The Hindu Business Line : Broadcast Initiatives: Avoid

Investors can avoid the initial public offer of Broadcast Initiatives (BI), given that the company's plans are at a nascent stage and the success of its channels is yet to be demonstrated. The company operates the Janmat channel and plans to air a Marathi entertainment channel — Mi Marathi. Janmat.

While attempting to be different from others in the Hindi news channels space, it has in the short span since launch not made a significant mark amidst the clutter in that space. Mi Marathi is to be launched shortly and may provide some scope for revenue growth.

However, it may take more than a year before the broadcaster establishes a brand presence and ramps up market share. Given the poor earnings visibility at this stage and the presence of several listed options in the media sector at similar valuations, investors can wait for the channels to gain traction before considering exposure to the stock.

Background

The Sri Adhikari Brothers-promoted BI launched the Janmat channel officially in April 2006. The channel has a presence in the Hindi-speaking regions. Financials are available only for a five-month period and extrapolating this for the future can be misleading.

The company is likely to continue to register losses until it ramps up market share. It will operate its Marathi entertainment channel, Mi Marathi, through its subsidiary Sri Adhikari Brothers Media. The channel will be launched by the end of the month.

As both the channels are currently free-to-air, BI depends mainly on advertising income for revenues. Unlike other pay channels in the news space, the company may not benefit from a monetisation of viewership, because of the implementation of CAS. The company has tied up with NDTV media to manage its airtime sales.

BI will raise about Rs 100 crore at the upper end of the price band of Rs 100-120. About Rs 50 crore would go towards construction of a studio and investment in production and broadcasting equipment. Currently all its equipment are hired and even the uplinking is outsourced to Essel Shyam Communications. BI will also prepay loans worth Rs 25 crore from the offer proceeds.

Niche within a niche

The Hindi news genre has been a fast-growing market as it combines the distinctive target audience of news channels with the reach of regional channels. However, this has attracted several players, with Aaj Tak, Star News and NDTV India being the dominant ones while Zee News, IBN 7, Sahara Samay, India TV and DD News battling for market share.

Amidst the clutter, Janmat has been positioned as a "views" channel that focuses on discussing current affairs and on being a forum that would encourage greater viewer participation. Panel discussions and talk shows hosted by popular anchors such as Vir Sanghvi and Sekhar Suman on subjects that range from current affairs to social problems to lifestyle issues are likely to dominate the programming mix.

While the focus on "views" is likely to demand fewer resources than what would be required to break news, delivering programmes with strong content on a sustainable basis would be a challenge.

Also, given its analyses thrust, the channel may not enjoy the frequency of viewership that is typical of news channels. It may take time for such a channel to gain acceptance with viewers and to garner recognition from advertisers.

The company has just announced that it would be tieing-up with Jump TV, an IPTV (Internet Protocol Television) broadcaster, to take its channel online, after the IPO. This may provide an additional stream of subscription revenue. BI's promoters have experience in Marathi entertainment and the new channel may enjoy brighter prospects in the less competitive language space. However, it is early days and a wait-and-watch approach might be appropriate for now.

Offer details: About 85 lakh shares are on offer. The promoter's stake would fall to 55 per cent, post-offer, on the back of an 80 per cent expansion in the equity base. The lead manager is Allianz Securities. The offer closes on February 14.

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