AnalyseWise - HMVL Detailed Investment Note

Hindustan Media Ventures (HMVL)

Initial Investment Note

28th September 2014

Caution: This report is written keeping in mind an investment horizon of 3-5 years.

Current Price: `156 Market Cap: `1,142 Cr Our View: BUY

Investment Thesis & Company Overview

Business Model & Economics Of Print Media Business

Why Hindi Print Media Over English?

Why HMVL In Hindi Print Media?

Challenging Market Price Of HMVL

Summary Of Opportunity & Recommendation

Appendix: Detailed Financials & Shareholding

HMVL – Initial Investment Note 28th September 2014

HMVL – Initial Investment Note

Page 01

Investment Thesis:

Highly profitable business with presence of moat, high earnings growth potential, and a reasonable probability of re-rating.

Dear Clients,

In this period of euphoria, where numerous small and mid cap stocks have doubled /

tripled in the last 6 months and some have even risen 5-10 times, its very easy to fall

into the temptation and join the party.

While the dramatic rise in the prices of some stocks is supported by a great underlying

business with high earnings growth potential and a healthy balance sheet, there are

many stocks with mediocre businesses, poor management, and weak financial profile

who are enjoying a free ride.

Our experience shows that, it is this latter category of mediocre stocks, that do the

maximum damage to an investor’s wealth, when bought at unjustified prices during

general market euphoria such as the one prevailing now.

Thankfully, under such charged market conditions, we have found a business which is

not only sound fundamentally, but also available at attractive valuation.

The company is Hindustan Media Ventures Limited (HMVL), engaged in the business of

publishing Hindi newspaper “Hindustan” and Hindi magazines.

Company Overview:

Hindustan Media Ventures (HMVL) is a part of the HT Media Group (75% ownership in

HMVL). HT Media publishes the English daily “Hindustan Times”, Business daily “Mint”

and also runs the FM radio channel “Fever 104” and job portal “Shine.com”.

Smt. Shobana Bhartia, daughter of the renowned industrialist Mr. K.K Birla is the

promoter / chairman of the HT Media Group and Hindustan Media Ventures.

HMVL was de-merged from HT Media and got listed separately in Jul-10 when it raised

`270 crores by offering 16.27 million primary shares (22.2% stake) at an offer price of

`166, valuing the company at `1,218 crore (67.2x trailing PE).

HT Media

Hindi Print Business

English Print Business Radio Online portals

& other biz.

Hindustan Media Group Businesses

Source: HT Media company websites, NSE, BSE

HMVL publishes the Hindi daily newspaper “Hindustan” which is the 2nd largest Hindi

newspaper in India with a total readership base of 1.42 crores (Source: IRS 2013). “Dainik

Jagran” published by Jagran Prakashan is the #1 Hindi newspaper with total

readership of 1.55 crores.

HMVL Regional Presence, Readership, and Rank

Region Readership in Lacs

(IRS 2013) # Rank

Bihar

Jharkhand

Delhi NCR

Uttar Pradesh

Uttarakhand

42.7

14.0

10.6

72.0

4.3

#1

#1

#2

#2

#1

Source: HMVL Investor Presentation, IRS 2013

• FY14 Revenue: `2,021 Cr

• FY14 PAT: `207 Cr

• Current MCap: `2,583 Cr

• FY14 Revenue: `730 Cr • FY14 PAT: `111 Cr • Current MCap: `1,142 Cr


Page 02

Key publications of HMVL:

Flagship Daily

Supplement for Learning English

Children’s Magazine

Youth Supplement Education Supplement

Job Search Supplement

Women Centric Supplement

Health Supplement

Bollywood Supplement

Monthly Cultural & Literary Magazine

Source: HMVL Annual Report


Page 03

Key publications of HMVL:







28th September 2014




Have you ever wondered, how can newspaper companies afford to sell newspapers at a

subscription price which is less than what you make by selling them to a scrap paper

dealer?

The fact is that newspaper companies are not in the business of making money by

selling newspapers, rather they make most of their money by selling space in

newspapers to advertisers. They are in the business of displaying advertisements.

Revenue Sources:

Revenue Sources

Circulation Revenue

(20%-40% )

Advertising Revenue

(60%-80%)

Circulation Revenue

Realization per copy

# copies sold

Advertising Revenue

Rate per unit space Space sold

Circulation Revenue:

• Circulation revenue is the revenue generated from end users (i.e. individual readers)

by selling newspaper to them.

• Key drivers are number of copies sold and average realization per copy.

• Circulation revenue comprises of 20-40% of total revenue for typical Hindi print

media companies.


Page 04


Page 05

• Circulation revenue is generally immune to economic slow down compared to

advertising revenue which is directly linked to economic growth. People don’t stop

reading or demand lower prices for newspaper during an economic slowdown.

• Also, higher proportion of circulation revenues acts as a cushion for a newspaper

company as it can reduce cover prices of its newspapers to combat competition from

a new player who enters a market by offering very low cover prices.

Advertisement Revenue:

• Newspapers are the most popular & economical medium for local advertising in

specific district or state which is not possible with television. Television is usually

preferred for nation wide advertising campaign.

• Main drivers of advertisement revenue for print media companies are the volume of

space sold and advertisement yield i.e. advertisement rate per unit space.

• Volume of space sold: The higher the volume of advertising space sold, higher will be

the advertising revenue. Newspaper companies can increase the volume of space

available for sale to advertisers by increasing the number of pages in the daily, but

they cannot increase the pages beyond a certain level. Other strategy is to increase

the ratio of advertisement space to news content, but it will lead to deteriorating

reading experience as most of the newspaper will be covered with advertisements

rather than news content. Therefore it is not a sustainable long term strategy.

• Advertisement yield: It refers to the rate charged by newspaper companies to

advertisers per unit space occupied in the newspaper. It can be viewed as the pricing

power of the newspaper.

• Higher advertisement yield compared to competitors and an ability to hike the

advertising rates regularly without hurting volume of space sold exhibits the

bargaining power and leadership position of a newspaper in a region.

