Why profitable mobile VAS leader Onmobile Global trades just below book value?

That was the question which perplexed me because the company did not trigger any red flags during my initial scrutiny. Indeed, it has positive cash flows, net debt<0, strong customer loyalty, IP driven, white label B2B player thus insulated from retail customer vagaries  etc. And the company Investor relations materials are quite transparent and frank-in fact the Mar11 edition of the IR ppt even showed that the company had materially underperformed both Nifty and its peers/customers. For that type of chart to appear anywhere, needs gumption and I credit the company for that. Also, they have about 20% revenues on content spending, and they are trying to get themselves to a net revenue model(so that the telecom operator directly pays the content owner) with higher reported margins. For a company to intentionally lower net reported revenues in this dotcom age, is commendable.

But when I noticed the postal ballot results, alarm bell rungs. Nearly 10% shareholders opposed the option repricing, which went through due to the promoters support. Granted but unexercised options(which benefit from the repricing) amount to nearly 5% of the company's outstanding shares, which is not a small number. And the proposed 2011 Options scheme, is almost a similar percentage. Once management has got the disease of repricing options, then one never knows when it will end. However,  this has saving graces that

1. Indian promoters own only around 14%, balance 34% is with foreign VC fund which went along with the option repricing-so if they found it kosher, why not us
2. In Dec-11, the company separated posts of Chairman and CEO. 
3. The lockin period of the foreign VC recently ended, so the VC would certainly be looking for an exit. It would not dilute its holdings via options repricing, unless it is the the interest of the company. VCs are not known for being sentimental. 
4. Independent directors of the repute of Prof JR Varma would not pass such a resolution routinely.

 But the measure came in for severe criticism on forums like The Equity Desk, and also among some institutional investors as seen by the fact that otherwise postal ballot results read like election results in a banana republic-management wins by 99% or so! Given that, a 6 to 1 margin is quite low and reflects that institutional investors are asserting themselves.

Governance issues apart, the company is still an Indian player(75% revenues from India, though it aims at 50% foreign revenues by FY13-14) and the TRAI regulations on commercial communications/VAS confirmations etc have hit it. Also add the fact that telecom is in a relative slumber, and you see why investors are not very enthused about the company. That is a pity because

1. its ability to breakeven(cash flow basis no less!) in its Latin American operations within the first year itself, points to its execution ability. 
2. And despite the EU crisis, the extent of debtors(via dues from telecom operators) greater than 6 months, is quite less. 
3. The company has showcased its innovative nature quite well with innovations like zero balance missed call(!)-a truly Indian phenomenon-and is ahead of the curve so far.   

So I guess the stock is due for rerating, and I'll revisit it later if it still seems attractive.