6-Jan-2022

AFFLE (INDIA) LIMITED

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Affle (India) Ltd is a global technology company with a proprietary consumer intelligence platform that delivers consumer
engagement, acquisitions and transactions through relevant mobile advertising. The platform aims to enhance returns on marketing
investment through contextual mobile ads and also by reducing digital ad fraud. The company has been a long trusted partner for
many of the world’s biggest B2C brands across the industry verticals. Affle is enabling innovative, on-the-go and digitally empowered
ways for the advertisers to deeply engage with consumers.

The company has two business segments :

• Consumer platform – The platform provides services such as new consumer conversions (acquisitions, engagements and
transactions) through relevant mobile advertising, retargeting existing consumers to complete transactions for e-commerce
companies through relevant mobile advertising and an online to offline (“O2O”) platform that converts online consumer
engagement into in-store walk-ins. The consumer platform is used by business to consumer (“B2C”) companies across industries,
including e-commerce, fin-tech, telecom, media, retail and FMCG companies, both directly and indirectly through their advertising
agencies. Some of the customers includes Flipkart, Amazon, Goibibo, Airtel, Johnson & Johnson etc.

The company primarily earns revenues from its consumer platform on a Cost Per Converted User (CPCU) basis (contributes
~91.4% of consumer platform revenue), which comprises user conversions based on consumer acquisition and transaction
models. It also earns revenue through awareness and engagement type advertising (Non-CPCU), which comprises cost per
thousand impressions (CPM), cost per view (CPV) and cost per click (CPC) models.

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DIAGRAMMATIC REPRESENTATION OF THE CONSUMER PLATFORM
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• Enterprise platform – This platform offers an integrated approach to building audience centric mobile assets and comprise app
development for third parties, enabling offline to online commerce for offline businesses with e-commerce aspirations and
enterprise grade data analytics for online and offline companies.

While the majority of the industry is largely dominated by companies operating on clicks, views and impressions, Affle, with its
differentiated business model drives CPCU based conversions for advertisers primarily focused on emerging markets and across the
industry verticals. Most of these conversions are deeply linked to the deep funnel matrix which are always post click and post app
install events done by the consumers on their smart devices.

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DHD PLATFORM WISE REVENUE MIX (FY21) GEOGRAPHY WISE REVENUE MIX (FY21)

3%
9%

50%

50%

91%

97%
Consumer Platform Enterprise Platform CPCU Business Non-CPCU Business Outside India India
Note: Post the Jampp acquisition in July 2021, the share of
international business increased to ~67% of the overall revenue.

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 GROWTH
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DHD SALES GROWTH

In FY21, the revenue grew by 54.8% YoY to ₹517 cr
led by broad based healthy growth momentum both
in the CPCU and non-CPCU business, from existing
and new customers across top 10 industry verticals
in India and global emerging markets.
In the CPCU business, the converted users registered
a growth of 45.6% YoY to 10.53 cr users, while the
average CPCU rate remained flat at ₹40.8.
In H1 FY22, the revenue stood at ₹427.2 cr led by the
integration of Jampp, which contributed ~30% of the
revenue in Q2 FY22. Organically, the consolidated
revenue stood 53.4% YoY higher in H1 FY22.
Higher international contribution in Q2 FY22 led to a
significant increase in the CPCU rate at ₹47.6 (v/s
₹40.6 in H1 FY21). Going forward, the acquisition is
expected to continue to aid the international
contribution.
5 Year CAGR: NA

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DHD EBITDA GROWTH

The EBITDA grew by 47.7% YoY to ₹130 cr primarily
led by healthy revenue growth. The inventory and
data costs (77% of total expenses) were ~55% higher
in line with the revenue growth, however the
employee costs (13% of total expenses) were ~98%
YoY higher during the period which partially
impacted the EBITDA.
In H1 FY22, the EBITDA stood at ₹87 cr. The EBITDA
was impacted due to the lower margin in the Jampp
business at ~5% in Q2 FY22.

