Tanla Platforms: Undisputed Leader In Domestic Market; Eying Global Expansion With ‘One Platform’ Strategy

We attended Tanla Platforms' investor and analyst meet in which it gave insights about growth plans, industry landscape, international expansion and 'one platform' strategy. The highlights of the meet:

Strong industry tailwinds: CPaaS industry in India is expected to grow 3.5x over 2020-23, from ~$320mn in 2020 to ~$1.1bn in 2023. Global CPaaS market is expected to reach ~$47bn by 2023. The addressable market is evolving as enterprises and CPaaS players continuously innovate, broaden their offerings, acquire new capabilities through M&A, and create new use cases. Further, the Covid-19 crisis has led to the digitization of activities like commerce and business transactions, resulting in a surge in demand for CPaaS.

Undisputed leader in Indian enterprise messaging market: Tanla (Karix) is the undisputed leader in the Indian enterprise messaging market with over 30% market share. The next three competitors have a combined market share below 30%. Tanla serves ~1,300 enterprise clients in India and at least 6 out of 10 customers across major industries (BFSI, e-commerce, retail, social media, DTH, Pharma, government, etc.). The company derives 60% of its revenues from Top-50 customers. It added 250+ new customers in FY21 and has executed its land and expand strategy very well by ensuring growth from existing deployments, cross-selling of new products and upselling of products.

Adopting 'one platform' approach for global ambition: The company has adopted 'one platform' approach, under which the capabilities of Karix, Gamooga and Trubloq will be integrated with recently launched Wisely platform for international expansion. Tanla believes that the encryption capabilities of Wisely platform will be the key differentiator as enterprises are looking for more secure means of communication. The Wisely platform is developed on Microsoft Azure. The company has so far on-boarded clients such as HDFC Bank, Union Bank of India, Axis Bank and Free Charge on the Wisely platform.

Trubloq - DLT/GRC platform - adds highly profitable new revenue stream and stickier relationship with telcos: Trubloq, Tanla's blockchain-based stack, is built to solve the unsolicited commercial communication in accordance with the TRAI Telecom Commercial Communications Customer Preference Regulation (TCCCPR). The SMS and OTPs, when sent by enterprises, are checked against the templates pre-registered by them on this blockchain platform. Tanla has on-boarded 33,710 enterprises, processed over 200bn transactions since its commercial launch in Sept'20 and enjoys 62% market share. Recently, Tanla partnered with Etisalat and Du to implement a new regulation on mobile spam policy in the UAE.

Outlook and valuation: We remain positive on the CPaaS space and medium-term growth outlook of Tanla, considering growing needs of digital communications, expanding product offerings, scope of margin expansion with product mix change and operating leverage, and healthy cash generation (negative working capital cycle and low capital intensity). We have coverage on Route Mobile (Buy; TP - Rs1,820) while do not have active coverage on Tanla.