is historically a best quarter. This is due to the industry headwinds and delays in a couple of our large contracts going live.
In lieu of the above, we revised our FY '24 guidance from 20% to 25% revenue growth to 15% to 17% GAAP revenue growth. These developments while concerning are not uncommon in the fast-evolving tech landscape. The good thing is that our performance during the month so far is encouraging, and we are putting lots of effort to accelerate to go live, bid for some of the large contracts that we have won and to through that our verge of closure.
Some of the notable contracts which should go live during the course of this quarter are one of the largest e-commerce customers to go live for European destination, Vodafone Idea contract integration is ongoing rapidly. However, the full-fledged impact of this contract will start from April 1st onwards.
We have recently onboarded a large e-commerce client from Asia, which should gradually ramp up. We are on the verge of signing a contract with one of the largest private sector bank in India. We are also encouraged by the growing adoption of new communication channels like RCS and WhatsApp Business Messaging. In fact, some of our recent contract win on these product lines are as weak as our monthly revenue on these product lines.
The recent shifts in the messaging space are opening new avenues for communication. We expect to onboard a significant number of new customers to our omnichannel platform, leveraging these changes. This evolution in the market while bringing these challenges also present us with unprecedented opportunities for growth and expansion.
The evolving managing landscape is creating exciting opportunity for us to welcome numerous new clients to our omnichannel platform. This shift is quite challenging, is opening doors to unprecedented growth and development. We are in the process of implementing innovative technological solutions such as [indiscernible] to enhance our operational efficiency. While I won't delve into specifics, I can assure you that these advancements will significantly contribute to optimizing our processes and reducing dependency, aligning us with the best industry practices.
In terms of Proximus deal update, we have secured the most important U.S. approval and are in pricing distance of deal closure. A couple of regulatory approvals from the Middle East are awaited any time soon. Further, we have done a lot of ground work on the integration effort across the group and have clearly identified synergies across various buckets.
Upon the deal closure, we shall immediately act on the integration effort and the synergies should start to reflect in our financials immediately thereafter.
In conclusion, while we acknowledge the challenge we face, our outlook remains optimistic. Our strong foundation, coupled with our strategic initiative position us well to capitalize our future opportunities and deliver on our promises of relation and excellence.
Thank you for your continued faith in our [ Route Mobile ]. We are committed to keep you informed and increase as we progress towards our shared goal.
Now I will hand over the call to Gautam, who will share more about our financial highlights. Over to you, Gautam.
Thank you. Thank you, Rajdip. Good evening, everyone. Wishing all a very happy New Year 2024. We've already uploaded our quarterly earnings presentation on our website as well as on the stock exchange website. Hope you had a chance to go through the presentation.
I quickly summarize our financial and operating performance during Q3 FY '24 and 9 months FY '24 before opening the floor for Q&A.
I'll start by highlighting the key developments during the quarter gone by. We have registered -- as Rajdip highlighted, we have registered our first quarterly revenues during the quarter gone by, yet it was a slightly muted performance due to factors which Rajdip again highlighted, industry headwinds as most OTTs were in cost-saving mode, which affected the ILD traffic [ in regions ] and delaying certain large contracts going live.
With respect to our margins, we have incurred from one-off expenses. I'll just list out with some of those one-off expenses for the quarter gone by. Mr Messaging revenue grew by 40% sequentially, but this impacted -- but their performance actually was a drag on our EBITDA margin. Adjusted for MRM EBITDA, we achieved a 13% margin -- EBITDA margin.
MRM's performance for 9 months FY '24 was affected largely by geopolitical issues in Europe and industry consolidation. Since an exceptional item of INR 150.4 million was booked in Q3 FY '24, which represents a fair value gain as of December 31, 2023, of the contingent configuration payable towards the acquisition of the 100% equity stake of MR Messaging.
There was also a bad debt write-off in Masivian to the tune of INR 46.6 million in 9 months FY '24 and we have already initiated legal actions for recovery. There was a one-time consultancy on retainer fees paid in Q3 FY '24 for market expansion in Africa and LatAm, which amounted to INR 29.9 million.
In volume terms, we processed 31.2 billion transactions, similar to Q2 FY '24. Despite Q3 seasonal, the muted sentiment across the geographies is reflected in these volumes. India continues to be our largest market by termination accounting for over 47% of our revenue by termination. The revenues from U.S. headquarters customers declined owing to reasons highlighted above, you may refer to Slide 16 for the same.
