Hem Securities recommends to 'subscribe' to the UFO Moviez IPO

1. Research Analyst : Astha Jain 1
www.hemonline.com
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY
IPO REPORT
UFO MOVIEZ INDIA LIMITED
The company is bringing the issue at price band of Rs 615-625 at p/e multiple of 30-31 on post issue annualized eps of Rs
20.91 per share.
Company being the leading player in the digital cinema space in India works on business model that is focused on creating
value for all stakeholders in the cinema industry. Company being the market leader in reach in the fast growing in-cinema
advertising market in India has advanced end-to-end technology platform with high uptime levels. Also company with its
experienced management team with established track record and strong profitability with diversified and visible revenue
streams is all set to cater future business opportunities present in this sector. Hence we recommend “Subscribe” on issue.
Issue Size Rs 600 Cr
Of Which
Offer for Sale Rs 600 Cr
Fresh Issue ----
Of Which
QIB Category 50% of Net issue
Non Institutional Category 15% of Net issue
Retail category 35% of Net Issue
Eq Sh Pre Issue 25,897,669 Eq Shares
Eq Sh Post Issue 25,897,669 Eq Shares
ISSUE HIGHLIGHTS
Issue Opens On 28th April 2015
Issue Closes On 30th April 2015
Price Band Rs 615-625 per Share
Bid Lot 24 Equity Shares
Face Value Rs 10 Per Share
Listing BSE, NSE
Registrar Karvy Computershare (P) Ltd
BRLM Axis Capital Ltd,
Citigroup Global Markets India Ltd
RECOMMENDATION - SUBSCRIBE
ISSUE BREAK UP
VALUATION

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Company is India’s largest digital cinema distribution network and in-cinema advertising platform (in terms of numbers of
screens) as at October 31, 2014, according to CRISIL. It operate India’s largest satellite-based, digital cinema distribution
network (in terms of numbers of screens) using its UFO-M4 platform, as well as India’s largest D-Cinema network (in terms
of numbers of screens), according to CRISIL. In fiscal year 2014, company digitally delivered more than 1,500 movies in 22
languages to 4,703 screens with aggregate seating capacity of approximately 2.15 million viewers spread across India. Since
the beginning of its operations, company have digitally delivered more than 8,800 movies in India until February 28, 2015. As
at February 28, 2015, co’s global network spans 6,626 screens worldwide, including 4,911 screens across India and 1,715
screens across Nepal, the Middle East, Israel, Mexico and the USA.
Co have created a pan-India, high-impact, in-cinema advertising platform with generally long-term advertising rights to 3,770
screens, with an aggregate seating capacity of approximately 1.85 million viewers and a reach of over 1,800 locations across
India, as at February 28, 2015.
Company deliver movie content through (i) its satellite-based cinema distribution network using its UFO-M4 platform, and
(ii) D-Cinema network:
Company receive revenues primarily from (i) advertisers, through in-cinema advertising, (ii) movie producers and
distributors, for the secured delivery and screening of their movies and (iii) exhibitors, through equipment rental and sales
for digital cinema equipment. Company have a variety of revenue arrangements with exhibitors depending on the technology
format (UFO-M4 or D-Cinema) and investment in equipment.
On December 18, 2014, the Company entered into an investment agreement with Valuable Technologies Limited (one of co’s
Promoters, referred to herein as “VTL”), VDSPL and other parties for the acquisition of the entire equity share capital of
VDSPL, in two tranches. The Company completed the acquisition of the initial tranche for cash consideration of
approximately ₹44.01 million, with VTL and other parties having transferred to and VDSPL having issued and allotted to the
Company a total of 11,580 equity shares representing 80% of the equity share capital of VDSPL as of January 6, 2015.As at
February 28, 2015, company have 1,669 advertisers that company work with in India. None of co’s advertiser customers have
contributed more than 10% of its consolidated total revenue for the past three years. As at February 28, 2015, company have 1,664
movie producers and distributors that company work with in India. As at February 28, 2015, company have 3,462 exhibitors’ screens
in India.
VDSPL is an India-based business that has two primary operations:
 The “Club Cinema” business provides digital screening of movies in clubs and community centres at private screens, such as
remote industrial townships, corporate auditoriums, educational institutions and other leisure and entertainment
complexes. Club Cinema provides a complete digital cinema solution for screening of recently released films outside of
traditional cinemas, facilitating content acquisition for such screening from movie producers and distributors and renting
and provision of digital cinema equipment.
 The “Caravan Cinema” business provides movie screenings with low capital expenditures in targeted rural areas, especially
“Haats” (weekly market place at villages), creating a unique opportunity for advertisers to reach a captive audience by
partnering with various brands. Currently, movies are screened free to viewers and Caravan Cinema derives its revenues
through advertising.
Proceeds of the Offer for Sale
The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the sale of
Equity Shares by the Selling Shareholders. Further, company expects that listing of the Equity Shares will enhance its
visibility and brand image and provide liquidity to its existing shareholders. Company will not receive any proceeds of the
Offer and all the proceeds of the Offer will go to the Selling Shareholders.
BUSINESS OVERVIEW
OBJECTS OF ISSUE