Advertisement yield is dependent primarily on two factors:

1. Reach of the newspaper, which is measured as number of people reading a

newspaper. IRS (Indian Readership Survey) measures this metric periodically.

Advertisement Yield (Rate per unit area)

Demographics of Readers # Readership


Page 06

2. Demographic characteristic of the readers like occupation, annual income, gender,

age group etc. Purchasing power of the reader as measured by annual income remains

by far the biggest driver of advertisement rates.

Major Expenses:

Major Expenses

(% Operating Expenses)

Cost of paper (Newsprint) (40%-50%)

Employee Cost (15%-20%)

Newsprint Cost

USD INR rate Intl’ Prices

Cost of paper (Newsprint cost):

• This is by far the biggest expense for print media companies accounting for about

half of the operating expenses. Due to insufficient domestic production, significant

quantity of newsprint is imported in India to meet the demand. International

newsprint prices and value of rupee against dollar decide the cost of import.

(Appreciating rupee reduces and depreciating rupee increases import cost )

• Since paper is a pure commodity, newsprint prices exhibit cyclical characteristics.

Periods of high prices are followed by periods of low prices.

• When the newsprint prices are low, print media companies achieve tremendous

operating margin expansion, which are not sustainable.

• Similarly, when newsprint prices are at the peak, the margins of print media

companies are depressed.

• Therefore, it is extremely important to understand the operating margins over a

complete cycle and use the normalized margins as reference for sustainable

profitability of a print media company.

• Current newsprint prices are at their peak and therefore expected to fall leading to

margin expansion for the print media companies.


Page 07

20,000

22,000

24,000

26,000

28,000

30,000

32,000

34,000

36,000

38,000

40,000

4Q

FY09

1Q

FY10

2Q

FY10

3Q

FY10

4Q

FY10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

Quarterly Newsprint Prices Trend`Per Metric Ton

Newsprint prices expected to soften from current peak levels

Note: Effective newsprint cost for DB Corp taken as proxy for newsprint prices. Source: DB Corp quarterly results filings

Moat / Competitive Advantage In Newspaper Business

In the newspaper business, the market leader which has the maximum readership

base in a region is the preferred partner for local advertisers, commands maximum ad

rates and therefore enjoys the maximum profitability. Heavy dependence on

advertisement revenues in this business means that top players takes most of the

value and remaining players struggle to remain profitable.

Due to the fixed pool of advertising revenue available in a region, a new player has to

take away the advertising revenue from its competitors.

This is not possible unless a newspaper has a wide and demographically desirable

readership base. In order to encourage readership, new players typically offer their

newspapers at extremely low subscription prices in the beginning. With almost zero

advertisement revenues and meagre circulation revenues, the entrant has to burn a lot

of cash towards printing copies which don’t yield any revenue.

Even if it garners a high readership base due to its extremely low cover prices, it

cannot offer those unrealistic rates forever. Once it raises its prices to comparable

levels, it has to ensure that readers stick to its newspaper which is dependent

primarily on its quality of editorial content and overall packaging & appeal.

It typically takes 4-5 years for a new player who is successful in breaking into a new

market and command a stable and wide readership base to become break even at

EBITDA level. Most new entrants don’t reach that point and keep burning cash and

finally exit the market.

Therefore newspaper is a region specific business in which not more than 1 or 2

players can thrive profitably at the same time. The incumbent players usually

continue to harvest profits for long periods.

The ability to earn excess returns over a long period of time is what defines a

company with a sustainable moat or competitive advantage. Leading newspaper

companies definitely make it into this coveted list.


Page 08

Attractive economics of the print media business is vindicated by the high margins

and return ratios of the major Hindi print media companies as depicted in the charts

below.

Margins and profitability: HMVL

16.9% 16.0% 17.7%

20.7%

2011 2012 2013 2014

EBITDA Margin

Source: Company filings

40.6% 37.2% 44.3%

55.2%

2011 2012 2013 2014

Pre-tax Return on Capital Employed

Margins and profitability: DB Corp


42.8%

31.7% 33.1% 40.0%

2011 2012 2013 2014


Margins and profitability: Jagran Prakashan

29.2%

21.9% 18.8%

21.3%

2011 2012 2013 2014

EBITDA Margin


45.4%

21.6% 14.3%

26.7%

2011 2012 2013 2014


23.8% 23.8% 26.9%

2011 2012 2013 2014

EBITDA Margin 31.9%


Page 09

Note: Pre-Tax Return on Capital Employed is defined as following :

Pre-tax return on capital employed gives an indication of how much return a business generates as a

whole before tax, on the total capital (both shareholder’s and lenders) which is employed in the core

business.

Ideally, we should use the post-tax return on capital employed, but when the effective tax rates are

different across companies, it doesn’t show the true picture of each company’s profitability.

In order to remove the effect of differential tax rates, we use pre-tax return on capital employed, to

ensure we are comparing apples to apples.

We usually look for a post-tax return on capital of at least 20%, which translates into a pre-tax return on

capital of 31% assuming a normal corporate tax rate of 35% as applicable in India.

As opposed to Return on Capital Employed, Return on Equity (Net Profit / Shareholder’s Equity) gives the

return generated on the capital invested by the shareholder’s only. It is important to not get carried

away by high Return on Equity without assessing the capital structure of the company.

Because ROE can be boosted by employing a high amount of debt compared to shareholder’s equity .

A company which achieves high ROE by employing moderate amount of debt is always preferable to one

which employs a large amount of debt.

Earnings Before Interest and Tax (EBIT) Shareholder’s Equity + Total Debt – Liquid Financial Assets

Which is computed as


Page 10

Pre Tax Operating Profit Capital Employed In Core Business









28th September 2014


9.0%

12.3%

10.6%

5.4%

Total Market

Vernacular

Hindi

English

Advert. Revenue CAGR 11-14

Circulat. Revenue CAGR 11-14

Total Revenue CAGR 11-14

6.5%

9.1%

7.4%

3.7%

Total Market

Vernacular

Hindi

English

8.1%

11.2%

9.4%

4.8%

Total Market

Vernacular

Hindi

English

English print media has lagged the growth of the overall print media market because

of the following structural reasons:

• English newspapers are usually popular in Tier 1 cities where the literacy rate and

penetration rate (% literate who read newspapers) is already high. Therefore the

scope for increase in circulation is limited.