We are seeing strong momentum in next generation products across multiple geographies. We witnessed a year-on-year growth of 58% and a quarter-on-quarter growth of 14%. You may refer to Slide 10 for the same. Our new products LTM revenue is around USD 25 million. The uptick in new products by enterprises, a few large contracts going live shortly, along with the synergy benefits that will accrue to Route Mobile post the deal closure will pave a very strong growth trajectory for FY '25.
With this backdrop, let me walk you through our financial performance. In Q3 FY '24, revenue from operations grew by 3.9% from INR 9,857 million in Q3 FY '23 to INR 10,243 million in Q3 FY '24. There was a sequential growth of 1%. Billable transactions increased from 27.7 billion in Q3 FY '23 to 31.2 billion in Q3 FY '24.
Average realization for billable transactions increased from -- increased to INR 32.9 in Q3 FY '24 from INR 32.4 Q2 FY '24. Gross profit margin remained flat on a sequential basis. EBITDA declined marginally owing to certain one-off expenses highlighted earlier. Effective tax rate for the quarter was around 15.4%. Profit after tax adjusted for exceptional items grew by 15.5% on a Y-o-Y basis and 11.6% on a sequential basis from INR 854 million in Q3 FY '23 and INR 884 million in Q2 FY '24 to INR 986 million in Q3 FY '24.
PAT margin was at 9.6% in Q3 FY '24 as against 8.7% in Q3 FY '23 and Q2 FY '24. The Board has recommended an interim dividend of INR 3 per share. The 9 months FY '24 revenue from operations grew by 17.4% from INR 25,606 million in 9 months FY '23 and INR 30,063 million in 9 months FY '24.
In terms of certain KPIs, billable transactions increased from 79 billion in 9 months FY '23 to 92 billion in 9 months FY '24. Average realization per billable transaction was [ INR 32.7 ] in 9 months FY '24 as compared to [ INR 32.2 ] in 9 months FY '23. We had our net revenue retention of 110%. You may refer to Slide 18 for the same.
We added over 700 customers -- new customers in 9 months FY '24 across all products. Gross profit margin declined from 22.4% in 9 months FY '23 to 21.3% in 9 months FY '24. EBITDA grew by 15.7%.
In terms of operating leverage, EBITDA as a percentage of gross profit stood at 59% in 9 months FY '24. EBITDA margin remained flattish. Effective tax rate was 12.3% in 9 months of FY '23 and 15.7% in 9 months FY '24. Profit after tax adjusted for exceptional items grew by 21.6% from INR 2,291 million in 9 months FY '23 to INR 2,786 million in 9 months FY '24.
The PAT margin improved from 9% to 9.3% in the same period. We onboarded 35 new employees and 29 employees left us during the same period. Net cash as on December 31, 2023 was INR 4,654 million. Average receivable days was 73 days in 9 months FY '24 versus 73 days in H1 FY '24. Average payable days reduced marginally to 59 days in 9 months FY '24 versus 64 days in H1 FY '24.
Normalized CFO conversion during 9 months FY '24 was in the range of 50% to 75% guidance range that we have rolled out at the beginning of the year. With these highlights, we open the floor for Q&A.
[Operator Instructions] The first question is from the line of Swapnil Potdukhe from JM Financial.
First, on your growth trends for this particular year. You mentioned that there has been a significant decline. I mean there has been a correction in growth, your guidance as well. Now my question is like would we be able to recover the lost growth in this particular quarter and the revenue that we have lost in this particular quarter starting Q4? If not, what would be the reason? That would be the first question.
So Swapnil let me start with this. So as I said, one of the largest [ telecom ] customer is live on our India platform right now. We were hoping them to start in 9 other countries which got delayed. And we are very much hopeful to get those started by this quarter, and we are in constant touch with them to start with U.K. and other countries. So hopefully, that will go live.
As far as our Vodafone Idea contract is concerned, I think we were expecting to go live by first of December, which is now extended to first of April as the exclusive partner should deal with Vodafone Idea. We are almost migrating the firewall on our -- the different circles on our firewall. And we believe by end of March, we are -- we will be able to complete the entire shift from another firewall to our firewall. So the complete growth kind of revenue on the firewall side will be effective from first of April.
So in terms of -- I think the last [ quarter ] I said we are seeing a significant growth in this month already. From the customer who lowered down their volume last quarter, we can see them started again. So we might not give any kind of guidance, but in terms of revenue guidance, I think we are very much confident that between 15% to 17% is something what we will achieve this financial year.
So just to extend that point, you mentioned 17% at the upper end of the guidance. So that if you're still looking out tells us that you're guiding for 15% of the sequential growth Q-on-Q. And historically, 4Q has typically tapered compared to 3Q. So this time around -- yes.
