My Best Pick 2015

Gaurav Parikh

Jeena Scriptech Alpha Advisors' co-founder is happy to be wrong about film content major Shemaroo

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Published 6 years ago on Jan 09, 2015 9 minutes Read
Soumik Kar

At the outset, let me confess that Shemaroo Entertainment (SEL), which is in the film and entertainment content business, did not appeal to me when it went public last September at an offer price of ₹170 and at a 10% discount for retail allotees at ₹153. Its debut on the bourses was anything but a blockbuster opening.

On the first day of listing — October 1 — the stock struggled to hold its head above water and over the next fortnight fell to a low of ₹145. Running an investment advisory firm for the past two years, I have seen several cases that have helped keep my skeptical instincts alive; there was no reason for Shemaroo to be any different. It had all the right ingredients to make a discerning investor wary: high debt, negative cash flows, legal issues, promoters’ conflict of interest and a business model that seemed suspect.

Incidentally, Shemaroo and I share the same year of birth and I grew up with it in the 1970s when it was a popular circulating library of 200 sq ft in south Mumbai — with the three Maroo brothers — Raman, Buddhichand and Atul — running the show. I am told that they have retained this small shop for sentimental reasons.

So, it’s not surprising, then, that in its over five decades of existence, SEL created a content library of over 2,900 titles with perpetual rights for over 750 films and aggregated rights (limited ownership) for the rest. It distributes this content to broadcasting and digital media platforms and has recently launched movies on Google+. Revenue models to monetise this content range from pay-by-transaction, subscription and advertisement support such as YouTube advertisements.

Vote of confidence

I observed that HDFC Mutual Fund had fallen in love with the stock: it had become the largest non-promoter shareholder with an 8% equity stake. The fund was an anchor investor at ₹170, and, post listing, bought the stock at ₹177-174 levels and then ten days later again at ₹152 levels. The purchases were spread across their schemes, including their month

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