Subscribe to Shemaroo IPO for listing gains: Nirmal Bang, PDF link

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Nirmal Bang's report on Shemaroo Entertainment

Shemaroo Entertainment (SEL) is an integrated media content house in India with activities across content acquisition, value addition to content and content distribution. Its content Library consists of more than 2,900 titles including 700+ of “perpetual rights”. “Perpetual Rights”, allows the company to distribute content worldwide for a perpetual period across all mediums. Titles over which it has limited ownership rights are referred to as “Aggregation Rights”. “Shemaroo” brand is more than 50 years brand and has strong brand recall. The company is not involved with licensing content to cinemas but is into licensing to third party vendors such television, airplanes, and the Internet. SEL's primary distribution channels are Broadcast Syndication (Satellite, Terrestrial and Cable T), which generates over 50% of the Company's revenues, New Media (Mobile, IPTV, YouTube, etc), Home Video (VCD, DVD, Blu‐ray) and Others (In‐flight entertainment and overseas sales).

Valuation and Recommendation
Between FY11-14 SCL's revenues grew at CAGR of 18.7% while EBIDTA grew at a CAGR of 4.0% and PAT 5.9%. On the valuation front, at the given price band of Rs 155-Rs 170, SCL is commanding at PE of 15.4x – 16.9x its FY14 EPS on its post issue fully diluted equity and 11.4x – 12.4x on pre issue equity. EV/EBIDTA is 8.8-9.4x on post issue equity. Considering the healthy balance sheet, strong double digit growth of around 30% in new media, we recommend subscribing the issue for listing gains.

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