Mobile Internet company S Mobility Ltd (formerly known as Spice Mobility Ltd), has swung into losses weighed down by its mobile devices unit besides sharp deterioration in profitability of its services business.
The company reported consolidated net loss of Rs 18.8 crore in Q3 FY'12 as compared to net profit of Rs 10.2 crore for the previous quarter ended September 30, 2011 and profit of Rs 17.3 crore for Q3 FY'11. Net sales for Q3 grew 14.67 per cent sequentially and 17.4 per cent over the year ago period to Rs 618.4 crore.
The results of the current quarter are impacted due to rupee depreciation resulting in higher costs of goods sold, according to the company. At the operating level, the losses were piled up by increase in stock in trade, staff costs among other cost heads.
Poor results from the company that switched its business model from primarily a device maker to a mobile Internet company last year comes as yet another quarter of deteriorating bottom-line performance. In Q2 FY'12 too, the company recorded sharp drop in profits as operating margins were severely hit in its handsets business and was compounded by decline in segment profits in services unit as well.
The mobile devices segment incurred a loss of Rs 26.9 crore as against segment profit of Rs 2.1 crore for Q2 FY'12 and Rs 13 crore in Q3 FY'11. Revenues from devices business rose 17.8 per cent over the year ago period and 16.7 per cent sequentially to Rs 556.9 crore during the quarter ended December 31, 2011.
Services business witnessed 85 per cent drop in segment profit and 90 per cent decline in profits during Q3 FY'12 over the year ago period to Rs 1.2 crore. Revenues of the services business rose 10.5 per cent over Q3 FY'11, but was down 1 per cent sequentially to Rs 61.6 crore for the quarter ended December 31, 2011.
During the quarter ended December 2011, a subsidiary of the company acquired 65 per cent in Spice VAS Tanzania Ltd and 100 per cent equity in Spice Digital South Africa (PTY) Ltd. Accordingly, these companies, have been consolidated from the date of acquisition. Further, the company also subscribed for 100 per cent equity in S Mobility Pvt Ltd.
The promoters of the company had recently decided to move out of executive roles and brought in fresh faces on board too as a part of the process to professionalize the management. Last week, it brought in R S Desikan as the CEO of the company. Desikan was group CFO & director finance of Mastek Limited. Prior to that he was CFO of Quinnox Inc and had earlier also served as CFO and board member of Xerox Modicorp Limited. S Mobility has also brought on board Rajiv Makhni as additional director on the board.