Shemaroo Entertainment Limited

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Company Overview
Shemaroo Entertainment Limited was founded in October 1962,
in Mumbai, as a book circulating library, which now has become
an established integrated media content house in India with
activities across content acquisition, value addition to content
and content distribution. In 1979, the company set up India's
first video rental business and thereafter in 1987 it forayed into
distribution of content through the home video segment in the
video home system ("VHS") format. Over the years, the company
has adapted to changing content consumption patterns by
expanding into content aggregation and distribution for
broadcasting on television platforms.
Key Highlights
The Company has an established brand name with high
recall in consumers mind for quality entertainment.
The Company's content library has more than 2900 titles
including new and old prominent Bollywood movies and
also titles in various other regional languages like Marathi,
Gujarati etc.
The Company has various distribution platforms like
television, home entertainment, digital new media, etc.
The Company monetizes content library by exploiting
content over various existing and emerging distribution
platform which reduces dependence on any single
customer.
The Company's revenues have grown at a CAGR of about
26.5% to Rs 265.95 Cr in FY14 from Rs 103.64 Cr in 2010.
The net profit of the Company stands at Rs 27.2 Cr in
FY14 and has shown a staggering CAGR growth of 208%
since 2010.
ISSUE DETAILS:
Date of Opening 16th September 2014
Date of Closing 18th September 2014
Price Band Rs. 155 - 170
Issue Size Rs. 120 Cr
No. of Share Offered 7,058,824 @ Rs 170
Face Value Rs. 10
BRLM Yes Bank Limited
ICICI Securities Ltd
Registrar Link Intime India Private Ltd
Bid Lot Maximum Bid: 13 Lots @ Rs 170
Post Issue Share Capital Rs. 26.9 Cr @ Rs 170
Source: RHP, SSL Research
For complete information and a complete list of the risk factors,
please refer the Red Herring Prospectus.
Pre Issue No. of Shares %
Promoter & Promoter Group 17,891,920 90.14
Institutions - -
Non Institutions 1,956,984 9.86
Public - -
Total 19,848,904 100.00
SHAREHOLDING PATTERN
OBJECTS OF ISSUE
Description (Rs. Cr.)
Funding working capital requirement 106.0
Funding expenditure of general corporate purpose [ ]
Post Issue @ 155 No. of Shares %
Promoter & Promoter Group 17,891,920 64.85
Institutions - -
Non Institutions 1,956,984 7.09
Public 7,741,935 28.06
Total 27,590,839 100.00
Retail Research IPO Note
Sector: Media and Entertainment View: Subscribe
12 September, 2014 Price Band (`): 155 - 170
Post Issue @ 170 No. of Shares %
Promoter & Promoter Group 17,891,920 66.49
Institutions - -
Non Institutions 1,956,984 7.27
Public 7,058,824 26.23
Total 26,907,728 100.00
Shemaroo Entertainment Limited Media and Entertainment
SBICAP Securities Limited 12 September, 2014 2
Established brand name
In October 2012 "Shemaroo" brand completed its 50th year of existence. The "Shemaroo" brand has been used in various
media related activities including books and magazines rental business, a video rental business, content aggregation, content
distribution, home video distribution and content creation. Over the years the brand has high consumer recall as being associated
with quality entertainment. The Company's content appears regularly on several television channels and is widely available on
New Media platforms such as mobile and internet and across a vast network of retail outlets. This gives the "Shemaroo" brand
a considerable and constant media visibility.
Vast and growing content library
The Company has a diverse Content Library, which is growing continuously with the addition of new releases as well as
through catalogue acquisitions. This enables the Company to distribute to platforms catering to a wide range of audiences.
The 'Content Library' consists of more than 2,900 titles spanning new Hindi films like Queen, Bhaag Milkha Bhaag, Dedh
Ishqiya, The Dirty Picture, Kahaani etc. Hindi films classics like Zanjeer, Beta, Dil, Disco Dancer, Mughal-e-Azam etc. The
Company also has titles in various other regional languages like Marathi, Gujarati, Punjabi, Bengali etc., as well as non-film
content.
Diversified distribution platform
The Company has presence in various distribution platforms such as television, home entertainment, digital New Media and
other media. Extensive distribution network is the key strength and sustainable competitive advantage. It is one of the few
companies within the Indian media and entertainment industry to have a comprehensive distribution capability backed by an
in-house television syndication team, a New Media marketing team for mobile value added services ("MVAS"), internet, DTH
and IPTV, and a nationwide home entertainment distribution network. The distribution reach is a key advantage, as the company
is able to offer "anytime, anywhere" entertainment to the consumers, which gives a direct insight to the consumer preferences
and consumption patterns across platforms helping to cross-leverage these insights.
De-risked business model
The Company de-risks its business model by having large number of titles so that the revenues are not dependent on success
of any one individual title and given the size of Content Library the Company is able to package diverse content and improve
the overall returns. The Company monetizes Content Library by exploiting content over various existing and emerging distribution
platforms. This reduces the dependence on any single customer or platform. Within platforms, the Company optimizes the
monetization throughout the lifecycle of the content.
