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Dish TV plans to raise up to USD200mn from foreign investors by issuing
equity shares through a combination of financial instruments. Foreign
Investment Promotion Board (FIPB) will consider this on November 15. As
per the company, these funds will act as a war chest (other DTH
companies like Videocon d2h are also planning to raise funds) to help it
target the compulsory digitization mandate and High Definition (HD).
Though the proposed fund raising contradicts Dish TV’s earlier stance of
not raising additional funds, we believe in view of the changed scenario at
the ground level, it will strengthen the company’s balance sheet.
Funds to be war chest for digitization and HD
As per Dish TV, funds raised will act as a war chest to help the company get ready for
digitization and HD. Also, with increasing number of HD channels (Zee and Sony’s
impending launch) and dipping cost of HD TV sets, HD penetration is bound to
accelerate. The subscriber acquisition cost (SAC) for an HD subscriber is INR3,000 vis‐àvis
INR2,200 for a non‐HD subscriber. While a HD set top box typically costs USD56 for
Dish TV, non‐HD set top box costs ~USD27. However, the ARPU of an HD subscriber is
3x non‐HD subscriber, which will accelerate breakeven and enhance profitability.
Raising USD200mn to reinforce balance sheet
Earlier, Dish TV had raised ~INR16bn through a rights issue and a GDR issue to PE firm
Apollo. It had an enabling resolution of raising USD100mn but in recent interactions, it
had stated that it may not go for any fund raising. However this has changed after the
recent digitization ordinance and the increasing demand for HD by subscribers.
Outlook and valuations: Positive; maintain ‘BUY’
Compared to 0.58mn subscriber additions in Q2FY12, we expect Dish TV to add ~0.9mn
subscribers in Q3FY12, which will boost EBITDA growth. At CMP of INR 72, the stock is
trading at EV/EBITDA of 16.3x and 11x FY12E and FY13E, respectively. We maintain
‘BUY’ recommendation and ‘Sector Outperformer’ rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV plans to raise up to USD200mn from foreign investors by issuing
equity shares through a combination of financial instruments. Foreign
Investment Promotion Board (FIPB) will consider this on November 15. As
per the company, these funds will act as a war chest (other DTH
companies like Videocon d2h are also planning to raise funds) to help it
target the compulsory digitization mandate and High Definition (HD).
Though the proposed fund raising contradicts Dish TV’s earlier stance of
not raising additional funds, we believe in view of the changed scenario at
the ground level, it will strengthen the company’s balance sheet.
Funds to be war chest for digitization and HD
As per Dish TV, funds raised will act as a war chest to help the company get ready for
digitization and HD. Also, with increasing number of HD channels (Zee and Sony’s
impending launch) and dipping cost of HD TV sets, HD penetration is bound to
accelerate. The subscriber acquisition cost (SAC) for an HD subscriber is INR3,000 vis‐àvis
INR2,200 for a non‐HD subscriber. While a HD set top box typically costs USD56 for
Dish TV, non‐HD set top box costs ~USD27. However, the ARPU of an HD subscriber is
3x non‐HD subscriber, which will accelerate breakeven and enhance profitability.
Raising USD200mn to reinforce balance sheet
Earlier, Dish TV had raised ~INR16bn through a rights issue and a GDR issue to PE firm
Apollo. It had an enabling resolution of raising USD100mn but in recent interactions, it
had stated that it may not go for any fund raising. However this has changed after the
recent digitization ordinance and the increasing demand for HD by subscribers.
Outlook and valuations: Positive; maintain ‘BUY’
Compared to 0.58mn subscriber additions in Q2FY12, we expect Dish TV to add ~0.9mn
subscribers in Q3FY12, which will boost EBITDA growth. At CMP of INR 72, the stock is
trading at EV/EBITDA of 16.3x and 11x FY12E and FY13E, respectively. We maintain
‘BUY’ recommendation and ‘Sector Outperformer’ rating.
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