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Rediff acquires India Abroad, ValueCom

Rosemary Arackaparambil

Leading India-focused Internet portal rediff.com has said it would acquire two US-based companies -- India Abroad Publications and Value Communications Corp -- to increase its penetration in the United States.

Rediff will also increase its stake in the Indian financial portal Apnaloan.com.

The NASDAQ-listed company warned on Thursday of lower revenues in the January-March 2001 quarter on falling sponsorships and dotcom advertising, but announced aggressive acquisition plans to diversify revenue streams.

Rediff warned that its overall revenue in January-March 2001 would be 35 per cent lower than in the last quarter. The company had a revenue of $1.75 million in the October-December quarter.

The firm projected a loss per American Depositary Share of 11-12 cents in the current quarter and a loss of 24-26 cents for the full year ending March 31, 2001.

Company officials said at a conference call of analysts that the decline was mainly on account of falling sponsorships, with some contracts that ended in December not being renewed, and reduced advertising from other dotcoms struggling for funding.

But they said traditional advertising from "old economy" companies grew 40-50 per cent and was likely to continue that way for at least the next two quarters.

E-commerce revenue would show growth of 25-30 per cent in the current quarter, they said.

Rediff forecast full year's revenue to grow 250 per cent over the previous year.

The company said it expected its acquisitive and organic growth to render a revenue of $32 million-35 million in the next financial year, with service revenues from consumers contributing 50-55 per cent.

Rediff, which recently acquired US-based portal thinkIndia.com, said its latest acquisitions were focused on creating "a more stable revenue matrix by diversifying its revenue streams across multiple services, markets and businesses".

It said on Thursday that it would acquire New York-based India Abroad in an all-cash deal worth $10 million.

The paper, said to be the oldest and most profitable south Asian weekly serving the south Asian community in the United States, has a circulation base of 65,000 and had revenues of $7 million in the year ended December 2000.

"rediff.com intends to integrate this acquisition with its current leadership position in the US-South Asian online space through the Rediff USA offering," it said in a statement.

Rediff also plans to acquire the Illinois-based Value Communications -- a profitable communications company which focuses on Internet-based marketing of international phone services to Indians in the United States.

The "earn-out" deal involves a down payment of $3 million. The rest will be linked to the company's profit before tax over a two-year period. Rediff gave no indication of what multiple of the PBT would be paid.

Value Communications has a user base of 45,000 with revenues of over $13 million in 2000, it said, adding that 65 per cent of its revenues came from online services.

Rediff also said it would raise its stake in India's apnaloan.com, which helps young, upwardly mobile Indians choose loans and credit card services, and said it had entered into an agreement with the firm to raise its stake to cent per cent over a period of time.

It did not give details of its stake, nor the price being paid.

"rediff.com believes the investment will help it serve the Indian consumer better, add a new revenue line and strengthen its presence in the online financial services segment," it said.

Rediff, which ended the October-December quarter with $57 million in cash, said it would enter the third quarter of the next financial year with a $30 million cash balance after taking into account the acquisitions and a cash-burn rate of $1.5 million to $2.5 million per quarter.

The firm said it continues to remain bullish about breaking even by the third quarter of the year beginning April 2001.

Rediff shares were down 4.35 percent at $2.75 in early NASDAQ trading on Thursday, while the NASDAQ composite index was off 0.84 per cent.

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