Tracking Ipo Hmvl[1]

8/9/2019 Tracking Ipo Hmvl[1]

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Tracking IPO:

Hindustan MediaVentures Ltd

Submitted To:

Prof. Allen Roy

Submitted By:

Vinay Ramesh Malani (09157)

Yogesh Gupta (09159)

Anupam Chaplot (09210)

Siva Harsha Karra (09250)

Srividya Shankar (09251)


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Hindustan Media Ventures Ltd

History of Issuer

The company was originally incorporated in Patna on July 9, 1918 under the name 'The

Behar Journals Limited'. The name of the company was changed to 'Searchlight

Publishing House Limited' on November 17, 1987. Subsequently, the name of the

Company was changed to its present name 'Hindustan Media Ventures Limited' on

November 11, 2008.

Hindustan Media Ventures Ltd is one of the leading print media companies in India in

terms of Readership (Source: IRS, R2 2009). They publish and print 'Hindustan', the third

largest daily newspaper in India in terms of Readership with a Readership of 9.3 million

readers (Source: IRS, R2 2009). 'Hindustan' has the largest Readership in key Hindi-

speaking markets of Bihar and Jharkhand, with a strong and growing presence in Delhi

NCR and the states of Uttar Pradesh and Uttarakhand. They are one of the fastest

growing Hindi daily newspapers in India with a growth in Readership of 9.2% in the

period between July 2006 and June 2009 (Source: IRS, R2 2007 to R2 2009).

'Hindustan' is presently printed at 16 locations in the states/regions of Uttar Pradesh,Bihar, Jharkhand, Uttarakhand, Punjab and Delhi NCR with a total installed rated

capacity approximately 0.78 million copies per hour. These printing facilities are located

at Agra, Allahabad, Bareilly, Bhagalpur, Dehradun, Delhi NCR, Dhanbad, Jamshedpur,

Kanpur, Lucknow, Meerut, Mohali, Muzaffarpur, Patna, Ranchi and Varanasi.

'Hindustan' is published in four editions and 113 sub-editions. Hindustan Media Ventures

Ltd also publish two Hindi magazines, 'Nandan', a children's magazine, and 'Kadambini',

a general interest magazine. They also operate the website, www.livehindustan.com,

which focuses on providing news in Hindi with regional content. Further, they have also

recently forayed into event management and customized event solutions.


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Company Promoters

Hindustan Media Ventures Ltd is promoted by HT Media Ltd, a public limited company,

is primarily engaged in the business of printing and publication of newspapers and

periodicals which includes 'Hindustan Times' and 'Mint' and hosting websites including

'www.hindustantimes.com' and 'www.livemint.com'.

In the financial year 2009-10, HT Media transferred its Hindi business comprising

Hindustan, Nandan, Kadambini and their respective online properties into subsidiary

Hindustan Media Ventures Limited (HMVL).

Investment Rationale

y Brand Recognition of Hindustany Expanding and enhancing operations in existing and new marketsy Strong relationship with the Advertisersy Robust synergies with HT Media Limited

EIC Framework

Economic Background

India, an emerging economy, has witnessed unprecedented levels of economic expansion,

along with countries like China, Russia, Mexico and Brazil. According to the estimates

by the Ministry of Statistics and Programme Implementation, the Indian economy has

registered a growth of 7.4 per cent in 2009-10, with 8.6 per cent year-on-year (y-o-y)

growth in its fourth quarter. Due to the strong position of liquidity in the market, large

corporations now have access to capital in the corporate credit markets.

Industrial Background

As per FICCI-KPMG Report 2010, the Indian print media segment is estimated to have

grown by 2% in 2009 to Rs 175 billion from Rs 172 billion in 2008. In 2010, the overall

print market size is expected to grow at 8% to Rs 190 billion on the back of

advertisement led recovery supported by partial economic recovery and release of pent-

up demand and advertisement budgets. Over the next 5 years, the overall print market is

expected to grow at CAGR of 9%.


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With a readership base of over 350 million, India is the second largest print market in the

world. However, this market is still under-penetrated in comparison to its population.

With a 42% reach in the urban markets and a low 21% reach in rural markets, major

growth opportunity lies in the vernacular markets.

