Shree Ashtavinayak Cine Vision Ltd.

Background:

• The company was incorporated in the year 2001 as Ashtavinayak Cine Vision Pvt. Ltd. to carry on the business of producing television serial. Subsequently in the year 2004 company’s name was changed to Ashtavinayak Cine Vision Ltd. (ACVL) with shifting focus from producing television serial to production, distribution and exhibition of films.
• ACVL is an integrated player in the commercial motion picture segment with presence from production to distribution to exhibition. Company had produced four films and distributed 23 films till Oct 2006. Company has tied up with 31 theatres across Mumbai Territory for exhibition of films.
• ACVL has entered into an agreement with K Sera Sera Production ltd and Studio 18 a division of Network 18 Fincap Pvt. Ltd. for films production and cost sharing for films.
• For the financial year 2006 film production, distribution and exhibition constitutes 51.66%, 44.35% and 1.43% of topline while for the month ending 31st July it was 60.2%, 39.3% and 0.7% respectively.
• Post issue share holding of the promoters will be at 67.1% from 100% at present.

Objects of the issue:

• To finance the estimated expenditure for Production of three films.
• To Purchase equipment for Film Production.
• For general corporate purposes.
• To meet issue expenses

Strength:

• Presence of company in the entire key segments of film value chain i.e. Production, Distribution and Exhibition allows ACVL to be free from external dependence.
• ACVL’s PAT for the month ended 31st July 2006 stood at Rs. 6 crores and is 80.5% of PAT earned for the financial year 2006. Company is already earned substantial PAT as compare to PAT in 2006 and is expected to report whopping bottomline for FY 2007.
• Proceeds from the IPO will be used to prepay high interest loan that will lead to reduction of interest expenses.

Weakness:

• The company has an established distribution network only in Mumbai Territory. and hence ACVL is largely dependent on revenues from Mumbai territory.
• CRISIL has assigned a “Grade 2” to the proposed initial public offer of Shree Ashtavinayak Cine Vision Ltd. Grading are on a five point scale from 1 to 5, with IPO Grade 5 indicating strong fundamentals and IPO Grade 1 indicating weak fundamentals.
• The shelf life in the nature of commercial theatrical screening of the films has reduced from more than one year to less than 6 weeks.
• Company face competition with corporate houses like Mukta Arts Ltd, Pritish Nandy Communications Ltd, Sahara One Entertainment Ltd among others. With a number of corporate houses diversifying into film production and distribution and liberalization of FDI norms in film industry the competition may significantly increase.

Valuation:

• ACVL has shown 620% increase in topline from FY 2004 to FY 2006. Mainly because of increased revenue from production segment. However company has produced only four films till now.
• ACVL’s net worth as on 31st July 2006 stood at Rs. 30.75 crores. While the book value was increased from Rs. 39.58 on 31st march 2006 to Rs.48.40 as on 31st July 2006.
• Post issue EPS based on 31st March 2006 earnings comes out to be Rs. 7.45. Shares are being offered in the price band of Rs. 140 to Rs. 160. The stock is priced at 18.8x at the lower band and 21.5x at the upper band. Industry is trading at an average P/E of 50.2.