A bold move indeed by mobile Value Added Services company Planet41 to seek to raise Rs. 50 crore from the capital markets in India; the company founded by brothers Somil and Sangam Gupta has filed its Draft Red Herring Prospectus with the Indian stock market regulator SEBI. Sangam Gupta, 24, is also the CEO of game development company Trine Entertainment Limited. By raising funds, it appears the company is trying to raise funds to address the gap between itself and the larger players in the mobile value added services ecosystem. Sample this: Planet41 reported sales of Rs. 1.1 crore and an earnings per share of Rs. 0.75 for the nine months ended 31st December 2009, compared with market leader OnMobile Global, which reported sales of Rs. 363.9 crore and an EPS of Rs. 12.2 for the same period. Planet41 is the second mobile VAS company to file its DRHP in recent times. There’s another one on its way.

Download: DRHP

What Will Planet41 Use The Money Raised For?

While the issue price and the total amount of money being raised hasn’t yet been disclosed,
– Rs. 6.3 crore will be used to fund raised for setting up corporate and branch offices.
– Rs. 11.82 crore for purchase of equipments and hardware
– An undisclosed amount will be used for strategic acquisitions in Information, communication and education sectors, mobile technology, content development or multimedia/graphic design space.

The investments being made:
– 3G R&D Facility: The company is in the process of setting up an R&D centre in Mumbai for 3G R&D, Technology management, Support, Porting, Product testing and Localisation. It has already been allotted 2 units each of 497 sq. ft. in Mumbai, and plans to invest Rs. 2.56 crore for purchase of equipment for research.
– Mobile Backup: It will insall 1000 units of UME-36 Pro for phone memory transfer and backup, sourced from Cellebrite Mobile Synchronisation Limited, Israel, and an amount of Rs.2.53 croreis proposed to be invested in procuring these units.
– Mobile Commerce Joint Venture: Planet41 has entered into a 50-50 JV with Delaware, US based mobile banking and payments company LinQpay, and intends to invest Rs. 2.5 crore in this business; the mobile payments investment, it expects will help it enter new markets, explore new business opportunities.
– Mobile Content & Short Code: Rs. 2.10 crore will be invested in procuring content like wallpapers, themes, mobile games, ringtones, songs, jokes etc. These services will be offered through their short code (it is setting up 58885), and the Short Code, Short Messaging Service Centre (SMSC), Multimedia Messaging Service Centre (MMSC) and Short Code Management Software (SCMS) will involve a total cost of Rs. 2.1 crore. Rs. 4 crore will be spend on brand building.

In all, it plans to invest Rs. 9.23 crore in technology for mobile commerce, mobile to mobile data transfer and backup gadets and short code and management software.

Financial Performance

The Net worth of the Company as on 31/03/2009 was Rs. 6.61 crore and as on 31/12/2009 was Rs. 7.19 crore. For the year ended March 31, 2009, the company had negative net cash flows of Rs. 2.26 crore.

Planet41 reported sales of Rs. 1.1 crore for the nine months ended December 31st 2009, up significantly from Rs. 64.05 lakhs in the full year ended March 2009. They claim that they inked deals with bollywood producers, and the revenue earned is from the pilot testing and after the commercial launch the company will generate greater revenues. But there will be a cost to the content: total expenses for 9 month period increased to Rs. 92.61 lakhs, from Rs.57.04 lacs for the 12 months ended March 2009. The corresponding PAT increased to Rs. 24.59 lakh (for 9 months) from Rs. 8.50 lakh (for the year before)

Shareholding Structure & Private Treaties Deal

– In the last twelve months, 3,23,000 Equity Shares to promoter Somil Gupta on 29/10/2009 at Rs. 10/- per share, which is likely to be lower than the price at which equity shares are to be issued. Average Cost per share is Rs. 4.17 for both promoters Somil & Sangam Gupta
– Promoter group holding will go down from 85.01% to 53.92% post listing
– Brand Equity Treaties Limited, a BCCL company, owns 1,95,385 shares in Planet41 ventures, a total of 2.88%. BETL has invested Rs.2.54 crore in the venture, and restricts the issue of any further shares until the IPO. In case the present price is lower that the subscription price, the company shall issue and allot such number of shares as fresh offering to BETL for no additional consideration or the minimum additional consideration permitted. Do read the terms of the private treaty deal in the IPO filing. The private treaty deal allows Planet41 to place advertising worth Rs. 4.8 crore (net of agency commission), of which Rs. 80 lakh will be until the IPO, half of which should already have been used up. Of this, the company would have to pay BETL 33% of the value of the advertising in cash, and post listing, 50%. BETL had purchased the shares at Rs. 130 each, valuing the company at Rs. 85 crore.

Note: If you want to know what a private treaties deal looks like, download the Planet 41 DRHP, which has significant details.

Products & Services

Planet41 provdes carrier-grade messaging platforms and gateways, content management platforms, WAP and Voice platforms in a managed services model, much like most other VAS companies, providing interactive portals, community and user generated content applications, caller ring back tone, video streaming, and provide content like SMS subscription services. The company provides content to Vodafone Live (on-deck WAP portal) in India, and runs the mobile portal Planet41live.com. It has outbound dialers for promotion.

The company appears to be pitching it’s 3G products in particular, including Live TV, Video Portal, Video Blogs, Video RBT, Video Dating, M-Banking, Video Mail, Video Conferencing, and Speech recognition for mobile Video – a platform called GO3 for interactive video services over 3G/UMTS and IP networks, Video Ringback Tone, 3G Video SMS, IVVR (Interactive Voice & Video Response), 3G Mobile Games, Video Conferencing, Mobile Video Dating, among others.

Clients

– Mobile Operators: Vodafone, Reliance Communication, Idea Cellular, Etisalat, Aircel, Tata Teleservices.
– Mobile Marketing: Agni, Shubam-Motiwala, Surbhi, Biguine, IOSIS Spa, Exhale Spa, Eco Fitness, Fortune (ITC Welcome Group), Grand Hometel, Bawa International
– Enterprise Solutions: Integrated Securities, PUG Securities, LKP Shares, Apex Soft cell, SBI-Life Insurance, SBI-Cross sell, Big Bazaar, Bharti-Walmart, Pawanhans Helicopters
– Content Aggregators: Big Music, Venus, NDTV, Saregama, Times Music, Phoney Tunes, SoundBuzz.

As of 31st December 2009, their content database included over 1,50,000 songs in more than 17 languages, as well as logos, wallpapers and 12,000 ringtones in our content database to cater to the needs of multicultural and multilingual subscribers in India. They have a partnership with pre-paid payment instruments company Oxycash for retailing mobile alerts services, and are setting up kiosks in metros. Additionally, they have a mobile data backup service that is deployed at mobile service centers, which also allows transfer of data from one handset to another.

Related:
One97 Communications Files DRHP; To Raise Rs. 120 Crores; Shareholding, Financials