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COMPANY’S STRENGTHS
 Leading player in the digital cinema space in India: Co’s end-to-end, high-quality digital cinema solution has made it an
essential partner for movie producers, distributors and exhibitors in India. Co has helped it to create the leading digital
cinema distribution network, in terms of market share, size and scale. According to CRISIL, company have an overall 54%
market share in India’s digital cinema exhibition industry in terms of screens that use digital cinema distribution
networks. Company have grown the number of screens that use co’s digital cinema distribution network in India from
1,817 as at March 31, 2010 to 4,911 as at February 28, 2015. Co have established its market share with its pan-India
presence, with a network of sales offices and service centres with field engineer staff across India, and a dedicated
workforce, with inhouse teams for software development, advertisement sales and repairs and maintenance. Further,
according to CRISIL, the Indian film industry is expected to continue growing despite the growth of digital entertainment
(i.e. entertainment delivered through mobile and the internet).
 Market leader in reach (in terms of number of screens) in the fast growing in-cinema advertising market in India:
Co’s in-cinema advertising platform can offer advertisers value through being a pan-India, high impact platform that
enables them to reach a targeted, captive audience with high flexibility and control over the advertising process, along
with high levels of transparency. Co’s in-cinema advertising platform offers a greater advantage to the advertising
platforms offered by large Indian cinema chains because it can provide reach to over 3,700 screens spanning 1,800
locations across India as at October 31, 2014, which, according to CRISIL, is six to seven times greater than PVR Cinema,
the largest cinema chain in India, thereby making it a market leader in terms of reach (through number of screens) in
India. As of February 28, 2015, co’s in-cinema advertising platform provided reach to over 3,700 screens spanning over
1,800 locations across India.
 Advanced end-to-end technology platform with high uptime levels: Cos have built an advanced end-to-end technology
platform in India backed by a dedicated workforce, with inhouse teams for software development, advertisement sales
and repairs and maintenance. With respect to co’s UFO-M4 platform, its use of satellite technology, enabled with its
advanced UFO-M4 compression and encryption technology, provides it with technological advantages, including the
ability to deliver high quality movies on a real time basis with lower bandwidth requirements, remote capability in
approximately 3,330 screens, advanced security features and flexible management of operations.
RISK FACTORS
 Company is presently involved in certain disputes with Real Image Media Technologies Private Limited, its competitor,
with respect to certain patents held by Real Image. If such disputes are decided against company or are not settled on
terms favorable to company, or at all, it would have a material adverse effect on Co’s business, financial condition,
results of operations, prospects and reputation and may also have a material adverse effect on co’s stock price.
 Co depend on its relationships and agreements with movie producers and distributors, with advertisers, agreements
with exhibitors and any failure to maintain these relationships, or to establish and capitalise on new relationships,
could have a material adverse effect on co’s business, prospects, financial condition and results of operations.
 A significant portion of co’s advertisement revenue are derived from its advertising contracts with the Indian Central and State
Governments and Public Sector Undertaking (“PSU”) customers. Further, a significant portion of co’s VPF D-Cinema is
collected from the D-Cinema screens of PVR Cinemas in India. If co’s relationship with PVR Cinemas deteriorates, or they
demand a higher share of VPF D-Cinema, its revenues and results of operations will be adversely affected.

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FINANCIAL STATEMENTS
Consolidated Financial Statement Rs Crore
Particulars FY’11 FY’12 FY’13 FY’14 9MFY15
Total Revenue 108.80 206.71 336.23 420.43 354.74
Total Expenses 97.12 155.35 230.55 289.39 236.19
EBIDTA 11.68 51.36 105.68 131.04 118.55
EBIDTA Margin 10.73 24.85 31.43 31.17 33.42
Other Income 2.30 7.57 4.35 4.08 6.16
Depreciation 25.42 38.96 53.62 65.47 56.92
EBIT -11.44 19.97 56.42 69.65 67.79
Interest 4.39 11.30 15.19 19.85 15.70
PBT -15.83 8.67 41.23 49.80 52.09
Tax -0.01 2.39 2.41 -1.08 12.70
PAT -15.82 6.28 38.82 50.88 39.39
Minority Interest 0.00 -0.12 0.25 -0.78 1.23
Adjusted PAT -15.82 6.15 39.07 50.10 40.62
NPM -14.54 2.98 11.62 11.92 11.45
Equity Capital 20.15 25.90 25.90 25.90 25.90
Reserves 116.48 283.82 320.64 374.28 416.01
Net Worth 136.63 309.72 346.54 400.18 441.91
EPS -7.85 2.38 15.08 19.34 15.68
Book Value 67.81 119.59 133.81 154.52 170.63
ROE % -11.58 1.99 11.27 12.52 9.19
ROCE % -6.7 5.4 13.1 13.9 12.5
Debt To Equity ratio 0.24 0.19 0.25 0.25 0.23
Companies# EPS( Basic) PE Ratio RONW % NAV /Share Face Value Std/Consol
UFO Moviez (FY’14) 19.34 --- 12.52 154.52 10.00 Consolidated
Entertainment Network** 17.54 21.11 15.70 111.72 10.00 Consolidated
Inox Leisure ** 4.85 23.57 8.31 46.23 10.00 Consolidated
TV18 Broadcast ** 0.61 41.72 3.38 17.92 2.00 Consolidated
PVR Ltd ** 13.72 34.11 15.65 87.14 10.00 Consolidated
Zee Entertainment** 9.19 29.56 33.99 27.33 1.00 Consolidated
** Source : Prospectus
#: For the year ended on March 31,2014
COMPARISON WITH OTHER LISTED PLAYERS

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Disclosure of Interest Statement
1. Analyst Ownership of the Stocks No
2. Hem & its Group Company Ownership of the Stock No
3. Hem & its Group Company Director Ownership of the Stock No
4. Broking relationship with Company covered No