On Thursday, the co-founder of Subex Limited, Mr Subash Menon quit the company. Once hailed as a successful and profitable Indian product company, Subex nose dived into losses after disastrous acquisitions and failed turnarounds. Shares of the company, which touched Rs 800 in its heydays a few years back, plummeted to low double digits.
In dire straits?
For the year ending March 2012, on a topline of Rs 329 cr, Subex reported a 96 % year on year decline in net profit at Rs 2.5 cr. After clocking massive losses in 2009, the company has been trying to stage a turnaround. But the most recent quarter’s results aren’t too encouraging. Last quarter, the company made a net loss of Rs 8.63 cr.
Much of the company’s losses are being attributed to the big ticket overseas acquisitions made by Subex. Back in 2006, in a deal billed as one of the largest overseas acquisition by an Indian company, Subex acquired UK based Azure Solutions for $140 mn. Less than a year later, Subex, under Mr Menon, made another big ticket overseas acquisition for $ 164.5 mn.
The acquisitions, funded using cash raised from foreign markets through Foreign Convertible Currency Bonds (FCCB) did not work well for the company, Mr Menon later admitted. The second acquisition, of Canadian firm Syndesis just before the global financial crisis of 2008 battered the company’s profits.
Last year, the company sold part of its business to pay back debts which included the bonds up for redemption in March 2012. It then rolled over existing bonds and issued new bonds worth $ 127 mn maturing in July 2017. Mr Menon had to step down from the company’s chairmanship in July. Two new directors, Mr Surjeet Singh and Karthikeyan Muthuswamy joined the company’s board as nominees of the new bond holders. The appointments were approved today.
According to a report in Livemint this morning, Mr Menon is going to focus on his three year old waste and energy management startup. He says that his waste management company- Kivar Environ Private Limited- already has a revenue of Rs 100 cr.
Another Bangalore based company serving the telecom market, Sasken Communications Technologies, is struggling to adapt in the fast changing market. So much so, that its being called the company’s second brush with death in 22 years. In 2006, Sasken acquired a Finnish company called Botania for $ 45 mn to get a larger wallet share from Nokia, its biggest customer at that time. Then came the iPhone in 2007 and the rest is history. Sasken was one of the few companies that initially concentrated on building products. But now, its almost completely a services company.