Risky initiative

IPO REVIEW

Nine-month-old Broadcast Initiatives will have to prove its mettle.

The past few weeks have been a dream run for the Indian media companies. The implementation of conditional access system (CAS) has assured spikes in subscription revenues for broadcasters, while the revenues from advertising are already trending upward.

Add to this a sustained bull market during the same period and companies gearing up to expand, initial public offerings (IPOs) are rushing to the stock markets.

Among the long-standing players in the industry is the Sri Adhikari Brothers group, which is the promoter of Broadcast Initiatives, apart from other concerns like SAB TV Network (SABTNL).

Broadcast Initiatives (BIL) is coming out with an IPO of 8.55 million shares in the price band of Rs 100-120 aggregating between Rs 85 crore and Rs 102 crore. The issue would constitute of 44.27 per cent of fully diluted post issue capital of the company.

BIL is in the business of broadcasting, and owns a comment and analysis-cum-news channel called Janmat, which targets the Hindi speaking audiences from the 25-plus age group in the higher socio-economic classes.

The channel was launched on April 30, 2006 and has roped in eminent television personalities like Vir Sanghvi, Shekhar Suman, Alka Saxena, Rahul Dev and Mehar Bhasin in its team. The company now plans to launch a Marathi general entertainment channel, called Mi Marathi on February 19.

"Both the channels would remain free-to-air at the moment, but we plan to turn Mi Marathi into a pay channel three months down the line," says Markand Adhikari, vice-chairman and managing director, BIL.

The issue is aimed at funding expansion by purchasing land, setting up a studio and a captive uplinking facility in Greater Noida, prepayment of loans and purchase of production, post production and broadcasting equipment.

More than half of the proceeds from the issue contribute to the scheduled capital expenditure, while about Rs 25 crore will be used to reduce the debt.

BIL has been in business for just nine months, and has significant capital expenditure in the pipeline.

"At present, we have outsourced our uplinking facility, while the production equipment is used on a rental basis. Once we have our own facilities and equipment, we expect a reduction in our operating expenses," says Sanjay Bhandari, president-finance, BIL.

In addition, a reduction in debt indicates lower interest payments. "We are looking forward to breaking even by FY09," adds Bhandari.

Based on the company's performance for the five months from May 2006 until November 2006 with significant investments still underway, analysts are not comfortable projecting financials.

The promoter group has successfully made an exit from its channel SABe TV in the past, apart from having forays in the television content production business.

However, the new channel Janmat is still young, and Mi Marathi is yet to be launched which leaves the performance of the company in the realms of uncertainty. It would therefore, be wiser to give this one a miss.

Issue Opens: 9 February, 2007
Issue Closes: 14 February, 2007