Hind Media

Another issue from the Bhartiya stable, after Jubilant Foodworks, Hindustan Media Ventures publishes the 70 year old Hindi daily Hindustan, India's 3^rd largest newspaper in terms of readership (99 lakh readers). It also publishes Hindi magazines Nandan (children's magazine) and Kadambini (general interest magazine).

'Hindustan', with 16% readership growth during Jul06 to Dec09, is currently the No. 1 newspaper in Bihar (45 lakh readers) and Jharkhand (14 lakh readers), No. 2 Hindi newspaper in Delhi NCR and No.3 newspaper in Uttar Pradesh (26 lakh readers), India's largest market for Hindi newspaper. Going forward, company plans to improve its readership base and circulation in Uttar Pradesh and Uttarakhand.

A 98.85% subsidiary of HT Media, it has 17 printing facilities and an editorial team of over 800 journalists. A new printing facility at Gorakhpur, UP, will become operational by next month, which will give the company a pan-UP presence and help it offer a complete UP pack to advertisers, thus augmenting its position in that key growth market.

The objects of the IPO include:

1. Establishing 8 new publishing units worth Rs 66 crore, to be fully operational  by FY12-end
2. Upgrading exiting plant and machinery for Rs 55 crore, during FY11
3. Immediate pre-payment of unsecured loans, borrowed for discharging purchase consideration for Hindi business acquired from HT Media in December 2009, worth Rs 135 crore. The company will, thus become debt-free post-issue. 

Coming onto the financial performance, FY10 operations have to be viewed for 8 months period from Apr-Nov09, when the business was under HT Media, together with 4 months period from Dec09-Mar10, post transfer of Hindi business to the company. For FY10, it reported sales of Rs. 439 crores, of which advertising revenue accounted for Rs. 297 crore (or 68% of sales). It earned net profit of Rs. 45 crores, amounting to 10.3% net margins. Advertising revenue, the lifeline of media companies, grew at a compounded annual growth rate (CAGR) of 33% between FY07-10.

At the lower and upper end of the price band, issue is discounting an EPS of close to Rs. 8 for FY 10, by about 20 and 22 times respectively. With focus on UP market going forward, a pre-dominantly higher advertisement revenue generating market, the company is likely to increase its advertising revenue to paper sales ratio of 68:32 presently, to 80:20 in next couple of years. This will result in improvement in the bottomline. The company also enjoys operational and management synergies with parent HT Media.

Peers such as Jagran Prakashan and D B Corp, two Hindi print media companies, though larger in size, but with debts on their books, are presently ruling at PE multiples of 22-24 times, based on historic earnings.

The company, with estimated market capitalisation of Rs. 1,270 crore on the upper end of price band (debt free status due to loan pre-payment), looks good in terms of strong foothold in its key markets, future growth prospects and group pedigree. The issue looks good at the lower band of Rs. 162, considering its listed peers, while at the upper price band of Rs. 175, it restricts near term and listing gains.