UFO Moviez IPO Review (May apply)

UFO Moviez India Ltd is India’s largest digital cinema distribution network and in-cinema advertising platform in terms of number of screens. UFO operates India’s largest satellite-based, digital cinema distribution network using its UFO-M4 platform, as well as India’s largest D-Cinema network. 3i Research Mauritius Limited and P5 Asia Holding Investments (Mauritius) Limited has made investments in UFO.

UFO is India’s largest digital cinema distribution network and in-cinema advertising platform (in terms of numbers of screens), as at October 31, 2014, according to CRISIL. In fiscal year 2014, the company digitally delivered more than 1,500 movies in 22 languages to 4,703 screens with aggregate seating capacity of approximately 2.15 million viewers spread across India. Since the beginning of its operations, it has digitally delivered more than 8,800 movies in India until February 28, 2015. As at February 28, 2015, its global network spans 6,626 screens worldwide, including 4,911 screens across India and 1,715 screens across Nepal, the Middle East, Israel, Mexico and the USA.

UFO Moviez has created a pan-India, high-impact, in-cinema advertising platform with generally long-term advertising rights to 3,770 screens, with an aggregate seating capacity of approximately 1.85 million viewers and a reach of over 1,800 locations across India, as at February 28, 2015. UFO has also brought cricket matches LIVE to cinema screens in high definition, thus providing an option of alternate content to exhibitors in India. Company has 54% share in the digitized movie exhibition market with lion share in Tire-II and Tire-III cities.

To meet listing requirements and to unlock the value for its stakeholders, the company is having offer for sale from existing stakeholders for approx 96 lakh equity share of Rs. 10 each in a price band of Rs. 615-625. Issue opens for subscription on 28.04.15 and will close on 30.04.15. Minimum application is to be made for 24 shares and in multiples thereon, thereafter.

Under an exclusive arrangement with Impact Media Exchange Limited, it is marketing an electronic ticketing platform known as the Integrated Media Pact, or “IMPACT”, to improve transparency, efficiency and accountability in movie screening industry. The transactions on IMPACT are captured on a real time basis as it is connected via satellite to a centralized Network Operation Centre. IMPACT mediates the transactions between exhibitors on one hand and distributors on the other, ensuring that ticketing transactions and movie screenings are transparent. IMPACT has been designed to ultimately act as a settlement exchange for various stakeholders of the movie screening industry. Provide an end-to-end, high-reach and high-quality digital cinema solution for movie producers, distributors and exhibitors and offer a flexible, transparent and high-impact platform that allow advertisers to have maximum engagement with cinema-goers.

For last three fiscals on consolidated basis the company has posted turnover and net profit of Rs. 207.65 crore/Rs. 6.15 crore (2012), Rs. 337.50 crore/Rs. 39.07 crore (2013), Rs. 421.09 crore/Rs. 50.10 crore (2014). For first nine months ended 31.12.14 it has earned net profit of Rs. 40.62 crore on a turnover of Rs. 357.23 crore. As on same date its equity of Rs. 25.90 crore is supported by free reserves of Rs. 416 crore plus. Being offer for sale, paid up equity stands at the same level post IPO. During the period July 2005 to March 2012 company made preferential issue of shares at a price ranging from Rs. 90 to Rs. 603.54 and also issued bonus in the ratio of 2 for 1 (March 2010). If we attribute annualized earnings for 2014-15 on the basis of first nine months result, then the asking price is at a P/E of around 30 and at a P/BV of 3.70 as per NAV of Rs. 169+ on consolidated basis as on 31.12.14. Based on this, although the issue appears pricy, being the first IPO in this segment, it is set to repeat the history of Just Dial, Wonderla, Snowman Logi. 

BRLM for this IPO are Axis Capital Ltd and Citigroup Global Markets India Pvt Ltd. and registrar to the issue is Karvy Computershare Pvt Ltd. Post allotment, shares will be listed on BSE and NSE.