New acquisition hit margins; India biz to do well: OnMobile

OnMobile Global’s co-founder, MD and CEO, Mouli Raman, feels that the company’s changed revenue mix has hit its profits and margins in the quarter. OnMobile Live, the acquisition that was done three months ago, has been combined with the core operations, which has reflected in the numbers, he says. While acquiring, the revenue and EBITDA losses were seen for three quarters and these (results) are in line with expectations, he tells CNBC-TV18.

Raman expects its Indian business to pick up in the next two quarters. Currently, there is a rough patch due to the regulatory environment, but there are opportunities ahead, he adds.

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Below is the edited transcript of his interview to CNBC-TV18.

Q: I am just looking at the numbers and the revenue looks good at Rs 225 crore. But why has profit been low at Rs 1.5 crore versus Rs 14 crore?

A: We should realize that this is the first quarter wherein we have combined OnMobile live; the acquisition that we did three months back along with our core operations. So that is one difference.

On the international front, our growth strategy through expansion in international markets is growing very well. We have seen pretty robust growth in Latin America, Europe, and Africa. If you look at it last quarter, our international growth is about 24.8 percent quarter on quarter. If you look at India we have done well compared to the rest of the industry given the regulatory challenges.

As you know there was a regulatory directive early July. While the industry has been impacted up to about 60 percent, our revenue decline has been about 21 percent. We have seen stability in September and expect it to continue, but will take a few quarters before we can be sure about that.

As far as OnMobile live is concerned, these are initial days of integration and the rational for acquiring OnMobile Live was two fold. One is to get access into the North American market. Second one was that they had a very good product called music service which we wanted to leverage in our existing customers.

On both the fronts, we have seen pretty good traction that is we have discussed with all the customers over the last few months. Our bullishness on the North American market remains. We have discussed with various operators around the world, existing customers and we have seen pretty good traction on that.
Primarily, the margin is lower because of the change in revenue mix over the last quarter.

Q: For the Livewire Mobile acquisition; could you tell us what the revenue as well as the EBITDA contribution was? Was there a loss?

A: Yes there was a loss and this is as per our expectations. It is about Rs 2.5 crore and we had said that for three quarters we will be seeing EBITDA loss of about half million dollars, which is in line.

Q: Do you think the worst is over? Is that something that the investors would want to know? The company has really gone through some tough times over the last two-three years. Is the worst over and operationally do you think performance can return to normalcy or the kind of performance that you had may be two-three years back?

A: Definitely. We are seeing tremendous opportunities both internationally and in India. Internationally, we are already seeing the results of our efforts over the last few quarters.

As far as India is concerned, we are going through a rough patch because of the regulatory impact, but from the market standpoint, there are tremendous opportunities. So, once we tide over the current challenges, even India will be attractive over the next few quarters.

Q: For now at least India will continue to degrow for the next three-four quarters?

A: We see stability in India now and expect it to continue. The growth should start in about two quarters or so is our estimate.