So if you see our last year, also the Q4 was better than the Q3. So we believe that this year Q4 will be better than Q3.
Got it. And if I were to just extrapolate a few things and ask you about FY '25, what would be the incremental revenue potential that you are looking at? From all the deals that you just mentioned and things starting -- the Vodafone deal also comes in from first of April.
So apart from Vodafone and Idea deal, I think the synergy between the TeleSign and [ Route ] Proximus deal. So we are expecting that deal to get closer -- close very soon. Those -- the deal is also -- those synergies come along with Route Mobile I think we have a very high number to achieve. Right now, we are assessing the whole value. We might not be able to give you the exact growth trajectory for the next year, but very soon, we will be able to share that.
Okay. And one thing on your gross margins. You just mentioned that your RCS and WhatsApp revenue has been doing well. But that does not seem to be reflecting in your gross margins. And in fact, if I see from a Y-o-Y perspective you're down significantly, on Q-on-Q perspective also, you are flattish. Where -- when exactly should we start seeing these margins to get some benefits from the new product lines?
So Swapnil, you need to also understand when we talk about, say, INR 25 million for the yearly basis, revenue against INR 4,000 crores revenue. So it always be very small. I think Gautam mentioned some of the contracts which we have just won recently and some of the contracts which we are working on are very large contracts. And as soon as the scale-based entire revenue to around INR 300 crores to INR 400 crores, or INR 500 crores a year, probably due to the impact from that synergy. But we are working very hard to onboard and focus more on omnichannel potential which we see right now. So that's the current status. Gautam, will surely add to this.
Yes. Swapnil. So we just -- I think we mentioned in our remarks also, I think MRM I think -- well I think they have not had the best 9 months, but I think last quarter, I think they did exceedingly well in terms of growing their revenue sequentially by 40%. But in terms of gross and EBITDA margin, I mean, it was a drag on our overall financials. So adjusted for the MRM gross and EBITDA margin, I mean our margins would have expanded significantly. I mean sure, it would have been closer to last year's gross margin.
Got it, Gautam. And just one last question on your employee expenses. Right now, they are hovering around INR 55 crores on a quarterly basis. Is there any impact of any price hike or something or -- sorry, the salary hikes or something in this particular quarter or like that comes in later? If you can just guide some, how things we should forecast?
For some of the subsidiaries, they also have January to December kind of cycle. So there are some bonus payouts and all that happen typically at the end of December. So some of those things have happened during the course of last quarter.
So fair to assume INR 55 crores is the run rate in the near term, the next 1 or 2 quarters?
Yes, in that vicinity, that's right.
The next question is from the line of Dipesh Mehta from Emkay Global.
Maybe a couple of questions. First of all, if I look at vertical mix, which we provide in terms of which segment has driven growth. Digital native and our aggregator seems to be weak. So if you can provide some color what is playing. So CPaaS partner as well as digital native have some weaknesses there. Second question is about some of the comments you made in delaying large contract rent. So if I look your PPT indicator, Vodafone where we are already live and in record time, we implemented and stuff like that. So what led to delaying conversion to revenue or maybe billing, if you can provide some sense?
And third question is about the gross margin trajectory. I understand new product is not significant. But if I go to, let's say, your 2-year back and overall consistent narrative about gross margin expansion plan over a period of time. Some of it is not evident in the numbers. So if you can provide what led to some kind of news, not for this quarter, particularly, but broader, let's say, 9 months or something like that.
So Gautam, I'll start with the second question and probably you can answer the remaining two. With Vodafone, we went live on first of December with our hub, which is like a record implementation via Vodafone Idea. And there is a current partner who have the firewall deployed into all the various circle of Vodafone Idea, which is a very tedious job to transform entire fire traffic from one circle -- one firewall to another firewall. And that is why now we have started from January to moving the traffic from one firewall to our firewall. That process has been started. We cannot move all the traffic in short because we have to test. We have to make sure everything is working fine from firewall A to firewall B. So that transition period is longer. That is why it will take another -- I think it takes another 20 -- sorry, 2 months more, and that is what we expect. And that is why we're talking about the first of April as we go live and we will become exclusive also from first of April, which means that all the traffic from first of April onwards will flow through our firewall. Gautam?
Just to add on this part, so earlier when we indicated it to contribute revenue from Q4 onwards, whether we [indiscernible] quickly assume transit [indiscernible] kind of transition.
