OnMobile Global promoters sold 19 million shares of the company to Jump Networks at a price of more than Rs 75 per share, almost double than the current market price of the stock at below Rs 40. Explaining the price, OnMobile Global CFO Ganesh Murthy said the company has always believed that the stock has been significantly undervalued.
"If you look at our financials last year, year ending March 2019, we had a revenue of Rs 594 crore and end of June, we had a cash balance of Rs 251 crore. We have no debt in the company. So a total of about Rs 800 plus one time revenue is about Rs 845 crore and we have 105 million shares outstanding. So that roughly gives you a value of about Rs 80 per share. The current transaction is near that,” he noted.
Murthy said the promoter currently holds 48 percent of the company, which will be reduced to 30 percent following the sale.
“Our board remains as before. There is no commitment or discussion regarding their board seat to Jump Networks. We believe that there is a lot of synergy between Jump Networks and OnMobile. The plan is to leverage their customer base, which can be pretty large and offer services that OnMobile traditionally provides through the telecom operators,” said Murthy.
“The reason for the revenue decline over the last couple of years - Ring Back Tones which is our flagship product has been declining in many of the mature markets even in India. However, we have taken steps to launch products, which are related to mobile entertainment, like mobile gaming. That is our growth area in the future. We expect a significant growth. Our plan is to significantly invest in these areas and grow the business in mobile gaming,” he further mentioned.
“Our aim is to complete the year with around 10 percent EBITDA margins in the following years and that is the result of investments that we are making in the mobile gaming area,” Murthy said.
“For the next five years, we are looking at something like about Rs 300-400 crore coming out of gaming itself,” he added.
When asked why the promoter is selling, he replied, “Those are the reasons which we have to ask the promoter. The company is not aware of those reasons, why he is selling. He has been promoter for many years now in the company, so I think this is a partial liquidation of his stake and partial encashment of profits.”