IPO Update : Prime Focus Ltd.

Nice Visual-effects, but an expensive IPO


Prime focus is entering the capital markets with a public issue of Rs. 115 crore at a price band of Rs.450-500. Investment guru is of opinion that though the company’s business prospects look good, the issue has been priced very aggressively which takes the sheen out of the offer. However, if we go by the track record of IPO listing, many aggressively priced IPO’s have also delivered good returns on listing. One should consider subscribing to the IPO with above factors in mind.


Let’s Focus on Prime Focus Ltd.

Prime focus is one of the leading integrated end to end post production and visual effects services house in India. The company offers a wide spectrum of services ranging from visual effects, digital film lab, telecine, editing, and motion control to High Definition production.

The post-production industry is currently estimated at Rs.500 crore and is expected to grow to Rs.1,000 crore by 2007. International outsourced work and mainstream films, currently accounting for Rs.65 crore of the total market is estimated to grow to Rs.400 crore.
The Indian film industry's contribution towards visual effects and postproduction is expected to grow from the current size of Rs.52 crore to Rs.143 crore by 2008

The company has posted net profit of Rs. 11 crore on a revenue of 33 Crore for the nine months ending 31st December,2005.

The weighted average EPS stood at Rs. 6.54 which translates into a P/E of 76 at the higher price band. Even if we consider the fact that the company is on a strong growth track and consider its last years EPS , the P/E comes to 53 at the higher band. The company has stated that there are no listed peers in the market.

Return on net worth was 26% for year ended 31st March 2005. Weighted average return for last three years comes to 22%. Net Asset Value for the nine months ended on December 31, 2005 is Rs. 64.49.

The company holds 55% of the share capital of VTR plc bought at a price of 35 pence per share against the current market price of 28 pence per share. VTR plc is a loss making company and is not doing well. The losses of this subsidiary will eat into the profits of Prime Focus.

Adlabs Films holds 482,000 shares of the company bought at a price of Rs. 97 per share. The company has an agreement with Adlabs wherein the terms give Prime Foces a non-transferable, non-exclusive right and license to use the brand of Adlabs Films in
consideration of royalty of Rs 12,80,000/- per annum.

Reliance capital holds 15,00,000 shares of the company.

Issue opens : 25-05-2006
Issue Closes : 31-05-2006
Regisrar : Intime Spectrum

10 comments:

MUKESH said...

WHAT IS YOUR OPINION ON THIS IPO. SHOULD WE GO FOR IT OR NOT ? MOST ANALYST ARE POSITIVE ON THE IPO.

Anonymous said...

Sir, Blueplast is coming with IPO in the 1st week of June. What is your views on the company. The offer price is Rs.32.
thanks
uday

krishankumar said...

sir please suggest if
petronet lng
gujarat ambuja exports

can be invested from six months perspective
as the earlier blog in which you
recommended these stocks was prior
to the market fall...

please sir

i value ur advice...

regards...

krishankumar

Anonymous said...

Hi Rajesh,

how does the markets looks with one month's timeframe? I want to invest some money for 1 month and cannot afford to extend my position beyond this. please suggest some stocks for this level.

Anonymous said...

markets are volatile . Put your MONEY in mUTUAL fUNDS.

Rajesh Soni said...

Hi Mukesh
I have mentioned the facts on the IPO in my post It all depends on your risk taking capacity.

Rajesh Soni said...

Hi Uday,
I have not studied the company yet. Will out a post near the IPO date

Rajesh Soni said...

Hi Krishna Kumar
After the recent crash in stock markets, the mid caps have shown a stagnant growth in terms of stock prices. It is a general phenomenon that after such a drastic fall , investors shy away from such stocks and prefer to be with large caps.

The current market scenario suugests that it will take some time for the markets to stabilise since the overall signals from FII's are also negative.

So, essentially you will have to extend your duration from 6 months to one year. I would suggest that you invest in petronet LNG at this stage and wait for some more time for Gujarat ambuja export.

Rajesh Soni said...

Hi anonymous
From one month's prespective the markets would continue to have volatile sessions with profit booking coming at every high levels. This is a side effect of a big fall in markets, so we have to live with it for some time. For one month , you better stick to some large cap stock like Reliance or infosys or any other fundamentally strong stock. They will at least give you more than bank interest.

Ankit Singhal said...

Whats your opinion on Air Deccan IPO. I have invested in that