Yes. So I think it was a little bit of miscalculation from our side. And probably that was one of the reasons that these were always calculated, I think Vodafone again to go live from January. But because of the shift takes more time but we already started the process and that's why we are not considering the revenue of that in this quarter. But we have now -- the shift has already started. We have already moved 3 circles to our firewall now and remaining are going briefly [indiscernible]. And keeping that in mind, I think first of April is tentative date where [indiscernible] the disclosure on Vodafone Idea. Gautam?
Sure. So Dipesh your first question was on digital native and CPaaS. So you're absolutely right. I think those two segments have witnessed some headwinds, and that's largely an industry-wide phenomena and not specific to Route Mobile per se. So some of these CPaaS players, I mean, who are also our partners, they service a lot of large global enterprises. And we have seen back trend pretty much play out across, I mean most of these large global enterprises during the -- I mean, during the last 2 months of the last quarter -- previous quarter. Hopefully, I think things are coming back. I mean with some of these enterprises now doing their budgeting and staff. So things -- I think should come back at least and it should steady now. So from that aspect, I think we are cautiously optimistic about that -- both these segments. And as Rajdip said, I mean, once Vodafone goes live, I mean, we'll definitely be able to increase our wallet share with each of these comments.
So Dipesh your third query was on new products, right? I mean the ramp up. So I think we are very infused with the kind of ramp-up that you're witnessing...
No. It was on gross margin.
Yes. On the gross margin -- okay, the expansion that you are seeing?
That's right. Let's say, if I go to a 2-year...
Can you just repeat the question.
Sure. So let's say, if I go to your 2-year back narrative about gross margin trajectory, 1 year back also same narrative. We expect gross margin trajectory to improve over a period of time, and it will be a consistent, steady kind of improvement.
Now if I look actual delivery, the trajectory seems to be different. Now we explained ABC reason why it is not happening. But if I look trajectory perspective, in '22, we were at 21% at gross margin, today, we are not different. So I just want to understand whether one should expect 21% is a reasonable number to expect for medium term or you think 25%? And because at one point of time, you indicated it can go as high as 30%. So we are way below those kind of numbers. So I just want to get sense.
Dipesh, so as I said, our other business and our omnichannel business is growing since -- in the single quarter. Okay. I think because the run rate of INR 25 million as of now. And we are expecting this to grow, I think, at least very high as comparable SMS piece. But again, I think we are -- as soon as it increases to over INR 500 crores revenue run rate, I think that is where you can start looking at gross margin increase in overall. Gautam, if you want to add to this.
Yes. And just to give you a perspective, I think we have given a 3-year perspective of margin expansion, and that's a fair observation. I think some of that has kind of got a little diluted because of, I think, [indiscernible] I applied, I mean, MR Messaging the margin was a draft, right? If you adjust for that, I mean, there is some bit of margin expansion that's played out. But -- notwithstanding that, I think the important thing is, I think this year, as we said, I think this would be an inflection year for the new products. I mean, at this point in time, I mean, they're working on a few contracts where our monthly run rate of the new product revenue, I mean, some of the contract sizes that we are winning are greater than that. So some of those validations are happening. I think let this new products wants to gather some [ critical mass ] at that point in time. I think this should definitely play out, I mean from an expansion standpoint.
And one last question from my side. Now if I look your Q4 guidance range, I'm looking sequential perspective, implying roughly around 7% to 14% as quarter-on-quarter growth. Now Vodafone is likely to ramp up from April, which -- so it should not contribute. So what we are building, because from a seasonality perspective, typically, volume is not showing any material growth if I look last few years of our performance. So what we are building here if you can help us understand.
I think some of the segments which are now coming back, essentially the CPaaS that had actually kind of dingle down quite a bit during last quarter. I think some of those things are now coming back.
And I think last year, if you look at the trajectory on a sequential basis, we were able to demonstrate growth, I mean, Q4 versus Q3. Plus, we are assuming that some of these contracts that we have won, I mean, the e-commerce plant in Asia that we have won, I mean we already started the throughput, and that should meaningfully ramp up. We are also assuming that one of the largest e-commerce clients, I mean, they will start the European traffic during the course of this quarter. So some of these things are baked into the assumption.
Last year growth was partly driven by acquisition. Interteleco was not there in Q3, and that's why some growth happened. If I adjust for it, your growth was not there sequentially, which is the usual pattern. And that's why I try to -- but you said this 3, 4 reasons are sufficient for us to give that confidence.
No. So Dipesh I think Interteleco acquisition happened in December '21, not last year.
The next question is from the line of Nikhil Choudhary from Nuvama.
