Why did Tanla solutions stock price rise 2212% ?

This stock managed to record 2212% increase in the share prices in past one year. The major driver of this rally can be considered the recent acquisition of Karix and Gamooga as it gave an access to their client based.

Tanla has shown remarkable perform on the stock market. The recent collaboration with Microsoft to launch its product “Wisely” secure communication solution reflected positively on its share price. In the past one year the share managed to increase by 2212%; i.e. from March to March 2021, the share reached to 1030 on 3rd March, from 44.55 on 27th March,.

Cloud Communication is a way to contact via the internet. It enables businesses or individuals to interact with customers, stakeholders, and other recipients. Tanla Platforms Limited is in the field of Could Communication, based in Hyderabad, India. The company was established in 1999 by Uday Reddy. Currently, it has expanded the operations to Dubai and Singapore.

Financial Overview:

The major sources of revenue are platforms and enterprises. The platforms are set-up with the telecom operators in India to provide the access to the subscriber base of the operators. The revenue via the platform is recognized at a fixed value/percentage of the transaction rate applicable to each communication via their network by Tanla’s customers. The revenue from enterprise is procured by serving the platform at an agreed rate per communication, calculated on monthly basis, for the total communications processed in a month.
The FY20 revenue increased by 94% from the previous financial year; the raise is due to the combined results of the Karix and Gamooga acquisitions and acquired new database of customers and offer additional products. The acceleration in cost by 80% is the result of higher consolidated business volume.
The cost of services comprises hosting charges paid to data centers and bandwidth charges paid to telecom operators. Also, transaction fees to third-party telecommunications providers/ telecom operators are a cost for enterprise business.
R&D is an important parameter to judge the future commitment of the firm. Tanla increased its investment in R&D by 412%. The funds are aimed to use in upgrading the platform with new products such as Trubloq.

Management Overview:

Product: the launch of Trubloq allowed the firm to create a strong position in their market as it is the first blockchain platform that enabled commercial stack, capable of mitigating unsolicited commercial communication, spam, and mobile fraud risks, and additionally provides end-users with the power of choice.

Merger and Acquisitions: In 2019, Tanla successfully closed the acquisition deal with Karix and Gamooga. The amalgamation will allow the firm to expand further in the digital and cloud market with 1500+ enterprise customers from Banking, Insurance, Retail, and E-commerce markets via Karix. Gamooga is AI-driven and big data marketing channel and enables businesses and government to engage with the end-users via SMS, push notifications, voice, and e-mail.

Platform expansion: Tanla opened a new SEZ house as Tanla Digital Labs Private Ltd. in Hyderabad, to oversee the innovation and R&D for new products in the global markets. The R&D includes Blockchain, Cryptocurrencies, and AI & ML.

Peer Overview:

Tanla has been overvalued in all the metrics. Currently, Tanla’s share is running at 68.22x P/E, whereas the industry median is 33.25x. The reason for the high net sale of this firm is due to the recent acquisition deals. The positive aspect is that company holds a low amount of debt and a good proportion of funds are parked in investments.

Share Overview:

Results from Models:
A 0.453 beta suggests that if the market outperformed by 20% then shock might perform by 12.02% but again this also keeps stock on high alert in the bearish market. The linear correlation of 0.95 suggested a strong strength between the price of a share and Nifty 50, hence this share is more preferred when the market is bullish and has an optimistic view.

This article is written by Swatika S for Pvot. Swatika has completed MSc in Finance and Investment, and is currently working as Research Associate.