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Jul 12, 2012, 08.23 AM IST
According to portfolio manager PN Vijay, OnMobile Global’s best way out of its current sticky situation is to get taken over by another company.
According to portfolio manager PN Vijay, OnMobile Global’s best way out of its current sticky situation is to get taken over by another company. This will also give investors a way to exit the share.
Speaking exclusively to CNBC-TV18, Vijay explains that OnMobile has an excellent business model, but that the company was bucking under weak corporate governance.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: Where do you think this news flow on OnMobile is going to lead that stock because even a few quarters back that was one midcap stock which a lot of institutional investors seemed to be interested in?
A: People were interested in OnMobile because of its excellent business model. They are in the application space for mobile and that’s one of the fastest growing areas, so understandably people liked the business model.
Unfortunately this is one more case of corporate governance; it is not the business model to be faulted, it’s a corporate governance issues. We have seen in the market that wherever corporate governance becomes an issue, whether it was Sun Media or Kingfisher Airlines, the market immediately gives a thumbs down. Let’s not forget OnMobile is a stock where private equity and FIIs have invested a lot and they go to the exit door even before talking, so all that has to get sorted out.
I believe the final solution for OnMobile will be taken over by some company and that will be the way out for investors I guess.
A: No. Actually what's happening in the financial sector is there are some regulatory changes coming up which one can't anticipate. Generally the regulation is towards tightening up on companies which are in non conventional financial sources like gold financing or micro financing.
Today what's happening is you are getting excellent opportunities; even private banks, leave alone PSUs, and companies like LIC Housing are at fairly attractive valuations. So if I want to increase the exposure in BFSI, unless I am a punter, a very high risk investor, I would stay clear of the lower market of the BFSI space and stick to the middle or top end of the market where I feel I will get pretty decent gains.
Q: What about JSW Steel , how would you approach that one?
A: There I am seeing certain reporting and corporate governance issues cropping up because of the controversy with Credit Suisse. Also there are issues relating to the mines and what's happening in Karnataka. These are all very big issues and one has to hope that it will all become alright because as I say there is no smoke without fire.
We are looking at the metal space with great circumspection because my view is that the economy is troughing out. In the next quarter results we’ll see EBITDA margins improving but top line flat. But steel is still a big question mark, and if at all one is playing steel, pick Tata Steel rather than something a lot more controversial like JSW.
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