Infosys Technologies Ltd has proposed exit its holding in OnMobile said a report released just a while ago by HDFC Sec. The stock at 32x FY09E earnings estimates is expensive, considering that the only comparable peer listed, Tanla solutions is at 14x FY09E earnings.
Product concentration, which is 67% on ringback tones, ringtone downloads and music messaging applications is a major cause of concern. Going forward, spending per user on these services will fall with the introduction of innovative services in the Indian VAS market. In-house development by Telcos of product suites offered by Onmobile will further dent the revenues of OnMobile. Two major telcos Bharti Airtel and Reliance Communications already have their own operations – Bharti Telesoft and Tech Reliance which will cater to parent company needs.
The stock looks expensive at current levels and investors are advised to Book profits.