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BAG Films IPO opens today
 
Bag Films at IPO junction
(6 September 2003 3:00 pm)

IPO snapshot

Issue opens 6 September 2003
Issue closes 17 September 2003
Issue size Rs 14.86 crores
Listing on BSE, NSE, DSE
Offer price Rs 10 (Rs 2 each at a premium of Rs 8)
Minimum application for shares in nos: 800. Further multiples of: 100
Lead manager to the issue KJMC Global Market (India) Ltd
Registrar to the issue Alankit Assignments Ltd
Promoters Anurradha Prasad, Rajiv Shukla

Object of the issue

A major part of the issue is proposed for:

  • Production of feature films
  • Financing a new media school
  • Part financing Convergence Studio Complex

Quantitative measures of profitablity

Adjusted Earning Per Share (EPS)

Year EPS Weight Gross
2000-01 0.41 1 0.41
2001-02 0.26 2 0.52
2002-03 0.68 3 2.05
Weighted Average EPS 0.50

EPS takes into account the closing capital.

Price/Earning Mulitple (P/E): 20.16
Based on weighted average EPS at Issue Price of Rs 10

Entertainment/Electronic Media/Software Industry P/E Ratio based on trailing 12 months
Highest 195.8
Lowest 5.7
Average 29.0
(Source: Capital Market, Vol.XVIII/10 August 3, 2003)

Return on Net Worth (RONW)

Year Average Weights Weighted average
2000-01 16.49% 1 16.49%
2001-02 9.95% 2 19.90%
2002-03 13.85% 3 41.54%
Average & Weighted average 13.43% 12.99%

Minimum return on total net worth post issue needed for maintaining EPS at Rs 0.68
For issue at Rs 10
Total net worth after issue (Rs in lakhs) 3,868.93
No. of equity shares after the issue (in lakhs) 590.06
Profits required to get required EPS (Rs in lakhs) 402.59
Minimum required RONW for maintaining above EPS 10.41%

Net Asset Value (NAV) Rs Per share
As at 31.03.2003: 4.93
After Issue: 6.56
Issue Price: 10.00

About the company

B.A.G. Films is mainly into production of TV software for various channels in India. The company also produces corporate and advertisement films, promotional capsules and other non-broadcast videos. The company has started work on alternative sources of revenue through delivery of content on different media such as Interactive Voice Response on mobile phones, Automatic Speech Recognition and Short Messaging Service platforms. It is also planning a foray into feature film production.

B.A.G. Films was incorporated as B.A.G. Films Private Ltd. on 22 January 1993 at New Delhi and was converted into a public limited company vide special resolution passed on 3 March 2001 and renamed as B.A.G. Films Limited on 29 March 2001.

The company is promoted by Anurradha Prasad and Rajiv Shukla, both core media professionals, and claims an on-air programming of more than 1500 hours in diversified software categories and strong relations across all major channels including Star Network, Zee Network, Sahara Television, Doordarshan and a host of regional channels.

Awards

In 2000, B.A.G. Films produced Chalti Ka Naam Antakshari for Star TV, which ran for over 100 telecasts including repeats and which won The Best Musical Game Show at The Indian Telly Awards 2002.

B.A.G. Films' program Haqeeqat on the Sahara Television Channel won the Best Director and Best Screenplay Award at The Indian Telly Awards 2002. It was also nominated in the Long Format Docudrama Category at the Asian Television Awards at Singapore.

Timeline

B.A.G. Films started in 1993 with a talk show on Doordarshan called Aaj Ki Baat and then produced programs like Green File and Awaam Ki Awaaz.

In 1994 as the Cable & Satellite platform was evolving in India and private broadcasters commenced operations with Zee TV, B.A.G. Films produced long running and high quality programs like Zaike Ka Safar and Ru-Ba-Ru for Zee TV. Other programs which have been telecast on the Zee Network of channels are Hit Thi Hit Hai, Do Aur Do Panch, Tum Pukar Lo, Ardhangini, Jugnu Kenda Hai (Punjabi), Mon-niye (Bengali), Shan-e-Punjab (Punjabi), and recently, Sone-te-Suhaga (Punjabi).

