OnMobile to use IPO proceeds for international expansion

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » Infosys BSE | NSE 01/06/12 Are Mutual Funds betting on Infosys? Other Stocks in this news OnMobile Global |

Speaking to CNBC-TV18, Arvind Rao , MD & CEO, OnMobile Global said promoters will hold a significant part of the company. He added that there are three primary purposes for user proceeds. They plan to build some more R&D centers and hire more engineers to expand their team. The company also plans to expand internationally. OnMobile Global is looking for for inorganic growth acquisitions. It is opening an office in London and are also planning to open an office in the US.

 

Excerpts from CNBC-TV18's exclusive interview with Arvind Rao:
 

Q: Your company is incubated by Infosys. But Infosys is not offering its 10% or sub-10% holding in this public offer. How much are they divesting through this public offer? At the end of the public offer, what will promoters hold?

 

A: The promoters will still hold a significant part of the company. It is largely for liquidity purposes. We have a holding company in the US. So, we see Argo as a part of our holding company. They are selling only a small part of their overall stake. Some of the other investors, who have been with us, from the very start, are also selling out. But none of the promoters are selling out in a major manner.

 

Q: You intend to raise Rs 350-450 crore via this issue. What will be the exact nature of deployment of these funds, because you have talked about inorganic growth moves? Are you identifying targets currently, since you have been making some aggressive acquisitions, over the last eight-nine months?

 

A: There are three primary purposes for user proceeds. The first is in infrastructure. We plan to build some more R&D centers and hire much more engineers to expand our team.

 

The second purpose is to expand internationally. We are opening an office in London. We are also planning to open an office in the US. The third thing, apart from working capital purposes, is also to do some inorganic growth through M&A.

 

We have done two small acquisitions in the past. One was a small Indian company for data services and the recent acquisition was a French company, which has an exciting product, which does phone backup. So, everything on your phone can be backed up to the network server. So, if you lose your phone, you do not lose any of the data on the phone.

 

So, we are very selective in acquisitions. We are looking for inorganic growth acquisitions, going forward.

 

Q: In which geographies and how much have you set aside for acquisitions?

 

A: We have not set a specific amount because it is difficult to tell. We look at it on an opportunistic basis. This could include either companies or even asset sales from existing private or public companies.

 

The acquisitions that we are looking for are largely based on products and less for customers or market access. Today, for example, with the track record and credibility we have, we do not have too much of a problem accessing markets.

 

Q: More than 90% of your revenues are subject to end-user pricing and that is a bit of a risk factor. That depends on the reconciliation between the service provider and your records as well, going forward. How would you explain this going ahead?

 

A: We are a white label company. So, we provide our technology and services to the telecom operators, who then rebrand it and offer it to the end-users in the markets.

 

At the end, the telecom users set the pricing. So, whether it is Rs 6-7 a minute or Rs 99 for a subscription pack, that number is set by the telecom operator. We do it jointly in partnership with them, although they have the final say.

 

They do not behave irrationally and they would do whatever is necessary to grow the market, as well as to price fairly. So, we are fairly comfortable with the end-user pricing being in the hands of the telecom operators right now.