5 Year CAGR: NA

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DHD PAT GROWTH

The PAT in FY21 doubled to ₹135 cr aided by lower
effective tax rate at ~17% and substantially higher
other income.
The other income was substantially high on account
of a gain on revaluation of financial instrument of
~₹34 cr. Hence, the adjusted PAT stood at ~₹103.1 cr,
a gain of ~56% YoY.
The PAT stood at ₹84 cr in H1 FY22 aided by higher
other income during the period.

5 Year CAGR: NA

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 GROWTH EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

The EBITDA margin over the past two years has been
steady at ~28%. In FY21, the EBITDA margin stood at
~33% aided by higher other income. The adjusted
EBITDA margin (excluding the gain of ₹34 cr on
revaluation of financial asset) stood at ~27% in FY21.

In H1 FY22, the EBITDA margin (including other

income) stood at ~26.9% (v/s 27.1% in H1 FY21).
Excluding other income, it stood at ~20.4% (v/s
25.3% in H1 FY21) primarily due to the lower margin
Jampp business.

Management iterated that it would eventually bring

up the Jampp EBITDA margin to mid-teens and then
to ~20% in the next 18-30 months.

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DHD PAT MARGIN

Affle has had a stable PAT margin over the past two
years at around ~19.5%. In FY21, the PAT margin
stood at ~26% which was aided by lower effective tax
rate and higher other income.

The adjusted PAT margin stood at ~20% which is at

par with the past two years margin.

The PAT margin in H1 FY22 stood at ~19.6%.

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DHD ROCE
The company continues to generate a robust ROCE in
FY21 stood at 39.4%. Increase in the reserves
balance partially on account of the Jampp acquisition
is expected to keep the ROCE levels subdued for the
year.

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DHD ROE
The company continued to report a steady ROE of
~45% during the year.

The company has raised ~₹600 cr in May 2021, as it

allotted 11,53,845 equity shares to the qualified
institutional buyers at ₹5200 per equity share. The
company is looking to allocate these for inorganic as
well as organic growth opportunities.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, Affle generated ₹102 cr of operating cash
flows aided by healthy profits and working capital
adjustments. The management continues to remain
focused on the collection efficiency and working
capital management.

Under investing activities, the company spent ~₹112

cr on acquisition of businesses and ~₹49 cr on
purchases of fixed assets. Also, it invested ~₹141.3 cr
in the bank deposits which led to a net cash outflow
of ~₹175 cr in FY21.

In financing activities, the company raised net non-

current borrowings worth ~₹57 cr during the year.
This led to a net cash inflow of ~₹53 cr in FY21.

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WORKING
DHD CAPITAL CYCLE
Affle has had a negative working capital cycle over
the years.

The company generally receives its due from debtors

in around 65 to 70 days whereas it has to pay to its
creditors in around 95 to 100 days. However, the
payable days are subject to change based on other
factors as the company is dependent on the credit
terms given by the suppliers.

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DHD FREE CASH FLOW

Affle has had a positive free cash flow per share over
the years. Since, the company is not into capital
intensive industry, a majority of the investments are
into platforms and synergetic acquisitions. In FY21,
the company spent ~₹49 cr on fixed assets. Apart
from that, ~₹112 cr was spent on acquisition of
various businesses.

In July 2021, Affle completed the 100% acquisition of

Jampp (Ireland) ltd and its subsidiaries for a cash
consideration of USD 41.3 million (around ₹300 cr).

In October 2021, the company conducted a share

split in the ratio of 1:5 with an aim to facilitate larger
shareholder base and aid liquidity.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY21, the asset turnover ratio was lower on the
back of higher total assets. This was led by an
increase in the fixed assets (due to an increase in the
goodwill post acquisition of the few businesses) and
an increase in the cash & bank balance during the
year.

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 EFFICIENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The debt to equity ratio in FY21 continued to
increase to ~0.33x which was led by an increased
borrowings during the year.

