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Indian IPOs
>> OnMobile Global
OnMobile Global Ltd. IPO Analysis 24 January 2008 Source: www.keynoteindia.net
OnMobile Global Ltd. IPO details: Price Band: Rs. 425 - 450 per share Issue open between: January 24 - 29, 2008 Book Running Lead Managers: Deutsche Equities, ICICI securities To List on: NSE and BSE Market Cap post-listing: Rs. 25.8 billion or $655 million (based on the cap price) Highlights: OnMobile Global Ltd. (OMGL) provides value added software products and services such as network based in-call solutions viz., ring back tones, voice mail, missed call alerts, etc., interactive media solutions, mobile commerce solutions and mobile marketing solutions to leading telecom service providers. The company has well-entrenched promoters in the field of software development and telecommunication. The company’s strategies to enter into long term contracts (of say 2-5 years) is also a major positive, leading to visibility of revenues. Strong clientele includes Bharti Airtel, Vodafone, Reliance Communications, Tata Teleservices, etc. The company has developed software applications compatible with 2G, 2.5G and 3G networks. The data / value added services business is highly technology-intensive. It requires capable personnel with a strong technology base, in order to rapidly develop new products and services. We expect strong volume as well as price-led growth in the industry, due to factors like low tele-density of 23.21 in India and entry of new telecom players. According to Gartner, growth in value-added services (CAGR of 45.7%) will outperform growth of overall telecom industry (CAGR of 26.6%) over 2006-11E. In view of declining tariffs, telecom players are focusing on VAS (value-added services) in order to improve ARPUs. We believe OMGL is well poised to tap this opportunity, in view of its track record of acquiring and retaining customers. Financial track record too is impressive (revenue CAGR of 99.3% and earnings CAGR of 100.8% over FY04-07). Capex of Rs180Cr for installation of equipment at OMGL’s and clients’ facilities will help it develop new services, such as mobile commerce / mobile marketing and media solutions. These investments in hardware equipment will help support application development engineers and technical personnel, business development experts etc. In our view, going forward the growth potential of the industry may attract new players, while existing players will be required to employ resources on creating new products, services and technologies. We believe growth of the company will largely depend on its ability to develop new software applications and acceptability of the same by consumers. We expect revenue CAGR of 57.9% and earnings CAGR of 54.5% over FY08-10. The company is also planning entry mainly into the Europe and US markets which may create more opportunities, going forward. Concerns include (i) relatively low pricing power and (ii) relatively low entry barriers. We rate the large capex of Rs180Cr for equipment as a key concern, given the rapid obsolescence of hardware and technologies and increased costs on account of higher depreciation charge. Valuation of the IPO, at 22.1x FY09E and 15.4x FY10E, appears stretched vis-?-vis closest competitor Tanla Solutions Ltd. which operates in the same industry. |
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