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Affle India's Rs 459 crore IPO opens for subscription; should you invest?

The Affle IPO offer (a combination of fresh and OFS) summarises a fresh issue of 5,500,000 equity shares aggregating up to Rs 90 crore (Rs 900 million) (20% of the issue size) and an offer for sale of Rs 367-369 crore (80%) - by the promoter.

Affle India's Rs 459 crore IPO opens for subscription; should you invest?

As per offer documents, the company has no listed peers to compare with.

The Rs 459-crore initial public offer (IPO) by Affle India, the Indian unit of global mobile marketing company Affle, opened for subscription on July 29 and will close on July 31, 2019. The price band for the offer is fixed in the range of Rs 740-745 per share. Here is a list of the key things you need to know about Affle's IPO:

Issue offer


Provider of mobile advertising solutions, Affle India's IPO becomes the first offer under the new Unified Payment Interface (UPI) mechanism, which was made mandatory for the retail investor category with effect from July 1, 2019.

The IPO offer (a combination of fresh and OFS) summarises a fresh issue of 5,500,000 equity shares aggregating up to Rs 90 crore (Rs 900 million) (20% of the issue size) and an offer for sale of Rs 367-369 crore (80%) - by the promoter. Affle will not receive any proceeds from the offer for sale.

Listing on both the major exchanges NSE and BSE, the IPO, which is a 100 % book built issue IPO type at the face value of Rs 10, comes at the price band fixed at Rs 740 - 745 apiece, with a minimum order quantity of 20 equity shares (Lot size).

Overall 75% of the net issue shall be allocated on a proportionate basis to qualified institutional buyers, while remaining 15% and 10% is reserved for non-institutional bidders and retail investors, respectively.

Parent-company Affle Holdings will be reducing its stake in Affle (India) to 75.6% from 83.5% by offloading shares worth up to Rs 369 crore.

As per company's Red Herring Prospectus, the objectives outlined for raising funds through IPO and using the net proceeds include funding the working capital requirements (Rs 69 crore) and general corporate purposes.

ICICI Securities Limited and Nomura Financial Advisory And Securities (India) Pvt Ltd are the company's IPO lead managers. As per offer documents, the company has no listed peers to compare with.

About the company


Incorporated in 2005, Affle (India) Limited is a leading global technology company with a proprietary consumer intelligence platform that delivers consumer acquisitions, engagements and transactions through relevant mobile advertising.

The company has two business segments - the consumer platform and the enterprise platform and earns revenue from a cost per converted user (CPCU) basis and by engagement and awareness type advertising.

It owns platforms such as mobile-audience-as-service (MAAS), mFaaS for mobile ad fraud detection, 'ad2campaign' for mobile marketing, 'Ripple' for cross-screen advertising and 'mTraction TVSync' for TV-linked digital advertising, among others.

Company Financials


Over FY17-19, Affle on a standalone basis registered revenue and PAT CAGR of 34.0% and 610.9%, respectively, with EBITDA margin expanding from 5.4% to 21.0%.

FY19 consolidated RoE stood at 67.4% with debt to equity at 0.1x. On a consolidated basis, Affle reported revenue of Rs269 crore and PAT of Rs52 crore for FY19.  

Customer Base


As at March 31, 2019, its Affle Consumer Platform had approximately 2.02 bn consumer profiles, of which approximately 571 mn were in India, 582 mn were in Other Emerging Markets and 867 mn were in Developed Markets. The company earns 70% from its global business and the rest 30% from home.

The company is currently working with all of the top 6 global advertising agency groups and has run mobile advertising campaigns for some of the largest e-commerce and mobile App companies / brands in the world namely Amazon, Flipkart, Goibibo, Zee, Dunzo, Dailyhunt, Meesho, Games 24x7, Shipt, Jabong, BookMyShow, Wynk, ALTBalaji, PhonePe, Gojek, Spotify, Sivvi, and well-known companies in other industries such as Airtel, Reckitt Benkiser, Johnson & Johnson, McDonalds, Nissan, Air Asia, Axis Bank, Citibank, and BTPN.

Company's Growth Model


Profitable global ad tech solution provider-Affle has an asset-light model and continues to focus on inorganic growth which could provide an opportunity to expand customer base and cross-sell solutions.

Affle has been acquiring companies in synergy with its business namely 2018 - Markt and Vizury Commerce Business and 2019 - Shoffr Platform Business and RevX Platform, after which the service offerings have increased.

Key Risks


The rapid change in digital technology trends, reduction in digital ad spends by companies, high dependence on top customers, the slowdown in global economic expansion and the emergence of competition are the key risks as per the company's prospects.

Rating Agencies' Call on the IPO


Most brokerages like Samco Securities, Centrum Broking and Choice Broking are positive on the Affle (India) IPO, have given 'subscribe' rating to the issue.

"The company runs the asset-light business model with debt-free status. The company has stated that it has applied for 10 patents in India covering various algorithms in the area of digital fraud detection, all of which are pending. It has no listed peers to compare with", quoted SMC Online in their IPO report on the firm, giving it 2 out of 5 ratings ( Neutral)

"Being the first of its kind issue and growth prospects, despite mature valuations, investors can subscribe to the issue from a long term perspective," said Centrum Broking, amidst rating the IPO 3 out of 5 stars.  

"On the IPO front, Affle India looks promising considering its strong growth in the last 3 years. Even though the ad tech industry is competitive, Affle outperforms its peers with a higher number of consumer profiles and data points leading to a network moat. Hence, the high valuations justify the listing premiums it deserves" says Umesh Mehta, Head of Research at Samco Securities.

Choice Broking, too, suggests 'subscribe' rate to the issue on its IPO report on Affle.

About the Parent company


Affle Holdings was incorporated in July 2008 in Singapore and has an individual promoter, Mr Anuj Khanna Sohum.

The Singapore based parent company is engaged in the business of research and experimental development on IT & product development for mobile software & technology, through its subsidiaries, operating in South East Asia, MENA, Europe, US, Japan, South Korea and Australia, other than India.

Additionally, Microsoft Global Finance, a subsidiary of Microsoft Corp has over 6% stake in Singapore based Affle Holdings as a key shareholder.

Edited by Rupa Burman Roy

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