This Indian Company is Critical to the Success of India's Smartphone Revolution

In a major move that is likely to revolutionise India's tech landscape, the Indian government has ordered all smartphone companies to start supporting NavIC, India's navigation satellite system.

The announcement, made in September 2023, makes it mandatory for 5G smartphones to support NavIC, short for Navigation with Indian Constellation, by 1 January 2025, and other phones by December 2025.

The new rule comes after Apple's groundbreaking decision to incorporate NavIC support in some of its latest iPhone 15 models.

NavIC is a navigation system developed by the Indian Space Research Organisation (ISRO). It operates on similar principles and functions akin to the GPS (Global Positioning System).

The key difference is that the GPS is owned and operated by the United States, whereas NavIC is owned and operated by India.

Additionally, NavIC is still a regional navigation system, meaning that it provides more accurate coverage over India and the surrounding region than other global navigation satellite systems such as US-developed GPS.

It covers the Indian subcontinent and offers a positional accuracy of 5 meters. Relying on a constellation of seven satellites, it provides comprehensive coverage over India and its adjacent regions, including the vast expanse of the Indian Ocean.

However, its efficacy is set to expand as additional satellites join the network, paving the way for NavIC to extend its reach to international destinations beyond Indian borders.

But presently, not every smartphone or navigation device is compatible with the NavIC. To unlock the potential of NavIC signals, a device needs a built-in NavIC-compatible chipset or microchip.

Devices that receive and interpret NavIC signals come equipped with specialised chipsets or microchips. These components are built to handle the signals beamed down by the Indian satellites.

Currently, the market relies on chipsets produced by international companies, including Qualcomm Technologies from the USA and Mediatek Inc.

And this is what the government of India aims to transform.

It's not the first time that the government is doing this. It has already made it mandatory for the automobile segment to use GPS that uses the NavIC chipsets.

Why NavIC is Part of a Larger Trend in India Towards Self-Reliance...

India is investing heavily in key sectors like defence, manufacturing, and technology. It's encouraging international companies to produce in India by restricting imports, the recent laptop ban for example.

This push comes from a larger plan to reduce its reliance on imports, and the promotion of NavIC is a crucial part of that strategy.

Much like it did with other sectors, the government aims to introduce financial rewards to expedite this transition. It plans to offer incentives for companies that use Indian-made or designed NavIC-compatible chips in their products in the next round of the production-linked incentive (PLI) scheme.

But the government is not compelling exclusive use of NavIC. Despite its intent to enforce mandatory usage, it is asking companies to incorporate NavIC in addition to other GPS systems that are already in use.

This move, in tandem with the launch of ISRO's Chandrayaan 3 and Aditya L1 and the mainstream acceptance of the NavIC technology, also highlights India's growing power as a space nation.

How Can Investors Benefit from this Megatrend?

Investors looking to ride the expected booming NavIC trend can look at CE Info Systems.

Also known as MapmyIndia, the company is a market leader in the B2B (business to business) and B2C (business to customer) mapping industry in India.

It provides a range of services, including proprietary digital maps as a service (MaaS), software as a service (SaaS) and platform as a service (PaaS).

It holds the top position in India as a provider of cutting-edge digital maps, geospatial software, and IoT (Internet of Things) technologies focused on location-based solutions.

The company had a successful IPO in 2022 thanks to its growing revenues and healthy profitability.

While CE Info Systems is newly listed, the business spans over three decades. During this period, it has built a suite of products in the digital mapping space despite Google's monopoly in the mapping business. This has helped the business chart a long history of profits and robust growth.

Between 2019-2023, the business has grown substantially. While the sales have grown at a 4-year CAGR of 18%, the net profit has registered a 33% growth. The company has no debt on its books.

The returns have been strong, with the RoCE and RoE averaging 22% and 24%, respectively, over the last 5 years.

CE Info Systems Financial Snapshot (2019-23)

	2019-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	-	0.09%	18.01%	29.59%	27.46%
Operating Profit Margin (%)	39.62%	29.74%	59.82%	63.73%	54.09%
Net Profit Margin (%)	24.82%	15.61%	39.24%	43.44%	38.20%
Return on Capital Employed(%)	15.58%	11.80%	24.78%	29.60%	28.16%
Return on Equity(%)	23.50%	15.72%	32.70%	27.04%	22.50%

Data Source: Ace Equity

Its healthy cash flow from operations, supports the company's growth plans and helps in retaining its debt-free status.

The company enjoys an 80% market share in automobile navigation systems. It is a direct beneficiary of an increasing number of use cases for mapping services arising from rapid smartphone and mobile internet penetration in India.

In Conclusion...

The Indian government's mandate for NavIC support in all smartphones by 2025 is a big step towards self-reliance and the advancement of India's tech landscape.

However, before you go all in, it is important to do your own research. It can help you better understand the risks and potential rewards of investing in any lucrative opportunity.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...