First question is regarding the decline we have seen in the volume number. Wherein -- when the argument has given that there is cutting spending in ILD by global enterprises. Volume clearly is driven by [ selling ] department. So ILD is related to small portion of overall volume and decline on Q-on-Q basis are more or less showing that even on NLD, there is at least some pressure. We have heard from your competitor last quarter that there are challenges from other players who are not passing on the increased costs. So anything to highlight there in terms of volume?
So in terms of volume, what we've actually transpired is, I think there was a significant drop in volume for Masivian. And while I think that their volumes dropped by 10%, their revenues increased by 15%. So they were able to do a lot of solution selling, I mean which are inherently on a larger ticket sizes solutions that we were able to sell. So I think that way, I think we have done really well in terms of the margin expansion and in terms of the gross margins.
So if they have done margin expansion this quarter, let's assume and there is that -- driven by realization, then this organic performance is even inferior, right, like on a revenue basis.
No, no. For that I think we did call out, right, the digital native and CPaaS. I think those two segments got impacted during February -- during November and December. So that led to kind of a slightly muted for some Route Mobile on an organic basis.
Sure. And can you highlight the reason -- the claim which you initiated against Masivian. Any more color would be helpful.
Sorry, sorry, come again.
One-time cost against Masivian.
So this actually happened -- a part of it happened in Q2 and large part of it happened in Q3. So this was pertaining to one, I think, solution that we sold to Mexican enterprise. But ultimately, the Mexican enterprise was not able to realize it. I mean it's more to do with the industry headwinds than anything else. So we've kind of already started a litigation proceeding against them. So we are hopeful that we'll be able to recover this amount that we've written off.
Sure. Just last point here. Well, a few questions asked by earlier participants regarding the required growth rate of 7% to 14% in the fourth quarter. How much will be driven by increase in volume or pricing, more or less our existing business? And how much is it driven by incremental revenues coming from our -- one of the top -- starting in Europe?
So I think, honestly, Nikhil, we can't quantify at this point of time, but we believe that when this pattern of spending on the [indiscernible] if we get all of them as a part of our platform, we believe that it will add easily $3 million to $4 million additional to our revenue.
Okay. $3 million to $4 million [indiscernible]. So the remaining portion you are saying that's going to come organically.
As I said, I think the volume for this particular month as we have seen a growth. Whatever the distance we have seen from those large OTT players in the month of November and December, we start seeing the traffic coming back to our platform and we see a decent growth for this particular months. And if you assume that the same growth will continue for the next 2 months as well. And we will easily reach to our guidance of 15% to 17% year-on-year basis.
The next question is from the line of Amit Chandra from HDFC Securities.
So my first question is on the ILD part of our business, wherein in the past we have seen multiple price hikes on the ILD side, so is it fair to assume that because the ILD revenue is being dominated by, say, like, I don't know, 5, 6 large clients. So maybe the higher pricing of ILD is forcing them to shift to some other modes of communication and now with RCS becoming preferred mode, okay? So as we see the shift from ILD to RCS because the pricing differential is very high. And so because if I see the sharp drop in the top client revenue for us in this quarter, so this is also indicating to some extent that the top client is not -- I mean, using the ILD channel as it was using, say, a quarter back.
Not exactly it is. First of all, let me just clarify that RCS is no way allowed to send OTTs for OTT partners. RCS in India has been governed by Vodafone Idea as their hub, and it is definitely not allowed to use that channel to send OTT. So I think that's an misleading information has been passed to the market, which is not correct. And we have not seen changes because of RCS being used for OTT, okay? It was not only for India, but I think OTT player like Google or Facebook, there are many others who have reduced their volume not for India, from multiple destinations in those months. So it is not just for India and ILD business.
No, sir, I agree to that, that it's not for OTT messages, but mostly for the promotional part and for the promotional part of the messages.
Even for the promotional part of the messages, I think we serve one of the largest e-commerce customer right now in India. And we have seen, in fact, a growth in their volume on SMS side. And we have -- I think there are lots of [ Route ] available in the market and that was due to the growth in traffic. Now most of this large brand there where the people are using the Route to terminate their messages and we intend to getting more traffic, more assurance from these brands that they want to work with the people who have the [indiscernible] route to terminate the traffic. First of all, that is something which we have got some confirmation for this month. And that is why we see growth in our ILD traffic for this month.
With RCS, we might refer to some of the transaction happening on WhatsApp or for Amazon, which is totally not has accounted transaction in our revenue model. So we still see the growth of whatever traffic which is coming for traffic with companies like Amazon, we still see they have certain impact with us.
