Shemaroo Announces IPO For Rs 120 Crore

The bidders will be required to bid for a minimum of 85 shares and in multiples thereafter. The net proceeds from the IPO will be used for scaling up of the current list of titles which the company holds or the content library. The company intends to dilute 26% stake through this issue taking the promoter holding to 64% from existing 90%. The bidding process starts on 16th September 2014 and ends on 18th September 2014. The company has offered a 10% discount to the retail investors.
 
The company’s core assets are its content library and its copy rights. There are two types of copyrights the company owns, firstly perpetual copyrights wherein Shemaroo is the sole owner of the content and secondly, in partnership or “aggregate rights”. The company owns 759 perpetual titles and 2159 in partnership or limited ownership titles taking the total to 2918 titles. The content includes titles such as Queen, Bhaag Milkha Bhaag etc.
Of the total funds raised through the IPO, Rs 106 crore will be used for scaling up the content library i.e. acquisition of various titles. However, the cost of acquisition of a title varies and the management of the company was not at liberty to disclose it, said Hiren Gada, Wholetime Director & CFO, Shemaroo.
 
The company primarily earns revenue by selling content on various platforms such as; firstly television which includes satellite, terrestrial and cable television , secondly new media platforms like mobile, internet, direct-to- home (DTH) and lastly through other applications, home entertainment and other media. The revenue from selling the broadcast rights of its titles to television channels contributes 50% to its topline.
 
The total income from operations increased to Rs 265.95 crore in FY14 as compared to Rs 206.08 crore in FY13, up 23.07 %. The EBITDA increased by 11.88% to Rs 656.85 crore in FY14 from Rs 587.04 crore in FY13. The net profit after tax increased at 10.58% standing at Rs 27.14 crore in FY 14 as compared to Rs 24.55 crore in FY13. The company’s debt stands at Rs 183.09 crore as of 31st March 2014 and debt to equity ratio stands at 1.10x. The company is to issue 2.69 crore shares in IPO process. The P/E stands at 17x post issue.
 
The growth drivers for the company are strong brand presence, vast collection of titles, diversified distribution platforms. However, the biggest threat to the company is that of piracy because of which the company’s revenues will be affected. The company aims to focus more on new media i.e. for providing content through the internet and mobile devices as the internet users are projected to increase by 32% in the next five years ending 2017, according to the company. Furthermore, the ad spends are expected to increase by 6-7% in the next year, the company said.
We advise our investors to avoid this IPO.