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Music Broadcast Private Ltd (MBPL), the promoter of private FM station Radio City 91.1 FM, is considering launching an initial public offering (IPO) in the first quarter of 2015. Proceeds from the IPO will be used to run radio stations across the country, including those acquired in the third phase of radio auctions.
Apurva Purohit, chief executive, Radio City, says the Telecom Regulatory Authority of India (Trai) has approved a formula to migrate phase-II licences to phase-III (renew the licences bid for in phase-II for the next phase), adding the company has earmarked Rs 200 crore for this. It has been estimated the cost of acquiring and rolling out new radio stations across the country will be an additional Rs 100-150 crore.
“We have been able to maintain Ebitda (earnings before interest, tax, depreciation and amortisation) margins of 25-30 per cent year-on-year, through the past two to three years. Currently, we are debt-free. After internal discussions and deliberations, we have concluded between our current cash reserves, fresh equity investment from promoters and loans from banks, we will be able to raise the money for licence extension and acquisition in phase-III,” she says.
Purohit adds the company has had a good record with its lenders and is already in discussion with Axis Bank to raise money for auctions. “The IPO is being considered to source additional funds so we have flexibility in bidding and are able to get all the stations we require, without being constrained for the capex to set up new stations,” she says.
Radio City is present across 20 cities — Mumbai, Delhi, Bangalore, Chennai, Ahmedabad, Pune, Hyderabad, Lucknow, Jaipur, Vadodara, Surat, Sholapur, Nagpur, Sangli, Coimbatore, Visakhapatnam, Ahmednagar, Akola, Nanded and Jalgaon. The company plans to increase this count to 40 after the third phase of radio frequency auctions.
The strategy of the company has been to target listeners from SEC (socio-economic class) A and B sections. Currently, Radio City has a share of about 50 per cent in the SEC A and B markets. To retain this share after the 800-odd frequencies have been auctioned in phase-III, the company will need 35-40 stations.
Purohit says during phase-II, the company wasn’t considering aggressive expansion. One of the first entrants into the business, Radio City had set an agenda of operating in markets that provided a balance of high advertising potential and relevance.
“We, therefore, needed just enough presence to remain relevant to our core — SEC A and B — and, at the same time, operate in cities where advertising potential is higher,” says Purohit. This time, the company’s strategy also includes maintaining the market shares it has gained through the past decade and expanding its footprint across SEC A and B.
