Shemaroo Entertainment Ltd IPO Review (Apply)

Post LS Elections and budget, we are surprisingly marking main line IPOs with name beginning with letter “S”. Snowman Logistics broke the ice and thereafter we witnessed IPO of Sharda Cropchem. Both these IPOs got overwhelming response with nearly 60 times subscription. As Snowman IPO was having 10% retail portion, it got subscribed above 41 times whereas Sharda Crop has 35% retail portion, it got subscribed around 6 times. HNI got over 200 times in both IPOs. Now we have another main line IPO from Shemaroo that also has “S” in its name.

Shemaroo Entertainment Limited, (the “Company” or “Shemaroo”) is today an established integrated media content house in India with activities across content acquisition, value addition to content and content distribution. Together with film based copyrights and other entertainment rights, the brand 'Shemaroo' is synonymous with quality entertainment. 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’s 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. Shemaroo is one of the largest independent content aggregators in Bollywood. Currently, the Company distributes content over which it has either complete ownership rights or limited ownership rights.  The Company distributes its content through various mediums such as (i) television such as satellite, terrestrial and cable television; (ii)New Media platforms consisting of mobile, internet, direct to home (“DTH”) and other applications; (iii) home entertainment; and (iv) other media. 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”. 

Now to meet its working capital requirement, the company is entering the capital market with an initial public offering of (*) equity shares of face value of Rs. 10 each for cash, aggregating up to Rs. 120 crore. The equity shares are being offered in the price band of Rs. 155 to Rs. 170 per equity share of face value of Rs. 10 each. Minimum application is to be made for a minimum of 85 equity shares and in multiples thereon, thereafter. The 100% Book Built Issue will open on Tuesday, 16th September, 2014 and close on Thursday, 18th September, 2014. A discount of 10% to the issue price is being offered to the retail individual bidders. The equity shares of the Company are proposed to be listed on the National Stock Exchange of India Limited and BSE Limited. 

On performance front, for past three fiscals, the company has posted an average EPS of Rs. 12.57 (on consolidated basis). For the year ended 31.3.14 it posted net profit of Rs. 27.27 crore on a turnover of Rs. 265.95 crore. Its current equity capital of Rs. 19.85 crore includes two bonus issues in the ratio of 9 for 1 (March 2011) and 3 for 1 (August 2011). Post IPO the equity will rise to around Rs. 27 crore. If we attribute its 2013-14 working on enhanced equity post IPO then the asking price is at a P/E of 15.5 to 17 based on lower and upper price band. Promoter’s current holding of 90% will get diluted around 64% post IPO.

 Issue is lead managed by Yes Bank Limited and ICICI Securities Limited whereas Link Intime India Pvt Ltd is the registrar to the issue. Both merchant bankers’ past mandates have mixed performance.

 Investors can consider moderate investment at cut-off rate.