Affle India IPO to open on July 29, 10 things to know

After the public issue, promoters shareholding will be reduced to 68.38 percent from 92.17 percent, and total public shareholding will be 31.62 percent including Malabar India Fund and Malabar Value Fund.

Mobile marketing firm Affle India will open its initial public offering for subscription on July 29. This is the sixth company launching an IPO in the current financial year 2019-20.

ICICI Securities, and Nomura Financial Advisory and Securities (India) are the book-running lead managers to the offer. Equity shares after public issue are proposed to be listed on the National Stock Exchange of India and BSE.

The issue will close on July 31, 2019, according to a company statement.

Company Profile

Affle is a global technology business. It has two business segments – Consumer Platform and Enterprise Platform.

Consumer platform primarily provides services like new consumer conversions through relevant mobile advertising; retargeting existing consumers to complete transactions for e-commerce companies through relevant mobile advertising; an online to an offline platform that converts online consumer engagement into store walk-ins.

The company’s Consumer Platform is primarily used by B2C companies across industries, such as e-commerce, fin-tech, telecom, media, retail, and FMCG.

Enterprise Platform primarily provides end-to-end solutions for enterprises to enhance their engagement with mobile users.

As on March 31, 2019, Affle Consumer Platform had approximately 2.02 billion consumer profiles, of which approximately 571 million were in India, 582 million were in other emerging markets and 867 million were in developed markets. During fiscal 2019, Affle Consumer Platform accumulated over 300 billion data points.

For fiscal 2019, on a consolidated basis, revenue from Consumer Platform contributed 97 percent of its revenue from contracts with customers.

Its business is asset-light and scalable as its employee benefit expenses, depreciation and amortization expenses and other expenses have remained relatively unchanged despite significant changes in the company's revenue in the last three fiscal years.

The company has three registered patents in the United States, with multiple patent claims in areas of advertising via data communication clients, online search system, method and computer program and method and system for extending the use and/or application of the messaging system. It also has 10 pending patent applications in India covering various algorithms in the area of digital fraud detection.

The company has run mobile advertising campaigns for some of the largest e-commerce and mobile app companies/brands in the world, such as Amazon, Flipkart, Goibibo, Zee, Dunzo, Dailyhunt, Meesho, Games 24x7, Shipt, Jabong, BookMyShow, Wynk, ALTBalaji, PhonePe, Gojek, Spotify, Sivvi, and well-known companies in other industries such as Airtel, Reckitt Benkiser, Johnson&Johnson, McDonalds, Nissan, Air Asia, Axis Bank, Citibank, and BTPN.

As on May 31, 2019, the company had 236 full-time employees across offices located in Gurugram, Mumbai, Bengaluru, Singapore, Jakarta (Indonesia) and Dubai (UAE).

The company acquired Vizury Commerce Business in India with effect from September 1, 2018. On May 18, 2019, but with effect from February 19, 2019, the company's Singapore Subsidiary acquired the Shoffr Platform Business and on June 28, 2019, but with effect from April 1, 2019, acquired the RevX Platform Business by way of a slump sale.

About Public Issue

The IPO comprises of a fresh issue aggregating up to Rs 90 crore and an offer for sale of up to 49,53,020 equity shares by Affle Holdings Private Limited.

Money to be raised

The company is aimed to raise Rs 456.52 crore at the lower end of the price band and Rs 459 crore at the higher end of the price band of Rs 740-745 per share.

Out of the total funds, the company already raised about Rs 206.55 crore from 15 anchor investors by allotting 27,72,483 equity shares at a price of Rs 745 on July 26.

Aberdeen Asian Smaller Companies Investment, Franklin Templeton Investment Funds, Goldman Sachs India, Malabar India Fund, etc are among the 15 anchor investors.

Objects of Issue

The company intends to use its net proceeds from fresh issue for funding the working capital requirements, and general corporate purposes.

The company will not receive any proceeds from the offer for sale.

Strengths

> Consumer Platform has a leading position in India; a high growth market with substantial barriers to entry.

> The company has a proven international track record.

> It has a profitable, low-cost business model built on an asset-light, automated and scalable platform.

> As on March 31, 2019, Affle consumer platform had approximately 2.02 billion consumer profiles. For fiscal 2019, Affle Consumer Platform accumulated over 300 billion data points.

> The company works with customers, who it believes are likely to grow. The company believes that it will help them grow in various countries in which customers provide services.

> The company is addressing digital fraud and data safety issues that are prevalent in the industry.

> Vizury Commerce Business and RevX Platform expand its engagement with e-commerce companies to include retargeting services and its Vizury Commerce Business expands its reach in the Middle East and Africa.

> It has experienced and dedicated key management personnel.

Strategies

> To enhance Affle Consumer Platform's revenue from existing and new customers in India and acquire new consumer profiles beyond Tier 1 cities.

> To expand its international business through local business development efforts and through referrals from existing customers.

> To drive further penetration in its top customers and deliver more converted users for large e-commerce companies.

> To continue to invest in and develop technological capabilities.

> To continue to develop award-winning fraudulent data detection and prevention platform.

> To continue to selectively pursue acquisitions.

> To cross-sell solutions.

Ad-tech Industry

The ad-tech market in India is fast-growing, with market size of $304.9 million in 2017 and is likely to grow at a CAGR of 39 percent to $808 million by 2022. (Source: Frost & Sullivan Report)

The company believes the Indian market presents many barriers to the entry, given its unique challenges such as a disjointed demographic, which is just getting habituated to digital applications (such as the use of e-commerce, digital payments, etc.) and low cost per converted user (CPCU).

In the last two calendar years, only about 25 percent of all Internet users in India have shopped online.

The global ad tech market is expected to grow at a CAGR of 10 percent from $34 billion in fiscal 2017 to $54 billion in fiscal 2022. (Source: Frost & Sullivan Report)

Financials

For fiscal 2019 on a consolidated basis, its revenue from contracts with customers outside India was Rs 140.54 crore, which is 56.4 percent of the total revenue from contracts with customers.

Revenue from contracts with customers from the Consumer Platform on an unconsolidated basis has grown by 40 percent from Rs 76.94 crore in fiscal 2018 to Rs 107.68 crore in fiscal 2019.

In FY19, consolidated earnings included its acquisition of Vizury Commerce Business.

Promoters Anuj Khanna Sohum and Affle Holdings held 75.63 percent stake in the company while Affle Global (incorporated under laws of Singapore), owned by Affle Holdings, is a group company.

After the public issue, promoters shareholding will be reduced to 68.38 percent from 92.17 percent, and total public shareholding will be 31.62 percent including Malabar India Fund and Malabar Value Fund.

Malabar India Fund and Malabar Value Fund acquired 6.65 percent and 1.17 percent stake respectively in July 2018.

Anuj Khanna Sohum is the Chairman, Managing Director and Chief Executive Officer (CEO) of the company.

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