OnMobile shares tank after board orders probe against CEO

MUMBAI: Shares of OnMobile Global were down under selling pressure after ET Now reported that the company's board ordered a probe against its promoter and CEO Arvind Rao for alleged misappropriation of funds.

The stock ended at Rs 33.25, down 16.98 per cent on the BSE. It plunged to an all-time low of Rs 32.65 in trade today. The stock is down 47 per cent in past one year and is trading below all DMA. Volume in the counter was the highest seen in last one year at 11.6 times the two-week average. Over 1.47 crore shares were traded in counter today.

According to people familiar with the development, Arvind Rao has been accused of diverting company funds to another entity promoted by him. The board has since asked KPMG to conduct an audit to establish and verify the charges. "The charges are serious. It was expected from a few quarters because the stock was steady at Rs 60-plus levels and continuously fell from there in the last three or four months. So somewhere people were aware that some news could come. Today when the news came, we saw a kneejerk reaction.

Whenever such things happen, you need to also look at the business model of the company which is quite robust. News like this should be used as an opportunity to pick at lower levels because a stock which was touching Rs 60-75 levels six months ago is available for Rs 33," Ambareesh Baliga, COO at Way2Wealth, said.
Earlier this month, OnMobile informed the exchanges that Arvind Rao the CEO and MD of OnMobile will focus on international growth while an operations committee comprising chairman HH Haight and Audit Committee chairman Naresh Malhotra will oversee the affairs of the company. HH Haight, who heads Argo Global capital, is one of the early investors in OnMobile.

Sources say, in recent weeks, the board has also fired the company's M & A head Sandhya Gupta, as part of the probe.

In response to queries from ET NOW, OnMobile said in an e-mail response that Arvind Rao is not under the board's scanner. However, the company said that the Audit Committee has appointed an independent agency to review internal control mechanisms and that this is part of an ongoing exercise to improve corporate governance.

"The stock has hit a new low and closed near Rs 33 level. It may consolidate for the next few days and then another leg of downmove can drag it down to Rs 26 levels in the next few sessions," said Bharat Gala, President, Ventura Securities.