• Online news portals and apps are becoming preferred medium for news consumption

for the time bound and busy urban individual.

On the other hand, the scope for growth in Hindi and Vernacular print media is

immense because of lower literacy and penetration rates.

Due to the resilient rural economy and higher growth in per capita income of

individuals in the non tier 1 cities, companies are spending more on advertisements in

these regions as exhibited by the ad revenue growth of 10.6% and 12.3% between 2011-14

for Hindi and Vernacular print media compared to only 5.4% for English.

The difference between ad rates in English and Hindi newspapers has also narrowed

down over the years from ~7x to 3x now on account of non tier 1 cities outpacing the

tier 1 cities in terms of purchasing power growth.

Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2014


Page 11









28th September 2014


There are only three listed Hindi print media players in India including HMVL.

A brief snapshot of the other two listed players is given below:

DB Corp: Publishes 6 newspapers in 4 languages across 14 states in India.

• Key Newspaper Brands:

• Leadership position in Chandigarh, Haryana, Madhya Pradesh and Chattisgarh.

• DB Corp also engaged in radio business through 94.3 MY FM, present in 17 locations

• Key financials and other metrics:

Jagran Prakashan: Publishes 12 newspapers in 5 languages across 15 states in India.

• Key Newspaper Brands:

• Key financials and other metrics:

Dainik Bhaskar is #3 Hindi daily

with total readership of 1.29 crores

according to IRS 2013. Hindustan

replaced Dainik Bhaskar as #2

player in 2013

Key Metrics ` Crores

FY14 Revenue 1,860

FY14 PAT 307

Current Market Cap 6,648

Revenue Split FY2014

Advertising 76%

Circulation 17%

Other 6%

Dainik Jagran is #1 Hindi daily in India

with total readership of 1.55 crores

according to IRS 2013. Dainik Jagran

enjoys #1 position in the biggest Hindi

market of Uttar Pradesh

Key Metrics ` Crores

FY14 Revenue 1,699

FY14 PAT 226

Current Market Cap 3,962

Revenue Split FY2014

Advertising 70%

Circulation 21%

Other 9%


Page 12

-0.7%

8.0%

26.6%

14.6%

14.7%

13.3%

11.6%

13.7%

12.2%

11.6%

12.2%

12.3%

Growth Comparison of Key Income Statement Items: CAGR FY11-14

Advertisement Revenue

Circulation Revenue

Total Revenue

8.1%

11.7%

13.8%

Gross Profit EBITDA EBIT

0.5%

7.5%

20.1%

-0.9%

6.6%

22.3%

Profit Before Tax Profit After Tax Earnings Per Share

2.5%

5.8%

27.5%

-0.3%

5.5%

27.5%

Source: Respective company filings


Page 13

Key Observations:

• Although, HMVL has grown in line with its peers in terms of revenues, it has

outperformed its peers by a wide margin in terms of bottom line viz. operating profit

(EBIT) and Earnings Per Share growth.

• EBIT has grown at a CAGR of 22.3% between FY11 and FY14 compared to 6.6% for DB

Corp and a de-growth of 0.9% for Jagran Prakashan

• EPS has grown at a CAGR of 27.5% compared to 5.5% for DB Corp and a de-growth of

0.3% for Jagran Prakashan.

Why has the bottom line of HMVL outperformed the topline?

• HMVL was present significantly only in Bihar, Jharkhand and Delhi NCR prior to 2005.

• It was #1 in Bihar and Jharkhand and #2 in Delhi behind Nav Bharat Times.

• Until 2005, Hindustan’s presence in UP was limited to just two editions – Lucknow &

Varanasi which was non-meaningful compared to the pan state presence of the

leaders Jagran Prakashan (#1) and Amar Ujala (#2).

• In 2005, HMVL decided to focus on expanding in the largest Hindi print advertisement

market, Uttar Pradesh by launching further editions in the major cities.

• 10 new editions were rolled out in succession – Agra in July 2006, Kanpur in August

2006, Dehradun in May 2008, Meerut in October 2008, Haldwani and Allahabad in

January 2009, Bareilly in October 2009, Gorakhpur in December 2010, Aligarh in

December 2011 and Moradabad in February 2012.

• Over the course of 7 years, HMVL prudently expanded, recording a six-fold increase in

circulation. With 12 editions now, Hindustan covers the entirety of these two states.

• Advertisement revenue from UP/UK grew from a mere `19 Crores in FY07 to `152

Crores in FY13 growing at a CAGR of 41%.

• HMVL also overtook Amar Ujala as the #2 player in UP with a readership of 72 lacs

according to the IRS 2013.


Page 14

71

212 37

92

19

152

0

50

100

150

200

250

300

350

400

450

500

FY07 FY13

Bihar & Jharkhand Delhi NCR UP and Uttarakhand

Advertisement Revenue (`Cr)

217.6

636.3

As mentioned earlier, newspaper business is such that one needs to first invest in

printing copies, and then once the optimum number of newspaper copies and

readership is reached, companies start monetizing them through sale of

advertisements.

But initially, the ad rates that can be charged by an entrant are significantly lower

compared to top players, due to which the ongoing expense of printing copies is not

offset by the revenue generated by advertisement and subscription.

Overtime, as the newspaper gains loyalty, it can charge much better advertisement

rates and earns more revenue per copy of newspaper while the cost of producing a

newspaper copy pretty much remains the same (assuming same newsprint cost).

Therefore, most of the increase in revenue flows directly to the bottom line leading to

margin expansion.

Source: HMVL Investor Presentation

HMVL Advertisement Revenue By Region


Page 15

This phenomenon is called operating leverage, and is usually seen in companies with

fixed operating costs which are independent of the revenue generated.

