Music Broadcast IPO (Radio City IPO) – Should you invest?
Mumbai based, Music Broadcast IPO (Radio City IPO) would open for subscription on 6th March, 2017. Music Broadcast Ltd is the first Radio Broadcast in India which operates 91.1 FM Radio City. Its revenues grown at 18% CAGR in last 5 years. It earned 17% profits in FY16. Should you invest in a Music Broadcast IPO (Radio City IPO) ? What are the hidden factors an investor should consider if you want to invest in a Music Broadcast Limited IPO? In this article, I would provide Music Broadcast IPO Review.
About Music Broadcast Limited
Radio City is the first private FM radio broadcaster in India. They operate radio stations under the brand “Radio City”. It is part of Jagran Prakashan Ltd group. They have grown its presence from four cities in 2001 to 29 cities as on November 25, 2016. These radio stations include the eight “Radio Mantra Stations” transferred from SPML pursuant to the Scheme of Arrangementand a radio station at Kanpur which we launched recently. They are present in 12 out of the top 15 cities in India by population. As on March 31, 2016, its radio stations reached out to over 49.60 million listeners in 23 cities covered by AZ Research.
Issue details of Music Broadcast IPO
- IPO opens: 6-March-2017
- IPO closes: 8-March-2017
- Face Value: Rs 10 per share
- Issue price band: Rs 324 to Rs 333.
- Issue size: Rs 400 Crores
- Market lot: minimum of 45 shares
- Minimum investment: Rs 14,580 on lower price band
- Leading Managers: ICICI Securities
- Listing: BSE / NSE
- Download Music Broadcast IPO DRHP / Radio City DRHP Prospectus at this link.
Objects of the Music Broadcast Limited IPO issue
1) Offer for Sale by selling shareholders. Company would not get any amount from this.
2) Redemption of Listed NCDs
3) Early redemption of the JPL NCDs and repayment/pre-payment of JPL ICDs
4) General corporate purposes.
Company Financials (reinstated-standalone)
- The company generated revenue of Rs 128.4 Crores for the year ended Mar-12 and Rs 245.5 Crores for the year ended Mar-16. Its revenues for 6 months ended Sep-16 are Rs 138.2 Crores
- The company posted a loss of Rs 2.17 Crores for the year ended Mar-12 and profit of Rs 42.5 Crores for the year ended Mar-16. For 6 months ended Sep-16, it earned profits of 29.7 Crores.
- Its restated standalone EPS for FY ending Mar-16 is Rs 9.95 and last 3 years average EPS Rs 9.69.
Reasons to invest Music Broadcast IPO
- Revenue grew at 18% CAGR in last 5 years.
- Good profits of over 17% for the year ended Mar-2016.
- 91.1 FM RadioCity is a good brand.
Reasons not to invest in a Music Broadcast Limited IPO
- Advertisement is its main source of income and they are heavily dependent on continuous flow of advertisements at effective rates.
- Company rely on third parties to source sound recordings that are broadcasted on its radio stations.
- They are involved in various litigations pursuant to the Copyright Board’s order dated August 25, 2010 granting compulsory licenses for broadcast of sound recordings by radio companies.
- They are required to comply with certain guidelines and conditions under the Phase III Policy and Grant of Permission Agreement to operate its FM radio stations.
- The Government’s policy on cross media ownership could have adverse implications.
- Permission granted under Phase III Policy is valid for only 15 years.
- They need to obtain prior security clearance from MIB for appointing Director(s) on its Board.
- They derive a significant portion of its revenue from advertisers or advertising agencies in respect of its radio stations in select locations
- The FM radio broadcasting industry is highly competitive.
- They have incurred losses in FY12. One should invest in consistent profit making companies.
- Other risk factors (Internal and external) can be viewed in the prospectus from Page no. 18 onwards.
Recommendation / Investment strategy – Music Broadcast IPO
- On the upper price band of Rs 333 and on FY16 EPS of Rs 9.95, P/E ratio works out to 33.4x. Similarly, on last 3 years EPS of Rs 9.69, P/E Ratio works out to 34.3x. Means company is asking the upper band of issue price of Rs 333 for a P/E ratio between 33x and 34x. There is only one listed peer Entertainmnet Network Limited which is trading at P/E ratio of 33.8. One cannot guess with just peer ccompany whether IPO price is under priced or over priced.
- Company revenues grew at 18% CAGR in last 5 years. It generated good profits of 17% in FY16. FM Radio City 91.1 has good brand. Considering all these factors, high risk investors can invest in this IPO. However, considering that markets are at peak and may take correction now, one may or may not get listing benefits. If you get listing gains, you can do party.
Disclaimer: I am interested in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Music Broadcast IPO – Should you invest or not
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