Den Network

Den Networks is entering the capital market on 28^th October, 09 with a public issue of Rs. 2 crore equity shares of Rs. 10 each, in the band of Rs. 195 to Rs. 205 per share.

The company is into distribution of analog and digital cable television services, with presence in 77 cities in India for Analog and 37 cities for Digital. The business model of the company has been to expand its own proprietary infrastructure organically, as also, to acquire majority interest in Mutti System Operators (MSOs) and had acquired majority interest in 65 MSOs. Due to this, the company has 71 subsidiaries.

Star DEN is a 50:50 JV of the company, with STAR, which acts as a content aggregator and currently has the exclusive right to distribute 23 television channels. The company is presently offering up to 180 channels through digital compared with up to 100 channels though analog cable television service.

The growth strategy of the company has been to acquire majority stake in MSOs and to achieve economies of scale, deliver a standardised service and provide broadcasters, a single point connect with millions of subscribers. The key business strategy of the company is to digitise the analog subscribers, with a view to tackle the menace of local cable operators under-reporting the revenues and encouraging its subscribers to subscribe for pay channels, which is the key revenue driver. The company has also obtained an all India ISP license and has recently commenced a limited roll out of broadband Internet services in select areas.

On consolidated basis, for FY09, the total income of the company was at Rs. 719 crores, with loss after tax of Rs. 15.13 crores, on an equity base of Rs. 18.12 crores. For quarter ending 30^th June 09, the total income was at Rs. 214 crores, with profit after tax of Rs. 3.24 crores. Hence, it implies that the company is into the Rs. 1,000 crore topline league with bottomline in black.

It may be noted that WWIL, the only comparable and listed peer, had a total income of Rs. 308 crores, for FY09, with a net loss of Rs. 94 crores. WWIL has been posting flat to declining trend of financial performance with income being placed at Rs. 48 crores with net loss of Rs. 41.37 crores, on standalone basis, for the quarter ending Sept. 09. For June 09 quarter, they were at Rs. 47.50 crores and Rs. 46.47 crores.

The company had estimated requirement of Rs. 210 crores, for its core business of development of cable television infrastructure and of Rs. 25 crores for cable broadband infrastructure. The total fund requirement of Rs. 285 crores is to be met from proposed IPO.

It seems that the financial health of the company is in place with its networth at Rs. 174 crores, as at 30-06-09 and with total debt of just Rs. 156 crores. These are largely used to acquire fixed assets of Rs. 185 crores and goodwill on consolidation, having created, on acquiring majority stakes in MSOs, of Rs. 128 crores. It is likely that the financial performance will remain on track, in the coming years, which will be its added advantage, over its peers.

The present market capitalization of WWIL is at Rs. 900 crores while that of Dish TV is at Rs. 4,000 crores. At the current valuations, this company will have a market cap of Rs. 2,700 crores, calculated on expanded equity base of Rs. 132 crores.

Considering this, issue is likely to have a good listing as also having potential to rise, if held with 6 to 12 months view. Hence, one can apply in the issue, even at the upper band.