Okay. And sir, recently, Apple also mentioned that they are going live with RCS globally because RCS is only on Android right now. So with Apple going live on RCS and RCS being a cheaper mode of communication as compared to ILD, which is INR 5 can -- obviously, is an opportunity for like newer clients, but for existing clients can this be a risk as a shift to volumes, which are on a -- like lower on realization?
So Amit, RCS is live in almost now 95 to 100 countries as of today. The local -- see the biggest threat between WhatsApp and RCS is the [indiscernible] not on SMS side. So if you talk about the conversational messaging, which is happening on RCS as compared to conversational messaging, which is happening on WhatsApp. WhatsApp is INR 0.75 in India and RCS is about INR 0.25 in India. So we see lots of shifting happening from WhatsApp to RCS, that is real shift and that is something which we see as we have seen a trend.
As a company, we are doing reasonably well on RCS side and as well as on WhatsApp side.
As the only channel provider, we are not seeing that trend of RCS or WhatsApp being used for the SMS channel, but I think there's a biggest gap basically between WhatsApp business messaging and RCS. And we see people adopting RCS more to replace WhatsApp business message. So that is a trend we're seeing for last few months and that is happening. And because of the cost and because of that is governed by the operator ecosystem by GSMA and the data residing within the country, RCS is preferred to be communicating channels over WhatsApp, this is the trend we have seen in the last few months.
Okay. So sir, you mentioned that most of the ILD -- large ILD spenders they are like -- they have not spent what they have intended to in the last 2 months. So the drop in the spending on ILD is because of the higher pricing that ILD because you're finding alternate challenges or is it more linked to macroeconomic conditions?
It is more linked to macroeconomic condition and there are -- India is just $0.05 market right now, but there are various markets where SMS is charged to $0.23 to $0.25 also. So you it is not just India is one market which is charging $0.05 cents. If you go to Bangladesh or Sri Lanka, I think it is as expensive as about $0.13 to $0.20 range. So I think the overall these are various other countries [indiscernible] channel. And I think commonly the macroeconomic condition, which has led them to withdraw some of the traffic because the billing is not critical and there is still some critical traffic. But again, from month of January, we see this traffic coming back.
Okay. And sir, on the Vodafone Idea deal -- sorry, the VI Idea deal you mentioned that it will start from April onwards. So the revenue commitment or revenues that you're building in that remains the same? Or is there any change in scope of the project?
It will remain as same whatever the guidance we have given before.
[Operator Instructions] The next question is from the line of Swapnil Potdukhe from JM Financial.
I just wanted to confirm one of the question that I had earlier asked with respect to the gross margin. So you mentioned that MRM is something which has impacted the margins over there. Now as we understand, the MRM margins are significantly better than our stand-alone margins. And is that understanding correct? And if that is so, then...
So Swapnil it was historically -- I mean, what you're saying is right, but I think last quarter. So if you remember, I mean, the first half for MRM was significantly sort of muted in terms of revenues, right? What they are doing good in terms of markets. I think this quarter, there's still revenue growth and compromises the margins a little bit. So that has actually diluted our margins for the quarter.
Okay. And secondly, now do these numbers that we have reported for this quarter include any trials that you were doing with TeleSign? I remember you saying, I think a couple of quarters that...
No, no. There is nothing that we are doing right now because we're not -- I mean because of the competition commissions and other aspects, we can't do some of these would be tantamount into consumption. So I think we're working independently as two entities right now. Once the deal closes at the point in time, the throughput would start.
Okay. And one more thing, as you consolidate with TeleSign at some point of time, your volume is consolidated, is it possible that the enterprises may not be -- may have a challenge because due to higher concentration coming from just one particular CPaaS player because ultimately, TeleSign and Route will be considered as one by an enterprise. That may lead to some of the enterprise trying to diversify their exposure to some other details...
Yes. Swapnil, there are many customer what TeleSign has, we don't have. Okay. Some of the classic example is like Spotify or Netflix or others, right? So new customers don't have. We don't serve them. And there are few large needs of [indiscernible], we would have is fine. But there are many of them in USA, we don't serve them directly. And that is the opportunity we see in long term where we will get as a one combined team to serve all the customers, users, as single entity or a partnership.
And Swapnil, just to add to what Rajdip said. So I mean, as part of the integration exercise, I mean we have done exhaustive work on all this, along with our global consulting firm. So at this point in time, there is no, I mean, we don't believe that we run in concentration risk per se. I mean, if at all, I mean, we'll both complement each other rather than creating any concentration risk per se. So I think that is, again, a very positive kind of outcome that we have been able to kind of at least from hypotheses standpoint been able to formalize.
