DB Corp price band Rs185-212

Leading media house DB Corp Ltd, the publisher of Hindi daily Dainik Bhaskar, Gujarati daily Divya Bhaskar, Hindi business daily Business Bhaskar and MyFM radio services, has set a price band of Rs185-212 per share for its initial public offering of 1.81 crore equity shares.

The issue opens on Friday, December 11, and closes on Tuesday, December 15. It offers a discount of Rs2 per share to retail investors.

Based on the price band, DB Corp would be raising around Rs336-385 crore.
Speaking at a media conference to announce details of the issue, Ramesh Chandra Agarwal, chairman of DB Corp, said, “The way we have won the trust of readers across states, across geography and across languages, similar would be our endeavour to win the trust and confidence of the investors and the markets.” 

Of the proceeds of the IPO, a chunk will be used to consolidate the company’s position in existing markets by upgrading infrastructure. It will also enter some new markets by setting up publishing units.

DB Corp also plans to utilise Rs110 crore to repay debt and Rs20 crore to lower working capital loans. The company is focusing on increasing its reach in Tier II and III cities where consumption is growing at a faster pace and is higher than Tier I cities.
This offers a tremendous opportunity for regional players like DB Corp to leverage on increase in advertisement spends by companies in these areas, the company said.
There has also been a shift from advertisement spends from English dailies to regional newspapers in the recent past.

Of the total print advertising pie, the language media had a 40% share in 2003. This figure rose to 54% in 2008. Slightly over three-fourths of DB Corp’s annual revenues come from advertisements. Advertisement revenues have risen at a compounded annual growth rate of 27% for the company in the last couple of years. Any reduction in adspends or loss of customers due to economic downturn or inability to attract new customers could have an adverse affect on DB Corp’s revenues, the company said. Further, the print business is dependent on supply and cost of newsprint, which may affect the margins, the company has cited among risk factors.

DB Corp revenues have grown at CAGR of 19.43% over FY07-09 period. In FY09, it reported net profit of Rs47.7 crore on a total income of Rs960.99 crore. While in the first half this year, it has already generated total revenues of Rs524.39 crores with a net profit of Rs95.53 crore. Based on the fact that the company traditionally gets 55% of total annual ad revenues in second half of the year, it is expected to report around Rs210 crore of net profit for FY10.

The consolidated EPS for FY10 thus works out to Rs11.60. At the upper price band of Rs212, it would result in a PE of 18.27, which is much better than industry average of 28.2 and other peers. The IPO has been assigned a rating of ‘IPO Grade 4/5’ indicating that the company has sound valuations, and above-average fundamentals compared with peers.

Disclaimer: DB Corp has no involvement in Diligent Media Corporation Ltd (DMCL) which publishes the DNA newspaper. But the promoter of DB Corp is also the promoter of DMCL.