Shemaroo Entertainment IPO-Should we invest?

Shemaroo Entertainment Limited IPOShemaroo Entertainment IPO-Should we invest?

(Updated: Shemaroo Entertainment IPO Allotment link added at bottom of this article). Shemaroo Entertainment Limited is coming up with an IPO next week. This company is an established integrated media content house in India with activities across content acquisition, value addition to content and content distribution. The IPO Price band is Rs 155 to Rs 170 (cut-off price is Rs 170. There are several  good factors about this IPO. Does Shemaroo Entertainment IPO would create buzz like Snowman Logistics IPO and Sharda Cropchem IPO, which was oversubscribed almost 60 times? What should be your call on Shemaroo Entertainment IPO?

About Shemaroo Entertainment Limited

Shemaroo Entertainment Limited was founded in 1962, in Mumbai, as a book circulating library and today they are an established integrated media content house in India with activities across content acquisition, value addition to the content and content distribution. The brand “Shemaroo” is synonymous with quality entertainment together with film based copyrights and other entertainment rights. More details about the company can be seen in its prospectus.

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Issue details of Shemaroo Entertainment IPO

  • IPO opens: 16-Sep-2014
  • IPO closes: 18-Sep-2014
  • Face Value: Rs 10 per share
  • Price Band: Rs 155 to Rs 170 per share (cutoff price Rs 170). Retail invetors would get 10% discount on issue price. Hence you would get at Rs 153 (Rs 170 minus Rs 17). However when you are applying, you should indicate tick cut off price. Based on your retail status based on allotment only 153 would be deducted from your account.
  • Minimum shares to be applied: 85 per lot
  • Issue size: Rs 120 Crores
  • Lead Managers: ICICI Securities Limited
  • Listing: BSE  / NSE
  • Download Shemaroo Entertainment IPO Prospectus from SEBI website here

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

  • Fund working capital requirements
  • Fund expenditure for general corporate purposes.

Company Financials

  • The company generated revenue of Rs 103.64 Crores for the year ended Mar-10 and Rs 265.95 Crores for the year ended Mar-14. This indicates strong annualized growth of 27% in last 5 years.
  • Company posted a profit of Rs 0.31 Crores for the year ended Mar-10 and a Profit of Rs 27.14 Crores for the year ended Mar-2014.

Shemaroo Entertainment IPO Financials

Reasons to invest Shemaroo Entertainment IPO

  • Good revenue growth in last 5 years.
  • Good profit of 10% on revenues for FY2014. It maintained 11% for FY2012 and FY 2013. Profits have been growing consistently.
  • The Indian Media and Entertainment (M&E) industry grew from INR 728 billion in 2011 to INR 821 billion in 2012, registering an overall growth of 12.6 percent. The industry is projected to grow at a CAGR of 15 percent between 2012 and 2017 to reach INR 1661 billion. This would provide opportunities to companies like Shemaroo Entertainment.

Reasons not to invest in an Shemaroo Entertainment IPO

  • There are criminal proceedings pending against this Company.
  • Its Group Companies, its Directors, its Subsidiaries and Promoters are party to certain legal proceedings. Any adverse decision in such proceedings may adversely affect business prospects, results of operations and financial condition.
  • Revenues and profitability are directly linked to the exploitation and growth of the company Content Library. Any failure to source content could adversely affect company profitability and business growth.
  • The distribution of content may not generate adequate revenues to recover associated costs. This could impact company growth plans and may adversely impact our profitability.
  • Intensified competition may result in content cost escalation which may restrict ability to access content at favourable terms or at all. Any escalation in the content acquisition cost as a result of such competition could result in us losing out on opportunities to acquire content, or, could impact the profitability of the content so acquired, which would adversely affect our growth and profitability.
  • One cannot predict or forecast if a film created by them will be successful. In addition, changing consumer tastes further compromise company ability to predict which films will be popular with audiences in India and internationally.
  • They have limited experience in producing films, which could adversely affect the quality and consequently the profitability of the films they produce.
  • The company has availed of certain unsecured loans, which may be recalled at any time.
  • Its Subsidiaries and Group Companies have incurred losses during recent Fiscal Years (Shemaroo Entertainment Inc, Shemaroo Entertainment Private Limited and Shemaroo Entertainment UK Private Limited).

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Recommendation / Investment strategy

  • Based on consolidated EPS of FY2014 of Rs 13.74, the cutoff price of Rs 170, the PE Ratio would work out to be 12.37. Based on consolidated EPS of last 3 years of Rs 12.57, at the cutoff price of Rs 170, the PE Ratio would work out to be 13.52. Means for the issue price at the cutoff price of Rs 170, the PE Ratio asked is in between 12.3 to 13.5. Its industry average is at 24.7 and lowest is 4.8, hence asking price at a cutoff price of Rs 170 is reasonable.
  • Shemaroo Entertainment IPO has several positive factors. Company revenues are growing consistently and has healthy profits at 10% of revenues. Issue price also looks reasonable.
  • Retail investors would get 10% discount on issue price.
  • After taking negative factors into consideration, investors can subscribe to this IPO. I am planning to subscribe to this IPO. Yes, I am a little disappointed that I have not been allotted Snowman Logistics IPO and hope to get some allotment for Shemaroo Entertainment Limited IPO.

How to check Shemaroo IPO Allotment?

Shemaroo IPO Allotment link is given below. You can click on this link and select Shemaroo and give necessary application no or PAN number and select ABSA/Non ABSA and it would indicate whether you got the allotment of not. Shemaroo IPO Allotment is expected to done by 28th September / 29th Septemer, 2014

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Shemaroo Entertainment IPO

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  1. I had allotted 1 lot of sheemaroo ent ltd but not able to sell d share is it ok hold the share or better to sell it out at loss also. Is there any possibility of increasing share price.

  2. I applied for 2 lots got nothing.

    Now after listing look like this share is not doing great closed on first day at only 171.
    Is this share still good to buy or it is just that now market is not doing great due to RBI unchanged repo rate?

    What is your take on this?