Route Mobile is a disruptor tech company
Route Mobile came into our radar when Sunil Singhania of Abakkus PMS Fund revealed that it is his biggest stock bet, with an allocation of 25% of the funds (see Sunil Singhania Recommends Stocks Which Are At “Mouth Watering Valuations” & Which Are His “Biggest Bets”).
He explained that the dominant themes which will play out in the foreseeable future are ‘SaaS‘ (Software as a Service e.g. Netflix, Zoom, Dropbox) and ‘CPaaS‘ (Consumer Platform as a Service e.g. Route Mobile, Tata Comm, Gupshup, Kalyera).
“The digital theme is going to last for a long time and it has got a big boost during the Covid times because the way we work, the way we study, the way we consume, the way we shop, the way we entertain ourselves has completely changed and this is here to stay for a long time,” he said.
“You do not need cash in your day-to-day transactions. You can walk without a wallet if you have your phone in your hand and you will not be inconvenienced,” he added.
He also explained the USP of Route Mobile in the following words:
“The biggest bet we have is on a CPaaS company and for example every purchase you do on Amazon results in seven to eight messages. You go to an ATM, you need an OTP, you do any shopping, you need an OTP, two factor authentication and so on,” he said.
Ravi Dharamshi endorsed this analysis.
“Unlike most of the tech companies, Route Mobile does not burn cash and that was the first thing that attracted us. In fact, the company has been set up with barely Rs 6 lakh capital. So, it is a profitable model. The unit economics is very attractive and the strategy was to bolster their balance sheet and try and go for scale,” he said.
He, however, cautioned that technological changes happen very fast and what is in fancy today may become obsolete tomorrow.
“We can never be very sure which way the technology is panning and the twists and turns of technology can end up disrupting the disrupter as well,” he warned.
Laurus Labs is the largest ARV API Co. There is a big shift happening in the ARV market
Laurus Labs is also familiar to us because it has been on a gorgeous multibagger trajectory.
Dharmashi pointed out that he had spotted the opportunity early and has pocketed much of the gains.
“The decision about Laurus Labs we took almost a year back. What got us excited was that it had invested ahead of the curve. It had leveraged itself, the company and the promoter both were leveraged and it had created the capacities and the costs had been borne but the fruits had yet to come,” he said.
He explained that Laurus is the largest ARV API company and there is a big shift happening in the ARV market where the treatment is moving away from the last gen to the next gen — from TLD to DTG. The Company was well positioned to take advantage of that.
He also heaped rich praise on Dr Satya, the illustrious founder of Laurus Labs.
“We always admire Dr Satya in terms of his technical and his risk taking abilities,” he said.
Dharmashi pointed out that in the past, the market had underestimated the Company as well as its promoter though it has made amends now.
“Here was a company that was really positioned to take advantage of the coming wave and the market was very sceptical about it and was not giving any valuation. It was giving low multiples to a very subdued P&L and balance sheet. That is why the returns have been so big because suddenly the P&L as well as the balance sheet has improved dramatically in the last four to six quarters,” he stated.
It is worth noting at this stage that ICICI-Direct has recommended a buy of Laurus Labs for the target price of Rs. 785.
Stock Reco: Laurus Lab has given 7.3x return over 5 yrs. Its' strong performance is driven by formulations. It is evolving as a strong vertically integrated player with strong order book visibility & is developing robust generic pipeline for developed mkts https://t.co/cIv8BugNMu pic.twitter.com/1ZGtnbJ7iQ
— RJ Stocks (@RakJhun) July 31, 2021
Praj Industries, Polycab India and Natco Pharma are the other three top stocks in the portfolio
Praj Industries, Polycab India and Natco Pharma are also very familiar to us.
According to experts, Praj Industries will be a big beneficiary of the emphasis on ethanol production. “It is on the cusp of a significant growth cycle. Very few companies have that kind of visibility today. It will continue to do well. There will be a re-rating of profitability & valuations. It should be bought on sharp correction,” an expert advised.
Polycab, which manufactures electrical goods, is also a strong contender for our money. According to a initiating coverage research report by Prabhudas Liladhar, it is fast emerging as a B2C player given 1) strong potential in FMEG and Retail wires segment 2) sustained investments in brand building and 3) steadily increasing distribution network. Polycab is well placed to capitalize on uptick in demand for housing construction given wide product range in Cables, Wires, Switchgear, Switches, Conduit Pipes, Lighting, Fans and Water heaters etc.
Time is still not ripe to add financials stocks
Dharamshi revealed that his portfolio is underweight financials stocks owing to fears of NPAs due to Covid and lack of demand from borrowers.
“We are a little underweight on the financials but that is because I do not think we have reached a stage where the capex cycle begins. Some of the consumers in India are still facing the brunt of the Covid and the spending is getting redirected towards other things. MSMEs are also suffering because of Covid. So, there is a little bit of tension on that front,” he said.
He, however, alerted that the Capex cycle may begin in the next four to six quarters away and this may lead to a renewed demand for financials stocks.