Smallcap World sells 2% stake in of OnMobile

Smallcap World Fund, one of the largest shareholders of OnMobile, has sold 4.82 million shares of the company in three different transactions.

The fund in a bulk deal sold shares worth Rs 12.73 crore over two transactions on the National Stock Exchange, representing a total of 4.03 million shares. It also sold 0.78 million shares on the Bombay Stock Exchange worth Rs 2.56 crore.

As of March 31, 2012, Smallcap World’s total holding in the company was 6.25 per cent. With these sale, it has come down to 4.19 per cent.

On Thursday, Birla Sunlife Trustee that holds 3.26 per cent in the company, sold 0.8 million shares on the NSE for Rs 2.7 crore. Meanwhile, Barclays Capital Mauritius bought 0.73 million shares worth Rs 2.33 crore.

The stock selling comes close to media reports that the company's CEO was being probed for financial irregularities. On Thursday, the company denied about any such financial irregularities or that its CEO was under probe.

It had also stated that the company had appointed external consultants over the past year to pursue its ‘OnMobile 2020’ strategy to review, rework and strengthen the company’s corporate governance policies, including internal control mechanisms, procurement-to-payment processes, risk management framework, succession planning, etc.

"Though fundamentally, the company continues to do alright, we advise our investors to exit the stock on the back of management concerns. In light of the current news on the management, we have kept the stock under review and will come out with an update when further clarity emerges on the situation. We advise our clients to refrain from bottom fishing in the stock," said Karan Mittal and Anil Shenoy of ICICI Securities in their report.

The report, however, maintained that fundamentally, the company has been doing well due to growth in its international business. The domestic business has been struggling due to the The Telecom Regulatory Authority of India guidelines on double confirmation before activation of value-added services, low average revenue per user in the telecom industry and slow uptake in 3G services.

"The international business has more than compensated for the slump in the domestic business, growing 86.9 per cent in FY12 to Rs 284.2 crore from Rs 152.1 crore in FY11," said the report.

According to the company's filing on the BSE, Arvind Rao, chief executive officer, had been asked to focus on the international growth and market strategy and building relationships with large global customer accounts around the world. In addition, he was to also increasingly focus on new product direction and strategy and the future product roadmaps of OnMobile around the world.

Whereas investor relations, strategy and strategic projects are concerned, an operations committee of the board, comprising H H Haight, chairman, and Naresh Malhotra, chairman of the audit committee, would oversee the affairs of the company.

The company's stock on June 28, tanked almost 17 per cent to Rs 33.2 per share. On Friday, the stock was down 8.12 per cent to Rs 30.55. It had fallen almost 72 per cent in the past one year, according to Bloomberg data.