D B Corp, one of the leading print media house in the country, publishing 48 newspaper editions, in three languages, in eleven states and which also operates 17 FM radio stations, is entering the capital markets. The public issue consist of 1, 81, 75,000 shares of Rs 10/ each, including the offer for sale of 1, 27, 25000 shares in the price band of Rs 185 -212.
The issue will open on 11-12-09 and closes on 15-12-09. Enam Securities private limited, Citi Corp Markets India private limited and Kotak Mahindra Capital Company limited are the Book Running Lead Managers.
The flagship newspapers of DB Corp are, Dainik Bhaskar, Divya Bhaskar and Saurashtra Samachar, have a combined average daily readership of 15.5 million readers, making them one of the most widely read newspaper groups in the country. The other newspapers are Business Bhaskar, DB Gold and DB Star and, on a franchisee basis, DNA (in Gujarat and Rajasthan). In addition to newspapers, they also publish 5 periodicals, namely, Aha Zindagi, a monthly magazine published in Hindi and Gujarati, Bal Bhaskar, a Hindi magazine for children, Young Bhaskar, a children’s magazine in English and Lakshya, a career magazine in Hindi.
OBJECTS OF THE ISSUE
The objects of this Issue are to raise funds for - setting up new publishing units, upgrading existing plant and machinery, enhancing brand image through sales and marketing, reducing existing working capital loans and for prepaying existing term loans.
However, the projects for which the Net Proceeds are intended to be utilized have not been appraised by any bank or financial institution and the costs of the projects are based on the internal estimates of the Company.
FINANCIALS
07 08 09 (Rs in crores)
Total Income 674.37 862.69 960.98
Net Profit 35.90 69.77 54.81
EPS (In rupees) 3.06 6.01 4.06
The weighted average RoNW was in excess of 30% for the last three years.
VALUATION AND MATTERS OF CONCERN
Established brands in Indian print media with wide geographical reach. Average fundamentals. Based on FY 2009 EPS, in the price band of Rs 185 -212 the stock is valued around 50 times its earnings, as against the industry average of 28 times. The valuation is very much stretched. The company has no definitive business plans. The promoter group companies have history of de-listing from the Stock Exchanges. Some of the trademarks, logos and copyrights are not registered. The company is unable to disclose information in relation to certain promoter group companies. Promoters and promoter group have equity interests or investments in other entities that offer services that are related to the business of DB Corp.
BUSINESS CHALLENGES
D B Corp business is dependent on advertising revenue and a reduction in advertising expenditure,loss of advertising customers or inability to attract new customers could have a material adverse affect on the business. The company relies substantially on advertisements revenue. During the financial year ended March 31, 2009, the company derived 75.50% of consolidated income from advertisement income.
According to PWC report, the media growth rate to increase in 2010 to 10.4%, from of about 9% now, as economic conditions are expected to gradually improve. The industry will continue to grow at increasing rate and there will be an overall compounded annual growth rate for the period 2009-13 of 10.5 percent. The report also predicts a healthy growth in all eight segments of entertainment and media industry in next four years (2010 to 2013). These are television, filmed entertainment, print media comprising newspaper and magazine publishing, radio, emerging segments like music, animation, gaming, internet advertising.
The Indian newspaper industry is intensely competitive. In each of the markets, DB Corp faces competition from other newspapers for circulation, readership and advertising. In addition, they may face competition from other forms of media including, television broadcasters, magazines, radio broadcasters and websites. These other forms of media compete with newspapers for advertisement and for the time and attention of readers. The group may also face competition from international media companies as the Government of India has recently liberalized its foreign investment regulations and restrictions applicable to the media sector. Competition for circulation and readership has often resulted in competitors reducing the cover-prices of their newspapers. Furthermore, competition for advertising from newspapers has often resulted in competitors reducing advertising rates or offering price incentives to advertising customers. Such reduction in prices or rates or the introduction of new price incentives could have a material adverse effect on financials.
Circulation and readership of newspapers among readers is an important source of revenue as they significantly influence ad-spend by advertisers and advertising rates. Circulation and readership are dependent on, among other factors, the quality of editorial content and the preferences of readers, the reach of newspapers, and the loyalty of readers to newspapers and ability to successfully establish new locally focused newspapers in new regions. Any failure to meet readers’ preferences, quality content may affect circulation and in turn revenues.
The issue is very unattractively priced. There is nothing left for investors. AVOID SUBSCRIPTION.
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