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S Mobility posts Rs 18.67 Cr loss in Q3-FY14 due to increased brand building investments

The mobile devices segment of S Mobility* saw a significant increase in its losses (before tax) to Rs 17.93 crore for the quarter ended March 31, 2014, up from Rs 5.43 crore loss in the same quarter last year and Rs 1.47 crore loss in the previous quarter.

The company says this was due to its decision to invest in brand building through increased media spends and better distribution infrastructure to grow its business. The branding expense for the quarter increased by 135.7% YoY (year-on-year) to Rs 21.71 crore from Rs 9.21 crore in the same quarter last year. On a quarterly basis, it increased by 43% from Rs 15.18 crore in the previous quarter.

The segment reported total revenues of Rs 421.6 crore for the quarter, up from Rs 335.4 crore in the same quarter last year. In the previous quarter, the segment had reported revenues of Rs 517.34 crore, but remember that it was the holiday quarter where the devices sales tends to be the strongest. Mobile devices currently represent around 89.9% of S Mobility’s revenues for the quarter which was at Rs 468.99 crore, up 18.9% YoY.

This brand building investment also impacted the company’s total profitability, with S Mobility reporting a net loss of Rs 18.67 crore for the quarter, as compared to Rs 2.24 crore profit in the same quarter last year and Rs 1.02 crore profit in the previous quarter. This was the first loss making quarter for S Mobility after five straight profit quarters. It had last reported a loss in Q2-FY13, when it had posted a loss of Rs 13.8 crore.

Services Revenue Declines: The revenue from S Mobility’s services business continues to decline, with the segment reporting revenues of Rs 48.72 crore for the quarter, down 17.3% from Rs 58.92 crore in the same quarter last year and down 6.3% from Rs 51.99 crore in the previous quarter.

The profits also marginally declined to Rs 4.86 crore from Rs 5.21 crore in the same quarter last year. It had reported profits of Rs 4.02 crore in the previous quarter. Services business currently represents 10.4% of S Mobility’s total revenues for the quarter, down from 14.96% contribution in the same quarter last year.

Stake declined in Spice VAS (Africa): During the quarter, S Mobility’s subsidiary Spice VAS (Africa) issued 218,610 shares, due to which the S Mobility’s stake in the company dipped to 62.09% from 65.39%.

Share Buyback: S Mobility has also bought back 1,300 equity shares of face value Rs 3 each under the ongoing buyback offer from the company, of which 1,200 equity shares has extinguished as of March 31, 2014.

DownloadFinancials

*Disclosure: Spice Digital, a subsidiary of S Mobility is an advertiser with MediaNama

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