Tanla Platforms has been one of the favorite stocks for long-term investors. The stock has risen around 1,800 percent in the last 5 years on the back of robust fundamentals and stock potential. However, today, the stock is locked in its 20 percent lower circuit to ₹730.60, it's all-time low due to weak June quarter results.
2022 has not been the best year for the software firm. It has given negative returns in each month since January. So far in the year, the stock has lost more than half of its investor wealth and is down 61 percent.
In the June quarter, the firm reported a sharp fall in its bottom line figures on a sequential as well as YoY basis.
Its profit after tax fell 28.6 percent QoQ to ₹100.4 crore in the June quarter, while on a YoY basis, it dropped 3.9 percent. Its revenue increased 28 percent YoY to ₹800 crore in the quarter under review but fell 6.18 percent QoQ. Margin also contracted to 16.3 percent from 21.5 percent.
The EBITDA margin was impacted by operational headwinds such as market disruption, modernization of the company’s legacy systems and foreign currency impact of Euro depreciation, the firm said.
Hyderabad-based Tanla provides value-added services in the cloud communications space.
In a letter to shareholders, founder Chairman & CEO, Uday Reddy, said, "Q1 had some operational headwinds in the Enterprise business, but we have our building blocks in place to accelerate our momentum in the coming quarters. We have a strong balance sheet and are excited by the opportunities ahead of us."
“Our operational headwinds in Q1 are due to a combination of external and internal factors: Market disruption, Legacy systems and infrastructure modernization and forex impact," he added.
"While Q1 did not go in the direction we would have liked, it takes nothing away from my conviction of how exciting the future is. Our building blocks are coming together, and we are just getting started. We are staying true to our strategy of ‘build over buy’, Reddy further stated.
"While the markets are moving from pure growth companies to companies with profitability and cash flow, we have always been on the path of driving profitable growth with strong free cash flows. We have a very strong balance sheet (cash balance of ₹987.3 crore and zero debt) as well as a strong cash flow generating business ( ₹96.5 crore operating cash flow).
I am very excited by the opportunities and potential that lie ahead of us. I am confident that we will continue to deliver on our promise of strong, consistent, and profitable growth for the years to come," Reddy told shareholders.
He also pointed out that over the past few years, we have been building a great institution at Tanla and have been a consistent industry leader in the rapidly evolving space of digital interactions. This is reflected both in the quality of our business (platform-led, deep relationships with leaders across industry segments) as well as the robustness of our financial performance (13X growth in PAT in 6 years), he said.
Recently, brokerage house HDFC Securities initiated coverage on the stock after the massive correction in 2022 with a 'buy' call and a target price of ₹1,350, indicating an upside of 85 percent from its all-time low price, hit today.
HDFC Securities expects the growth momentum in enterprise/platform to continue (+18/34 percent FY22-24E CAGR), driven by rising marketing and transactional messaging traffic. The enterprise market share will be maintained while the platform share can come down. The margins will moderate in the near term, given higher competition and telcos demanding higher revenue share, the brokerage firm added.
