The company funds majority of its working capital requirements in the ordinary course of its business from clients’ advances in respect of content sold by it, banks facilities, various financial institutions and unsecured funding as well as internal accruals. Subscribe.

1. www.hemonline.com
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY
Ipo Analysis
Shemaroo Entertainment Ltd Subscribe
Ipo Information
Issue Open Date 16th Sept 2014
Issue Close Date 18th Sept 2014
Price Band1 Rs 155-170 per Share
Face Value Rs 10 per Share
Bid Lot 85 Equity Shares
Issue Size Rs 120 Cr
Pre Issue Equity Capital Rs 19.85 Cr
Post Issue Equity Capital2 Rs 26.91 Cr
Post Issue Equity Capital3 Rs 27.59 Cr
Pre Issue Promoter Holding 90.14%
Listing BSE, NSE
Lead Manager Yes Bank Ltd
ICICI Securities Ltd,
Registrar Link Intime India Pvt Ltd
*Note: 1: Discount of 10% to Issue Price is offered to Retail
bidder
2. Calculated at Upper Price band of Rs 170 /Share
3. Calculated at Lower Price Band of Rs 155/Share
Issue Structure
QIB ---
Non Institutional ---
Retail ---
Research Analyst: Astha Jain
Objects of Issue
Fund working capital requirements
Co’s business is working capital intensive and it fund majority of its
working capital requirements in the ordinary course of its business from
clients’ advances in respect of content sold by it, banks facilities, various
financial institutions and unsecured funding and from its internal
accruals. As on March 31, 2013 and March 31, 2014 Company’s working
capital facilities consisted of Rs 12,211.04 lakhs and Rs 18,309.90 lakhs
respectively, based on the audited and restated standalone financial
statements.
General Corporate Purposes
The proceeds of the Issue will be first utilized towards the aforesaid
items and the balance is proposed to be utilized for general corporate
purposes including strategic initiatives, brand building exercises and
strengthening of its marketing and distribution capabilities subject to
compliance with the necessary provisions of the Companies Act.
Valuation
The Company is bringing the issue at price band of Rs 155-170 per share
which will turn into p/e multiple of 15-17 at post issue FY’14 eps of Rs
10.13.
Company with its presence in various distribution platforms such as
television, home entertainment, digital New Media and other media have
a diverse Content Library, which is growing continuously with the
addition of new releases as well as through catalogue acquisitions. Also,
Co’s recent initiatives as an official channel partner for Google Inc.’s You
Tube is infusing optimism in growth prospects of company.
Hence we recommend ”Subscribe” the issue.
For Private Circulation Only 1 HemResearch

2. www.hemonline.com
Business Details
Co was founded on October 29, 1962, in Mumbai, as a book circulating library. It is an
established integrated media content house in India with activities across content
acquisition, value addition to content and content distribution. In 1979, company set
up India's first video rental business and thereafter in 1987, company forayed into
distribution of content through the home video segment in the video home system
(“VHS”) format. Over the years, company has successfully adapted to changing content
consumption patterns by expanding into content aggregation and distribution for
broadcasting on television platforms. Company is continuing the expansion into New
Media platforms.
Co’s Content Library consists of more than 2,900 titles spanning new Hindi films like
Queen, Bhaag Milkha Bhaag, Dedh Ishqiya, The Dirty Picture, Kahaani, OMG: Oh My
God!, Black, Ishqiya, Ajab Prem Ki Ghazab Kahani, Omkara, Dil Toh Baccha Hai, Bheja
Fry 2, amongst others. Hindi films classics like Zanjeer, Beta, Dil, Disco Dancer,
Mughal-e-Azam, Amar Akbar Anthony, Namak Halaal, Kaalia, Madhumati etc., titles in
various other regional languages like Marathi, Gujarati, Punjabi, Bengali among others
as well as non-film content. Company is one of the largest independent content
aggregators in Bollywood. Currently, company distribute content over which company
have either complete ownership rights or limited ownership rights. Titles over which
company have complete ownership rights are referred to as “Perpetual Rights”,
which allows it to distribute content worldwide for a perpetual period across all
mediums. Titles over which company have limited ownership rights are referred to as
“Aggregation Rights”. Aggregation Rights are restricted by either period of usage,
distribution platforms, medium and geography or combination thereof. Titles where
company have Perpetual Rights or Aggregation Rights are known as co’s “Content
Library”.
Company distribute its content through various mediums such as (i) television such as
satellite, terrestrial and cable television; (ii) New Media platforms consisting of
mobile, internet, direct to home (“DTH”) and other applications; (iii) home
entertainment; and (iv) othermedia.
Co’s recent initiatives include tying up as an official channel partner for Google Inc.’s
You Tube where company is managing 32 channels. Company is also moving beyond
providing just content, to providing content management solutions to partners
including Reliance Communications Re1 WAP store and Airtel digital television in
connection with an interactive devotional service, namely “iDarshan”.
For New Media platforms, company have tied up with more than 100 labels or content
providers who provide company with a range of content including music, videos,
imagery content, games, applications, celebrity chats, text content, and voice based
services etc.
Co’s Content Library includes a mix of Hindi films, regional content, devotional
content, and special interest content. The ongoing addition to co’s Content Library
helps company generate diversified revenues and reduce its reliance on the success of
a single film. The size, extent and diverse nature of co’s Content Library allow
company to package and distribute a diverse portfolio of content together, such that
company is able to maximize its return on an aggregate basis. For example, co’s
television syndication strategy is driven by licensing a package of films to television
channels.
For Private Circulation Only 2 HemResearch

