DB Corp

D B Corp is entering the capital market on 11th December 09, with a public issue of 181.75 lakh equity shares of Rs.10 each, in the price band of Rs. 185 to Rs. 212 per share. Of this, fresh issue is of 127.25 lakh shares, while offer for sale, is of 54.50 lakh shares. The proposed IPO will result in 10% equity dilution, with promoters' stake to be placed at 86.34%, of post issue equity, of Rs. 181.52 crores.

The company is offering a discount of Rs 2 to retail investors, on the discovered price, which seems like peanuts, more of an insult to retail category. It would have been better, if the company had not have given this discount.

The company needs to be compared with the listed peers, with similar size and reach, and on these parameters, HT Media and Deccan chronicle are the fit peers to compare. The company is bit weak on financials when compared with its peers but  has certain advantages over those two, in respect to face value of share at Rs.10 of the company as against Rs.2 of those two  and second being high promoters' stake at 86% against 64% of Deccan and 69% of HT Media.

Now, coming on financial performance, this company is on a weak footing as evident from the financial performance of other two listed peers. D B Corp for FY 09, had total income of Rs. 961 crores with PAT at Rs.35.90 crores, resulting in an EPS of Rs. 2.12. Deccan, for FY 09, had total income of Rs. 858 crores with PAT at Rs. 140 crores, on an equity base of Rs. 49 crores, resulting in an EPS of Rs. 5.72 while HT Media had a total income of Rs.1,360 crores with PAT at Rs. 85 crores, on equity of Rs.47 crores, resulting in an EPS of Rs. 3.64.

For 6 months ending 30-9-09, D B Corp had a total income of Rs. 524 crores with PAT at Rs.91 crores, resulting in an EPS of Rs. 5.40 for the period. H T Media had total income of Rs.690 crores with PAT at  Rs. 64 crores, translating into an EPS of Rs. 2.75, while Deccan had total income of Rs.482 crores with PAT at Rs. 177 crores, resulting in an EPS of  Rs. 7.25.

The market capitalization of D B Corp, at the upper band would be close to Rs. 3,850 crores, while that of H T Media is at Rs. 3,400 crores and Deccan at Rs. 3,800 crores. Deccan is presently ruling at PE of 10 times, based on expected EPS of Rs. 15.40 for FY 10 while H T Media is ruling at PE of 24 times. As against this, D B Corp, at the upper band is seeing shares, issued at a PE of about 19 times. Also, vernacular print media rules at lower valuations on bourses as compared to English language.

Considering the presence of the company with 7 newspapers, 48 newspaper editions, 128 sub- editions, as also, 31 facilities spread across 31 cities, with combined average daily readership of 1.55 crore readers, the company would get placed in the upper league of print media with other listed peers. Even the debt burden of the company is comparable with other two listed peers.

Keeping all these facts in mind, issue at Rs. 185, being its lower band, looks attractive while at Rs.212, being its upper band, does not leave anything on the table for the prospective investors, as better alternatives are available in the secondary market.