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Wednesday, October 1, 2014

Update on Shemaroo Entertainment Ltd. IPO

Unlike previous issues this time I too got allotment and as expected and pre-decided I booked profit in Shemaroo @ 172. Some nimble-footed people claim to offload their stake @ 180.
The company was facing a damn working-capital (WC) mismanagement problem and to cope- up with this problem, this issue was floated.
For a sales-figure of Rs. 264 crore, there is cash-in-hand of meager Rs. 0.9 crore, while Accounts receivable (AR) is as high as Rs. 140.
Inventory days too were as high as 275 and AR collection period was almost 5 months.
A higher AR collection period makes a company prone on the solvency frontin case a few of its debtors default.
The OCF of the company was negative and the only hope was the re-rating of the company in future due to the proceeds of this issue which was supposed to rectify the WC mismanagement.
Apart from the financials, the company is having perpetual-rights mostly for older titles and limited rights for newer titles.
The co. should concentrate on the streaming business and should not rely heavily on sites like YouTube which gets banned in various countries especially in those of Indian-sub-continent where piracy too is at its pinnacle.
If this company wants to flourish in future then the best way is to concentrate on the streaming business model.


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