Rediff.com paints grim picture of its financials

Rediff.com paints grim picture of its financials
DEV CHATTERJEE

MUMBAI, JUNE 7: Indian internet firm Rediff.com, which is planning to raise $ 75 million from the Nasdaq, has painted a grim picture of its financials in the coming years. In its American Depository Shares (ADS) prospectus filed with the US Securities and Exchange Commission, Rediff said that it has posted an accumulated loss of $ 8.4 million and it does not expect to make money in the next few years.

``We have incurred significant net losses and negative cash flows from operations since inception in January 1996, including a net loss of approximately $ 6.7 million for the year ended March 31, 2000. As of March 31, 2000, we have an accumulated deficit of $8.6 million. We expect to have increasing net losses and negative operating cash flows for the foreseeable future,'' it reveals in its offer document which has been written as per the strict laws laid down by the US SEC before any company can raise funds in the US markets.

Rediff.com is one of India's leading portals and it would be first Indian Indian dotcom company to list on the foreign stock exchanges. The company is eyeing a price band of $10 to 12 for its ADS and each ADS would represent one share of the company. ``Although our revenues have grown in recent quarters, our expenses have grown even faster and we expect to increase our spending significantly in advertising, promotion of brand, investment in infrastructure and sales and marketing staff. Accordingly, we will need to generate significant additional revenues, while controlling our expenses, to achieve profitability. We may not be able to do so,'' it adds.

``Our business model is not yet proven in India, and we can not assure that we will ever achieve or sustain profitability or that our operating losses will not continue to increase in the future. If we are unable to achieve or maintain profitability, we will be unable to build a sustainable business. In this event, the price of ADSs and the value of investment would likely decline,'' it says.

``We expect our quarterly results to fluctuate significantly in the future based on a variety of factors. These factors are also expected to affect our long-term performance. Some of these factors include:

* the timing of expansion plans in India and additional geographic markets;

* changes in pricing policies or our product and service offerings;

* increases in personnel, marketing and other operating expenses to support anticipated growth;

* ability to attract new users and retain existing users at reasonable costs;

* ability to adequately maintain, upgrade and develop portal, computer network and the systems that we use to process customer orders and payments;

* increased competition;

* seasonality in retail sales because of the festival seasons in the Indian winter months of November through February, and extended vacations in the Indian summer months of April through June; and,

* technical difficulties, system or web site downtime or Internet service disruptions.''

``Due to all these factors, we expect our operating results to be volatile and difficult to predict. As a result, quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. In addition, it is possible that our operating results in any future quarter could be below the expectations of investors generally and any published reports or analyses of our company. In that event, the market price of ADSs may decline, perhaps substantially,'' Rediff adds.

``Our business faces significant competition from other well-established Indian online content providers, as well as numerous new entrants. We also compete with foreign online content providers as well as with traditional print and television media companies. Additionally, we are competing with other forms of advertising for advertising customers. Competition for visitors, advertisers and e-commerce partners is intense and is expected to increase significantly in the future because there are no substantial barriers to entry in our market,'' it adds.

``Furthermore, it is difficult to predict which pricing model, if any, will emerge as the industry standard. This makes it difficult to predict our future advertising rates and revenues. Our revenues could be adversely affected if we are unable to adapt to new forms of pricing for the services and products we offer.''

``Increased competition may result in loss of visitors and website traffic; loss of advertisers, different pricing, service or marketing decisions; reduced operating margins; loss of market share; and, diminished value in our services,'' it adds.