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NXTDIGITAL Rights Issue review (May apply)

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•    This is a Hinduja group company is in the internet/entertainment channel segment. 
•    The company has been posting negative earnings for the past 27 months.
•    The issue appears reasonably priced against its price movements on the bourses.
•    Cash surplus/risk seekers may consider long term investment

ABOUT COMPANY:
NXTDIGITAL Ltd. (NXTDIGITAL) (erstwhile known as Hinduja Ventures Ltd.) is an established digital content distribution company in India engaged in delivering digital contents via cable network as well as through its Headend in the Sky ("HITS") platform through a network of Local Cable Operators ("LCO(s)"). It provides digital content to subscribers either directly or through affiliated LCOs.

Its business model is fundamentally a B2B2C model wherein, it generally structures relationships with LCOs such that these LCOs continue to be the principal contact with its subscribers in the relevant local area. NXTDIGITAL enters into business arrangements with LCOs through Interconnect Agreements executed by them on a principal-to-principal basis. Its primary source of revenue for digital content services is subscription income received from subscribers either directly or through LCOs, placement income received from broadcasters for placing their channels in preferred logical channel number line up on its platforms, incentives received from broadcasters for deeper penetration of their channels in customer base, and carriage income from carriage fees payable by broadcasters for carrying their channels.

As of September 30, 2021, it operates the business on a Pan India basis through more than 10,000 LCOs located across India. As of the same date, it has connected STBs to over 56 lakhs subscribers to whom it offers over 600 channels on cable platform and over 700 channels on HITS platform in India and these consists of both standard definition and high definition channels.

In addition to providing digital content, the company also provides broadband internet services through a subsidiary, ONEOTT Intertianment Limited ("OIL"). As of September 30, 2021, it had over 7 lakh broadband subscribers. Its broadband network includes an optical fibre network and internet nodes to enable seamless connectivity, higher broadband speeds with the ability to support multiple services including video on demand and OTT. 

ISSUE DETAILS:
NXTDIGITAL is coming out with RI of 9620463 equity shares of Rs. 10 each at a fixed price of Rs. 300 per share to mobilize Rs. 288.61 cr. The company is issuing rights equity shares in the ratio of 2 shares against 5 shares held as of the record date of October 25, 2021. The issue has already opened for subscription on November 15, 2021, and will close on November 29, 2021. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 1.66 cr. for this RI. From the residual portion, it will spend Rs. 260.00 cr. for repayment/prepayment of certain outstanding borrowings and the rest Rs. 26.95 cr. for general corporate purpose. 

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. 

Post issue, NXTDIGITAL's current paid-up equity capital of Rs. 24.05 cr. (24051158 shares) will stand enhanced to Rs. 33.67 cr. (33671621 shares). Based on the pricing of the RI, the company is looking for a market cap of Rs. 1010.15 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, NXTDIGITAL has (on a consolidated basis) posted a turnover of Rs. 1008.45 cr. with a loss of Rs. - (13.90) cr. for FY21. For the first quarter of FY22 ended on June 30, 2021, it has posted a loss of Rs. - (28.56) cr. on a turnover of Rs. 266.59 cr. For FY20 its losses were much higher at Rs. - (134.09). cr. Thus the company has been incurring losses for the past 27 months. Promoter's holding as of September 30, 2021, was 62.23%. Due to losses, it has not paid any dividend for the reported periods.

SCRIP PERFORMANCE: Based on BSE Website - Scrip code 500189.
The scrip last closed at Rs. 501.85 (cum-right basis) as of October 21, 2021, and opened at Rs. 449.80 (ex-right basis) as of October 22, 2021.  Since then it has marked high/low of Rs. 450.00 / Rs. 375.20 and last closed at Rs. 380 as of November 12, 2021. Based on this closing, its market cap on post-issue will stand at Rs. 1279.52 cr. The scrip has posted the last 52 weeks high/low of Rs. 569.94/ Rs. 346.92.


Conclusion / Investment Strategy

This being Hinduja group company, it is witnessing investors’ fancy. Pricing of rights issue appears reasonable though it has been incurring losses for the past 27 months and having a negative P/E. Cash surplus/risk seekers may consider an investment with a long term perspective.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Nov 14, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More NXTDIGITAL Limited RI Views / Analysis / Recommendations ...

The NXTDIGITAL Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if NXTDIGITAL Rights Issue worth investing. The NXTDIGITAL Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if NXTDIGITAL Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in NXTDIGITAL Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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