MapmyIndia: New Map for the Markets?
7 mins readPublishing Date : 2021-12-16
It has been a scintillating IPO season in 2021 with many tech oriented businesses getting listed. Today we analyse one such business whose business model revolves around SaaS and PaaS offerings which is throwing ample cash at higher rates of invested capital. Let us look at MapmyIndia, a product based Indian company which can be a proxy to digital transformation, e-Commerce, EV and autonomous driving like themes in times to come.
Who are the people running the show?
Company was founded by Rakesh Kumar Verma and Rashmi Verma in 1995. Their son Rohan Verma also joined the company 15 years back and as 19 year old, he built an interactive internet mapping portal, MapmyIndia.com, in 2004, while still an undergraduate at Stanford University. All the three are technocrats and possess knowledge around software and hardware engineering. Professionals are recruited to effectively manage day to day operations of the company
What does the company do?
MapMyIndia is data and technology products and platforms company, offering proprietary digital maps as a service MaaS software as a service SaaS and platform as a service PaaS. As per the F&S Report, they are India’s leading provider of advanced digital maps, geospatial software and location based IoT technologies.
The offerings have several use cases -
Automotive: navigation and maps in 2W, PV, CV
Food delivery: address intelligence, last mile delivery tracking
E-commerce: long haul first mile and last mile delivery tracking;
Healthcare and Pharma: distribution and logistics of medical goods, indoor mapping of plants, GPS tracking for ambulance
BFSI: geo verification and onboarding, usage based auto insurance, geo CRM for sales, claims and collection agents;
Retail and QSR: location enabled online e-commerce, location based digital advertising
Telecom and Utilities: field force monitoring, optical fibre mapping and distribution analytics;
Transportation and Logistics: fleet and asset tracking, transportation data, truck routing solutions, driver safety, route risk assessment;
Government: Geo tagging of public assets for repair and overhaul; for example, gas pipeline, water pipeline; emergency response, smart city, taxation;
Railways and waterways: network and route mapping; tracking of fleet
Forest department: geo tagging and digital mapping
Who are the customers?
B2B and B2B2C enterprise customers such as Auto OEMs such as Hyundai, MG, Consumer Tech companies like Flipkart, PhonePe, HDFC Bank, Airtel, Apple. The business model is to charge the customers fees per period based on per vehicle, per asset, per transaction, per use case, per user, as applicable. These take the form of subscription fees, royalties, annuities in return for providing licences and usage rights to our proprietary digital MaaS, PaaS and SaaS offerings. Subscription fee, royalty and annuity payments together contributed over 90% of the revenue from operation FY21
There are over 500 customers, and about 80% of revenue comes from 25 customers.
What is the moat?
Regulatory
The new Geospatial Policy 2021 guidelines in India allows all Indian entities to freely acquire, collect, generate, prepare, analyse, store or distribute geospatial data including maps. While it opens out huge scope for the geospatial sector in India, it restricts foreign companies’ ability for most accurate, high resolution mapping. Geospatial data with spatial accuracy of one metre for horizontal and three metres for vertical cannot be created/owned by foreign entities and they would have to licence the same from Indian players to serve their Indian customers. This feature is important to create accurate maps for ADAS, HD and 3D, virtual reality maps and Smart city simulation maps. Even the 2D maps of foreign entities may not be accurate to the doorstep. Several mapping activities like terrestrial mobile mapping survey, 360-degree street view survey and Indian territorial waters survey have also been reserved only for Indian entities.
Network Effects
As more and more customers use digital maps offered by MapmyIndia, it creates a positive feedback loop, bringing network effects in the system. With the usage of these maps, the accuracy of the maps increases making it more valuable for existing customers and any future customer coming to the platform.
Technology Know-How
MapmyIndia has built proprietary technology over 25 years and built ground validated geospatial databases of large countries like India may be difficult to replicate by a new entrant in a short period of time.
How is the industry structure and Who are the competitors?
The industry has limited players globally due to regulatory restrictions that nations enforce, plus the technology related entry barriers have prevented competition. Google is a key player in the Indian market but offers mostly B2C solutions and the company claims their maps and navigation services are more accurate due to regulatory advantages present with them.
What do the financials look like?
MapmyIndia being a product company providing SaaS and PaaS solutions is an asset light business with huge operating leverage present in it. In FY21 the company did about 150 Cr of sales with 80% + Contribution Margins. EBITDA margins were about 25% and the company did about 59 Cr of PAT in FY21. With these numbers, the IPO is coming around 5500 Cr valuation at 62 PE. Point to note is that there was other income inflating the PAT, excluding that other income, normalized earnings mean that IPO valuation is at 100 times PE.
What does the growth runway look like? What is the opportunity size?
As per the estimates by Frost and Sullivan, the total Indian addressable market of digital maps and location based intelligence services is expected
to grow to 47K Cr in 2025 at around 15.5% CAGR from 2019 to 2025, and most of this growth would be from new projects and policies announced by the GoI that encourage domestic players of digital maps and associated solutions. The total global addressable market would be around 12 trillion INR by FY25 growing at 13%
Current revenues of the company (150 Cr) are small in this large pond and it will be interesting to see how much of this huge pie can be captured going forward. Double digit teens growth can be expected from the company in 3-5 years. Also the company has an order book of 468 Cr which will be billed over a period of 3 years.
What can be key risks in the company?
Substantial chunk of revenues come from auto sales as maps are embedded in automotive vehicles. Auto being a cyclical industry will create cyclicality in this vertical's performance.
Competition may increase since the Government has liberalized policies in the Geospatial sector.
FY21's PAT has contribution of other income and removing that makes MapmyIndia valuation at 100 PE. The paucity of unique business model of SaaS and PaaS offerings might create scarcity premium for the stock in the Indian market but still no margin of safety is present at IPO price and the valuations.
80% of revenues are coming from 25 customers and loss of even a single customer can cause damage to company's growth or the existing revenues.
Consistent R&D is required to keep with tech changes and innovate, any laxness on this end will cause damage to existing customer relationships.
Cybersecurity risks and other operational challenges can cause harm to the reputation of the company.
Fellow Reader, I ask you, What do you think about the business? Do let us know in the comment section!
About the Author
Simrat is a Software Engineer, Fitness Enthusiast, and a passionate reader of multidisciplinary topics. He enjoys reading about businesses across India and the world to find suitable opportunities for equity investing.
His twitter profile link: https://twitter.com/simrat11exp/
Disclosure: Nothing on this website should be considered as a stock recommendation. Please consult your financial advisor before taking any buy/sell action. We do not hold the stock in our portfolios.