Adlabs IPO more suitable for long-term investors: Sharekhan

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Adlabs IPO more suitable for long-term investors: Sharekhan

Adlabs Entertainment IPO note by Sharekhan Adlabs Entertainment (Adlabs) is coming out with an initial public offering (IPO) of about 2.03 crore equity shares of face value of Rs10 each. The offer for sale is 20 lakh shares (seller being Thrill Park) while the fresh issue is of around 1.83 crore shares. After the issue the promoter’s holding in Adlabs will reduce from 77.0% to 56.8%. The issue is priced at Rs221-230 per share, resulting in an issue size of Rs468 crore at the upper price band. The objects of the issue are prepayment of loan and general corporate purposes. Valuation The public offering would go a long way in reducing the stress on Adlabs’ balance sheet (its debt/equity ratio is likely to improve from 2.8x to 1.4x post-issue) and improving its valuations in terms of the price/book value (from 3.1x preissue to 2.1x post-issue). Consequently, on a post-issue basis, the valuations appear to be comparable or favourable as compared with its peers listed in India and globally. However, the company is still in the initial stages of the business cycle. It has a long gestation period and is still in investment mode. Hence, it is more suitable for the long-term investors looking at the asset-backed stable cash flow generating business.