Music Broadcast Ltd IPO plans to raise Rs 400 crore through a fresh issue and an offer for sale of about 2.66 million shares. Music Broadcast Ltd (MBL) will be the second radio operator to list on the bourses after Times Group-controlled Entertainment Network India Ltd, which runs the country’s top FM radio business under Radio Mirchi label. Music Broadcast Ltd IPO is opening on 6th March 2017 and is priced at Rs. 324-333. Music Broadcast Ltd IPO issue size is Rs. 488.5 crore. Music Broadcast Ltd peer analysis attempts to assess its financial strengths vis a vis its major competitor Entertainment Network India Ltd. (ENIL).
About Music Broadcast Ltd IPO
Music Broadcast Ltd (MBL) brand Radio City is one of the fastest growing FM Networks in India and has witnessed strong sales. There are good prospects for radio industry which has been growing at rate of 14-15% for last five years. Radio City is the first private FM radio broadcaster in India. MBL operates its radio stations under the brand “Radio City”. Music Broadcast Ltd has grown its presence from four cities in 2001 to 29 cities. MBL also have sales alliances in two cities. MBL has won bids under Phase III Policy to expand its presence to 11 additional cities across India which are primarily located in tier-I, tier-II and tier-III cities. Also, its Existing Radio Stations have a license period of 15 years commencing from April 1, 2015 and the New Radio Stations have a license period of 15 years commencing from the date of their going operational. Through Planet Radio City, MBL also operates 31 web radio stations in six languages.
Comparison of Major FM radio Operators in Metros*
|Share of FM radio operators in Major cities (RAM report Week 41, 2016)|
|Radio city||Radio Mirchi||Big FM||Fever FM||Red FM||Oye||Radio nasha||Radio one|
The figures are for a particular week. However they may be fairly representative.
Radio City’s advertising volumes have grown at a CAGR of ~12.5% over the five year period FY2011-16, while Radio Mirchi (ENIL) reported ~9% CAGR in advertising volumes during the same period. Radio City’s advertising volumes are only slighly lower than ENIL while ENIL has a much higher revenue base.
Post Issue Equity & Promoters holding :
As per government directives while allocating FM stations, the promoters cannot dilute their holding below 51% at least for three years from the start of broadcasting.
|Music Broadcast Post Issue Equity & Promoter Holding|
|Pre issue equity||45.04||cr|
|IPO new share size in crores||400||cr|
|Estimated IPO Price||333||rs.|
|New Equity added||12.012||cr|
|equity in offer for sale||2.658518||cr|
|Total Equity sold in IPO||14.6705||cr|
|promoters holding pre issue||96.34%||43.39154||cr|
|Promoter holding aft IPO||40.7330|
|% Promoter Holding post IPO||71.40%|
Entertainment Network India Ltd (ENIL), which belongs to Bennett Coleman group & operates its FM services under Radio Mirchi is the largest listed company in this space. Half year 2017 and FY 2016 Results of two companies have been compared
|HY 2017||FY 2016||H Y2017||FY 2016|
|PB excep. Items & Tax||29.76||42.51||35.64||148.19|
|CAGR sales 1 yr||15.68%||15.98%|
|CAGR sales 3 yr||18.95%||14.55%|
|CAGR PBT 1 yr||19.17%||2.46%|
|CAGR PBT 3 yr||69.00%||18.32%|
|CMP / IPO Price||333||333||774.2||774.2|
|PE Ratio (ann)||25.19||33.47||75.61||36.9|
|Post issue equity||57.052||57.052|
|EPS (Post Issue Eq)||5.22||7.45|
|PE ( Post Issue Eq -ann)||31.9||44.7|
|Market Cap/Sales Ratio||8.18||7.26|
The Music Broadcast IPO peer analysis shows that overall it is reasonable stacked against Entertainment Network India Ltd (ENIL), the largest listed company in this space. While for FY16 ENIL has enjoyed better OPM of 31.34 % than MBL’s OPM 24.87, MBL has stolen a lead in H1FY17 with OPM of 28.58 % against ENIL’s OPM 21.57%. Music Broadcast FY 2016 Net profit has been impacted by one time exceptional items, else its PE ratio based on 2016 figures would have been lower than the indicated value. For this reason CAGR PBT has been considered in place of CAGR NP to compare the two companies. Music Broadcast also has better RONW% as compared to ENIL. P/BV ratio of MBL shall also be in range of ENIL after IPO due to issue of shares at premium. However Marketcap/sales ratio for Music Broadcast appears bit steep than ENIL though it is enjoying better growth
I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.