Mobile Value Added Services company ValueFirst is eying an IPO in 2012: we’ve heard of IPO plans from several companies in the past, including competitor One97 Communications, and spoke to ValueFirst COO Kumar Apoorva to get a sense of what ValueFirst has been doing, the implications of its acquisition of CellNext earlier last year, and what it needs to do to be IPO ready.
Being IPO Ready
In order to be IPO ready, Apoorva says that the Value First should be over a 100 crore in revenue in the coming year, and growing at 55-60 %. He claims that the company grew 100 percent year-on-year. “EBITDA needs to be in the 25-30 percent plus. The mix of the revenue needs to change, wherein revenue from enterprise business will still be the leader, but significant revenue needs to start coming from Voice, mobile marketing, email and operator VAS, which is basically non-SMS related services. An important benchmark for us will be that around 20-25 percent of our revenue in the coming year comes from non-SMS processes, so that we can show that we are derisking in SMS and our potential to investors that we have four more streams which are nascent and are growing at a rapid pace. Eight months back we were one product company, now we are a 5 product company.” Between ValueFirst and Cellnext, the group has over 350 employees. They’ll be adding about 40 to 50 more in sales over the next 4-5 months.
He disagrees with our contention that they’re in a highly commoditized business: “There are others who sell it like a pipe, and it’s commoditised for them. We do a lot of SAP and CRM integration, and we have a developer team of 70-80 people. So for example if you are running a process for a company that if the server goes down people should be informed within 2 seconds via SMS. If that guy does not respond to the SMS, then the escalation will go to his boss. Commoditization does not happen quickly when it’s core process or transactional traffic.”
But what of the dropping bulk SMS rates? Apoorva claims they’re doing better – “For example, if somebody is selling at 3 or 4 paisa, we are still being able to sell at the 7 or 10 paisa. While some might get 30-40 percent gross margin or lower, we are getting reasonably good margins from most of our clients. Even if you are getting 8 paisa or 10 paisa with a large corporate, or 7 paisa with a small medium corporate, it’s still not bad for a commoditized market.”
Product Portfolio: CellNext Acquisition
Apart from SMS, ValueFirst has added voice products, as well as an MCommerce platform following the acquisition of CellNext. “We are leveraging the payments business across all our enterprises clients who send SMSs or voice calls, in case they want integration with payments. The sales team keeps on acquiring clients, and a separate team mines the data for upselling. Also, because we have deep level integration, customers find it difficult to move away.”
Additionally, with the acquisition of CellNext, the company has acquired clients such as Bharti AXA, Aegon Religare and LIC. Cellnext has given us access to two more product lines which we did not have earlier – commerce and operator VAS. “I will do more than 12-15 crores on the VAS business in Cellnext in the coming year, it might have been small, but they have the entire SDK deployment for IDEA and Reliance.
There’s also mobile marketing space through Spot On. “We just crossed around 35 lacs of revenue per month for the lat 4-5 months at SpotOn. They broke even in October, they are doing 50% EBITDA plus every month, because there’s low burn. ValueFirst sales force is also selling SpotOn. We have over a hundred brands who are engaging with us actively, and have already done 200 plus campaigns this year. They are targeting 10 crore revenue in the coming year, thats the jewel in the crown for us at present.”
More Acquisitions Planned
Apoorva said that the company is looking at acquiring companies that have relevant products and technology, but haven’t been able to scale up in terms of revenue and sales on their own. “We’re looking at companies with products that can enhance our product lines; products that we can sell to our existing customer base. We’re looking at companies with revenues of Rs. 1-2 crores. Another segment that we’re looking at is in the social networking space, that have synergies with SpotOn,” he said.
Aggressively Expanding Customer Base
Over the past 15 months, ValueFirst has aggressively gone after the enterprise segment, and claims a total customer base of 2500. With 100 people in sales, Apoorva says that at present getting 200 new customers a month is not difficult for the company, and it is targeting a customer addition of as much as 300-350 customers a month. Unlike other VAS companies, ValueFirst is focusing the enterprise business, at times acquiring small accounts and growing them over a period of time. Kumar said that they’re not primarily operator driven. They have a few ‘Mega accounts’, while 30% are large corporates, 20% are smaller corporates, 10% is sold to aggregators and re-sellers, and the rest is the SME. “We are still not that SME focused, more towards medium tier corporates and large corporates”, he adds.
Out of 200 additions, Apoorva says that a hundred are from the SME, and the rest are from medium tier corporates, large corporates aggregators etc. Among their base are a healthy number of corporates – like insurance companies and banks. “We made a huge dent in tier-2 and tier-3 banks, and have a lot of co-operative banks as well. We plan to get to 5000 customers within the next one and a half years, and if we can do that than we can be easily a 100 crore plus company. The structure is already geared up for scaling.”