3. www.hemonline.com
Sectoral Outlook
Film- Industry Growth Drivers
Distribution – Digital dominance is here
Over the past few years the industry has steadily shifted from releasing films
with physical prints to digital distribution. The share of the digital format has
increased from roughly 50 percent in 2010 to around 80-90 percent in 2012.
Digital distribution has enabled films to broaden their reach and do it far quicker
than ever before. Distributors are now able to capture revenues in a shorter time
frame by having same-day release across theatres and pre-selling C&S rights.
Most films now garner about 60-80 percent of their revenue in the first week of
release.
Evolving production approach
Production houses are now focusing on producing films which are based on
strong content (storyline), small budgets and nonstar films with aggressive
marketing and distribution spends. The success of Vicky Donor marks the change
in the content strategy of the Indian film industry.
The advent of organized funding
Sourcing of film financing has been largely unorganized due to high risk nature of
the business. However, with scaling up of revenues, Indian films are increasingly
attracting private equity / venture capital funding from institutions directly.
Cinema Capital, a venture capital fund focused on the film and entertainment
sector has recently funded films like ‘Heroine’, ‘Bol Bachchan’, ‘Chakravyuh’ and
‘Dabangg2’. Highground Enterprises, Magus Entertainment and Springboard
Ventures are some of the other venture capital firms investing in Indian films.
After a lull in interest from film funds and other venture funds’ interest in the film
business, 2012 saw a revival of interest. This indicates the growth of organized
film financing for the film industry, and is expected to sustain and grow in the
years ahead.
For Private Circulation Only 3 HemResearch

4. www.hemonline.com
Rationales
Shemaroo, an Established Brand Name
On October 2012 “Shemaroo” brand completed its 50th year of existence. From
1962 to date, the “Shemaroo” brand has been used by company in various media
related activities including books and magazines rental business, a video rental
business, content aggregation, content distribution, home video distribution and
content creation. Over the years the “Shemaroo” brand has high consumer recall
as being associated with quality entertainment. Co’s content appears regularly on
several television channels and is widely available on New Media platforms such
as mobile and internet and across a vast network of retail outlets. This gives the
“Shemaroo” brand a considerable and constant media visibility.
Vast, Diverse and Growing Content Library
Company have a diverse Content Library, which is growing continuously with the
addition of new releases as well as through catalogue acquisitions. This enables
company to distribute to platforms catering to a wide range of audiences. Co’s
Content Library consists of more than 2,900 titles spanning new Hindi films like
Queen, Bhaag Milkha Bhaag, Dedh Ishqiya, The Dirty Picture, Kahaani, OMG: Oh My
God!, Black, Ishqiya, Ajab Prem Ki Ghazab Kahani, Omkara, Dil Toh Baccha Hai,
Bheja Fry 2, amongst others. Hindi films classics like Zanjeer, Beta, Dil, Disco
Dancer, Mughal-e-Azam, Amar Akbar Anthony, Namak Halaal, Kaalia, Madhumati
etc., titles in various other regional languages like Marathi, Gujarati, Punjabi,
Bengali etc., as well as non-film content. Company have built a vast library of
content ownership through Perpetual Rights and Aggregation Rights. As of July 31,
2014, Company has Perpetual Rights for 759 titles out of which 355 are Hindi
films. Company have Perpetual Rights over content like Beta, Dil, Xcuse Me, Mann,
Raja, Masti, Chal Mere Bhai, Dus, Shool, Aankhein, Love Ke Liye Kuch Bhi Karega
and other classics like Anari, Jab Jab Phool Khile, Neel Kamal, Kaajal, and Shiva.
Company have strong content identification and acquisition capability as a result
of co’s experienced management team which is focused on commercial viability
backed by stringent legal and technical processes.
Diversified Distribution Platforms
Company have a presence in various distribution platforms such as television,
home entertainment, digital New Media and other media. Company have an
extensive distribution network which is co’s key strength and sustainable
competitive advantage. Company is one of the few companies within the Indian
media and entertainment industry to have a comprehensive distribution capability
backed by an in-house television syndication team, a New Media marketing team
for mobile value added services (“MVAS”), internet, DTH and IPTV, and a
nationwide home entertainment distribution network.
For Private Circulation Only 4 HemResearch