Right. But just to -- just for clarity sake, would it be able -- would you guys be able to give us what would be the total overlap of revenue between TeleSign and Route today. I do understand you very clearly mentioned that there are a few other clients which we do not serve at all...
Swapnil, at this point in time, it will be premature for us to kind of divest some of the information considering...
The next question is from the line of Dipesh Mehta from Emkay Global.
Two questions. First about one -- in last quarter, we announced large e-commerce client deal. And in that, you broadly indicated India is roughly half, half is from around 8, 9 countries outside of India. So can you provide some update? I think partly you touched upon, but if you can provide more clarity on it?
Second question is now if, let's say, one look at it, some of the challenges which we face in Q3, Q4 or may be Q3 particularly. Now it has some implication in Q4, some kind of a quarter kind of delay in one large deal. So base effect is supportive for FY '25 growth trajectory plus some of the actions which you highlighted in terms of new product growth, what we are witnessing. Do we expect our FY '25 growth trajectory will be much better than what you might have anticipated at the end of Q2? If you can toward qualitative comment around it.
Dipesh, honestly, to see some of these deals which you're talking about materialize on time, plus the Vodafone deal plus the TeleSign synergy, right? This will definitely lead to a much better revenue guidance for...
Rajdip, sorry to interrupt, but your voice is breaking. I can't hear you clearly.
As I said, the Vodafone being [indiscernible] plus always new I think we got a new large e-commerce giant user [ Robi Axiata ] . I think that is also a big deal for us right now. There are lots of banks, we are working right now. There's definitely a large e-commerce company for 9 countries, which will come for Vodafone deal plus the synergies between TeleSign, Route Mobile and the Proximus. We'll definitely add much higher revenue potential for the next financial year. Right now, we might not be able to give any kind of a guidance. We are still at very early stage here. But definitely, we see the growth and potential of this partnership in the next financial year.
Understood. So I understand for qualitative '25, I just want to update on this deal? You said there is some delay even in the e-commerce kind of client...
There is no -- first of all, the entire system was saved in the month of December. Now in January, they all are back and we started the communication to start being tested and I think the testing is over. We will start getting traffic very soon. It will start country by country, not just all country together. So it's a process there, which may take some time. But even one country adding to our platform, as I said, even 3 to 4 countries start between this quarter, may lead to about $3 million to $4 million adjusting revenue to our portfolio.
Understood. So broadly, this will be fully ramped up somewhere in Q1. That is right understanding?
Yes. Q1 next year, yes.
[Operator Instructions] We have the next question from the line of Ronak Chheda from Awriga Capital Advisors.
Am I audible?
Yes.
A couple of questions. One is on this global scenario. Just going back to this ILD fees, we've seen in the quarter and what we've seen is that the fungible volumes have been backed up and not just for India but globally. So how now -- when you're you thinking about, let's say, 2, 3 years down the line as a CPaaS business of the entire group entity? How are you seeing the competitive intensity and in your view, do we see this as a structural trend where the volumes will keep on coming down on the ILD is not just in India, but in all the markets where we operate where the fungible volumes will shift to other platforms. Just your thoughts on this.
We are very clear in terms of the -- as a platform company, we have all the channels available within our offering. And if the customer is looking out to change from platform A to platform B, everything is possible from our end. But as far as the messaging trend is concerned, there is a huge adoption in the growth in the SMS side also. On ILD business, we have not seen that kind of reason. It was just one time, I think the most [indiscernible] that they wanted to reduce the cost for those particular months, and that is the [indiscernible] .
And as far as I know, there are markets where prices are almost $0.25 and still all the OTT players are using those country's networks and paying that amount. So I don't think there's any change we can see but then definitely different channels may be used by the players to have OTT for one channel and promotion for the month, that is possible. But it all depends on the regulatory matters also because there are various regulatory aspects linked to this kind of traffic to be terminated between the country.
And just an extension to this question there, for the Vodafone deal, we have certain business assumptions baked in, right, and there is some commitment also. So just if the channel changes or shifts, the OTT players shifts between the channels, do you see a risk to the $100 million business annual run rate that we've baked in?
No. That is a minimum we have baked in and the potential is much higher. Considering all the parameters, we believe that [indiscernible] minimum we can receive out of that.
Understood. And just lastly on -- Rajdip, you had mentioned in the last call that there was some deals on the MNO site which you were hoping to close this quarter. On the MNO side, we had certain deals in pipeline on the firewall side of the business. And you mentioned in the call that we were hoping to sign, but we don't see that. So just an update there, is this delayed or are we out of...