HMVL Income Statement; Operating leverage at play

Year Ending March; [` Crores] 2011 2012 2013 2014 CAGR 11-14

Income Statement

Daily Circulation (Million) 2.02 2.20 2.35 2.40 5.9%

Realization Per Copy (`) 1.70 1.71 1.84 2.08 7.0%

Advertisement Revenue 374.1 439.2 460.1 530.0 12.3%

Subscription Revenue 122.3 134.8 155.3 178.2 13.3%

Other Operating Revenue 19.7 22.6 20.9 21.6 3.0%

Total Operating Revenue 516.2 596.6 636.3 729.7 12.2%

Newsprint & Ink Cost 224.5 256.7 264.8 300.4 10.2%

Gross Profit 291.6 340.0 371.5 429.3 13.8%

(Increase) / Decrease in inventories -0.2 0.1 -0.2 0.1 NM

Employee Benefit Expense 63.6 73.4 80.4 86.6 10.8%

Other Expenses 140.9 171.2 178.7 191.4 10.8%

EBITDA 87.4 95.3 112.6 151.2 20.1%

Depreciation & Amortisation Expense 16.4 19.4 21.7 21.6 9.4%

EBIT 70.9 75.9 90.9 129.7 22.3%

Interest Expense 4.5 3.3 5.3 5.7 8.4%

Non Operating Income 9.7 19.1 28.5 30.6 46.7%

Profit Before Tax 76.2 91.7 114.0 154.6 26.6%

Total Tax Expense 22.6 26.4 29.5 43.4 24.3%

Effective Tax Rate 29.6% 28.8% 25.9% 28.0%

Profit After Tax 53.6 65.3 84.5 111.2 27.5%

Earnings Per Share 7.3 8.9 11.5 15.2 27.5%

Margin Analysis 2011 2012 2013 2014

Gross Margin 56.5% 57.0% 58.4% 58.8%

EBITDA Margin 16.9% 16.0% 17.7% 20.7%

EBIT Margin 13.7% 12.7% 14.3% 17.8%

PBT Margin 14.8% 15.4% 17.9% 21.2%

PAT Margin 10.4% 11.0% 13.3% 15.2%

Cost Analysis as % Operating Revenue 2011 2012 2013 2014

Newsprint & Ink 43.5% 43.0% 41.6% 41.2%

Employees 17.0% 16.7% 17.5% 16.3%

Printing & Service Charges 6.7% 6.4% 5.8% 5.2%

Advertising & Sales Promotion 4.3% 4.2% 5.0% 4.8%

Consumption of Stores & Spares 3.3% 3.0% 3.3% 3.1%

News Services & Despatches 2.1% 1.9% 2.0% 1.8%

Power & Fuel 1.8% 1.8% 1.7% 1.6%

Other Operating Expenses 4.5% 6.9% 5.4% 5.2%

Depreciation & Amortization 3.2% 3.3% 3.4% 3.0%

Source: HMVL Annual Report, AnalyseWise Analysis


Page 16

A good example of business with operating leverage is a stock exchange. Its revenues

depend on value/volume of transactions traded, but its major expense of technology

and employee costs is pretty much fixed. If an exchange is able to increase its

volume/value of transactions, its revenue will increase but the cost of technology and

employee wont change much. Thus, most of the revenue increase flows to profit.

Operating leverage is not necessarily positive in all the situations. It is beneficial if a

company can increase its revenue consistently. But in the case of loss of revenue, the

fixed operating cost will still need to be serviced leading to operating losses.

HMVL has benefitted from operating leverage due to improving advertisement yield in

Uttar Pradesh and Uttarakhand while the expense of printing copies has been more or

less constant.

UP market far from mature for HMVL; Enough room for margin expansion:

Although the margins of HMVL have expanded over the last few years, its primarily on

account of narrowing losses in UP & Uttarakhand. HMVL achieved breakeven in UP at

EBITDA level during 2QFY14. UP contributes to about ~26% revenue of HMVL.

During our interaction, the company has indicated current EBITDA margin of ~7-8% in

UP and expects to achieve 10% margin in FY15 and 20% in FY16.

HMVL commands ad rates which are ~0.6 times the rates of former #2 player Amar

Ujala. The gap between the advertisement yields of HMVL and Amar Ujala is expected

to reduce going forward as HMVL benefits from the latest IRS 2013 results.

Thus, margin expansion in UP will be driven primarily by increase in ad rates.

The subdued margins in UP is also vindicated from the fact that the FY14 consolidated

EBITDA margin of HMVL is still ~20-21% compared to ~27% for DB Corp (Jagran

Prakashan has much lower margins because of heavy investment in Nai Duniya

newspaper acquired in FY12 and also in internet portals and outdoor advt. biz. Prior to

FY12, Jagran enjoyed margins of 29% as shown in the chart on next page).

HMVL management has guided towards consolidated EBITDA margin of 25% by FY16

compared to current EBITDA margin of 20.7%.


Page 17

60

70

80

90

100

110

120

130

140

150

160

Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Aug 13 Jan 14 May 14 Sep 14

HMVL DB Corp Jagran Prakashan

16.9% 16.0%

17.7%

20.7%

31.9%

23.8% 23.8%

26.9% 29.2%

21.9% 18.8%

21.3%

2011 2012 2013 2014

HMVL DB Corp Jagran Prakashan

HMVL EBITDA margin still below peers as UP market not matured yet

Share price performance – Apr-11 to Current (Rebased to 100)

Share Price CAGR EPS CAGR

6.2% 27.5%

11.0% 5.5%

-0.7% -0.3%

Trailing PE (Current) Trailing PE (Apr-11)

10.3x 20.9x 17.5x

19.5x 16.3x 18.2x

Source: Bombay Stock Exchange, Company Filings

Source: Company Filings, AnalyseWise Analysis

Despite rapid earnings growth of 28% from FY11-14 and headroom for further

growth driven primarily from UP, HMVL stock has only returned 6% p.a during this

period and trades at ~10x PE which is at a significant discount to peers. Why?