On a consolidated basis, the debt in FY20 pertained

to the wholly owned Singapore based subsidiary
Affle International Pte. Ltd. However, on a
standalone basis, it continues to remain a debt free
entity.

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INTEREST
DHD COVERAGE RATIO
The company had raised most of its borrowings from
Affle Holdings (related party) in USD and Euro
currencies, hence the effective rate of interest is
substantially low as compared to the rate of interest
in India.

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DHD CURRENT RATIO

Affle has maintained an optimum mix of current
asset and liabilities over the years resulting in a
comfortable current ratio.

As of FY21, the current ratio stood at ~1.28x,

impacted due to increase in the trade payables.
However, current assets grew marginally.

The current assets primarily comprised of cash at

bank (~49%) while the trade payables account for a
majority of the current liabilities (~49%).

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 SOLVENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Affle is trading at a rich PE multiple of 103.13x on a
TTM basis.

Post covid, there has been a significant increase in

the screen time and online content watch time
within the consumers boosted by the pandemic led
lockdowns. This has created a good opportunity for
Affle and the ad tech industry as a whole, as a lot of
companies can be seen shifting to mobile ads instead
of TV or print advertisements. This has helped the
company garner better reach and earnings and
hence led to an increase in the PE multiple.

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DHD DIVIDEND YIELD

The company has not declared any dividends since it
got listed.

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 VALUATION
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DHD KEY LEVELS

Affle got listed in Aug 2019 at a price of ₹185 per
share in NSE which was at a premium of 24% over its
issue price of ₹149 per share.

Since Mar 2020, the stock saw a phenomenal run

and rose from ₹190 to ₹1257 in Mar 2021. This was
followed by some profit booking.

In line with our expectations the stock moved

beyond the ₹1020 mark to make a high of ₹1260 on
11 Oct, 2021.

₹1000-₹1040 is likely to act as a strong base for

accumulation by long term investors.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
The management has a vision to develop the market
share and build a robust portfolio of services that will
help them to get long term sustainable growth. With
the Affle 2.0 strategy, the management is focusing on
being a leader in the Indian market, verticalization of
AI innovations, penetrate vernacular section of India
and create an omnichannel connected ecosystem.

The recent fund raising activity will help to build a

robust business structure in the future either
through organic or inorganic routes.

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SHAREHOLDING
DHD PATTERN
Affle (India) is held by Affle Holding PTE LTD (44.81%
stake) and Affle Global PTE LTD (15.08% stake).

The FII and DII shareholding reduced to 16.14% and

6.40% in September 2021. Non institution
shareholding increased to 17.57%.

Top Public Shareholding:-

Malabar India Fund Limited 4.48%

Aberdeen Standard Asia Focus 1.63%
Nippon India Trustee 1.61%

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 QUALITY
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DHD SECTOR POTENTIAL

• The total digital ad spend in India increased by 37.6% from ₹11.6 cr in FY18 to ₹16 cr in
FY2019; and it is further projected to increase to ₹53.9 cr by FY24, representing a (FY19
- FY24) CAGR of 27.5%.
• Indian digital advertising channel is set to become the largest amongst all media
channels including TV, print, radio, Out-of-Home, etc. as ad spends are expected to be
increasingly redirected towards digital formats. A segment that is fueling growth for
digital advertising segment is mobile advertising, driven by 4G penetration, cost-
effective data packages and rapid growth in smartphone penetration. Hence, the
mobile advertisement spend is projected to reach a share of 64% of total digital ad
spends by 2022. Source: Annual report
• In terms of contribution towards digital advertising spend by sector, banking and financial institutions (BFSI) is currently the largest
in India, accounting for 22% of all digital spend. There is significant momentum on part of banks and financial institutions to push
digital banking, digital payments, and other services such as insurance. It is followed by e-commerce, fast-moving consumer goods
(FMCG) and telecom.
• Digital advertising by e-commerce is forecasted to grow at a CAGR of 35% to equal 22% of the total digital ad spend, while FMCG is
forecast to comprise 19% in 2022. (Source: Dentsu Aegis Reports and Frost & Sullivan Estimates)

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COMPETITIVE
DHD LANDSCAPE
The global advertising technology market is highly
competitive, however, is dominated by digital giants
such as Google and Facebook. There are over a
hundred companies who offer one or more
components of this solution.

