The Hindu Business Line : Repro India: Avoid

REPRO India is making a public offer to be priced in the range of Rs 145-Rs 165. The offer is priced at 17 times its annualised FY-06 earnings per share (based on half year ended September 05 earnings). We believe the Repro India offer is aggressively priced vis-à-vis its peers.

The company is not on the same league as Macmillan though it demands a higher valuation. Macmillan has the advantage of a strong parent backing with continuous flow of work from abroad; higher proportion of contractual work ensuring a smooth revenue flow, wider array of products and better margins.

Repro does project-specific work and is gradually getting into contractual work. This subjects the company to revenue fluctuations, as is reflected in the financials for the last five years. The company does not have the comfort of a multinational parent to ensure continuous flow of orders. Repro is now trying to expand its content outsourcing business, which is the high-end work where margins are superior. Macmillan is already established in this business, giving it an edge.

Revenues from the domestic market have shrunk and so have margins, offering limited scope for growth. This depends on the company's success in getting a higher share of the clients' print budget.

Consistency of workflow would depend on the company's success in procuring contractual work orders. As the company is yet to make a headway in this direction, the revenues and earnings might be subject to fluctuations in the near term.

Plus points

Repro India is predominantly in the English language books and publishing segment, which includes specialty publishing such as children's books and educational manuals for corporates. The possibility of maintaining margins is higher in this segment compared to the vernacular publishing segment.

Publishers in the UK and the US — the company's key markets — are looking at outsourcing a higher portion of their work to low-cost locations such as India. India is expected to get more of the high-end work in future. The children's books segment, where Repro has a good presence, is growing at a faster pace. Despite the positive growth outlook, the offer is expensive.

From the offer document: Repro India is an integrated player in the publishing industry. Its current business involves printing and publishing services for magazines, books, children's books, brochures, pamphlets, annual reports and investor communications for corporates and educational manuals for IT companies. It primarily caters to the US and UK markets. Africa is another potential market. The issue proceeds would be used to expand its printing and publishing facility and set up infrastructure for content process outsourcing.

Issue details: Repro India is making a public issue of 26.2 lakh shares in the price band of Rs 145 to Rs 165. The issue would constitute 25 per cent of the post issue capital. It opens on November 28, and closes on December 1. Enam Financial Consultants is the lead manager to the offer.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

More Stories on : Public Offer | Recommendation | Stocks