Indo-China tensions pull back grey market premium of Route Mobile

The grey market premium for Route Mobile shares dropped as the initial public offering (IPO) entered the second day of the subscription on Thursday. The multi-channel cloud calling service provider plans to raise up to Rs 240 crores by issuing new shares and up to Rs 360 crore through an Offer for sale (OFS) by the promoters. The issue is open for subscription till Friday, September 11. 

The grey witnessed a frenzy ahead of the stake sale and the premium reaching Rs 175-180 per share on Monday evening. However, dealers of unofficial markets turned cautious with increased volatility in the secondary market amid geopolitical tensions. 

Abhay Doshi, an independent dealer of unlisted stocks in Gujarat, said that the Sino-India face-off has led to market uncertainty, which had stabilized the premium at current levels. "However, the primary market is still imagining the problem," he said. "The IPO is worth investing in to incorporate earnings in addition to long-term acquisitions, for those with a high appetite for risk and who wish to take advantage of a unique business model in the fast-growing digital communications industry."

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Dealers are comparing Route Mobile's problem to that of Affle India and IndiaMART Intermesh, which has a business model that specializes in serving B2B customers. Mumbai-based Route Mobile started operations in 2004. It provides diversified communications solutions, including firewall filtering and analytics for messaging, voice, email, and business process outsourcing (BPO) services to enterprises and mobile operators, and provides connectivity services. Online content providers (OTT)) in 18 countries. 

Dinesh Gupta of UnlistedZone, a Delhi-based firm that deals in unlisted shares, expects a higher level of underwriting from retail investors due to excessive liquidity in global markets. "The whimsy is pivotal in an IPO as investors put their money for listing pop. It's crazy to have strong fundamentals and a strong balance sheet," he said. 

After the recent surge in valuations, Gupta said, valuations in the secondary market have expanded and few options remain. That's why investors are directing their money to the primary markets for an adrenaline rush on the day of trading.

Route Mobile earned a total revenue of Rs. 968.10 crore for FY20 on the back of Rs 852.37 crore in tax year 2019. Profit after tax (PAT) surged to Rs. 54.53 crore to Rs 69.10 crore during the period. In the June quarter of 2020, the company achieved a total revenue of Rs. 312.29 crore, of which 85% came from exports. Net profit for the quarter was Rs 26.93 crore.

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