Route Mobile: Comparison of Stock price vs Business

Route Mobile is in the business of providing various Cloud Communication Platform services to Enterprises, OTT Players, Mobile Operators, etc. It got listed on the Stock Exchanges in Sept'20. The IPO issue price was ₹350 per share, but it listed above ₹700 & ended Day-1 at ₹938, which is ~ 2.7 times the issue price. Route Mobile continued to be a darling of Investors & Traders for another 12 months, as it went on to hit it's All-Time-High of ₹2389 in Oct'21, which was ~ 6.8 times the issue price & over 3 times the listing price.

As can be seen from the price chart alongside, from that point onwards Route Mobile's share price has come down & never managed to scale back to that level in the last nearly 4 years. If we just believe the share price, one might think that the company's business did well only in the initial few quarters after listing & after that the business performance has been lacklustre.

That is not the case here. The share price movement over initial 12 months of listing was clearly a case of supreme euphoria being built into the company's valuations. Route Mobile's P/E Ratio went all the way up to almost 100x during it's ATH days. Very high growth expectations over a long period were being built into the price at that time.

Route Mobile has delivered healthy growth over the last 5 years. Between FY'20 & FY'25, Route Mobile's Revenues have multiplied 4.8 times and it's Net Profit has grown to 5.7 times. This is fairly healthy growth record.

Coming to how Valuations have moved..... Route Mobile's MCap on the day of listing in Sept'20 was ~ ₹5400 crs. It went all the way to almost ₹14K crs in Oct'21. And is now down to ₹6300 crs. It now trades at a P/E Ratio of under 20. And it is important to note that there was a change in promoter of Route Mobile about a year ago. Proximus Group acquired almost 75% stake in Route Mobile at a price of over ₹1600 per share, i.e. at a valuation of over ₹10K crs. The current price of ~ ₹1000 per share is at a discount of almost 40% to what Proximus paid last year.