Music Broadcast Limited
Total Page：16
File Type：pdf, Size：1020Kb
IPO Review March 1, 2017 Rating matrix Music Broadcast Limited Rating : Unrated Price band | 324-333 Music Broadcast (MBL) is one of the first private FM radio broadcasters in Issue Details India and operates under the brand “Radio City”. The company has 39 Issue Opens 6-Mar-17 frequencies currently (37 operational) including eight stations acquired Issue Closes 8-Mar-17 from Radio Mantra and 11 acquired via Phase III auctions. The company Issue Size (| Crore) 486-488 migrated all its Phase II licenses to the Phase III regime, which has a Fresh Issue 400 validity of 15 years. In addition, MBL also has a sales alliance with ITM Offer for Sale 86-88 Software and Entertainment Pvt Ltd, which operates “Suno Lemon 91.9 Price Band (|) 324-333 FM” in Gwalior and Ananda Offset Pvt Ltd, which operates “Friends 91.9 No of Shares on Offer (crore) 1.20-1.23 QIB (%) 50% FM” in Kolkata. The company also operates ~40 web radio stations via its Non-Institutional (%) 15% internet portal planetradiocity.com and has a listenership base of 16.94 Retail (%) 35% million. Jagran Prakashan acquired the company in FY15. MBL’s Minimum lot size (No. of shares) 45 operating revenues and EBITDA have grown at 18.9% and 32.4% CAGR, respectively, in FY12-16 to | 232.3 crore and | 78.6 crore, respectively. It Objects of the issue is coming out with a fresh issue of | 400 crore (1.20-1.23 crore shares) Objects of the Issue Amount and offer for sale (OFS) of ~| 86-88 crore post which the promoter stake a) Redemption of listed NCD's b) Early would be in the range of 71.0-71.4%. redempiton of the JPL NCD's and repayment/pre- Investment Rationale payment of JPL ICD's c) General corporate | 486- 488 Crore purposes d) Offer for sale Strong leadership position and pan-India presence in radio industry… Radio City is the first and oldest private FM radio broadcaster in India with over 15 years of expertise and a pan-India presence spanning 39 Shareholding Pattern frequencies (two yet to be operational). As per RAM data, it has Pre-Issue Post-Issue consistently been the No. 1 radio station in terms of average listenership Promoter & promoter group 96.3% 71.0-71.4% share in Bengaluru & Mumbai with 24.1% & 17.2%, respectively, among Public 3.7% 28.6-29.0% private players. The company is also present in 12 of the 15 most populated cities in India and has been able to reach out to over 49.60 Financial Summary million listeners and covers 62% of India’s population with access to FM | Crore FY13 FY14 FY15 FY16 radio in 302 towns (post Phase III). Net Sales 138.1 154.2 200.8 232.3 EBITDA 33.9 42.4 62.2 78.6 New markets of Phase III to drive revenues, capitalise on radio growth EBITDA Margin (%) 24.6 27.5 31.0 33.8 The radio industry is expected to grow at a CAGR of 16.9% in CY15-20 to PAT 11.6 24.3 47.1 42.5 | 4360 crore (Ficci KPMG) driven by commencement of new radio stations, increase in listenership in tier-II & tier-III cities & an overall Valuation Summary (at upper price band: | 333) increase in ad rates. MBL being a key player would see incremental (x) FY13 FY14 FY15 FY16 revenues from Phase III and underlying radio industry growth. P/E 163.5 78.1 40.4 44.7 Strong financials, cash flows… EV/EBITDA 62.6 50.0 34.1 27.0 MBL’s operating revenues and EBITDA has grown at 18.9% and 32.4% Research Analyst CAGR, respectively, in FY12-16 to | 232.3 crore and | 78.6 crore, Bhupendra Tiwary respectively, and has generated positive operating cash flows over the [email protected] past five years. MBL has registered 15.0% CAGR in FY14-16 in its advertisement volumes with the total number of seconds advertised in its Sneha Agarwal top 14 cities at 63.72 million (as per AirCheck). MBL’s advertiser base has [email protected] increased from 4,118 in FY14 to 5,211 in FY16. Key risks and concerns • The loss of one or more significant advertisers or advertising agencies could have an adverse effect on the business • Reliance on third parties to source sound recordings imposes content sourcing risks • Outstanding litigation pursuant to the grant of compulsory licenses • The business is subject to government guidelines and conditions Priced at FY16 PE multiple of 44.7x on higher band… At the IPO price band of | 324-333, the stock is available at a multiple of 43.7-44.7x FY16 EPS. ICICI Securities Ltd | Retail Equity Research Company Background Radio City is the first private FM radio broadcaster in India and operates under the brand “Radio City”. The company has grown its presence from four cities in 2001 to 37 cities as on February 15, 2017. These radio stations include eight “Radio Mantra Stations” transferred from Shri Puran Multimedia (SPML) pursuant to the scheme of arrangement and nine out of 