OneSource Techmedia To Offer 20 Lakh Equity Shares Through Its IPO

OneSource Techmedia (OTM), a Chennai-based company is coming up with an IPO on the BSE SME platform. The issue will open on 17 May 2013 and will close on 21 May 2013. The company is going to offer 20 lakh equity shares through this IPO, which will aggregate to Rs 280 lakh. At present, the company has 44.93 lakh equity shares. This offering is a fixed price issue at Rs 14 per share. Further, market makers have a reserved portion of 1.12 lakh equity shares and the remaining 18.88 lakh equity shares will be the net issue to the public. The lead manager for this issue is Guinness Corporate Advisors.

The company is involved in the business of distribution and trading of media contents. It distributes audio and video cassettes, compact disks etc. They have a royalty agreement with various media houses for marketing the audio and video contents. OTM has a pool of contents, which comprises of Hindi devotional, Bengali devotional, Bhojpuri film, Animation movies, Tamil films etc. This company also organises corporate events and other small events.

OTM has distributed Tamil serials like Oviya, Junior Senior, animation movies like Jai Vigneshvara, Bengali devotional songs like Bondir Bipad Taran, Tara Pither Maa Tara and Hindi devotional songs like Do Aansu, Bhajan Ganga, Jai Shree Krishna.

The company intends to use the funds raised through the IPO for office infrastructure development (Rs 50 lakh), development of content (Rs 100 lakh), deposits for acquisition of content (Rs 50 lakh), brand building and meeting corporate expenses (Rs 35 lakh) and for issue expenses (Rs 45 lakh).

On the financial front, the company posted Rs 725 lakh revenue for eight months in FY13, whereas its bottomline grew by Rs 4.52 lakh. However, its EBITDA margin stands at 0.78%. The higher revenue in this period of FY13 is mostly due to the sale of inventory. Further, there is not much value addition in the sale of this inventory which can be seen from its EBITDA margins. Further, the company has posted only Rs 60.48 lakh revenue for FY12 and a net profit of Rs 3.29 lakh in FY12. 

Moreover, the company is an inexperienced and small player in the industry. Further, there is no entry barrier in this industry, which enables the company to command a low premium putting pressure on its bottomline. Also, the production and media houses themselves distribute and market the media content directly and this limitation puts a big barrier for OTM to grow at a faster pace. Hence, we recommend our readers to stay away from this public offering.