There is a significant mismatch between the readership numbers and advertising revenues

forEnglish and Hindi newspapers due to the rate of advertising in Hindi dailies being

much lower than in English dailies. Though the reach of Hindi print is higher, it has not

been able to monetize that reach. The premium ofEnglish over Hindi is estimated to be

6.4 times. With growth picking up outside the metros, as can be seen by the growth in

Tier II and Tier III cities, the rates are expected to move in favour of Hindi and regional

print. E.g. Bihar & Jharkhand have been the two leading states in terms of GDP growth

faster than the national average.

Company Background

With an improved macro environment (especially in the Hindi speaking markets), higher

disposable incomes, improved literacy and increased penetration of newspapers, the

company expects the readership of HMVL`s publications to improve strongly in the

coming years. They expect the print media industry to grow at approximately 10%

compounded annual growth rate (CAGR; the Hindi print media segment is expected to

grow at about 15% CAGR) over the next two to three years. This growth will be largely

driven by an organic increase in advertisement revenues.

'Hindustan' has a strong foothold in the Bihar & Jharkhand market. Its share of readership

is increasing in the biggest Hindi region of Uttar Pradesh. The funds raised would be

utilized to set up more printing facilities in Uttar Pradesh, thereby increasing its

penetration in the state. Also, 'Hindustan' has been one of the fastest growing Hindi daily

in the country, with 6% increase in readership to 99.14 lakh, as per the latest readership

survey.

Issue Detail

y Issue Open: Jul 05, 2010 - Jul 07, 2010


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y Issue Type: 100% Book Built Issue IPOy Issue Size: 16,265,060 Equity Shares of Rs. 10y Issue Size: Rs. 270.00 Crorey Face Value: Rs. 10 PerEquity Sharey Issue Price: Rs. 162 - Rs. 175 PerEquity Sharey Market Lot: 40 Sharesy Minimum Order Quantity: 40 Sharesy Listing At: BSE, NSE

Issuer

Company

CRISIL / CARE /

ICRA / FITCH

IPO Grading

Capital Market IPO

Rating Other Ratings /Suggestions

Rating

Scale > 1 to 5 1 - 100 -

Hindustan

Media

Ventures

Ltd 4 47

Emkay Global - Subscribe.

Angel Broking - Subscribe.

Hem Securities - Invest with

high risk.

BASIS OF ALLOTMENT

Public issue of 16,265,060 equity shares of Rupees 10 each (the "equity shares") for cash

at a price of Rs. 166 per equity share including a premium of Rs. 156 per equity share

Hindustan media ventures limited ("our company" or "the issuer") aggregating Rs.

2,699,999,960.00 (the "issue") at the issue price. The issue shall constitute 22.16% of the

post-issue share capital of our company.

Bidding in the the Anchor Investor Portion opened and closed on the Anchor Investor

Bid/ Issue date i.e. one working day prior to the Bid/ Issue Opening Date i.e. July 2, 2010

The Equity Shares of the Company are proposed to be listed on Bombay Stock


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Exchange Limited ("BSE") and the National Stock Exchange of India Limited

("NSE") and the trading will commence on July 21, 2010.

PRICING

The Issue was made through the 100% Book Building Process wherein at least 60% of

the Issue was allocated on a proportionate basis to Qualified Institutional Buyers

("QIBs" and such portion the "QIB Portion"), and our Company has allocated 28.46%

of the QIB Portion, to Anchor Investors, on a discretionary basis (the "Anchor Investor

Portion"). Further 5% of the QIB Portion less the Anchor Investor Portion was available

for allocation on a proportionate basis to Mutual Funds only. The remainder was

available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to

valid Bids being received from them at or above the Issue Price. If at least 60% of the

Issue cannot be allocated to QIBs, then the entire application money will be refunded

forthwith. Further, not less than 10% of the Issue was available for allocation on a

proportionate basis to Non-Institutional Bidders and not less than 30% of the Issue was

available for allocation on a proportionate basis to Retail Individual Bidders, subject to

valid Bids being received at or above the Issue Price. The Issue received 15,342

applications for 79,570,160 equity shares resulting in, 4.89 times subscription. There

were 2,451 applications for 30,028,760 equity shares made under ASBA process. Of

these 2,338 applications for 3,733,784 equity shares were found valid and they were

considered for allotment. The details of the applications received in the Issue from

Qualified Institutional Buyers, Non-Institutional, Retail Individual Investors and Anchor

Investor categories are as under: (Before technical rejections and after cheque

returns).

