Retail investors may avoid the initial public offering of Cyber Media (India) as the risks involved in the projects in the pipeline planned are fairly high. Given Cyber Media's long presence in niche media publications segment, it plans to scale-up its presence in content BPO (business process outsourcing) using its existing customer relationships, especially in the European market. This project is to be launched by May 2006.
While the initial flow of projects for content BPO may not be an issue, managing the challenges of scale-up, process efficiencies, attrition and competition will be fairly stiff. As the company claims that content BPO will be its main thrust area in the coming years, investors will have to assess its track record in content creation and delivery and the right tie-ups with agents in Europe over a longer time frame before taking an exposure in the stock.
Besides this Cyber Media is also launching three media publications that are to be financed through this IPO. As Singapore is slowly emerging as Asia's global hub for biomedical sciences, the company is launching BioSpectrum Singapore, a magazine focused on the nascent field of biomedical sciences. Second, to focus on the growing field of BPO, it is planning a magazine, Global Outsourcing that will focus on the readership in the Indian and American markets. Both the magazines are likely to be launched between May and July 2006. Finally, McGraw Hill, the publishers of BusinessWeek, has licensed Cyber Media to publish BusinessWeek India, subject to permission from the Ministry of Information and Broadcasting.
A chunk of the revenues for these two publications - BioSpectrum Singapore and Global Outsourcing - will be derived from advertising. As these two publications will be aimed at a global audience, the competitive intensity for advertising revenues will be quite high. Unlike information technology, where Cyber Media has operated over five publications in India for long, its exposure to the field of biotechnology and bioinformatics has been of more recent vintage (2002). Though it has run this magazine in the domestic market for over two years now and estimates a readership of 40,000, replicating this experience for a global audience remains untested.
As the quality of content will drive advertising revenues to start with, margins on this magazine will be fairly low for at least a year or two.
Relatively, its BPO publication may be placed on a better footing as it has an established presence in the Indian market.
Given these uncertain variables, the offer price of Rs 60 per share, which works out to a price-earnings multiple of 10 times the annualised per-share earnings for 2004-05, appears to be on the high side.
Cyber Media's integrated model in the publishing businessis a positive. For the nine months ended December 31, 2004, Cyber Media clocked consolidated revenues of Rs 50.4 crore and post-tax earnings of Rs 3.25 crore. The operating profit margin stands at 13.5 per cent, steadily moving up in the last couple of years.
Last year was the best for the print media across an entire business cycle, with advertising revenues driving overall growth for the general and special media.
The real test will be in sustaining this growth over the coming years. Given its long presence in this sector across publications that cover IT, telecom and consumer electronics, Cyber Media will be in a position to maintain its growth momentum.
Moreover, its integrated model has confined its dependence on advertising revenues to about 50 per cent of its consolidated revenues, with the rest coming from multimedia, online, event management and research sources. While this is encouraging, the new projects planned by Cyber Media present a new set of challenges and risks that may impact the group's overall performance.
Facts: Cyber Media is offering 28.2 lakh shares to raise Rs 16.9 crore . The offer opens on May 4 and closes on May 9. The lead manager is Khandwala Securities.