Page 18

Share

Price

Rebase

d t

o 1

00

9.8%

6.0%

2.2%

HMVL Jagran DB Corp

Free Cash Flow Yield (FCF / EV)

As it is not prudent to base undervaluation or overvaluation of a company based on a

single metric, lets look at how HMVL is valued relatively to its peers on a wide range of

metrics.

Comparison of HMVL versus peers on different valuation metrics

10.3x

17.2x

20.9x

HMVL Jagran DB Corp

Trailing Price to Earning

1.9x

4.1x

6.2x

HMVL Jagran DB Corp

Trailing Price to Book

4.8x

11.0x

12.8x

HMVL Jagran DB Corp

Trailing EV/EBITDA

Source: Company Filings, NSE, BSE, AnalyseWise Analysis

From the above charts, it is clear that HMVL is trading at a steep discount to its peers

not only from PE basis but also on cash flow, book value and EBITDA basis.

Its interesting to note that HMVL is providing a free cash flow yield of almost 10% based

on its current enterprise value, which is greater than the yield of 9% available on a fixed

deposit. Additionally, if we buy HMVL at the current price, our FCF yield (based on our

buying price which is locked) will keep on increasing as the free cash flow of HMVL

increases in the future. Whereas in the case of an FD, the interest yield remains fixed.

The most important question to ask here is why is it trading at such low valuations?


Page 19

225 256

306

395

-12

2

62 55 60

-292

-188

-101

2011 2012 2013 2014

HMVL DB Corp Jagran

13.7% 13.5%

10.4% 7.9%

28.1%

44.0% 46.3%

43.4% 50.2%

62.1%

26.0%

57.8%

2011 2012 2013 2014

HMVL DB Corp Jagran

Answer: Because, HMVL is paying out a very small amount of its profits (~8%) as

dividends compared to its peers who are distributing 40-50% of profits as dividends.

Moreover it is sitting on a cash pile (including short term investments) of `420 Crores

as of Jun-14 which is significantly higher than peers. HMVL has indicated its priority of

using this cash pile for an acquisition rather than distributing it as dividends.

Dividend Payout Ratio of HMVL vs. peers is the lowest

Net Cash Position ( `Crores) of HMVL vs. peers is the highest




Page 20

“Value Traps & How To Avoid Them”

Although, it’s a positive to find stocks which look undervalued on different metrics, but

its extremely important to understand the reason behind that undervaluation.

Sometimes, companies which look cheap statistically may not actually be a bargain.

They may be suffering from several issues like unethical promoters, high debt, lack of

future growth etc. Such companies are called “value traps” and are cheap for the right

reasons and may always remain so. This is one of the common mistakes new investors

make when they look for bargains in the market and end up buying value traps.

But some companies are genuinely undervalued in the market. Some of the common

reasons being:

• Small Size: Many small companies having a sound business model and strong

financials trade cheaply because they are too small to be covered by analysts. But once

these companies grow to a certain size in terms of revenue & market cap, they attract

analyst and as well as institutional investor attention leading to strong re-rating.

• Over-reaction on sector specific developments: Sometimes, market over-reacts on

developments in specific sectors which have a temporary impact on the sector

companies. For e.g. hike in cigarette excise duty may lead to punishing of cigarette

stocks or increase in interest rates by RBI may lead to correction in Banks,

Infrastructure and other interest rate sensitive sectors. The key thing to understand

here is if the nature of impact on the sector is temporary or permanent.

Understanding the reason behind undervaluation helps investors avoid value traps and

also in identifying key triggers for unlock of value. The investor can keep track of the key

triggers and take hold / sell decisions accordingly in the future.

Other way of investing in statistically cheap stocks is to hold a large basket of such

stocks instead of one or two, so that the overall result is satisfactory even if some of the

stocks turn out to be value traps.

When buying a basket of statistically cheap stocks, an investor need not worry about the

reason behind undervaluation of each stock. But investors must ensure that stocks in the

basket are from different sectors to diversify the sector risk.


Page 21

The market is clearly not in favor of the current dividend sharing policy of the

company and also seems to be pricing a misuse of cash by HVML, through a bad

acquisition. These factors have led to HMVL trading at a steep discount to its peers.

HMVL Balance Sheet: Cash and Liquid Investments Rich (~37% of MCap)



Page 22

Year Ending March; [` Crores] 2011 2012 2013 2014

Balance Sheet

Share Capital 73.4 73.4 73.4 73.4

Reserves & Surplus 305.6 360.7 434.9 535.8

Shareholder's Equity 379.0 434.1 508.3 609.2

Non-Current Liabilities

Deferred Tax Liabilities 3.6 5.0 6.6 6.5

Trade Payables 1.6 2.5 0.0 0.0

Total Non Current Liabilities 5.2 7.5 6.6 6.5

Current Liabilities

Short-Term Borrowings 20.5 26.3 3.2 20.3

Trade Payables 76.4 65.1 60.3 76.2

Other Current Liabilities 41.8 36.8 37.9 50.3

Short-Term Provisions 10.0 11.7 12.2 11.9

Total Current Liabilities 148.8 140.0 113.7 158.7

Total Liabilities 154.0 147.4 120.3 165.2

Total Equity And Liabilities 532.9 581.5 628.6 774.3

Non-Current Assets

Tangible Assets 163.0 184.4 176.5 168.2

Intangible Assets 1.7 1.7 1.6 1.2

Capital Work-In-Progress 0.6 7.3 1.0 11.0

Intangible Assets Under Development 0.0 0.1 0.0 0.0

Non-Current Investments 0.0 5.3 125.0 125.0

Long-Term Loans And Advances 5.7 3.8 4.4 23.5

Other Non-Current Assets 0.5 0.3 5.1 8.2

Total Non-Current Assets 171.5 202.9 313.5 337.0

Current Assets 0.0 0.0 0.0 0.0

Current Investments 189.0 207.3 152.8 243.6

Inventories 24.2 31.5 32.4 33.0

Trade Receivables 77.1 78.0 79.1 93.3

Cash And Bank Balances 35.7 43.5 28.4 26.0

Short-Term Loans And Advances 29.3 12.0 12.4 23.1

Other Current Assets 6.2 6.1 9.9 18.3

Total Current Assets 361.5 378.6 315.0 437.3

Total Assets 532.9 581.5 628.6 774.3









28th September 2014

Challenging The Market Price:

