Channel Nine Entertainment IPO – Should you subscribe?


Channel Nine Entertainment IPO – Should you subscribe or notChannel Nine Entertainment IPO – Should you subscribe?

Delhi based Channel Nine Entertainment is coming up for fresh public issue of Rs 46.68 lakhs shares @ Rs 25 per share totaling to Rs 11.67 Crores. Should we subscribe for Channel Nine IPO?

About Channel Nine Entertainment

Channel Nine is more than a decade old company. This is engaged in business production, distribution television serials, films, corporate films, documentaries, marketing of sports and entertainment events.

Current issue to public

  • Issue price: Rs 25 per share
  • Minimum bid: 6,000 shares and multiples there-of
  • Minimum investment: Rs 150,000
  • IPO opens: 22-Feb-2013
  • IPO closes: 26-Feb-2013
  • Book Running Leader managers (BRLM): Guiness Corporate Advisors Ltd
  • Listing: BSE SME
  • Draft prospectus: http://www.bseindia.com//downloads/ipo/2013128144834Channel%20Nine%20Entertainment%20Ltd.pdf

Purpose of the IPO: The funds would be used for the following purposes.


  1. Finance the estimated expenditure of production of two (2) films strengthening distribution operations
  2. Brand Building
  3. Issue expenses

How the company is doing

Channel Nine Entertainment IPO – Should you subscribe

Comments on the financials:

  1. The company has made profit only last financial year ending Mar-2012.
  2. The revenues in the last financial year (ending Mar-12) were 25.3 lakhs. Before that, the revenues were in single digit in lakhs. Out of these revenues, Rs 22 lakhs, the revenues have come from “Website maintenance and development”. Means only Rs 3 lakhs has come from core business.
  3. Company earned revenue of Rs 2.06 Crores in 7 months ending Oct-12. Not sure how there is sudden increase in income which was not there in the last 5 years.
  4. The company’s cash generation from operation has been negative. No concrete projects on hand.

Recommendation:  There is sudden upswing in revenues in the last 6 months, whereas company has not been doing well in the last 5 years. The company average earnings per share is Rs 0.36 in the last 3 financial years and Rs 0.76 in the last 7 months of this financial year ending Oct-12. Considering earlier bonus issue and current IPO issue, the earnings per share is diluted to Rs 0.01. Company is asking for a share price of Rs 25, which translates to 2500 P/E (Rs 25 / 0.01) which is highly expensive inspite of pathetic track record of the company in the past. Retail investors should be very cautious and should stay away from such IPO.

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Suresh
Channel Nine Entertainment IPO


Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

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