Company Name: Geodesic
Market Cap: USD 183.0 million
CMP: INR 92.00
LTM P/E: 2.6x
Free Float: 76.8%
Geodesic, incorporated in 1999, is a Mumbai-based software technology company and is engaged in software product sales and related consultancy service. Its business units include unified communication services, collaboration and customer relationship management (CRM), mobile media, electronic computing, and financial products and services. CRM is an integral continuum, which includes a set of integrated module. The company’s unified communication, collaboration and CRM unit focuses on the banking and financial services institutions, SME’s, and large retail industry. Its Mundu products are retailed across www.mundu.com and application stores, including Nokia’s Ovi Store, Apple’s App Store, Palm Store and Blackberry Store. The company recently launched its app on the Android market which has been a great success in India, till date. Android, as we know has a tremendous potential in the Indian market, primarily due to its availability and price efficiency.
The company’s revenues grew at around 3.0x over the last three years to reach INR 503.2 crores in 2010, resulting in a CAGR of 42.8%. Despite the economic slowdown in 2010, the company witnessed a minor fall of 1.0% in its topline growth, displaying stability in its earnings. In the first nine months of this fiscal, the company has already recorded revenues of INR 487.9 crores, which if annualized (although not appropriate) translates into INR 650.6 crores (29.3%) already.
Although, the company doesn’t have a core peer in the domestic market, internationally there are number of companies involved in developing apps for the smartphone market. The company is trading at a P/E of 2.6x, which is at a steep discount to its peers across the globe which is trading at P/E of 23.2x.
Geodesic derives most of its revenues from developing instant messaging platforms/services, Internet radio, IP telephony and other such applications and licensing them to enterprises as well as retail users (directly or indirectly) under the ‘Mundu’ brand. The company has added new clients in nearly all its segments of operations. Usage of its retail offering instant messaging, VoIP platform and mobile SMS over IP has witnessed a rapid increase. With all these segments set to expand in a big way as companies and portals, offering social networking, etc., seek to cut costs, Geodesic is well positioned to tap into this opportunity. The company also has acquired many small software companies across the globe which helps it to tap in those economies and also, enables the company to be ahead of the curve.
It has a developed revenue model comprising license fees, customization fees, per-usage fees and recurring revenues. In fact, 55.0% of its revenues are recurring revenues. This enables revenue visibility and better margins as well. The company has also bagged contracts from the Government of India, as part of its e-governance program, which gives a tremendous upside to the earnings potential of the company. The company recently bagged a deal from the Madhya Pradesh government for implementing Public Distribution Service. Other deals include traffic management and the NREGA (now Mahatma Gandhi NREGA). Chandamama, the children’s magazine that it owns, has also witnessed a ramp-up in revenues.
The way forward
The Indian smartphone market is expected to increase significantly with the smart phone sales grown 3.0x times between (July-Sep) of 2010 compared to 2009. Moreover, the market potential is huge with – 80.0% of smartphone market still untapped, and according to a recent survey by Delloite, 90.0% of all users want to move to smartphones. This has also been helped by declining prices of the smart phone market. In the Q2 2011, 80.0% of the total Indian smartphone sales were lesser than the avg. sales value of INR 18,000, the proportion of which rose to 90.0% in the Q3 2011. Due to ever increasing demand of apps such as Live TV aided by the introduction of the 3G technology, the number of apps for these markets is expected to increase significantly. Moreover, NDTV in its recent survey rated Mundu as the #1 App for India, which puts the company in the driver seat and first mover advantage.