Financial Projections: Assuming HMVL doesn’t utilize cash on balance sheet

Key Assumptions


Page 23

FY Ending March; [ ` Cr] 2014A 2015E 2016E 2017E 2018E 2019E CAGR

2014-19

Income Statement

UP & UK Revenue 240.8 276.9 318.5 366.2 421.2 484.4 15.0%

Bihar Revenue 364.9 397.7 433.5 472.5 515.0 561.4 9.0%

Delhi NCR Revenue 124.1 135.2 147.4 160.7 175.1 190.9 9.0%

Total Revenue 729.7 809.8 899.3 999.4 1,111.3 1,236.6 11.1%

EBITDA 151.2 176.7 206.7 242.3 282.5 313.0 15.7%

EBITDA Margin 20.7% 21.8% 23.0% 24.2% 25.4% 25.3%

D&A 21.6 28.3 31.5 35.0 38.9 43.3 15.0%

EBIT 129.7 148.3 175.2 207.4 243.6 269.7

EBIT Margin 17.8% 18.3% 19.5% 20.7% 21.9% 21.8%

Interest Expense 5.7 5.7 5.7 5.7 5.7 5.7 0.0%

Non Operating Income 30.6 34.2 40.1 47.4 56.4 66.7 16.9%

PBT 154.6 176.8 209.7 249.1 294.3 330.8

Total Tax 43.4 61.9 73.4 87.2 103.0 115.8 21.7%

Tax Rate 28.0% 35.0% 35.0% 35.0% 35.0% 35.0%

PAT 111.2 114.9 136.3 161.9 191.3 215.0 14.1%

PAT Margin 15.2% 14.2% 15.2% 16.2% 17.2% 17.4%

FY Ending March; [ ` Cr] 2014A 2015E 2016E 2017E 2018E 2019E CAGR

2014-19

Free Cash Flow

Cash Flow From Operations 113.3 123.7 144.7 169.6 197.8 219.1 14.1%

Capex 42.7 47.4 52.6 58.5 65.0 72.3 11.1%

Free Cash Flow 70.6 76.3 92.1 111.2 132.8 146.8 15.8%

Revenue Growth 2014A 2015E 2016E 2017E 2018E 2019E

UP & UK NA 15.0% 15.0% 15.0% 15.0% 15.0%

Bihar & Jharkhand NA 9.0% 9.0% 9.0% 9.0% 9.0%

Delhi NA 9.0% 9.0% 9.0% 9.0% 9.0%

EBITDA Margin 2014A 2015E 2016E 2017E 2018E 2019E

UP & UK 4.5% 8.5% 12.5% 16.5% 20.0% 20.0%

Bihar & Jharkhand 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%

Delhi 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%

FCF Related Assumptions 2014A 2015E 2016E 2017E 2018E 2019E

CFO as % EBITDA 74.9% 70.0% 70.0% 70.0% 70.0% 70.0%

Capex as % Revenue 5.8% 5.8% 5.8% 5.8% 5.8% 5.8%

Other Assumptions 2014A 2015E 2016E 2017E 2018E 2019E

D&A as % Revenue 3.0% 3.5% 3.5% 3.5% 3.5% 3.5%

Yield on Cash & Investments 8.7% 8.0% 8.0% 8.0% 8.0% 8.0%

Tax Rate 28.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Key Assumptions and Rationale:

• UP & UK revenues expected to grow at 15% from FY14-19E driven by increase in

advertisement yield as HMVL benefits from latest IRS result. Current yields in UP are

~0.6x times that of former #2 Amar Ujala and ~0.4x times the leader Jagran.

• Bihar, Jharkhand & Delhi NCR being mature markets expected to grow at a

conservative rate of 9%.

• Implied consolidated revenue growth comes at ~11%, although company has indicated

growth closer to 15% for the next few years.

• HMVL has indicated UP & UK EBITDA margins of 10% in FY15 and 20% in FY16. We have

remained conservative and assumed 20% margins will be achieved in FY18. Although,

one may argue about the likeliness of HMVL achieving 20% margins? With the recent

margin expansion in the region and favorable IRS numbers, we believe occurrence is

likely but have assumed a longer timeline as compared to the company.

• EBITDA margins expected to remain stable at 30% in Bihar & Jharkhand and at 25% in

Delhi NCR.

• Yield on cash and investments assumed to be 8% as most of the investments are in

Fixed Maturity Plans and Debt funds. Yield assumed slightly less than historical to

account for potential rate cuts by RBI.

• Effective tax rate assumed at 35% compared to historical rate of 28%. This is because

historically interest income on investments in FMP’s and Debt funds was non-taxable

if yield was less than inflation. But post the recent budget, that criteria only applies if

the instruments are held for more than 3 years. Considering that HMVL is looking for

potential acquisition, it is unlikely that it will tie up the funds for 3 years.

• Cash flow from operations assumed at 70% of EBITDA in line with historical trend.

• Capex assumed in line with historical at 5.8% revenue. Entirely maintenance capex.

• Our projections assume HMVL carries its operations in existing regions and doesn’t

invest in new regions. We also assume that the company doesn’t utilize the cash on

the balance sheet and invests them in debt funds as done historically.


Page 24

Valuation:

We value the business of HMVL fundamentally using a DCF (discounted free cash flow)

analysis. HMVL has completed its cash investments in UP & UK. The other markets of

Bihar, Jharkhand and Delhi NCR are already mature. Therefore, according to us free

cash flow is the ideal tool to understand value generated by current operations.

