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Review By Dilip Davda on April 6, 2019
• VRFSL is engaged in providing localizing services for entertainment/digital industry.
• The sudden spurt in the top and bottom lines for FY18 raises concern.
• The company is spending nearly 18% to raise such a small amount.
• Tiny equity may be the hindrance for migration to the main board in stipulated time.
ABOUT COMPANY:
V R Films & Studios Ltd. (VRFSL) is engaged in the business of providing complete localization services for television, film and digital industry, which consists of dubbing, mixing, subtitling, content editing and content localization services for movies, documentaries, audiobooks, games and TV programmes in regional and international languages. VRFSL also acquires foreign language films mainly from Hollywood and Chinese film industry and dub them in Indian Local language (Hindi, Tamil, Telugu etc.) and then distribute them theatrically or sublicense to sub-distributors across all licensed territories in all licensed languages including English.
Dubbing is a post-production process used in filmmaking, video production and animation in which additional or supplementary recordings are mixed with original production sound to create the finished soundtrack for Original and localized content.
The Company has 3 dubbing studios obtained on rent in Mumbai. Its list of clients includes some of the renowned names in Films and Television Industry such as Viacom 18 Media Private Limited, Sony Pictures Networks India Private Limited, Zee Entertainment Enterprises Limited, Discovery Communications India, Paramount Pictures Corporation, Paramount Pictures International Limited etc.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, VRFSL is coming out with a maiden IPO of 372000 equity shares of Rs. 10 each at a fixed price of Rs. 61 per share to mobilize Rs. 2.27 cr. The issue opens for subscription on 12.04.19 and will close on 18.04.19. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.11% of the post issue equity capital of the company.
Hem Securities Ltd. is the sole lead manager while Link Intime India Pvt. Ltd. is the registrar to the issue. Hem Securities Ltd. is also acting as a market maker for this issue. To raise Rs. 2.27 crore, the company is spending Rs. 0.40 cr. (refer page 77 of the offer documents).
The company has issued initial equity at par and converted equity on business take over process at Rs. 610 per share on incorporation. Thereafter it has issued bonus shares in the ratio of 99 for 1 in February 2019. The average cost of acquisition of shares by the promoters is Rs. 0.10 and Rs. 6.10 per share.
Post issue, VRFSL's current paid up equity capital of Rs. 1 cr. will stand enhanced to Rs. 1.37 cr. post issue.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VRFSL has posted turnover/net profits of Rs. 6.28 cr. / Rs. 0.03 cr. (FY16), Rs. 6.11 cr. / Rs. 0.27 cr. (FY17) and Rs. 12.83 cr. / Rs. 0.98 cr. (FY18). More than doubling top line for FY18 raises concern. For the first seven months ended on 31.10.18 of FY19, it has earned a net profit of Rs. 0.34 cr. on a turnover of Rs. 3.67 cr. The sudden boost in the bottom line for the past one and half year also appears as window dressing before IPO.
For the last three fiscals, VRFSL has posted an average EPS of Rs. 5.85 and an average RoNW of 21.2%. The issue is priced at a P/BV of 1.83 on the basis of restated NAV of Rs. 33.25 as on 31.10.18 and at a P/BV of 2.52 on the basis of post issue NAV of Rs. 24.24.
If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 14.42, thus the issue is fully priced on the basis of the current earnings, but will the company be able to sustain such growth going forward?
COMPARISION WITH LISTED PEERS:
As per offer documents it has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 34th mandate from its stable in last three fiscals. Out of last 10 listings, 2 opened at discount, 1 at par and the balance 7 with premiums ranging from 0.16% to 20%. Thus it has an average track record.
Super performance for FY18 and first seven months raises concern. The issue is priced at an average P/E on the given super earnings, but will the company be able to sustain it going forward? Considering post issue paid up equity level, this company will take longer period for migration to main board. Considering there aspects, cash surplus risk savvy investors may consider investment at their own risk.
Review By Dilip Davda on April 6, 2019
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of V R Films & Studios Limited offers an early investment opportunity in V R Films & Studios Limited. A stock market investor can buy V R Films IPO shares by applying in IPO before V R Films & Studios Limited shares get listed at the stock exchanges. An investor could invest in V R Films IPO for short term listing gain or a long term.
Read the V R Films IPO recommendations by the leading analyst and leading stock brokers.
V R Films IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the V R Films IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for V R Films IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the V R Films IPO.
The V R Films IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit V R Films IPO allotment status to check.
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