CRISIL assigns IPO grade `4/5` to Hindustan Media Ventures
Credit raring agency, CRISIL Equities has assigned a CRISIL IPO grade of `4/5` to the proposed initial public offer (IPO) of Hindustan Media Ventures (HMVL). This grade indicates that the fundamentals of the IPO are above average relative to other listed equity securities in India.
However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instruments future market price or its suitability for a particular investor.
The IPO grade assigned to HMVL takes into account its presence in the Hindi newspaper industry, which is expected to grow faster than the overall newspaper industry.
The higher growth in the Hindi newspaper industry is expected as a result of a rise in readership due to an improvement in literacy rate, increasing penetration and strong domestic consumption-driven growth in the rural markets especially where HMVL is present.
HMVL`s newspaper Hindustan, the third largest Hindi newspaper with readership of 9.9 million is poised to benefit given the strong growth potential. HMVL is the market leader in Bihar/Jharkhand, the second largest Hindi daily in Delhi/NCR and the third largest Hindi daily in UP/Uttarakhand.
The grade also takes into account HMVL`s strategy to deepen its presence in the existing markets through (a) establishing new printing units in sub-pockets and (b) increasing the printing capacities of its existing units.
Also, the company`s plans to consume higher proportion of domestic newsprint will help reduce overall newsprint cost and effectively manage raw material costs. The grade also factors in HMVL`s zero debt position post the IPO.
The Hindi newspaper business was carved out from HT Media, the parent company, in December 2009.
However, CRISIL Equities believes that synergies between the parent company and HMVL will continue to benefit HMVL in terms of access to national content, combined go-to-the-market options, raw material procurement, industry experience and corporate governance practices.
The grade has factored in the entry of DB Corp (the second largest Hindi daily) in Bihar/Jharkhand expected in H2CY10, which will increase competition in the region.
Also, in UP/Uttarakhand, which is the largest market for Hindi newspapers, HMVL currently has a smaller presence compared to competitors like Dainik Jagran and Amar Ujjala.
Source : My iris
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Category: IPO
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