Serial

No. Category

No. of

Applications

No. of

Equity

Shares

No. of times

Received subscribed

A

Retail

Individual 15230 4780960 0.98


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Bidders

B

Non

Institutional

Bidders 34 5606120 3.45

C

Qualified

Institutional

Bidders 65 64497600 9.24

D

Anchor

Investors 13 4685480 1.69

Total 15342 79570160 4.89

Final Demand

A summary of the final demand as per the BSE and the NSE as on the Bid/ Issue Closing

Date at different bids is as detailed hereunder:

Bids @

price BIDS

No. of

Equity

Shares

% to

total

Cumulative

total

Cumulative

%to total162 413 381600 0.5 381600 0.5163 165 91520 0.12 473120 0.61

164 11 840 0 473960 0.62

165 43 848880 1.1 1322840 1.72

166 607 31315120 40.67 32637960 42.39

167 9 800 0 32638760 42.39

168 13 880 0 32639640 42.39

169 4 720 0 32640360 42.4

170 54 6738680 8.75 39379040 51.15

171 4 400 0 39379440 51.15

172 9 720 0 39380160 51.15

173 1 120 0 39380280 51.15


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174 2 80 0 39380360 51.15

175 1893 33229840 43.16 72610200 94.31

at cut off 13673 4380440 5.69 76990640 100

OUTCOME

y Issue Price: Rs. 166 perEquity Sharey Face Value of the Equity Share is Rs. 10 eachy Issue Price is 16.6 times the Face Valuey Anchor Investor Issue Price is Rs. 166 per Equity Share

Date

Open

Price

High

Price

Low

Price

Close

Price

No.of

Shares

No. of

Trades

Total

Turnover

(Rs.)

Spread

High-

Low

Spread

Close-

Open

21-Jul-10 170 191.9 170 189.2 14943690 109313 2755668203 21.9 19.2

22-Jul-10 190 196.7 190 195.4 2245175 21435 435827770 6.7 5.4

23-Jul-10 197.8 197.8 184.55 187.2 904146 10765 170629313 13.25 -10.6

26-Jul-10 187 187 180 180.7 103622 1790 18886722 7 -6.3

27-Jul-10 181 188.3 177.85 185.95 228873 2661 41844508 10.45 4.95

28-Jul-10 187 187 181 181.85 81264 925 14849285 6 -5.15

29-Jul-10 181.75 183.2 181.25 182.05 50166 311 9122534 1.95 0.3

30-Jul-10 181.15 183 176.55 179.45 36172 423 6491090 6.45 -1.7

Investment bankers

Edelweiss Capital and Kotak Mahindra Capital Company are the book running lead

managers to the issue.

Valuation


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Valuation Vitals of HT Media

The Companys net worth as at March 31, 2010 was Rs. 731.89 million as per restated financial

statements. The book value per share of the Company as of March 31, 2010 as per restated

financial statements was Rs. 12.81

Public Issue of Equity Shares of Rs. 10 each for cash at a price of Rs. per Equity Share

aggregating to Rs. 2,700 million. The Issue shall constitute %of the post-Issue share capital of

the Company

The average cost of acquisition perEquity Share by Promoter, HT Media, is Rs. 10.07

None of the Group Companies have any business or other interest in the Company except for

business conducted on an arms length basis, to the extent ofEquity Shares held by them and to

the extent of the benefits arising out of such shareholding

As per the prospectus we have deduced that this company is following Comparable multiples

method of valuation. Let us see how this translates into their market capitalisation and

subsequent MV per share Possible techniques of comparable valuation

1. P/E multiple2. Market to Book multiple3. Price to Revenue multiple4. Enterprise value to EBIT multiple

HT Media has used the first method i.e P/E Multiple approach:

1. If valuation is being done for an IPO or a takeover,y Value of firm = Average Transaction P/E multiple v EPS of firm


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y Average Transaction multiple is the average multiple of recent transactions (IPOor takeover as the case may be)

2. If valuation is being done to estimate firm valuey Value of firm = Average P/E multiple in industry v EPS of firm

3. This method can be used wheny firms in the industry are profitable (have positive earnings)y firms in the industry have similar growth (more likely for mature industries)y firms in the industry have similar capital structure

HT Media is also attempting a similar capital structure. India is one of the fastest-growing media

markets in the world, with current advertisement expenditure at only 0.41% of GDP per capita in

2009 as compared to global average advertisement expenditure,which is approximately 0.8% of

GDP per capita (Source: FICCI-KPMG Report 2010). Overall advertisement expenditure is

expected to grow at the rate of 12.4% per annum from calendar in the year 2013. Hence an

overview of the three comparable firms along with Ht Media corresponds with the pre requisites

of the P/E multiple approach of valuation. The fundamentals for all the industry appear positive

which point towards positive earnings.

