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An Indian tech stock that hasn’t lost its way

War, inflation, looming rate increases and a possible slowdown in global growth are rarely good news for stocks. India’s booming tech sector hasn’t been immune.

But there are some interesting exceptions. Shares of Walmart-backed CE Info Systems, a digital mapping company that works with Apple and Amazon, are holding up well since the firm’s market debut in late 2021—despite an eye-popping price to sales ratio of over 50. Unlike many of its unicorn peers, the company is benefiting from direct regulatory tailwinds and is experiencing sustained profit growth.

For those who don’t want to cut all exposure to Indian tech during this volatile period, that might hint at a viable way forward: focus on tech stocks that are already in the black, rather than aspirational, and whose profits will be driven to a certain extent by government policy, even in a trickier overall economy.

Shares of CE Info Systems—better known as MapMyIndia—are up 8% from their December IPO price against a 1.5% fall for benchmark India’s S&P BSE Sensex over the same period. Shares of Indian food-delivery firm Zomato, cosmetics e-commerce player Nykaa, and fintech firms Paytm and Policybazaar, are all down 35% to 50% from their first-day close. U.S. tech darlings have also been punished this year.

MapMyIndia, which also counts Japanese map publisher Zenrin as an investor, couldn’t be more different than its consumer tech peers. It is older, more profitable, majority family-held, and has a robust order book. That provides visibility on future revenue and profits for the next three to four years: something that is worth a lot when more speculative tech plays are getting hammered. The company, currently valued at about $1 billion, posted a profit of $8.5 million for the nine months ending in December, up 60% from the same period last year. Net margins were a healthy 37%.

The company will also benefit, to an extent, from recent policy changes and the Modi government’s protectionist bent. Last year India relaxed restrictions on the collection and use of high-resolution geospatial data—a privilege previously reserved for the government. Public access to existing government data and new precision satellite data could help, for example, to better target e-commerce deliveries, boosting demand for the services of digital mapping firms like MapMyIndia. Unsurprisingly, the new regulations also explicitly banned foreign firms from using such data, except through Indian intermediaries. Google’s plan to cover India through its Street View service was rejected in India in 2016.

MapMyIndia’s profits are growing fast but shares aren’t cheap at around 50 times sales and 100 times the firm’s last 12 months’ earnings according to FactSet. One risk is that the new regulatory changes encourage more competition in the domestic digital mapmaking space, diluting any boost from increased demand. Continuing supply chain troubles in the automotive industry, which accounted for 52% of sales last year, could remain a drag for a while. And the founding family still owns a controlling stake in the company at 54%. Finally, as in all emerging markets, currency risk is a major consideration for foreign investors.

Nonetheless in an environment where more speculative tech shares are getting crushed, profits—and policy tailwinds—speak loudly. For those with a stomach for volatility who prefer to keep some exposure to emerging market growth stocks in these turbulent times, “X” may mark the spot.

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