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Entertainment companies join race to go public

Zee Telefilms and Adhikari Brothers are the pioneers who started the trend of entertainment companies going public. Both had opened their shares at par in

Earlier there were innumerable finance companies in the market, where are they today? Now it is the time of entertainment software companies because leaders like Zee and Adhikaris have set a good example -- Shyam Malpani, financial expert

the market some five years ago and today their shares are selling at mind-boggling premium in the market. Adhikari’s share stands at Rs.1860. Share prize of Zee Telefilms has increased by 100 per cent since the financial year 1998. Opening price of the share of TV18 was 182, today it is selling at Rs.1650. It has been a vertical climb and the buyers are going crazy. The figures are so lucrative that anybody who is somebody in entertainment media is either going public of is in the process of doing so, a trend that is scary for the finanicial circuit.

According to Shyam Malpani, CA and a financial expert on the matters of share market, “Such trends are always visible in the market. Earlier there were innumerable finance companies floating in the market, where are they today? Now it is the time of entertainment software companies because leaders like Zee and Adhikaris have set a good example. But only the ones with good package will last. Rest will perish within a year or so.”

Cinevista too is going public. On February 7, during book building only, the company got a premium of Rs.300 on the original price. Cinevista cashed for a mininum of investment of Rs.10 lakhs (5000 shares) their shares were sold for Rs 500 black. It was also 90 times over subscribed. According to company spokesperson, “We did not expect such response, but it was good for our moral.”

Nimbus too, is going the same route. Their price bond is between Rs.300 to 400 and they are looking for an issue of 192 crores. Last week only they have filed prospects to pave way for this move. Another is Yash Management and Satellite Ltd. In the last three months their share price went up by 22 times.

What is it that fetches such a overwhelming response in an otherwise slow growing share market and how long will it last? “Of late entertainment companies have scaled heights and set the trend. Due to advertisers and sponsors, huge wealth accumulation is anticipated. On the surface, everything is hunky dory. Television is growing in software technology and looks lucrative. Gradually this boom is going to settle down. Since it is going high tech, companies with their own channel will do much better than others.
Originally they have shot up un-proportionally but within two years we will see the true worth of each,” said Atul Mehta, financial advisor to Film Center.

This boom, in the meanwhile, is inspiring many more to rope in public money. Creative Eye, Raman Kumar, Ekta Kapoor, Devgan Productions and quite a few others are eyeing the huge market to generate funds and expand. However, the moot question is that when private channels are funding the producer for programmes and when on DD one can start recovering cost within 30 days, where is the need to bring in such huge public money? It is not enough to merely say that ‘market is good’. “We are turning into broadcasters by mid March. Investment in such activities is much higher than one’s own capacity. If I were only a production house I could have managed with my own funds, but now I do need larger funds to grow as a channel. I’ve not jumped on the bandwagon just like that,” said Markand Adhikari, justifying his move.

According to Uday Merchant, a stock exchange expert, “it is the outcome of a gap between demand and supply. Zee and Adhikari did well, so investors expect all of them to give the same results. Media companies are encashing on this belief. The info tech companies and the media barons will boom for another six months. Then there will be no takers for the B grade companies. Only the ones who are performance oriented will stay. The rest will be gone like the finance companies.” He believes that it is simply the case of more money chasing fewer stocks.

So is it a bad bargain to invest in entertainment software companies? No, say most of the experts, but the investor must be careful of the strength and track record of the company. Their growth and future expansion, including the necessity to go public should also be taken into consideration. As RP Goyal, ex-chairman State Bank of India said, “Entertainment will never go out of fashion and media software companies will grow more for at least another 5 years. It has a good market. The software industry growth has given it tremendous scope but only the fittest and professionally managed companies will survive it.”

In short, reap the harvest while the going is still good.

Neelam Gupta