What you must know about Baweja Studios IPO?

Tanushree Jaiswal Tanushree Jaiswal 19th January 2024 - 06:31 pm
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About Baweja Studios Ltd

Baweja Studios Ltd is a film production company incorporated in the year 2001. Baweja Studios Ltd specializes in Hindi and Panjabi films; with some of the marquee franchises being Chaar Sahibzada, Love Story 2050, Qayamat and Bhaukaal. The company is also into the business of marketing film rights wherein it procures film rights from the producers and sells them to exhibitors and streaming platforms. The company has completed a total of 22 film projects with 6 films in production and 7 in pre-production. It is basically a content houses that focuses on streaming relevant and narrow-cast content based on the unique needs and tastes of various regions. This has enabled the company to also create a library of content, which is a substantial property that can be monetized effectively at a future date. It is broadly involved in several key areas including digital films, web series, animation films, Punjabi films, advertisement films, and music videos.

The company was promoted by Harman Baweja, who is a well known name in film production and the media house brings 22 years of media experience. They have been closely involved with Punjabi and Hindi films and that has allowed them to create a network of strong relationships and a strong franchise with the end customer also. The big advantage that the company brings to the table is its diverse and growing content library, which is now being monetized through a variety of mediums. Some of its key strengths in the business are effective marketing, ability to identify potential scripts, acquiring new OTT platforms and online digital partners, and achieving economies of scale in content production.

Key terms of the SME IPO of Baweja Studios Ltd

Here are some of the highlights of the Baweja Studios IPO on the SME segment of the National Stock Exchange (NSE).

  • The issue opens for subscription on 29th January 2024 and closes for subscription on 01st February 2024; both days inclusive.
     
  • The company has a face value of ₹10 per share and it is a book built issue. The price band for the book built issue has been set in the range of ₹170 to ₹180 per share. The final price of the IPO will be decided by book building within this price band.
     
  • The IPO of Baweja Studios Ltd has a fresh issue component and an offer for sale (OFS) portion as part of the IPO package. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
     
  • As part of the fresh issue portion of the IPO, Baweja Studios Ltd will issue a total of 40,00,000 shares (40.00 lakh shares), which at the upper band of the book building band of ₹180 per share aggregates to fresh fund raising of ₹72.00 crore.
     
  • As part of the offer for sale (OFS) portion, Baweja Studios Ltd will sell a total of 14,00,000 shares (14.00 lakh shares), which at the upper band of the book building band of ₹180 per share aggregates to fresh fund raising of ₹25.20 crore. The entire 14 lakh shares are being offered by the promoter (Harjaspal Singh Baweja)
     
  • Therefore, the overall IPO size will also comprise of the issue and sale of 54,00,000 shares (54.00 lakh shares) which at the upper IPO band price of ₹180 per share will aggregate to overall IPO size of ₹97.20 crore.
     
  • Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,88,000 shares. The name of the market maker to the IPO is yet to be announced by the company. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
     
  • The company has been promoted by Harjaspal Singh Baweja, Paramjit Harjaspal Baweja, Harman Baweja, and Rowena Baweja. The promoter holding in the company currently stands at 99.99%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 70.70%.
     
  • The fresh issue funds will be used by the company for meetings its working capital expenses as well as to meet its general corporate expenses. Part of the IPO proceeds will also go towards meeting the issue related costs.
     
  • Fedex Securities Private Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue.

IPO allocation and minimum lot size for investment

Baweja Studios Ltd has already announced the market maker allocation at 2,88,000 shares as inventory for market making. The name of the market maker is yet to be announced by the company. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Baweja Studios Ltd in terms of the allocation to various categories are captured in the table below.

Investor Category

Number of shares allocated by category

Market Maker Shares

2,88,000 shares (5.33% of the total issue size)

Anchor Allocation

Will be carved out of the QIB quota

QIB Shares Offered

25,56,000 shares (47.33% of the total issue size)

NII (HNI) Shares Offered

7,66,800 shares (14.20% of the total issue size)

Retail Shares Offered

17,89,200 shares (33.13% of the total issue size)

Total Shares Offered

54,00,000 shares (100.00% of total issue size)

The minimum lot size for the IPO investment will be 800 shares. Thus, retail investors can invest a minimum of ₹144,000 (800 x ₹180 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 1,600 shares and having a minimum lot value of ₹288,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Application

Lots

Shares

Amount

Retail (Min)

1

800

₹1,44,000

Retail (Max)

1

800

₹1,44,000

HNI (Min)

2

1,600

₹2,88,000

Key dates to be aware of in the Baweja Studios Ltd IPO (SME)

The SME IPO of Baweja Studios Ltd IPO opens on Monday, 29th January 2024 and closes on Thursday, 01st February 2024. The Baweja Studios Ltd IPO bid date is from 29th January 2024 at 10.00 AM to 01st February 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 01st February 2024.

Event

Tentative Date

IPO Opening Date

29th January 2024

IPO Closing Date

01st February 2024

Finalization of Basis of Allotment

02nd February 2024

Initiation of Refunds to non-allottees

05th February 2024

Credit of Shares to Demat account of eligible investors

05th February 2024

Date of listing on the NSE-SME IPO segment

06th February 2024

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on February 05th 2024, will be visible to investors under the ISIN Code – (INE0JFJ01011).

Financial highlights of Baweja Studios Ltd

The table below captures the key financials of Baweja Studios Ltd for the last 3 completed financial years.

Particulars

FY23

FY22

FY21

Net Revenues (₹ in crore)

76.28

40.97

19.54

Sales Growth (%)

86.19%

109.67%

 

Profit after Tax (₹ in crore)

7.97

2.76

7.65

PAT Margins (%)

10.45%

6.74%

39.15%

Total Equity (₹ in crore)

19.86

7.24

4.48

Total Assets (₹ in crore)

44.90

30.56

32.24

Return on Equity (%)

40.13%

38.12%

170.76%

Return on Assets (%)

17.75%

9.03%

23.73%

Asset Turnover Ratio (X)

1.70

1.34

0.61

Earnings per share (₹)

7.83

2.82

7.82

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

  • In the last two years, the revenue growth has been quite robust. However, the net profits appear to have gone through a see-saw in the last two years. A lot will depend on what rate of PAT margins, the company can sustain. The latest PAT margin of 10.45% is impressive, but the key is about sustenance.
     
  • While the company has reported robust net margins, ROE and return on assets in the latest year, the numbers in the previous years are fairly volatile and hence not entirely comparable. Hence, only the latest year can be really considered for taking any view on valuations; assuming that the current trend sustains.
     
  • The asset turnover ratio or the sweating ratio has been robust at above 1 in the last two years and the hope is that as the sales pick up in the next two years, the sweating ratio should also pick up accordingly. Due to the robust ROA in latest year, a lower sweating may also be ok for the company.

 

The company has latest year EPS of ₹7.83 and previous data may not really be comparable. Either ways, the valuations look reasonable if you consider latest year EPS at 22-23 times P/E discounting. However, this film business has been known to be very volatile in the past. What stands in favour of Baweja Studios Ltd is that they have a very strong content library that can always be effectively monetized by the company at a future date. Also, its deep presence and relationships in the industry are an added plus. The industry is such that it would naturally suit investors with a higher risk appetite. But it can be a good area to play the content game, especially with OTT taking off in a big way in India.

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