Now that we have estabilished the foundations on which HT Media has chosen this method opf

valuation, let us see the differences between the MV per share between this approach and the

Discounted Cash flow technique which we have attempted in order to find out whether there is

any discrepancy in the MV set between Rs.162-175 per share.

POST ISSUE ANALYSIS OF SHAREHOLDING PATTERN


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Source: As per data available on BSE

POST ISSUE ANALYSIS OF STOCKMARKET PERFORMANCE

There is a close correlation between the stock prices at the NSE and BSE. They have followed

similar price points and pattern. Both the exchanges have valued the stock on similar grounds.


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HT Media is also attempting a similar capital structure. India is one of the fastest-growing

media markets in the world, with current advertisement expenditure at only 0.41% of GDP per

capita in 2009 as compared to global average advertisement expenditure,which is

approximately 0.8% of GDP per capita (Source: FICCI-KPMG Report 2010). Overall

advertisement expenditure is expected to grow at the rate of 12.4% per annum from calendar in

the year

2013. Hence an overview of the three comparable firms along with Ht Media corresponds with

the pre requisites of the P/E multiple approach of valuation. The fundamentals for all the

industry appear positive which point towards positive earnings.

Now that we have estabilished the foundations on which HT Media has chosen this method opf

valuation, let us see the differences between the MV per share between this approach and the

Discounted Cash flow technique which we have attempted in order to find out whether there is

any discrepancy in the MV set between Rs.162-175 per share.

0.00

10000.00

20000.00

30000.00

40000.00

50000.00

60000.00

21-Jul-10 22-Jul-10 23-Jul-10 26-Jul-10 27-Jul-10 28-Jul-10 29-Jul-10 30-Jul-10

Turnover BSE 27556.68 4358.28 1706.29 188.87 418.45 148.49 91.23 64.91

Turnover NSE 49096.14 6869.53 2334.41 671.27 691.95 208.16 108.85 225.17

Total Turnover at NSE and BSE


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VALUATION BY PRICE/EBITDA

Hindustan Media Ventures Ltd did not have any debt in its capital structure prior to 2010.

Hence if we use the Price/Earnings ratio the resultant value would not give an accurate picture.

Using Earnings Before Interest, Tax, Depreciation and Amortization resolves this problem of

benefits arising due to interest tax shields. The proxy companies selected were:

y Blue Bird India Ltd.y HT Media Ltd.y Jagran Prakashan Ltd.y Naveneet Publications Ltd.y Sandesh Ltd

The Price/EBITDA ratio of the above companies was calculated to be as follows as on

31/3/2010:

Company Price/EBITDA

Blue Bird India Ltd. 3.047035

HT Media Ltd. 0.517542

Jagran Prakashan Ltd. 0.371529

Navneet Publications India Ltd. 0.063105

Sandesh Ltd. 5.887509

average value 1.977344

Since the companies selected have a different face value for their shares, the multiple has been

adjusted to bring it at par for a comparison on a base of Rs. 10. This industry average has been

used in valuation of the company.

Industry Average 1.977


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EBITDA ofHVML

86.8

Price as per

valuation

171.6036

EBITDA in Rs. Tens of Millions

REFERENCES

y http://www.hmvl.in/y Annual Reports of Company for last 5 yearsy EMIS Database: http://site.securities.com/y National StockExchange: http://nseindia.com/y Bombay StockExchange: http://bseindia.com/y http://myiris.com/newsCentre/storyShow.php?fileR=20100705211823194&dir=2010/

07/05&secID=livenews

y http://www.hdfcsec.com/IPO/IPOStory.aspx?Heading=IPOAnalysis&NewsID=b767607a-83b8-48a3-be79-5cc5da9d41c4

y http://www.economywatch.com/indianeconomy/indian-economy-overview.htmly http://www.ibef.org/economy/economyoverview.aspx

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Tracking Ipo Hmvl[1]