The operating business of HMVL is worth 1,237 crores based on our DCF valuation. At current market value of 1,142 crores, we are not only getting net cash of 420 crores for free but also getting the operating business at a discount of 75 crores to its intrinsic value.

DCF Valuation Output


Page 25

DCF Valuation (INR Crores) 2014A 2015E 2016E 2017E 2018E 2019E 2024E

Cash From Operations 113.3 123.7 144.7 169.6 197.8 219.1 321.9

Cash Investment In Operations 42.7 47.4 52.6 58.5 65.0 72.3 106.3

Free Cash Flow 70.6 76.3 92.1 111.2 132.8 146.8 215.7

Present Value Multiplier 0.88 0.77 0.67 0.59 0.52 0.27

Present Value of Free Cash Flows 66.9 70.9 75.0 78.6 76.2 58.2

Total Present Value of FCF till 2019 367.7

Total Present Value of FCF from 2020-24E 325.0

Continuing Value (CV) post 2024E 2,019.3

Present Value of CV 544.7

Value of Operating Business (Enterprise Value) 1,237.4

Net Cash 419.8

Value of Equity 1,657.2

Shares Outstanding (Crores) 7.34

Value Per Share (INR) 225.8

Current Share Price (INR) 155.6

Margin of Safety 31.1%

Key Assumptions

Discount Rate 14.0%

FCF Growth Rate From FY19E-24E 8.0%

Terminal Growth Rate of FCF after 2024E 3.0%

0.0

400.0

800.0

1,200.0

1,600.0

2,000.0

PV of FCFFY15E-19E

PV of FCFFY20E-24E

PV of FCFPost FY24E

Total ValueOf Operations

Net Cash Tota Value ofEquity

HMVL Valuation Output Summary

Source: AnalyseWise Analysis

`Crores

367.7

325.0

544.7 1,237.4

419.8 1,657.2

Note to Clients:

Margin of safety is not the same as the potential upside in the stock. In HMVL’s case

the margin of safety is 31.1% which means that even if the intrinsic value of the stock

falls by ~31% due to lower FCF than expected, we would not have overpaid for the stock.

So 31% is the cushion we have for unforeseen business slowdown or any other value

destroying factor.

Conversely it means that there is a potential upside of 45.1% as the current price

becomes equal to the intrinsic value of `225.8. Once the stock reaches the intrinsic

value , we can expect a return equal to the discount rate which we have used that is

14%.

So the total return will come from two sources: a. closing of gap between market price

and intrinsic value and b. increase in intrinsic value as the business grows in the

future which we assume to be 14% (discount rate which we have used).

Sensitivity Analysis of Margin of Safety

A negative terminal growth rate of 8% (post FY24) in free cash flow and a discount rate of 18% is required to justify the current market price of HMVL.


Page 26

31.1% -8.0% -4.0% 0.0% 2.0% 3.0% 4.0% 5.0% 6.0%

12% 24% 29% 35% 40% 42% 45% 49% 53%

14% 16% 20% 25% 29% 31% 34% 36% 39%

16% 8% 11% 16% 19% 21% 23% 25% 27%

18% 0% 3% 7% 9% 11% 12% 14% 16%Dis

count Rate

Terminal Growth Rate


Reverse DCF: Implied Perpetual Growth Rate In Current Free Cash Flow

Implied FCF Growth Rate ` Cr

Current Equity Value 1,142.0

Net Cash 419.8

Current Firm Value 722.2

FCF (FY14A) 70.6

Discount Rate 14.0%

Implied Perpetual Growth Rate in FCF 4.2%

Current market price implies a perpetual growth rate of 4.2% in the current FCF of HMVL which is very conservative considering sector economics and growth potential.


0.0

200.0

400.0

600.0

Current SharePrice

DifferenceBetween Value

and Price

Intrinsic Value Increase InIntrinsic ValueDuring Next 5

Years

Intrinsic ValueAfter 5 Years


Page 27

Summary Of Expected Return

Price `

155.6 70.2 225.8

209.0 434.8

Expected return of 23% for a holding period of 5 years

Rate of increase in intrinsic value assumed equal to discount rate of 14%

Upside of 45% due to closing of gap between market price and intrinsic value

Summary of DCF Valuation and our thoughts on current price:

• We arrive at an intrinsic value of `226 per share compared to current price of `156 per

share. Current price is at a discount of 31% to intrinsic value.

• As a sanity check, our intrinsic value of `226 per share implies a PE of 14.9x based on

FY14A EPS compared to a PE of 18-20x for peers of HMVL.

• Core operating business of HMVL is worth `1,237 Crores.

• Therefore, at current market cap of `1,142 Crores, we are not only getting cash and

investments worth `420 Crores for free but also getting the operating business at a

discount of `88 Crores.

• Reverse DCF indicates that the market is incorporating a perpetual growth rate of

4.2% in FY14 FCF, which according to us is highly conservative.

• At the current price, market is discounting a worst case scenario in terms of cash

utilization. Any ways we are not paying anything for the cash held by HMVL.


Key Risks:

• Inability to maintain margins in its leading markets: DB Corp has entered Bihar

through its Patna edition launched in Jan-14 which will increase competitive

intensity. According to HMVL, advertisement revenues in Bihar come primarily from

the state government for which a newspaper needs to have a pan state presence.

HMVL feels it will take a while for DB Corp to establish pan Bihar presence and

become a genuine threat. Meanwhile HMVL has cut its cover price in Patna to fend off

the competition. To the credit of HMVL, it has successfully tackled similar

competition from DB Corp and Jagran Prakashan in the past in Jharkhand.

• Slower traction in Uttar Pradesh: Inability to increase advertisement yields in UP

and UK leading to slower or no margin expansion.

• Emergence of geo-targeted advertising technology on television where the same

channel can broadcast different advertisements in different locations in which it is

being watched. For e.g. Zee Cinema in Maharashtra and Uttar Pradesh may air

different ads at the same time. We feel that newspapers offer a different proposition

to advertisers compared to television. Also, this technology is yet to gain traction and

if it does pose threat to the business of newspapers, it wont happen overnight. There

will be enough time to monitor the developments and take appropriate action (like

selling the stock) before a lot of damage if done.

