CPaaS Industry in India: Growing from Strength to Strength

Published by Sharekhan Education | September 8, 2022

Amit Pathak | Sharekhan Education 

CPaaS Industry in India: Growing from Strength to Strength

Communication Platform as a Service (CPaaS) is a cloud-based platform that enables organizations to integrate different systems, such as voice, messaging, video, etc. in their existing service offering to facilitate easier customer communication. Companies across the world regularly use CPaaS. A few use cases, for example, are sending an OTP using SMS to finish an online transaction, sending flight passes to passengers through WhatsApp, or producing an automated email to reset a password. This cloud-based plug-and-play platform eliminates the need for organizations to build a real-time hierarchy of communication software layers such as operating systems, architectural layers, protocols, runtime environments, databases and function calls, etc.

About CPaas:

‘CPaas’ has found usage in several end-user industries such as BFSI & Insurance, Healthcare, Education, Legal, Real Estate, Retail, E-commerce, Transport & Logistics, Travel & Hospitality, Telecom, and IT, just to name a few. 95% of all CPaaS correspondence today is dominated by SMS. The covid-19 pandemic was a blessing in disguise for sectors such as e-commerce, food delivery, and online transactions, as they grew exponentially on the back of a structural change in the placement of orders for food and products. The pandemic additionally drove contact centers to embrace CPaaS to empower agents to work remotely. CPaaS increases organizational efficiency, reduces cost, and enhances customer engagement, customer service management, and automated communication as it provides flexibility and scalability. Rising digital penetration and a higher volume of transactions in India will drive further development in the sector.

Growth Prospects:

As per the Mordor Intelligence report, The Indian CPaaS sector is estimated to deliver a CAGR of 23.5% during FY2022-27. As per the Future Markets Insight report, although initial demand came from on-demand economy players, over-the-top firms, and cloud companies, most traditional firms have now been open to adopting CPaas software solutions and services. Enhanced security features such as authentication via SMS and OTT have increased the adoption of the technology. CPaaS is growing significantly in machine learning and AI, assisting large and small organizations in their progress. Further, 5G would lead the way for CPaaS platforms to build new digital businesses and revenue streams.

The sector has seen significant consolidation over the last two years owing to 46 acquisitions made since 2020. As the CPaaS industry undergoes consolidation, existing players stand to benefit both from leveraging operational synergies as well as from reduced competition. Globally, the two key players are Twillio and Sinch, whereas domestically Route Mobile and Tanla rule the roost.

CPaaS is here to stay for a long time as it only gets better with innovation. We have a positive view of Route Mobile within this space. Its omnichannel CPaaS platform provides communication services to traditional & new-age enterprises. The firm has a marquee customer base, including worldwide giants such as Facebook, Google & Samsung, and large Indian ventures, including SBI & ICICI Bank. The CPaas company’s revenue has grown at a 5-year CAGR of 34%, driven by rising digital adoption and aided by several acquisitions. Their business model requires minimal investments in fixed assets, which helps drive strong return ratios. We expect revenues/EBITDA/PAT to grow at 41%/52%/41% over FY22-24E.

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