In 1996, B.A.G. Films produced a three part series India At 50: The Party Angle celebrating the 50th anniversary of Indian independence for the Star TV network. Since then B.A.G. Films has produced two election series for Star TV - POLL98 and Y-Vote.

In 2000, B.A.G. Films produced Chalti Ka Naam Antakshari for Star TV, which ran for over 100 telecasts including repeats and has won The Best Musical Game Show at The Indian Telly Awards 2002.

In 2002, B.A.G. Films started the soap Kumkum - Pyara Sa Bandhan on Star Plus in the afternoon time band four days a week.

B.A.G. Films' program Haqeeqat on the Sahara Television Channel won the Best Director Award at The Indian Telly Awards 2002. It was also nominated in the Long Format Docudrama Category at the Asian Television Awards at Singapore.

B.A.G. Films has also produced Tedhe Medhe Sapne for Channel Nine, which continued till the channel wrapped up its operation in India due to non-extension of its license by Doordarshan.

B.A.G. Films has experience of producing more than 40 on-air programs ranging from news, chat shows, current affairs, entertainment, soaps, audience based shows, film based shows, infotainment etc. Major clientele includes Doordarshan, DD-Metro, DD Regional, Zee, Zee-Regional, Star Plus etc.

B.A.G. Films' list of popular programs includes, Ru-Ba-Ru (Zee), Picnic Antakshari (DD), Lets Talk (DD-Metro), Chalti ka Naam Antakshari (Star Plus), Rozana (DD-News and now on DD-Metro) and a host of other Hindi and regional programs.

Extracts from risk factors in the prospectus

· The Company is proposing to deploy Rs 916 lakhs out of the proposed issue of Rs 1,486 lakhs towards production of feature films, which amounts to over 60 per cent of funds raised from Initial Public Offer. Such a large proportion of funds earmarked for feature films expose the company to a very significant but unquantifiable risk. The feature films project has neither been financed nor appraised by any financial institution and there will be no monitoring of deployment of funds received for the same under the issue. The appraising agency for the revised cost of project at Rs. 4,524 Lacs (which includes the feature films component) is not participating in the means of finance. The appraisal of UTI / IDBI was at Rs 2,990 lakhs which did not include the feature film project.

· The production of feature films is merely a plan as on date, since the Company has only selected two books for the story of feature films to be produced by it and work on conversion of one of the book into a screenplay has been started. Except this progress, only negotiations have been started with the proposed Director, Coproducer, Leading Star Cast, etc. The final selection of the entire production team will depend upon the availability of the right people, which is very uncertain. This can cause adverse delay in the production of feature films. Further, the first and second feature films, which were planned to be released during Christmas 2003 and Mid-March 2004 respectively, as per the revised schedule of implementation, will now be released in June 2004.

Management Perception: Rights for the two books have been acquired. The Company has provided an implementation schedule of all these steps and is adhering to the same. In the feature film industry there is no "right person". Every major actor or technical person has given flops and hits.

· The company had a large share (32.70 per cent) of other income as a percentage of Net Profit Before Tax (NPBT) for the year ending 31.03.2002. The share of other income as a percentage of Net Profit Before Tax (NPBT) for the year ending 31.03.2003 was 3.26 per cent.

· The net worth of the Company as on March 31, 2003 was Rs. 1,923.73 Lacs.

· A profit making Company for over five years.

· The Company doesn't have any prior experience of producing a feature film. Production of feature films is considerably a different business line altogether compared to the existing business line of the Company.
Management Perception: Considering the new dynamics of the film distribution business, experience does not play much of a role anymore. Many national and international distribution agencies have started operating in India. Using professional distributors and exhibitors for its films in India and worldwide will reduce the risk for the Company.

· The promoters of the Company viz. Ms. Anurradha Prasad and Mr. Rajiv Shukla are first generation entrepreneurs.
Management Perception: The promoters have more than 15 years experience in production of television software and 6 years experience in marketing of airtime on television. Moreover, this Company has been a profit making Company for over 5 years.

· There have been delays in making the planned Convergence Studio Complex and Media School operational.

For risks and prospectus, click here: BAG Films Issue Prospectus


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