Mediasmart will help Affle India to build a greater strategic presence in Europe & Latin America: Anuj Khanna Sohum, CMD
The acquisition of MediaSmart is very strategic for us. The main criteria of the acquisition for us are that its team is based in Spain and Madrid. This team is culturally well versed in all languages that are used in Latin America like Spanish, Portuguese and Mexican among others, which provides us with an opportunity to introduce Affle India's products in the Latin American and European markets.
Anuj Khanna Sohum, Chairman & Managing Director (CMD), Affle India, speaks about the latest acquisition of Mediasmart and why it is important for the company, outlook for the fourth quarter and further acquisition plans among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: Tell us more about the recent acquisition of Mediasmart, a European Mobile Advertising company and what will be the overall growth prospects of the company?
A: The acquisition of MediaSmart is very strategic for us. The main criteria of the acquisition for us are that its team is based in Spain and Madrid. This team is culturally well versed in all languages that are used in Latin America like Spanish, Portuguese and Mexican among others, which provides us with an opportunity to introduce Affle India's products in the Latin American and European markets. These products will be launched in these geographies by adopting the two-pronged strategy under which this team will help us in introducing our successful products in three markets namely, Latin American markets, European markets and North American markets and increase our presence in these markets. At the same time, their products are very good and can be introduced in the Asian or emerging markets. So, strategically our main theme is, 'How to Build on Ground Presence', which will help us in increasing our team presence in these markets. If you have a look at Affle India then 50% of our revenue comes from India and the remaining 50% comes from the international market. When it comes to international market than Affle India's on-ground presence is limited till South East Asia, Middle East & African regions but we don't have an on-ground presence in Europe, North America and Latin America (LatAm). So I feel, the Spanish market is going to be a launchpad for us to cover these three areas and Mediasmart is a good team that has joined us and we are very happy that our team has completed the acquisition process of the company.
Q: What is your outlook for Q4 amid concerns like coronavirus and global slowdown?
A: First two months of the fourth quarter has ended and we have entered into March and we have done well in the first two months as have worked under the plans. Any negative impact - in absence of festive season - was not seen in January and February. The trend has been a positive one and the growth trend is going fine. We will meet our annual growth trend. The future outlook also seems to be on track. When it comes to coronavirus than it will not have any impact in this quarter because our advertising budgets were logged in and we are working with the customers that we had. It may have a marginal impact. But when it comes to next financial year then we are working a lot on the risk management under which we are trying to create a method under which our employees - who number more than 300 people - can work from home to make sure that they didn't suffer from the virus in any office of any market. The welfare of employees is the most important work and all meetings with the customers have been converted into video calls. So, this is an important and wise move of our team every employee of our South East Asian offices are working from home and can work productively. This process is being appreciated by our customers as the process is not having any impact on the work.
Q: What is the difference between the margins between Indian and international business? Do you think that this spread of 50:50 is likely to change in time to come?
A: Our priorities are pretty clear, at present. We have to dominate the Indian market as we are already a dominant player in this market. And, we need to see on the ways to increase our lead keeping ahead of the comparative advantage mode of the company. We want to make it strongest in India.
Secondly, we also want to strengthen the emerging markets of South-East Asia, Middle East, Africa and Latin America. Acquisition of Mediasmart provides us with a better presence and capability to go into the LatAm market and take our products there. It is our second big priority.
Thirdly, we also want to strengthen our presence in the developed geographies like North America and European markets. For the purpose, we will keep our inorganic plans and acquisitions on.
When it comes to coronavirus and its impact on the market than we may accelerate the inorganic strategy of our company - at least when other companies are not able to cope with the situation - as it will help us to do more transactions at better valuations. Thus, these actions will benefit our shareholders more. So, we are moving ahead with a holistic strategy. The mix between India Vs International than I think there can be a certain change in it because India will continue on massive growth but in the international growth, we can grow in two ways and they are organic as well as inorganic. If we merge these two then the balance shall shift towards the international market.
Q: Name the space that can help you to grow through acquisition and also tell us about the kind of acquisition on which you will focus and the markets where it is likely to happen?
A: We have a clear philosophy under which the acquisitions are funded internally. Interestingly, we haven't taken any debt or used its equity for acquisition. We are into a cash flow positive business and our EBITDA stood at 29% last year and it stood at the same level in the last quarter. So, we have a fundamentally sound profits and cash flow generation process, which is used primarily for the purpose. Secondly, our forward outlook for next year is positive and if the profits of that are factored in then we are making a strategy for acquisition by clubbing it this year. It is being done because the market sentiments are low at present and this is the right time when we should move ahead with the inorganic strategy. When it comes to the areas where acquisition can be done then it is based on three strategies and they are
Are we getting complimenting products?
Are we getting the complimenting team and market presence?
Are we getting good customers who are complimenting us?
If you have a look at the Mediasmart acquisition then the team is very complimenting for us and it is a technology-based team with strong cultural fitment. Besides, its team is present in the geographies where we didn't have our on-ground presence thus it provides a market presence opening to us. There is no overlap in terms of customers thus up-selling and cross-selling opportunities increases strategically. Further, all the inorganic acquisitions will be made in the same direction and our bottom line will grow sensibly.
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Q: Can you please tell us about your top five clients and their contribution to revenue?
A: Generally we talk about customer concentration or Top 10 customers but haven't had any such discussion on Top 5 customers with our analysts. If you have a look at the Top 10 list then we have seen there is a reduction in their concentration and there is broad-based growth. Our customer base across the industry segments whether it is e-commerce, healthcare, fin-tech, entertainment and online gaming then all these segments are big-growth segments for us. Our shareholders shall note that when people stop moving out then they will spend more time on their mobiles and entertainment and use e-commerce platform for several purposes. Same is the case of FinTech where people can sit at home and operate their bank accounts too. So, the lifestyle segment of the consumer will move to the digital platform and we think that these growth segments are broad-based so it doesn't matter where the customer base is maybe in India or the international market it is at a broad basis. Similarly, the Top 10 customers are also growing well and their growth is based on a broad base and that's why its concentration is decreasing consequently.
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