11 Phase III new radio stations. Jagran Prakashan (JPL) acquired a majority shareholding in the company in 2015 and the radio business was demerged into a separate entity pursuant to the Scheme of Arrangement. The company is present in 12 out of the top 15 cities in India by population. As on March 31, 2016, it reached over 49.60 million listeners in 23 cities covered by AZ Research. The company has successfully migrated all its Phase II Radio City Stations to the Phase III Policy and now enjoys an extended license period of 15 years. Moreover, under the Phase III regime, radio stations are permitted to carry news bulletins of AIR and also network their radio stations in all cities. It has, in the past, networked its stations in Sangli, Nanded, Jalgaon, Sholapur and Akola in Maharashtra and operates it from a single hub at Ahmednagar. The company intends to use this experience to network some of the stations in other states as well. Exhibit 1: Cities in which MBL possesses radio frequencies Phase II Phase III Radio Mantra Bangalore Jaipur Patna Agra Lucknow Vadodra Kanpur Bareilly Mumbai Coimbatore Madurai Gorakhpur New Delhi Vizag Nasik Varanasi Chennai Admegnagar Kolhapur Jalandhar Pune Sholapur Udaipur Ranchi Hyderabad Sangli Ajmer Hisar Ahmedabad Nanded Kota Karnal Surat Jalgaon Bikaner Nagpur Jamshedpur Akola Patiala Source: DRHP, ICICIdirect.com Research In addition to the above stations, MBL has a sales alliance with ITM Software & Entertainment Pvt Ltd (ITM), which operates Suno Lemon 91.9 FM (“Suno Lemon”) in Gwalior and Ananda Offset Pvt Ltd (AOPL), which operates “Friends 91.9 FM” (Friends FM) in Kolkata. The company also operates online web radio (40 web radio stations) “Fun Ka Antenna” on its web portal www.planetradiocity.com (Planet Radio City). The same was launched in 2010. The company has certain popular in-house shows such as ‘Love Guru’ and ‘Kal Bhi Aaj Bhi’ and pre-programming features such as ‘Babber Sher’ and ‘Joke Studio’ in its repertoire. The radio stations are operational throughout the year and the company has hired 108 RJs, including three web radio RJs to conduct its shows. Financials As a ‘free to air’ FM radio broadcaster, MBL’s main source of income is advertisement revenue. It does not earn any subscription from its listeners. MBL’s operating revenues and EBITDA have grown at 18.9% and 32.4% CAGR in FY12-16 to | 232.3 crore and | 78.6 crore, respectively. For the six months ended September 30, 2016, the company generated operating revenues of | 136.8 crore and an EBITDA of | 45.5 crore, thus leading to an EBITDA margin of 33.2%. ICICI Securities Ltd | Retail Equity Research Page 2 Exhibit 2: Revenue and EBITDA trajectory 250.0 232.3 40.0 200.8 35.0 200.0 30.0 154.2 150.0 138.1 136.8 25.0 20.0 (%) (| Crore) 100.0 78.6 15.0 62.2 42.4 45.5 10.0 50.0 33.9 5.0 0.0 - FY13 FY14 FY15 FY16 H1FY17 Net Sales EBITDA EBITDA Margin (%) Source: DRHP, ICICIdirect.com Research Exhibit 3: PAT and PAT margins 50.0 47.1 25.00 45.0 42.5 40.0 20.00 35.0 29.8 30.0 24.3 15.00 25.0 (%) (| Crore) 20.0 10.00 15.0 11.6 10.0 5.00 5.0 - 0.00 FY13 FY14 FY15 FY16 H1FY17 PAT PAT Margin (%) Source: DRHP, ICICIdirect.com Research Radio industry The radio industry is enjoying a steady CAGR (2011-15) of 14.5% and grew by an estimated 15.1% in 2015 to reach a revenue of | 1980 crore. Growth has been driven by both volume enhancements in tier-II and tier- Ill cities and an overall increase in advertisement rates. Radio's share in the overall media and entertainment industry pie is ~4% of the total advertisement market size. The completion of the Stage I & II of the Phase III auctions, migration of existing operators from Phase II to Phase III and announcement of the hike in foreign direct investment (FDI) cap for FM radio has benefited the industry. Companies spent ~| 1157 crore to acquire 97 new stations in Part I of Phase III and | 200 crore in Part II of Phase III auctions. ICICI Securities Ltd | Retail Equity Research Page 3 Exhibit 4: Indian radio industry size and projections 50 CAGR (2015-2020) 45 of 16.9% 40 35 30 25 20 43.3 (| Billion) 37.8 32.7 15 28.4 10 23.4 5 0 FY16E FY17E FY18E FY19E FY20E Radio revenues Source: DRHP, FICCI KPMG, ICICIdirect.com Research The chart below represents the growth in advertising volume for different radio stations as well as the radio industry as a whole for the given period: Exhibit 5: Advertising volumes across players 14 12 10 8 6 12.5 10.9 10.4 4 9 6.8 5 year CAGR % (FY11-16) % (FY11-16) CAGR 5 year 2 0 Radio City Radio Mirchi Big FM Red / S Fm Industry Advertising Volume Source: DRHP, ICICIdirect.com Research Following the new stations licensed in Phase III and consolidation in the industry, radio is transforming from a ‘coverage’ media to a ‘reach’ platform.