Truecaller's Buybacks and Growth: A Compelling Play on Shareholder Value

The digital communication landscape is undergoing a seismic shift, driven by the rise of AI-driven tools and the global demand for secure, interconnected platforms. Amid this transformation, Truecaller has emerged as a strategic leader, leveraging its massive user base and disciplined capital allocation to fuel growth while rewarding shareholders. With a newly approved 10% share buyback program, robust user expansion, and a dividend policy that signals confidence in its financial health, Truecaller presents a compelling investment opportunity for those seeking value in a volatile market. Let's dissect the company's strategy and why now is the time to act.

The Buyback Bonanza: A Vote of Confidence in Cash Flow Resilience

Truecaller's recent approval of a 10% share repurchase program marks a pivotal moment in its capital allocation strategy. This move, authorized at its May 2025 Annual General Meeting, underscores management's belief in the company's ability to generate sustainable free cash flow. With a SEK 1.4 billion cash reserve and minimal debt, Truecaller has the financial flexibility to execute this buyback without compromising growth initiatives. The buyback cap—capping repurchases at 10% of outstanding shares—also signals prudence, avoiding overextension while still returning capital to shareholders.

This aligns with Truecaller's dividend discipline, which has maintained a 25% payout ratio of annual profits. In Q1 2025, shareholders received SEK 1.70 per share, funded by an 19% year-on-year increase in operating cash flow to SEK 623 million. Together, dividends and buybacks create a powerful value proposition: a company that grows its user base while ensuring shareholders benefit from both income and equity appreciation.

User Growth: The Engine of Sustainable Value

Truecaller's 411.9 million monthly active users (MAU) in Q1 2025 reflect a 14% year-on-year surge, with strong momentum across key regions:
- India: MAU up 14% to 297.8 million, fueled by its dominance in telecom and financial services authentication.
- MEA (Middle East & Africa): MAU rose 18% to 82.9 million, highlighting Truecaller's success in high-growth markets.
- RoW (Rest of World): MAU grew 16% to 31.3 million, aided by its iOS launch and enterprise partnerships.

Daily active users (DAU) hit 355.6 million, a 16% annual increase, signaling sticky engagement. This growth isn't just about scale—it's about monetization. Truecaller's premium subscriptions surged 40% to SEK 82 million, with iOS contributing 43% of revenue and conversion rates climbing to 2.67%. Meanwhile, its Truecaller for Business segment—driven by verified business listings and messaging services—jumped 60%, reaching SEK 79.2 million.

Valuation: Undervalued Amid Strong Fundamentals

Despite its growth, Truecaller trades at a P/E of 40.1x, a P/B of 13.7x, and an EV/EBITDA of 27.5x—all below the analysts' consensus target of SEK 85.86 (implying a 31.78% upside). This valuation disconnect is puzzling given:
1. Revenue diversification: No longer reliant on India, Truecaller now derives 35% of sales from MEA and RoW.
2. Margin expansion: EBITDA margins rose to 40% in Q1 2025, excluding incentive costs, reflecting operational efficiency.
3. AI-driven innovation: Investments in features like the AI Call Scanner and fraud prevention tools position it to dominate enterprise and consumer markets.

Strategic Balance: Acquisitions vs. Treasury Management

Truecaller's leadership has wisely prioritized organic growth over aggressive M&A, focusing instead on optimizing its balance sheet. With negative net debt and a Rule of 40 score of 67% (combining growth and profitability), the company can allocate capital strategically:
- Share buybacks to reduce dilution and boost EPS.
- Dividends to reward long-term investors.
- R&D in AI and enterprise solutions to maintain its competitive edge.

The lack of major acquisitions reduces integration risks and keeps management focused on its core strengths.

Risks, but Manageable Ones

No investment is risk-free. Truecaller faces currency volatility (most revenue is in SEK, but costs in USD/INR), competitor pressure, and incentive costs tied to performance targets. However, its cash reserves and diversified revenue streams mitigate these risks.

Conclusion: A Buy at These Levels

Truecaller's combination of user growth, dividend discipline, and share buybacks creates a compelling case for investors. With a P/B of 13.7x—well below its 31.78% upside target—and a management team aligned with shareholders through performance-linked LTIPs, now is the time to act.

The market may be underestimating Truecaller's potential to dominate in trusted communication, but the data tells a clear story: this is a stock poised to deliver outsized returns. Add it to your portfolio before the crowd catches on.

Investors should conduct their own due diligence. Past performance does not guarantee future results.