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Review By ARM Research Pvt. Ltd. on September 16, 2014
Issue opens for subscription on 16.09.14 and will close on 18.09.14. Bids can be made for minimum 85 equity shares and in multiples of 85 shares thereafter. The price band of Rs155 – Rs170 implying a market cap range of Rs 419.1 Cr to Rs 448 Cr based on the final price determined through the book building process. A discount of 10% to the issue price is being offered to the retail individual bidders. Post issue promoters shareholding ~64%, Corporate Bodies 10 % & Public 26%.
Utilization of Funds
SEL is raising Rs 120 Cr from Maiden IPO of which Rs 106 Cr will be used as working capital i.e. expanding the library of movies and enhancing the monetization strategies on broadcast syndication of movies and digital. The remaining to be utilized for general corporate purposes including strategic initiatives, brand building exercises. A discount of 10% to the issue price is being offered to the retail individual bidders.
Lead Manger & IPO Grading
Issue is lead managed by Yes Bank Limited and ICICI Securities Limited whereas Link Intime India Pvt Ltd is the registrar to the issue. Since Issue size less than Rs 500 Cr monitoring agency is not required
Shemaroo Entertainment Limited, Founded on October 29, 1962, in Mumbai, as a book circulating library, Together with film based copyrights and other entertainment rights, the brand 'Shemaroo' is synonymous with quality entertainment. It is one of the largest independent content aggregators in Bollywood.
Shemaroo Entertainment Limited, is today an established integrated media content house in India with activities across content acquisition, value addition to content and content distribution.. Over the years, the Company has successfully adapted to changing content consumption patterns by expanding into content aggregation and distribution for broadcasting on television platforms. It is continuing its expansion into New Media platforms. Shemaroo acquires content only after the movie is released from its first copyright holders (usually TV broadcasters). So essentially, Shemaroo is a trading company which buys content, re-packages and markets it to various Exhibitors.
The Content Library consists of more than 2,900 titles spanning new Hindi films like Queen, Bhaag Milkha Bhaag, Dedh Ishqiya, The Dirty Picture, Kahaani, OMG: Oh My God!, Black, Ishqiya, Ajab Prem Ki Ghazab Kahani, Omkara, Dil Toh Baccha Hai, Bheja Fry 2, amongst others. Hindi films classics like Zanjeer, Beta, Dil, Disco Dancer, Mughal-e-Azam, Amar Akbar Anthony, Namak Halaal, Kaalia, Madhumati etc., titles in various other regional languages like Marathi, Gujarati, Punjabi, Bengali among others as well as non-film content. They are one of the largest independent content aggregators in Bollywood. The company distributes its content through various mediums such as satellite, terrestrial and cable television and new age media platforms like Internet and Mobile.
Currently, the Company distributes content over which it has either complete ownership rights or limited ownership rights. Shemaroo's recent initiatives include tying up as an official channel partner for Google Inc.'s You Tube where it is managing 32channels. It is also moving beyond providing just content, to providing content management solutions to partners including Reliance Communications Re 1 WAP store and Airtel digital television in connection with an interactive devotional service, namely 'iDarshan'.
Strengths
Business Strategy
Risks
Strong Anchor Investor Interest
The company has raised Rs 36 crore from two anchor investors Birla Mutual Fund and HDFC MF. Anchor investors were allotted 21.17 lakh shares at Rs 170 apiece.
Shemaroo has a total inventory of Rs. 142 Cr against the total sales of Rs. 266 Cr. The high inventory is an outcome of content acquisition that has a usable life 10+ years. This inventory is slowly written off by depreciating 65% in first 5 years and another 35% in 5 years thereafter. SEL has total receivable of 180 days which are extremely high. However, after interacting with industry sources; it emerges that this is a norm in this industry. Due to a continuous pipeline of content being supplied to broadcasters the receivable cycle is fairly long.
Shemaroo Entertainment Ltd. (SEL) is one of India's largest Film and Entertainment Content House involved in content aggregation, distribution, production and post‐production. & having film library of over 2900 films. Based on content that they have, Shemaroo will easily be able to monetize it for years through various platforms like TV Channels, DTH operators, and Internet based platforms. On the higher band Rs 170 the company is valued at P/E multiple of 12.3x of FY14 EPS & as retail clients are eligible for a 10% discount makes the IPO lucrative
Grey Market Commanding Premium ~ Rs 60 per share & expected retail oversubscription 20-25x
We advise "Subscribing" the issue for potential Listing gains...
Review By ARM Research Pvt. Ltd. on September 16, 2014
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