Among them, there are just a few international

companies that work closely with advertisers and
brands facilitating targeted advertising.

There are no direct competitors of Affle in the Indian

listed space. Even in the unlisted space, Affle is
among the few companies who have products that
span the entire value chain. The company is also set
to benefit from its differentiated CPCU based
business model and a deeper presence into the
emerging markets.

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DHD FUTURE OUTLOOK

• Affle 2.0 strategy: The company intends to connect 1,000 cr devices to its database through Affle 2.0 strategy which currently
stands at 200 cr devices. Affle 2.0 strategy for growth anchored on vernacular / verticalization / ecosystem-level partnerships. Affle
has a successful history of strategic acquisition in the past. These acquisitions are capability-based acquisitions that help to gain
either market share, market penetration or technology-based acquisition. The acquisitions will most likely help the company to
gain market share in the CPCU business. This will also help them to gain substantial revenue growth momentum in the future.

• Focus on improving scale: The company has a dominant position in India (the largest market) and is currently consistently working
to grow in scale significantly enhancing the strategic moats by focusing on three key aspects: 1) expanding the scope of the
products from just mobile to connected devices, going well beyond mobile and looking at connected devices as a strategic focus, 2)
looking at the consumer’s journey as an omnichannel platform, integrating it across both online journeys as well as offline journeys
and therefore creating new possibilities for the customers, and 3) continue to invest in the 4V strategy of Voice, Video, Vernacular
and Verticalization to reach the next billion shoppers on connected devices.

• US Patent granted – The company on 23rd September 2021 received the US patent which is related to the technology of driving
app installations and user interactions during podcasts. This grant would fortify AI-driven intelligence & automation for conversion-
driven marketing spanning the entire consumers’ digital journey. With this, Affle has built a robust patent portfolio with 20 patents
across India, US and Singapore. It now has 4 patents granted in the US, while 16 patents are filed and pending.

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DHD FUTURE OUTLOOK

• Focus on improving the conversions: Affle is consistently focusing on scale, growing the number of conversions, getting higher
wallet share and focusing on consumer proposition which would help it to improve the CPCU rates and hence the revenues. For
this, the company is investing into synergetic acquisitions as a part of Affle 2.0 strategy. This would help to keep delivering higher
value in the whole experience as an integrated platform for brands and advertisers, and also to drive higher scale without
commoditizing or taking any pressure on pricing.

• Strong growth outlook in India: Affle generates ~50% of its revenues from India. The management believes that the robust growth
in the Indian region (~25%-30% CAGR in the long term) led by higher online shopping and improved penetration in tier-2 & tier-3
cities of India is expected to drive topline of the company. This coupled with geographic expansion and significant shift among
consumers to adopt digital technology globally will drive long term revenues.

• Privacy policy risk pertains: The core asset of the company is data, with the help of which it targets its customers by pushing ads
via various channels. Hence, the company remains exposed to the risk of potential changes in the privacy policy wherein increase
in the action from companies like Apple and Google on their operating system, iOS and Android to improve user privacy, could
make data collection and targeting users difficult for the company. This can have a severe impact on the company’s earnings
growth potential.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
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DHD
Edge Meter Aspects Grade
Growth 4
Profitability 4
Efficiency 4
Solvency 4
Valuation 3
Quality 4
TOTAL 23

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
This document and the process of identifying the potential of a company has been produced only for learning purposes. Since
equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

www.stockedge.com

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DISCLOSURES
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Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
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of public appearance.
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banking or brokerage services from the subject company in the past twelve months.
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