5. www.hemonline.com
Concerns
Co’s revenues and profitability are directly linked to the exploitation and
growth of co’s Content Library. Any failure to source content could adversely
affect co’s profitability and business growth.
Co earns revenues by exploiting content that it distribute through various
distribution channels. Acquisition of content is an integral part of its business.
Co’s ability to successfully acquire content depends on its ability to maintain
existing relationships and form new ones, with industry participants. While
company have benefited from long-standing relationships with certain industry
participants in the past, there can be no assurance that it will be able to
successfully maintain these relationships and continue to have access to content
through such means. Co’s content Library includes content licensed from third
parties on fixed term basis. There can be no assurance that, upon expiry or
termination of these arrangements, content will be available to company at all
or on acceptable financial or other terms. If any such relationship were to be
adversely affected, or company is unable to form new relationships or renew
these arrangements in a timely manner or at all, or co’s access to content
otherwise deteriorates, or if any party fails to perform under its agreements or
arrangements with company, it could have a material adverse effect on co’s
business prospects, financial condition and results of operations.
The distribution of content may not generate adequate revenues to recover
associated costs. This could impact co’s growth plans and may adversely
impact co’s profitability.
Currently, company distribute its content through various mediums such as (i)
broadcast syndication, (ii) New Media, (iii) home entertainment, and (iv) other
media. Company invest significant amount of its working capital funds in
acquisition of such content. Company acquire content based on its management
estimates driven by certain assumptions. However, the actual performance of
the content acquired by company may vary from estimates for factors which
may be beyond its control. In certain contents, company may not be able to
generate adequate or expected revenues to recover the costs associated with
such contents. Further, company cannot give any assurance that all future
contents would generate sufficient revenues to recover their cost involved. The
aforementioned risks could adversely impact its profitability which could have a
material adverse effect on co’s business, results of operations and financial
condition.
For Private Circulation Only 5 HemResearch

6. www.hemonline.com
Restated Consolidated Financial Statements
(Rs Cr)
Particulars FY10 FY11 FY12 FY13 FY14
Total Income 101.68 158.24 182.01 214.74 264.61
Growth (%) --- 55.63 15.02 17.98 23.22
Total Expenditure(Cash) 84.16 124.04 135.46 157.38 200.27
EBITDA 17.52 34.20 46.55 57.36 64.34
Growth (%) --- 95.20 36.10 23.22 12.18
EBIDTAMARGIN 17.23 21.61 25.57 26.71 24.32
Other Income 1.96 1.18 5.11 1.35 1.34
Depreciation 2.69 2.71 2.95 2.98 2.96
EBIT 16.80 32.67 48.71 55.73 62.72
Interest 16.46 15.30 19.26 18.31 19.23
PBT 0.34 17.37 29.44 37.42 43.49
Tax 0.02 3.70 7.77 12.87 16.34
PAT 0.32 13.67 21.68 24.55 27.15
Minority Interest 0.00 -0.04 -0.74 -1.11 0.12
Adjusted PAT 0.32 13.63 20.94 23.44 27.27
Growth% --- 4206.51 53.56 11.96 16.32
NPM 0.31 8.62 11.50 10.92 10.31
Equity Capital 0.46 4.56 19.85 19.85 19.85
NetWorth 77.79 90.34 126.10 148.38 174.45
Ratio Analysis
Particulars FY10 FY11 FY12 FY13 FY14
EPS 6.95 29.92 10.55 11.81 13.74
ROE 0.41 15.09 16.60 15.80 15.63
BV 1707.08 198.25 63.53 74.75 87.89
ROCE 9.1 17.5 22.3 21.6 19.3
Debt To Equity Ratio 1.37 1.06 0.74 0.74 0.87
For Private Circulation Only 6 HemResearch

7. www.hemonline.com
www.hemonline.com
research@hemonline.com
HEM SECURITIES LIMITED
MEMBER-BSE,CDSL, SEBI REGISTERED CATEGORY I MERCHANT BANKER
MUMBAI OFFICE: 14/15, KHATAU BLDG., IST FLOOR, 40, BANK STREET, FORT, MUMBAI-400001
PHONE- 0091 22 2267 1000 FAX- 0091 22 2262 5991
JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001
PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757
GROUP COMPANIES
HEM FINLEASE PRIVATE LIMITED
MEMBER-NSE
HEM MULTI COMMODITIES PRIVATE LIMITED
MEMBER-NCDEX,MCX
HEM FINANCIAL SERVICES LIMITED
NBFC REGISTERED WITH RBI
For Private Circulation Only 7 HemResearch

8. www.hemonline.com
Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information
and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care
has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer
or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an
investment advise. Reader is requested to rely on his own decision and may take independent professional advise
before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited,
Directors and any of its employees shall not be responsible for the content. The person accessing this information
specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt.
Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and
further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or
any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by
the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors,
and employees, including persons involved in the preparation or issuance of this material may from time to time, have
long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have
acted upon or used the information prior to, or immediately following the publication.
Disclosure of Interest Statement Company Name
1. Analyst Ownership of the Stock No
2. Hem & its Group Company Ownership of the Stock No
3. Hem & its Group Companies’ Director Ownership of the Stock No
4. Broking relationship with company covered No
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject
securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly
related to the specific recommendations and views expressed by research analyst(s) in this report.
For Private Circulation Only 8 HemResearch