DB Corp: Regional edge
At the upper price band of Rs 212, it will be the most valued listed media company in India.
Late 2007, DB Corp — the publishers of Dainik Bhaskar, Divya Bhaskar and Saurashtra Bhaskar newspapers — filed an offer document to raise Rs 660 crore by issuing shares for Rs 350 each. The issue, if it had gone through, would have valued DB Corp at about Rs 6,600 crore, making it the most valued listed media company in India.
But the IPO was put on hold, as the markets crashed soon after the company filed its draft red herring prospectus (DRHP).
DB Corp’s second attempt to get listed has been successful. The IPO, which opened on Friday, got over-subscribed 2.02 times on day one itself. The company may still emerge as the most valued listed media player if the IPO is priced at the upper band of Rs 212 per share.
At this level, DB Corp’s market capitalisation works out to Rs 3,848 crore, compared with Deccan Chronicle’s Rs 3,778 crore, Jagran Prakashan’s Rs 3,777 crore and HT Media’s Rs 3,357 crore. At the lower band of Rs 185, DB’s market cap works out to Rs 3,358 crore, almost at par with HT Media.
| PEER COMPARISON | ||||
| Price (Rs) | PE(x) FY10E | EBITDA* FY10E | ROE(%) FY10E | |
| Dainik Bhaskar | 185-212 | 17.6-20.2 | 30.10 | 30.10 |
| Deccan Chronicle | 155.80 | 15.40 | 45.10 | 17.60 |
| Jagran Prakashan | 122.20 | 21.10 | 29.80 | 26.40 |
| HT Media | 145.40 | 28.50 | 17.50 | 13.90 |
| Source: Bloomberg estimates, HISL Advisory *Margin% | ||||
DB’s IPO comprises 18.2 million shares, including an offer for sale of 5.45 million shares. Of the Rs 235-270 crore the company will receive in IPO proceeds, it aims to use Rs 130 crore to repay debt, which will help reduce its consolidated debt-equity ratio to 0.60 from 1.47 as on September 30, 2009. The remaining funds will be used to set up new publishing units as well as modernise existing machinery and towards enhancing its brand image, with an aim to increase reach and circulation.
DB Corp’s print publications in Hindi, Gujarati and English have a readership of 15.5 million. The company currently operates in the northern, central and western states. It also publishes the DNA newspaper on a franchise basis. The company aims to further expand its presence into Tier-II and -III towns which, interestingly, are witnessing faster growth due to rising income, aspiration and literacy levels of the vast lower- and middle-income population.
Media companies, too, are increasing local affairs (content) in their newspapers and, as a result of all these factors, regional advertising is growing at a relatively faster pace. While analysts project the media industry’s revenues to grow at 9-10 per cent annually over the next couple of years, players with a higher regional focus should hopefully grow faster.
The company also has a reasonably big regional presence in the radio business through a joint venture which operates 17 stations under the ‘MY FM’ brand. While revenues in this business are relatively small, analysts say the venture reported a loss of about Rs 25-27 crore in 2008-09. Notably, expectations are that the business will be able to break even in the current fiscal.
Coming to valuations, the IPO of DB Corp appears to be attractive at the lower price-band. According to an HSBC InvestDirect note, considering the price-band, the PE works out to 17.6-20.2 based on DB Corp’s estimated 2009-10 earnings, which is slightly lower than 21.1 times of its closest comparable regional peer Jagran Prakashan.