Route Mobile Tanks 7% After Board Clears Buyback; What Should Investors Do Now?

Route Mobile Buyback: Route Mobile shares skid as much as 7 per cent to Rs 1,236.65 on the BSE in Wednesday’s trade, falling 10 per cent in two trading days, after the board approved share buyback via Open Market. The Route Mobile board at its meeting on June 28 approved the buyback at a price up to Rs 1,700 per share and for an aggregate amount up to Rs 120 crore, as per a release.

“The company’s board approved the buyback of equity shares having face value of Rs 10 at a price not exceeding Rs 1,700 per equity share and for an aggregate amount not exceeding Rs 120 crore, from the shareholders of the company, payable in cash via the ‘Open Market’ route through the stock exchanges mechanism,” Route Mobile said in an exchange filing.

The buyback of shares excludes promoters, promoter groups, and persons who are in control of the company, it said.

What Is A Share Buyback?

In an open market buyback, the company purchases shares directly from the market at the then prevailing price. The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.

Stock Price History

Earlier, the stock had bounced back 24 per cent in three days (till Monday), from its 52-week low level, after the company announced that its board would consider share buyback on June 28. It had hit a 52-week low of Rs 1,052.60 on June 23, 2022. Currently, it is trading 47.03 per cent below its 52 week high and 20.18 per cent above its 52 week low.

Ravi Singhal-vice chairman of GCL Securities, said that there is still more of going downside left. “We assume it to be nearly 7 per cent more. We give it a target price of Rs 1,100 and SI at Rs1,333”

Route Mobile said the contraction in earnings before interest, taxes, depreciation, and amortization (Ebitda) margins from 14.2 per cent in Q4FY21 and 13.7 per cent in Q3FY22 to 11.1 per cent in Q4FY22 is partially attributable to the seasonality of the business, especially of Masivian and certain one-off expenses.

However, Ebitda margin expanded from 12.5 per cent in FY21 to 12.9 per cent in FY22. The management said it is confident of delivering a 150 basis point improvement in Ebitda margin and 40 per cent year-on-year growth in revenue in FY23.

Ravi Singh-Vice President and Head of Research-ShareIndia, “Route mobile share price was rallying since the buy back report broker out publicly. Currently, the stock is witnessing profit booking after the official buy back announcement. The selling may continue to touch the levels of 1,150 which would be good for value buying opportunity. The stock may again recover from lower levels for the target of 1,400 in medium term.”

Route Mobile had made a stock market debut on September 21, 2020. The company had raised Rs 600 crore through initial public offering (IPO), issued shares at price of Rs 350 per share.

Punit Patni, equity research analyst, Swastika Investmart Ltd., “Route Mobile has been a prey of the huge sell-off in the tech stocks globally, falling ~50% from its 52-week price. The stock has been in the news regarding the buyback plan; yesterday in the board meeting it was announced that the board has approved the proposal of buyback of equity shares of the company up to Rs 120 crore at a price of up to Rs 1,700 per share, i.e. 1.12% of the paid-up equity. However, post the announcement the stock has tanked ~7% due to the open offer mode and the small size of the buyback program. The company is the largest CPaaS (Communications platform as a service) based out of India and is the largest in Asia, Africa, and the Middle East in terms of connectivity and customers, and is poised to grow substantially in the future as the CPaaS demand is increasing due to its cost advantages and ease of scaling up. Thus, we are positive about the company from a long-term perspective and the current correction provides a good entry point.”

Route Mobile is a cloud communications platform service provider, catering to enterprises, over-the-top (OTT) players and mobile network operators (MNO). The company’s portfolio comprises solutions in messaging, voice, email, SMS filtering, analytics and monetization.

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