Tanla to make a splash in the international markets

Abraham George Market Musings

It was a privilege to attend the Tanla AGM yesterday and even ask a couple of questions. I wish the proceedings could have been much better if the service provider had superior audio and video effects.

Nevertheless, the discussions and the tone of the senior management were very assuring and encouraging. I got the sense that Uday Reddy who is spearheading the company has a clear vision on what he wants to achieve and his team is behind to rally him.

A couple of years ago, when I wrote ‘A Case for Investing in India’, I did emphasize that many new companies will emerge from India which will make their mark on the international scene. Now, I am convinced even more that Tanla is one of them.

Very recently we saw the successful listing of Freshworks, a company born in India making its debut listing on Nasdaq. Freshworks will be a force to reckon with in the SaaS space and will give a run for its money with companies like Salesforce. My niece works for the company and she says it’s a great place to work. A year ago, I had written a focus piece on Freshworks.

If not this year, we could see many new Indian companies listing on NASDAQ in 2022. This has not happened before where Indian companies can directly list on Nasdaq without being listed in India.

Uday Reddy gave us a glimpse of his international growth plans and I got the sense that everything is moving systematically and methodically. Tanla is not a name well-known internationally, so we will go abroad under the banner of Microsoft with Wisely. There is no better name to partner with than Microsoft for Tanla’s international expansion.

Mr Reddy mentioned that Tanla ‘s competition are companies like Twilio and Ring central. Some may be feeling that is too far-fetched and too much of a pipe-dream. My retort to all naysayers is ‘why not’?. So far, Tanla has more than delivered on most of our expectations since 2018 in terms of profits, business growth, dividends and stock buybacks. With India being the most cost effective centre for digital research and development, why can’t Tanla be a global leader in the CPaaS space?

I don’t know how many of you know the history of Twilio, the undisputed leader in the CPaaS space currently. It started off as a business by making a prank call in 2008. After receiving a series of funding, the company came out with an IPO at $15 in June 2016. The latest price is around $343. While the company is one of the fastest growing companies in US, it is yet to be profitable. While its revenues probably outrun all of its competition by a mile, Twilio shoulders a lot of debt too. With the macro developments in US likely to turn towards interest rates moving sharply higher in a couple of years, we do not know what additional burden that will put on Twilio’s bottom line.

While Tanla has some cash to burn for its international expansion, it is also taking the help of one of the best consulting and management company for guidance that are international and country specific. These are all steps in the right direction. Secondly, Tanla is making two major partnerships and one is to do with a conversational platform. As a major CPaaS provider, the conversational element was missing in Tanla. So that is also covered now. Finally, a 92,000 square foot centre for research & development. Tanla has already hired 250 people in one year and this additional space should accommodate at least another 350 people.

Mr Reddy emphasized repeatedly that Tanla will be more focused on innovation and organic growth which was all good for me to hear. A stock’s price is supposed to be the present value of its future earnings. From all that I have outlined above its for each investor to decide if Tanla’s price truly reflects that. If not, don’t you think it is a great level to buy?

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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.