Music Broadcast Ltd. IPO (Radio City IPO) – Updates

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Music Broadcast, the operator of FM channel Radio City, open up its IPO of Rs. 500 crore on Monday. On day one the issue has subscribed nearly 6 per cent within the first four hour of the bidding process. Around 10.45 am, the public offer received bids for 6.15 lakh shares compared with nearly 1.05 crore shares on offer.

The company has raised Rs. 146.56 crore from anchor investors, has fixed the IPO price band at Rs. 324-333 per share. The IPO closes on March 8.

Peer comparison –

Particulars Music Broadcast Entertainment Network Zee Media
Key Brand Radio City Radio Mirchi 92.7 Big FM
Current Radio Stations Number 39 42 45
Listnership In million 50 million 60 million 43 million
H1FY17 annualised Revenue Rs. Crore 274 481 284
H1FY17 annualised EBITDA Rs. Crore 94 139 116
EBITDA Margin % 34.3% 28.9% 40.8%
H1FY17 Annualised PAT Rs. Crore 60 49 NA
Enterprise Value (EV) Rs. Crore 1900 3.973 1.592
Valuation Multiples – Current year, based on above H1FY17 annualised numbers
EV/Sales 6.9* 8.3* 5.6*
EV/EBITDA 20.2* 28.6* 13.7*
PE 25* 69* NA
EV/Station 49* 95* 35*

For first 6 months of FY17, company posted revenue of Rs. 137 crore. EBITDA of Rs. 47 crore and PAT of Rs. 30 crore, improving net margin to 21.5%. On then equity of Rs. 41.92 crore (30-9-16). EPS stood at Rs. 6.6 for H1FY17 in Nov 2016; it required 8 Radio Mantra FM stations from promoter group, via issue of 31.25 lakh equity shares. This expanded equity to Rs. 45.05 crore. Of this 96.34% stake is held by promoters.

At Rs. 333 per share, company will have a market cap of Rs. 1900 crore. Its total debt as of 30-9-16. Was Rs. 250 crore. While cash and equivalents are Rs. 46 crore. Fresh issue proceeds, nearly Rs. 250 crore will go to retire debt in FY17 and FY18 and another Rs. 50 crore in FY20. Thus, interest outgo of Rs. 16 crore per annum currently will be saved.

Based on enterprise value of Rs. 1900 crore, annualised H1FY17 earnings discounts the issue price by EV/EBITDA multiple of 20* and PE is a multiple of 25* on current year estimates. On one year forward estimates (FY18) these multiples are 19* and 24* repectively.

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