This Internet Economy Stock Turned Multibagger in 3 Months. Here's What You Need to Know About It...

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  • Dec 10, 2021 - This Internet Economy Stock Turned Multibagger in 3 Months. Here's What You Need to Know About It...

This Internet Economy Stock Turned Multibagger in 3 Months. Here's What You Need to Know About It...

Dec 10, 2021

This Internet Economy Stock Turned Multibagger in 3 Months. Here's What You Need to Know About It...

Tech stocks have been all the rage these days as they have fast-forwarded the adoption of digital technology in Covid.

The disruption caused by Covid showed us the true power of internet in the modern world, forcing changes one would never have imagined.

Now people are more reliant on internet connections than ever before, be it for our everyday work, education, shopping, or even to attend weddings.

Amid all the hype, a little-known cloud service providing company has trumped big internet companies such as Info Edge, IndiaMART InterMESH, Just Dial, and other big names.

The company is none other than Tanla Platforms.

Shares of Tanla Platforms are on a roll, giving over 60% returns in a month. Over the year gone by, they have gained over 110%.

A word about this near monopoly company

Tanla Platforms (formerly Tanla Solutions) is a cloud communications provider enabling businesses to communicate with their customers and intended recipients. It's a global A2P (application to person) messaging platform provider.

It has an almost monopoly in the OTP business.

The company is one of the world's largest communications platform-as-a-service (CPaaS) players, and processes more than 800 bn interactions annually.

About 70% of India's A2P SMS traffic is processed through its distributed ledger platform-Trubloq, making it the world's largest Blockchain use case.

Tanla Platforms is promoted by Dasari Uday Kumar Reddy, who formed it in May 1999 at the height of the 'dotcom' bubble.

The company is backed by marquee investors from the private equity and asset management industry such as Blackstone, Amansa Capital, and Capital Group.

Adding to the list, one more marquee investor was added recently. Premji Invest, the investment arm of Azim Premji's endowment and philanthropic initiatives, has invested in the company.

What's driving the stock?

There have been several instances in the past where the rally in tech stocks was a fluke and not backed by any fundamental performance.

For Tanla Platforms, that's not the case. There are definite reasons which can be attributed to the stock's spectacular performance.

Bullish stance by FIIs and DIIs

Over the past one year, the company has attracted several marquee investors.

Apart from that, it has attracted several domestic & foreign institutional investors (FIIs) lately. SBI Life Insurance Company & Smallcap World Fund Inc had picked up stakes in the company back in June 2021.

Last month, Pioneer Investment Fund bought 13.5 lakh equity shares (or 1% stake) at Rs 1,200 per share.

If you check out the latest shareholding pattern of Tanla Platforms, you will see that FIIs have consistently increased their stake for the past six quarters.

From 0.07% stake in June 2020, FIIs currently hold over 13.35% stake.

Strong earnings

For the quarter ended September 2021, Tanla Platforms reported good set of numbers.

The Hyderabad-based company posted an around 67% increase in consolidated net profit to Rs 1.4 bn for the second quarter ended September. It had posted a net profit of Rs 0.8 bn in the same period a year ago.

The company's revenue increased by 44% YoY at Rs 8.4 bn.

This stellar performance was attributed by higher wallet share from existing customers and additional market share expansion from newer clients.

Collaboration with Vodafone Idea

The recent spike in Tanla Platform's stock could be because of the recent collaboration it announced with Vodafone Idea.

The CPaaS firm announced its collaboration with telecom operator Vi to provide secure and encrypted international messaging traffic on the Vi network.

Tanla and Vodafone will deploy patented blockchain enabled Wisely Platform, a cloud-based platform developed with Microsoft.

The two companies aim to lead the global enterprise market in digital interactions with their partnership, which is expected to go live in the fourth quarter of 2022.

Note that Vodafone Idea made this pact at a time when its rivals are also betting big on blockchain solutions.

At a recent event, Mukesh Ambani, chairman of Reliance Industries-parent company of Reliance Jio, said blockchain is very important for a trust-based, equitable society.

Investors in Tanla Platforms are breathing a sigh of relief as hold on to one of its biggest clients - Vodafone.

Vodafone Idea survived the storm for now after the Supreme Court allowed telecom operators to pay their adjusted gross revenue (AGR) dues over a 10-year period.

Leading player in a fast-growing market

Tanla Platforms is a leading player in the fast-growing CPaaS market, which is driven by increased online transactions.

The company's business model has changed several times in the past two decades, but it has found success in the A2P messaging and platform business.

The company's enterprise messaging capabilities were strengthened by the acquisition of Karix, which is a market leader in India CPaaS.

Also, the rise in revenue share from the company's blockchain technology deployed through Trubloq is another factor why the stock is rallying. Trubloq is the only blockchain platform deployed by Vodafone Idea and MTNL and one of the two used by Bharti Airtel.

Stock performance

Over the past one month, Tanla Platforms share price has gained over 60%. If we consider a longer time frame of three months, it has turned into a multibagger and soared over 110%.

While the recent rally can be attributed to the above reasons, this is not the first time the company has seen a sudden spike in its shares.

When the stock listed in 2007 at Rs 265 apiece, it nearly doubled in a year. But then came the 2008 and 2011 market crashes which took the stock's price down to as low as Rs 2 by 2013.

The company's past three year performance has been stellar. Back in December 2018, it was trading at less than Rs 30. Today, it has scaled a peak of Rs 1,900.

The stock is still going strong, hitting new all-time highs on a daily basis for the past two weeks.

Today, the stock opened 4% higher but erased gains as the session progressed.

At the current price, the company commands a marketcap of Rs 248 bn.

About the company

From 2000 till now, Tanla Platforms has come a long way. At present, the company has achieved global leadership in its domain and is one of the largest cloud communication providers in the world.

As of September 2021, promoters of the company hold 42.5% stake. Check out Tanla Platform's latest shareholding watching the shareholding activity, it's easier to get a sense of a stock's prospects.

To know more about the company, check Tanla Platforms financial fact sheet and quarterly results.

For a sector overview, read our IT sector report.

You can also compare Tanla Platforms with its peers:

Tanla Platforms vs Cyient

Tanla Platforms vs Expleo Solutions

Tanla Platforms vs L&T Infotech

Since internet economy stocks interest you, check out Richa Agarwal's video on 6 Stocks to ride the internet economy megatrend.

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...

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