Strong financials with high growth
The Company's revenues have grown at a CAGR of about 26.5% to Rs 265.95 Cr in FY14 from Rs 103.64 Cr in 2010. The net
profit of the Company stands at Rs 27.2 Cr in FY14 and has shown a staggering CAGR growth of 208% since 2010. The PAT
margin of the company has improved from 0.3% in FY10 to 10.3% in FY14.
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. Source: RHP
Investment Rationale
Shemaroo Entertainment Limited Media and Entertainment
SBICAP Securities Limited 12 September, 2014 3
Growth Strategies
Scale up content library driven by return on investment
The Company aims to own the complete intellectual property rights in a film by acquiring Perpetual Rights, as well as, to
monetize them over a maximum number of distribution platforms. Over the last few years television has emerged as a
key monetization medium for films. Accordingly, the Company's strategy is to further strengthen its competitive advantage
by building on and augmenting its Aggregation Rights for television broadcast and further leveraging portfolio approach.
Based on view of entertainment consumption patterns emerging over the next few years, the Company intends to expand
further into New Media specific content including expanding presence in the music business to enhance scale in this
segment.
Enhancing monetization of content library through existing and emerging media platforms
Over the last few years, television has emerged as a key monetization medium for distribution of films. Further, the
implementation of Cable TV Digitization Law is expected to give a major boost to the broadcaster's revenues from the
subscription stream. The Company intends to broad base revenue streams by further increasing distribution of content
through New Media avenues, such as MVAS, internet, DTH, video on demand services and IPTV platforms.
Enhancing revenue predictability through strategically packaged sales
As non-theatrical revenues gain more importance, the Company has a vast and diverse Content Library that will allow it
to monetize satellite licensing, digital New Media licensing and home video distribution efficiently, as it will be able to
aggregate and package several films together instead of monetizing each title on an individual basis. The Company
typically packages compelling content and not so compelling content together which is a key competitive strategy and a
determining factor for content acquisition and distribution. This packaging of films enhances the Company's overall
return on investments.
Risk factors
The distribution of content may not generate adequate revenues to recover associated costs. This could impact Company's
growth plans and may adversely impact the profitability.
The Company relies heavily on the "Shemaroo" brand name and any dilution of its brand equity could adversely affect the
business.
The Company's revenues and profitability are directly linked to the exploitation and growth of Content Library. Any failure
to source content could adversely affect the profitability and business growth.
Shemaroo Entertainment Limited Media and Entertainment
SBICAP Securities Limited 12 September, 2014 4
For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus.
SHEMAROO ENTERTAINMENT LIMITED
Pre Issue Post Issue
(Rs. in Cr.) FY14 FY14
Price Band
Particulars 155 170
Net Sales 264.6 264.6 264.6
Total Income 266.0 266.0 266.0
EBITDA 64.3 64.3 64.3
PAT 27.3 27.3 27.3
Equity Share Capital 19.8 27.6 26.9
No of Equity Shares 2.0 2.8 2.7
Face Value 10.0 10.0 10.0
EPS 13.7 9.9 10.1
CMP 170.0 155.0 170.0
Cash and Bank 0.9 0.9 0.9
Debt 151.2 151.2 151.2
Market Cap 337.4 427.7 457.4
BV per share (Rs) 87.9 66.0 67.5
PE(x) 12.4 15.7 16.8
P/BV (x) 1.9 2.3 2.5
Enterprise Value 487.7 578.0 607.7
Mcap/Sales (x) 1.3 1.6 1.7
EV/Sales (x) 1.8 2.2 2.3
EV/EBITDA (x) 7.6 9.0 9.4
EBITDA Margins (%) 24.3 24.3 24.3
Net Margins (%) 10.3 10.3 10.3
Debt/Equity (x) 0.9 0.8 0.8
Networth 174.5 182.2 181.5
Financials and Valuation Snap Shot:
Recommendation:
Shemaroo Entertainment Limited is currently valued at 15.7x and
16.8x of its FY14 earnings on lower and upper price band,
respectively. While comparing with Eros and Balaji, the company is
fairly valued across different valuation parameters. Hence we
recommend investors to SUBSCRIBE the issue at cut-off price.
(10% discount for retail investors)
Particulars. Shemaroo Entertainment Limited Balaji Telefilms Eros Intl.Media
Lower Band Upper Band
CMP (Rs) 155 170 89 251
TTM Sales (Rs Crore) 264.6 264.6 456.2 1,189.8
Mcap (Rs Crore) 427.7 457.4 581.3 2,316.7
PE (x) 15.7 16.8 (56.5) 11.2
EV/Sales (x) 2.2 2.3 1.3 2.2
EV/EBITDA(x) 9 9.4 (279.8) 8.1
Mcap/Sales (x) 1.6 1.7 1.3 1.9
P/BV(x) 2.3 2.5 1.5 1.9
OPM (%) 24.3 24.3 (0.4) 26.8
NPM (%) 10.3 10.3 (2.3) 17.3
Relative Valuation:
Shemaroo Entertainment Limited Media and Entertainment
SBICAP Securities Limited 12 September, 2014 5
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