Music Broadcast (Radio City) IPO review (Apply)

Music Broadcast Ltd (MBL) is operating radio stations under the branch “Radio City” and has grown its presence from 4 cities in 2001 to 37 cities as on 15th February 2017. These radio stations include the eight “Radio Mantra Stations” transferred from SPML pursuant to the Scheme of Arrangement and nine out of eleven New Radio City Stations. The company expects the remaining two New Radio City Stations to be operationalised by March/ April 2017. MBL is present in 12 out of the top 15 cities in India by population having a reach to over 49.60 million listeners in 23 cities. All its Phase II Radio City Stations which were under Phase II Policy have been migrated to the Phase III Policy. These include Radio City stations which are present at Bengaluru, Lucknow, Mumbai, New Delhi, Chennai, Pune, Hyderabad, Ahmedabad, Surat, Nagpur, Jaipur, Vadodara, Coimbatore, Vizag, Ahmednagar, Sholapur, Sangli, Nanded, Jalgaon and Akola and the Radio Mantra Stations which have been transferred to it pursuant to the Scheme of Arrangement which are located at Agra, Bareilly, Gorakhpur, Varanasi, Jalandhar, Ranchi, Hissar, and Karnal. Under the Phase III Policy, new cities were opened up for auction, pursuant to which MBL acquired 11 additional radio stations i.e. the New Radio City Stations. The New Radio City Stations which have been operationalised are located at Kanpur, Ajmer, Kota, Udaipur, Patiala, Jamshedpur, Nasik, Kolhapur and Madurai. The remaining two New Radio City Stations namely Bikaner and Patna are expected to be operationalised by March/ April 2017. Under the Phase III Policy the license period for radio stations has been increased to 15 years and radio stations are now permitted to carry news bulletins of AIR and also network their radio stations in all cities.

For operational efficiency and cost effectiveness, the company is reworking its network with multi operational by a prime hub of the location. The company also has sales alliance with ITM Software & Entertainment Private Limited (“ITM”) which operates “Suno Lemon 91.9 FM” (“Suno Lemon”) in Gwalior and Ananda Offset Private Limited (“AOPL”) which operates “Friends 91.9 FM” (“Friends FM”) in Kolkata. It also operates online web radio www.planetradiocity.com (“Planet Radio City”), which was launched in 2010. It operates 40 web radio stations through planetradiocity.com in eight languages. As of January 2017, 30 of these 40 web radio stations are hosted with the StreamGuys platform and have a listenership of 16.94 million. Further, as of January 2017, 33 of the 40 web radio stations are also hosted with NGH.IN platform and have a listenership of 14.24 million. Its web radio stations offer 24 hours of internet radio along with few live RJ hosted shows. MBL also have a ‘Planet Radio City’ mobile app that plays various stations such as ‘Radio City Freedom’, ‘Radio City Electronica’, ‘Radio City Metal’ and ‘Radio City Smaran’, in various languages, on mobile and other smart devices. It has also created popular radio shows such as ‘Love Guru’ and ‘Kal Bhi Aaj Bhi’ and pre-programming features such as ‘Babber Sher’ and ‘Joke Studio’. ‘Radio City Super Singer’, a popular singer talent hunt on radio was launched in 2011 and continues till date. MBL has also launched ‘Gig City' a unique initiative which broadcasts music concerts simultaneously across multiple radio stations. In its endeavour to recognise independent singers and musicians, the company has initiated ‘Radio City Freedom Awards’ which has completed three years and the fourth edition is currently underway.

To part finance its plans of redemption/early redemption of NCDs and corpus fund needs, the company is coming out with a maiden IPO of 15004197 or 14670530 equity shares of Rs. 10 each (based on lower and upper price band) with a price band of Rs. 324-333 via book building route to mobilize Rs. 486.14 - 488.53 crore based on lower and upper price band. Issue opens for subscription on 06.03.17 and will close on 08.03.17. Minimum application is to be made for 45 shares and in multiples thereon, thereafter.

From 1999 till 2005 it issued equity at par and in 2006 it issued few shares at a price of Rs. 32703.47 per share. In 2007 it issued further equity at a price of Rs. 70 per share and thereafter it again issued more shares at par in 2007 and 2015. In 2006 it also issued bonus shares in the ratio of 705.13 shares for every 1 share held. Its current paid up equity capital of Rs. 45.04 crore will stand enhanced to approx Rs. 57.05 crore post issue(based on upper price band).

On performance front, the company has reported turnover/net profits of Rs. 157.27 cr. / Rs. 24.33 cr. (FY14), Rs. 207.51 cr. / 47.06 cr. (FY15) and Rs. 245.51 cr. / Rs. 42.51 cr. (FY16). For 2013 to 2016 fiscals the company has posted CAGR of 20.45%, 32.40% and 54.09% in Total revenue, EBITDA and net profits respectively. For six months ended 30.09.16, it has earned net profit of Rs. 29.76 cr. on a turnover of Rs. 138.21 crore. If we annualize this and attribute to the fully diluted equity post issue, then asking price is at a P/E of 31 against listed peer that is trading above 60 plus based on Dec 2016 earnings(as on 27.02.17 closing market price).

Issue is solely lead managed by ICICI Securities Ltd and Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

On merchant banker’s front, in last three years it has handled 18 public issues out of which 5 issues closed below the issue price on listing date.

Conclusion: Radio FM sector is set for a fast forward mode and this company with its niche play and presence in many cities set to benefit with more liberal new policy. Investors may consider investment for short to long term rewards.