Hem Securities has come out with research report on OnMobile Global IPO. It has recommended investors to deploy funds for listing gains.

OnMobile Global, a leading provider of telecommunications value added software products and services in India with an expanding international presence, has opened for subscription with an initial public offering of 10,900,545 equity shares of Rs 10 each for cash at a price to determined through a book building process.

The issue will close for subscription today, January 29, 2008. The price band is between Rs 425 and Rs 450 per equity share.

Hem Securities report on OnMobile Global IPO

Investment Rationale

• In India, Company’s customers include leading telecommunication carriers such as Bharti, BSNL, Idea, Reliance, TTSL and Vodafone Essar, which have 23.1%, 17.3%, 8.7%, 17.2%, 9.4% and 16.6%, respectively, of the market share of the total wireless subscribers as of June 2007, according to TRAI. As of September 30, 2007, based on the subscriber figures for company’s carrier customers, company had a market reach of approximately 95% of India’s telecommunications subscribers through its carrier customers, based on information obtained from publicly available sources such as COAI and TRAI.
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  Company’s senior management team has an average of over 15 years of experience in the telecommunications and technology industries and have previous work experience at well established companies such as Infosys, Ericsson India Private Limited, Nokia India Private Limited, IBM, Hughes Escorts Communication Limited and Samsung Corporation.
• Company market its products and services to well known media companies such as AOL Interactive Media India Pvt. Ltd. (“AOL”), Buena Vista Internet Group (“Disney”), ESPN Software India Pvt Ltd (“ESPN”), India Today Group digital, a division of Living Media India Ltd., Star India Pvt. Ltd. (“Star”), merchants, handset equipment manufacturers such as Nokia Pte Ltd. (“Nokia”).

Concerns

• A few major carrier customers account for more than 80% of company’s revenue. For the six months ended September 30, 2007, company’s five largest customers, constituting less than 10% of its total customers accounted for approximately 80% of company’s net revenue. The loss of any one of its major customers, a decrease in the volume of work from these customers or a decrease in the price at which company offer its services to them may adversely impact company’s revenue and profitability.
• Company and OMSI have received emails from Infosys stating its opposition to the proposed Issue by the company and reserving its right to oppose any action taken by OMSI and/or company, which it deems to be prejudicial to its interest as a shareholder of OMSI.
• Most of company’s customer contracts are on a revenue sharing basis and most of its contracts provide that company earn and receive revenue only if its customers’ end-user subscribers use or subscribe to the services offered by them. As a result, company’s revenue is subject to uncertainties that are beyond control, such as market acceptance of its application services by its customers’ end-user subscribers and the subscriber churn rate and are dependent upon the pricing of the services, product placement and marketing and promotion activities conducted by its customers either jointly with company or solely.

Valuation

The company at a price band of Rs 425-450 per share will have the P/E multiple of 39.03-41.33 at post issue EPS of 10.89 (Basis PAT annualized for 6 months ending Rs 312.51). The company has incorporated in September 2000 and launched its first product in 2001. As a result, there is limited historical financial and operating information available.

In 2006, Company acquired IT finity, a Mumbai-based developer of handset embedded software that allows consumers to access content from their mobile phones. In addition, company have recently acquired Vox mobili S.A., a Paris-based global provider of telecommunications related value added services focused on global management of personal and group data such as personal data management, wireless synchronization and embedded client solutions.

The company with its present business strategies and future business plans is looking forward for brighter future prospects.  Investor can deploy their funds for listing gains.