We will announce something in this quarter. That also got delayed because of the network free in various country due to last month. So we might get some kind of announcement in the quarter for our firewall win.
Understood. And lastly, on this competition globally, how is the pricing right now because we see some pressure on the margins as well. So how is the pricing? And how is the competitive scenario which you are seeing today?
So as I said, like, Route Mobile is a unique company, [indiscernible] of India, we are definitely not offering one country to all different companies. We are even offering multiple countries. And there are very few limited number of players right now in the market who has this kind of coverage and potential. And I think if you see there are 5 or 6 companies only who serve the customers for global termination and we are one of that.
And if there is a pricing challenge, but there's -- what I see normally is channel shift, and we see lots of use cases for WhatsApp and lots of use cases for RCS. These are all new use cases, and that's the potential you see from CPaaS industry because the growth on RCS and WhatsApp are totally new use cases, it is not somehow like killing the [indiscernible] volume as such because the 2-way communication, the conversational chat which is like, is a new thing right now. And we see a growth on that part of the business, and it will continue. So most of the company, most of enterprises are now looking out to engage their customer with a various mode of communication and the RCS and WhatsApp is one of them, including SMS right now. So we are very bullish about the growth of CPaaS and omnichannel coming down the line.
The next question is from the line of Sarang Sanil from RW Investment Advisors.
Happy New Year to the entire team. My first question is, is it possible to give volume growth in NLD and ILD for the quarter?
Gautam, if you have?
We don't share that level of details right now.
Sure. So was there a degrowth then?
In India , the volume growth was around 2%.
Okay. Okay. Okay. My second question is, since that was a guarantee in volume given to Vodafone Idea, in the firewall deal. So is that part affected or renegotiated as you are planning to go live with a 3-month delay now.
We cannot give those kind of detail right now. There's definitely agreement between Vodafone idea. We have a certain agreement that we may not be able to share in this call.
Okay. Okay. Second would be what are the margin levers going forward? Since RCS, WhatsApp would take new products would take time to scale to the INR 400 crores, INR 500 crores range, what would be the levers in the next couple of years?
Levers will be just omnichannel, right. For e-mail, WhatsApp, RCS, and Voice will be the levers for next -- we're playing well and our platforms are working well. We are among the top 5 partners with Google and RCS and I think we're doing fairly well on RCS right now. And on WhatsApp as -- team partnering well and I think things are going really well for Route Mobile on omnichannel and things are going good, and we believe that in coming quarters, this will keep on improving.
And the final question would be what is the effective tax rate for this year and the next couple of years?
18% to 20%.
The next question is from the line of Suresh, an Individual Investor.
I just want to understand what revised guidance is for the current year as well as in the past, we spoke about $1 billion revenue 2 to 3 years. Has anything changed on the long-term outlook both on the margins as well as revenue? And what is the revised guidance for this and next year if you may.
Gautam?
Yes. So in terms of guidance, I think you revised this year -- financial year guidance from the 20%, 25% back to 15% to 17%, and that's largely to do with the industry tailwinds. Considering -- I mean, some of these past contracts, which should go live during the course of this quarter. We'll see the full year benefit of that play out.
And there are, as Rajdip said, some large MNO deals also that we're working on, which are firewall lease across multiple operators. So some of these things, I think, will help us accelerate. And then for next year, I think the way -- as somebody had the kind of highlighted the base effect, I think next year, we're looking at a very strong year from a growth standpoint. And then the $1 billion revenue over 3 to 4 years, I think that stands valid even today. I think -- and then especially with this Proximus deal, we believe it will open a lot of avenues across the developed markets, which will be your partners to drive the core business.
In one of the [indiscernible] interviews, Rajdip mentioned that combined entity, TeleSign and Route Mobile targeting a $2 billion revenue in next 3, 4 years. I know this -- this probably is merger and probably evaluated to both organizations. But I want to check if that's still...
That is still intact. I think if you see combined revenue of both the company is over INR 1 billion already. So we definitely stick to that INR 2 billion, and we believe we can overachieve also.
Ladies and gentlemen, we will take that as our last question. I would now like to hand the conference over to Mr. Rajdip Kumar Gupta for closing comments. Over to you, sir.
Thank you, everyone. Thank you for joining this call. And we're looking forward to the strong quarter of this one, and we are working very hard to get more contracts. And at least to work on our leasing contracts to go live. Thank you for joining this call. Thank you, and have a nice evening.
Thank you. On behalf of Route Mobile Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.