The growth of mobile telecom markets has opened a huge opportunity for Indian companies to leverage the experience of the large domestic market to developing products and services for overseas markets. This is quite different from the rest of the software sector where companies have to develop products and services for markets that are largely overseas.

Among the companies that have used this opportunity to rapidly penetrate the market is the Hyderabad-based, Tanla Solutions. The high growth in both top line and profits achieved by Tanla is an indicator of both, the potential the mobile market holds for Indian companies, as well as the strong foundations that the company has built in this area.

Tanla Solutions clients include leading cellular operators from India and abroad. Their SMSC has been deployed with clients like Reliance, BPL, Hexacom, Airtel, and Essar.

Tanlas services include project management, application development and integration, technical support and consulting. It became the first Indian company to launch an aggregation service in the UK through Tanla Mobile (formerly Mobizar), a wholly owned subsidiary. With direct connections to all UK network operators, Tanla Mobile offers a range of SMS, MMS, WAP, and 3G services.

As on December 31, 2007, promoters own 35.85% of the companys shares while private corporates and the Indian public holds 25% and foreign institutional investors (FIIs) and NRIs hold 39%.

The company turnover for the year ended March 31, 2007 was up 252% at Rs 222 crore against Rs 63 crore last year. Net profits grew by 207% to Rs 93 crore against Rs 30 crore last year. The main growth was contributed by the mobile transaction and billing aggregation business, which grew from Rs 33 crore last year to Rs 157 crore this year. The offshore services business also grew from Rs 8 crore last year to Rs 26 crore this year.

While the attrition rate was around 20%, the company has increased its headcount from 140 last year to 270 this year. During the year, the company expanded its operations to Ireland and has signed revenue sharing agreements for mobile payments and messaging with Irish mobile operators including O2, Meteor, and Vodafone. Tanla also entered into an exclusive partnership with Breathe, a leading UK ISP, to power Internet SMS for UK subscribers.

4D Interactive signed a contract with the company to redevelop its social networking site. The company also entered into partnership with SKYPE to allow customers to send text messages from their computers to mobile phones around the world. During Q1, the Pocket Group of the UK tied up with Tanla to deliver multimedia entertainment services across their customer base and incorporated subsidiaries in the US, Singapore, and the UAE to expand its offerings to newer geographies.

The company reported revenues of Rs 119.34 crore for the quarter ended December 31, 2007 against Rs 56.73 crore for the corresponding quarter of 2006 on a consolidated basis, a rise of 110%. Net profits have jumped 88% to Rs 43.27 crore as compared to Rs 23.04 crore, during the same period last year.

During the quarter, Tanla Mobile, a wholly owned subsidiary of Tanla Solutions, launched its US operations. Tanla and O2 entered into an agreement under which Tanla may sell or market commercial WAP services to any O2 subscriber via PayForIt mobile billing services in the UK. Outcast TV selected Tanla to build Buzz, their media personalization platform.

European mobile company Mliven selected Tanla to provide a mobile billing platform for the launch of several of Mlivens mobile services in the UK. Mliven will immediately work with Tanla to launch several mobile gaming portals in partnership with global mobile game publishers.

The company was recognized as the Best Established Indian Company in the IT Sector conferred by HYSEA (Hyderabad Software Exporters Association). Also, Tanla emerged sixth among the top fifty fastest growing technology companies in the third Deloitte Technology Fast 50 India 2007 Program.

Tanla shares currently trade at Rs 679, discounting its 2009 earnings by seventeen times, reflecting the strong confidence investors have placed in the company and its growth prospects, which are significantly higher than its peers. We believe that the company will continue to outperform its peers in the medium term. Outperformer.

Sushanto Mitra

The author is director, Techcap India

sushanto@techcapIndia.com
The views reflected here are of the author and not of this publication. No liability is accepted for losses based on the information presented here

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