Mobile VAS company One97 Communications has filed a draft red herring prospectus with the Securities and Exchange Board of India, looking to raise Rs. 1200 million (Rs. 120 crores) from its proposed Initial Public Offering (IPO). Of the money raised, a significant majority – Rs. 940.34 million will be used for “Procuring telecom equipment and software for installation” by the company.

Once this issue goes through, One97 Communications will become the third Indian mobile Value Added Services company, after Tanla Solutions and OnMobile Global to seek to raise money from the Indian capital markets. (Read our coverage of recent financial results for Tanla here and OnMobile here). In the past, Spice Digital (then Cellebrum) had also filed a DRHP, only to withdraw it later. Details here.

Download One97’s Draft DRHP here from SEBI’s website. (In case the SEBI link isn’t working (some readers haven’t been able to download it), we’ve uploaded a copy here). Also, if you find anything particularly interesting in the DRHP that we haven’t covered, please share with us your inputs. We’ll add them (with attribution or anonymously) to this post.

Financials

One97’s income grew considerably at 99.6% between the 12 months  ended 31st March 2009 – from Rs. 400.70 million to Rs. 800.11 million. In the 9 months ended 31st December 2009, the company recorded a topline of Rs. 841.13 million. Assuming an average topline of Rs. 289.15 million, we estimate that One97 Communications should have ended the 2009-10 fiscal at Rs. 1156.6 million. (ED: we’ve edited this paragraph for better clarity)

Also note that the company appears to have recognized revenue for money invoiced, but not collected. In the DRHP, it mentions: “for the nine months period ended December 31, 2009 we have recognised Rs 146.49 million for such invoices and we have collected Rs. 108.32 million against such invoices as of April 27, 2010.” One97 has also mentions that the same amount is for invoices with customers with whom they have not yet entered into written agreements.

Profit after tax for One97 for the nine month period was 14.31% of topline, at Rs. 124.18 million, while profit before tax was 24.38% of topline.

We had spoken with One97 Communications MD Vijay Shekhar Sharma in November last year, about why they think the company is IPO ready. The company had also said then that they’ve done a “certain amount of Financial Provisioning”, apparently referring to write-offs.

Shareholders & Directors

— Vijay Shekhar Sharma, MD, One97 Communications: While the number of shares being sold has not been specified, since this is the Draft RHP, and costs of the listing will subsequently be taken into account, the company does warn that its promoter Vijay Shekhar Sharma will be able to exercise significant control post listing, and will in all probability be the largest shareholder. He owns 43.18% shares, and post conversion of Compulsorily Convertible Preference Shares by Intel Capital and Silicom Valley Bank, will own 38.52%.
— SAIF Partners currently owns the second highest stake at 41.13% shares, and post conversion of preferential shares, will own 36.7% shares.
Intel Capital has been allocated preferential shares, and post conversion will own 9.7% in the company. Another Intel Capital invested company recently listed in India – 123Greetings.com
Peeyush Aggarwal owns 9.01% in the company, and will hold 8.04% post conversion of SVB and Intel Capital’s preferential shares

Rajiv Madhok currently owns 3.96%, and will own 3.54% in the company post conversion
Silicon Valley Bank (SVB) currently owns 2.7% shares, and post conversion of preferential shares will own 3.49%.
— Independent Directors: It’s also interesting to note that MakeMyTrip CEO Deep Kalra and Kunal Bajaj, who was Managing Director of Telecom Consultancy BDA Connect India before it was sold recently to Analysys Mason (pdf), are Independent Directors on the board of One97 Communications.

Risk Factors:

— Customer base: One97 Communications is heavily dependent on few customers, namely, telecom operators. According to the DRHP, One97’s top 5 customers accounted for 79.40% of their operating income for the nine months ended December 31, 2009, 91.38% for the fiscal 2009, and 79.79% for 2008. That’s a fairly high ratio, in terms of dependency, and any loss of customer will hit the company hard.

— Investments, Acquisitions: In 2005 One97 Communications amalgamated with Worldwide Computer Services Private Limited. They then acquried 54.99% ownership interest in Oorja Mobile Services Private Limited, through which they provide marketing services to telecom service providers. In 2009 we acquired a 21.28% ownership interest in TenCube Pte. Ltd., through which they provide WaveSecure mobile phone security and data backup service.

— Limited International revenues: While One97 Communications also does business in Bangladesh, Nigeria and Afghanistan, with network services operations in Bangladesh and Afghanistan and consumer services operations in Nigeria and Italy. its earnings in foreign curency are just Rs. 11.29 million and Rs. 2.55 million (1.34% and 0.32% of total operating income), for the nine month period ended December 31, 2009 and the year ended March 31, 2009, respectively. It’s peer OnMobile Global began a concerted move a couple of years ago to expand abroad, and inked key contracts with Telefonica for Latin America, and Vodafone Global for worldwide deployment.

— Employee count: One97 added 358 employees between March 31st 2008 and December 31st 2009. Attrition rate for the nine months ended December 31, 2009 and fiscal 2009 was 26% and 23%, respectively.

Note: we’re updating this story with more details from the DRHP. Check back for more details

Disclosure: One97 Communicatons recently sponsored our coverage of the 3G Auction results