Recommendation from computer software Sector
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
Tanla Platforms Ltd. : Making Profitable Connections
Here Is Why
✓Strong liquidity position
✓Good demand growth
✓High returns on capital employed
Tanla Platforms Limited (formerly known as Tanla Solutions Limited) is engaged in providing integrated telecom infra- structure products and solutions. Its services include product development and operations in the wireless telephony industry, aggregate services and offshore development services. Over the years it has emerged as one of the largest cloud communication providers in the world. It is a global application to person (A2P) messaging platform provider. As regards its financial performance, the company reported net sales of Rs 2,341.5 crore in FY21 compared to Rs 1,943 crore in FY20, indicating growth of nearly 20.5 per cent.
The EBIDTA stood at Rs 457 crore in FY21 as against Rs 198.5 crore in the previous year which witnessed a jump of over 130 per cent. Also, the PAT stood at Rs 356 crore while it had suffered net loss of Rs (209.5) crore in FY20. It has delivered good profit growth of 107.95 per cent CAGR over the last five years. In terms of liquidity, the free cash flows in the past nine months comprise 95 per cent of profit after tax. The cash flows from operating activities increased from Rs 239 crore in FY20 to Rs 561 crore in FY21 by over 134 per cent. In Q3FY22, its revenue grew by 35.29 per cent YoY to Rs 884.92 crore from Rs 654.11 crore in Q3FY21.
On a sequential basis, the top-line was up by 5.15 per cent. The company witnessed addition in the number of customers which has driven growth in the quarter. Apart from this, revenue growth was boosted by increased volumes, price rise and traction in OTT channels. PBIDT exclusive of other income was reported at Rs 202.84 crore, up by 59.87 per cent YoY and the corresponding margin was reported at 22.92 per cent, expanding by 352 basis points YoY. PAT was reported at Rs 158 crore, up by 68.95 per cent from Rs 93.52 crore in the same quarter for the previous fiscal year.
The PAT margin stood at 17.86 per cent in Q3FY22, expanding from 14.3 per cent in Q3FY21. Among the key ratios, the ROE stood at 45.02 per cent and ROCE at 52.3 per cent which is really high. The stock price is trading near the PE level of 43. The company has negligible debt in its books and hence shareholders can relax on the finance cost front. The company mainly operates in two segments i.e. communications platform as a service segment which is operated under the product ‘Wisely’ and blockchain platform segment operated under the product ‘Trubloq’. To describe the functioning of Wisely in simple terms, a simple notification on a mobile phone from a bank to its customers is carried out by this application.
Its clients include the likes of HDFC, Canara Bank and others. Notably, it is one of the largest players operating in the communications platform as a service industry globally. Trubloq is a block- chain platform that handled 88 billion transactions in Q3 as against 77 billion in Q2. That makes it one of the largest blockchain platforms in the world on account of the sheer size of transactions. Going ahead, the management will be focusing on bringing discipline in its capital allocation and on bolt-on acquisitions that would provide niche capabilities. Considering all these factors, we recommend our reader- investors to BUY the scrip.
