Low earnings and competition from pan India players will make it difficult for Sea TV
Issue
Price: Rs90-Rs 100 per share with a face value of Rs 10 per equity share.
Number of shares: 55.77 lakh.
Issue size: Rs50.20 crore.
Issue duration: 27 September-29 September 2010.
Listing: BSE.
Book running manager: Chartered Capital and Investment Ltd.
Valuations
The issue is priced at nine times at the lower end of the price band and ten times at the upper band. Sea TV Network had an EPS of Rs2.15 in FY10. This compares with its competitor Den Networks Ltd which had an EPS of Rs1.60. The P/E ratio for Sea TV was 41.86 (in the lower band) and 46.51 (in the upper band) against 127.90 for Den Networks which was the highest in the industry. The lowest P/E in the industry in FY10 was 1.20 and the average was 25.10. Another cable TV service provider, Hathway Cable & Datacom Ltd, posted a net loss of Rs13.93 crore in the year ended 31 March 2010.
Business model
Sea TV Network is a multi-system operator (MSO) based in Uttar Pradesh. It aims to raised Rs 50.20 crore from the capital market through a 100% book-building issue. Sea TV airs programmes produced by its own team on its channels. These local channels mainly focus on Agra city/UP, state news/events and information and they broadcast free of charge to its subscribers.
Sea TV is engaged in providing MSO services to local cable TV operators in Agra. The company is promoted by Neeraj Jain, Akshay Kumar Jain, Pankaj Jain, Sonal Jain and Chhaya Jain. It plans to install optical fibre network with optical cable having 48 lines, of which 33 lines would be reserve for its own use against the immediate requirement of 15 lines. It plans to give the other 15 lines on rent to third parties which would translate into an additional source of income.
As per industry estimates, there are 120 million TV homes in the country. Of this 71 million are served by cable TV network, about 6 million by DTH and the rest by terrestrial TV. Apart from some ground-based channels, there are about 225 satellite channels registered under up-linking/downloading guidelines of the government of India.
Financial Snapshot
Objects of the issue
1) To set up a complete digital head end and network for implementation of conditional access system (CAS) at a cost of Rs27.51 crore.
2) To set up network for complete IPTV solution for Rs5.28 crore.
3) Setting up a cable distribution (underground optical fibre) network capable of digital transmission across Agra City and adjoining areas at a cost of Rs6.56 crore.
4) Setting up 20 branch offices in Agra at Rs15.55 crore, and
5) Meeting the issue expenses of Rs4.73 crore.
Analysts take
The Sea TV Network IPO has been graded as 'IPO Grade 1' by rating agency ICRA, indicating concerns over poor fundamentals. This grading reflects the concerns over risks arising out of the small scale of operations, the company's significant expansion plans, risk of geographic concentration with a presence only in Agra (Uttar Pradesh) and competition from other players in the city, as well as from companies like Bharti Airtel, Reliance Big TV, Dish TV etc which provide direct-to-home (DTH) cable services.
Positives
Expected revenue streams
Concerns
Permissions and competition
Concluding notes
Sea TV Networks is a small player with low earnings. In the face of competition from other small players and some really big operators, the company requires funds to expand its operations. Sea TV could find it quite difficult to achieve its ambitious plans and execution will be the critical factor.
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In Initial phase every business do have difficulty but only those survives who do continious innovation and value addition. apart from from Big companies with big investment, most of the business does have uncertainity but in case of Sea TV consistancy from last couple of year show clarity of vision, mission and objectives.
By just having a look on financial and edger Management one can think of possible possitive upside.
For further expansion company can also approach to PE firm to fulfil their dreams
Best:
Ankul Maheshwari