Mumbai: India’s largest telecom value-added service firm OnMobile Global Ltd has shelved near-term plans for a large acquisition, Mumbai-based brokerage India Infoline Ltd said on Monday.
OnMobile’s board of directors had on 29 January passed an enabling resolution to raise up to Rs1,000 crore.
“OnMobile had announced plans last month to raise Rs10 billion (Rs1,000 crore) to complete a large overseas acquisition. This could have led to potential 15% (equity) dilution,” said G.V. Giri and Mudit Bali, analysts with India Infoline, in a 26 March report. “The company has since dropped the acquisition plan, based on results of its due diligence of the target company.”
OnMobile’s chief financial officer Rajesh Moorti declined to comment, citing the silent period ahead of announcing its quarterly financial results in April.
The Bangalore-based firm, which had Rs406 crore in revenue for the fiscal ended March 2009, is a spin-off from India’s second largest information technology services exporter Infosys Technologies Ltd. Established in 2000, the firm has so far made four acquisitions for a total of around Rs269 crore.
Apart from most of the large wireless service providers in India, OnMobile counts Spanish telco Telefonica SA, the third largest telecom firm in the world, among its clients.
Another market analyst told Mint that some investors had raised concerns about the acquisition plans.
“At the time of passing the enabling resolution (by the board), a few institutional investors had expressed their displeasure at the management’s idea of wanting to grow through inorganic means,” the analyst with an independent equities research firm told Mint. He did not want to be identified as he is not the authorized spokesperson for the firm. “The firm had already made four acquisitions in the past. Moreover, it is in a space that has ample opportunities for organic growth.”
Shares of OnMobile on Tuesday fell by 0.89% to close at Rs383.90 on the Bombay Stock Exchange, while the benchmark Sensex index declined 0.68% to close at 17,590.17 points.