• Grossly overpaying for an acquisition leading to destruction of value.


Page 28









28th September 2014

Summary of opportunity

• HMVL is a stable asset engaged in Hindi newspaper business available at an

attractive valuation due to lack of clarity on the use of huge pile of cash on its

balance sheet (cash and equivalents account for 37% of market cap)

• The company possesses moat characteristics and is expected to grow its earnings by

~14% in the next 5 years. Growth driven primarily from Uttar Pradesh and

Uttarakhand which are its newer markets.

• Trades at only 10x PE compared to 17-20x for peers.

• High probability of re-rating if it utilizes cash prudently through a smart acquisition

or distributes it to shareholders via dividends.

• The company can’t do a buyback as promoters ownership is at the maximum

permissible limit of 75%.

Recommendation:

• We recommend our clients to buy “Hindustan Media Ventures” at the current

market price of `156.

• Current market price offers a margin of safety of 31% based on our DCF valuation.

• Our clients can expect a return of ~23% excluding dividends over a period of 5 years.

• Possibility of further upside if company prudently uses cash which will lead to re-

rating of the stock by the market.

• More importantly, the downside risk at the current price is very limited.


Page 29









28th September 2014

Appendix:

Detailed Annual Financials of Hindustan Media Ventures:



Page 30

Year Ending March; [` Crores] 2011 2012 2013 2014 CAGR 11-14

Income Statement

Daily Circulation (Million) 2.02 2.20 2.35 2.40 5.9%

Realization Per Copy (`) 1.70 1.71 1.84 2.08 7.0%

Advertisement Revenue 374.1 439.2 460.1 530.0 12.3%

Subscription Revenue 122.3 134.8 155.3 178.2 13.3%

Other Operating Revenue 19.7 22.6 20.9 21.6 3.0%

Total Operating Revenue 516.2 596.6 636.3 729.7 12.2%

Newsprint & Ink Cost 224.5 256.7 264.8 300.4 10.2%

Gross Profit 291.6 340.0 371.5 429.3 13.8%

(Increase) / Decrease In Inventories -0.2 0.1 -0.2 0.1 NM

Employee Benefit Expense 63.6 73.4 80.4 86.6 10.8%

Other Expenses 140.9 171.2 178.7 191.4 10.8%

Ebitda 87.4 95.3 112.6 151.2 20.1%

Depreciation & Amortisation Expense 16.4 19.4 21.7 21.6 9.4%

EBIT 70.9 75.9 90.9 129.7 22.3%

Interest Expense 4.5 3.3 5.3 5.7 8.4%

Non Operating Income 9.7 19.1 28.5 30.6 46.7%

Profit Before Tax 76.2 91.7 114.0 154.6 26.6%

Total Tax Expense 22.6 26.4 29.5 43.4 24.3%

Effective Tax Rate 29.6% 28.8% 25.9% 28.0%

Profit After Tax 53.6 65.3 84.5 111.2 27.5%

Earnings Per Share 7.3 8.9 11.5 15.2 27.5%

Year Ending March 2011 2012 2013 2014

Margin Analysis

Gross Margin 56.5% 57.0% 58.4% 58.8%

EBITDA Margin 16.9% 16.0% 17.7% 20.7%

EBIT Margin 13.7% 12.7% 14.3% 17.8%

PBT Margin 14.8% 15.4% 17.9% 21.2%

PAT Margin 10.4% 11.0% 13.3% 15.2%

Cost Analysis as % Operating Revenue

Newsprint & Ink 43.5% 43.0% 41.6% 41.2%

Employees 17.0% 16.7% 17.5% 16.3%

Printing & Service Charges 6.7% 6.4% 5.8% 5.2%

Advertising & Sales Promotion 4.3% 4.2% 5.0% 4.8%

Consumption Of Stores & Spares 3.3% 3.0% 3.3% 3.1%

News Services & Despatches 2.1% 1.9% 2.0% 1.8%

Power & Fuel 1.8% 1.8% 1.7% 1.6%

Other Operating Expenses 4.5% 6.9% 5.4% 5.2%

Depreciation & Amortization 3.2% 3.3% 3.4% 3.0%

Interest Expense 0.9% 0.6% 0.8% 0.8%



Page 31

Year Ending March; [` Crores] 2010 2011 2012 2013 2014

Balance Sheet

Share Capital 57.1 73.4 73.4 73.4 73.4

Reserves & Surplus 18.2 305.6 360.7 434.9 535.8

Shareholder's Equity 75.4 379.0 434.1 508.3 609.2

Non-Current Liabilities

Deferred Tax Liabilities 2.8 3.6 5.0 6.6 6.5

Trade Payables 0.0 1.6 2.5 0.0 0.0

Total Non Current Liabilities 2.8 5.2 7.5 6.6 6.5

Current Liabilities

Short-Term Borrowings 135.0 20.5 26.3 3.2 20.3

Trade Payables 0.0 76.4 65.1 60.3 76.2

Other Current Liabilities 114.6 41.8 36.8 37.9 50.3

Short-Term Provisions 2.5 10.0 11.7 12.2 11.9

Total Current Liabilities 252.1 148.8 140.0 113.7 158.7

Total Liabilities 254.9 154.0 147.4 120.3 165.2

Total Equity & Liabilities 330.2 532.9 581.5 628.6 774.3

Non-Current Assets

Tangible Assets 140.9 163.0 184.4 176.5 168.2

Intangible Assets 0.0 1.7 1.7 1.6 1.2

Capital Work-In-Progress 14.9 0.6 7.3 1.0 11.0

Intangible Assets Under Development 0.0 0.0 0.1 0.0 0.0

Non-Current Investments 31.2 0.0 5.3 125.0 125.0

Long-Term Loans & Advances 0.0 5.7 3.8 4.4 23.5

Other Non-Current Assets 0.0 0.5 0.3 5.1 8.2

Total Non-Current Assets 189.3 171.5 202.9 313.5 337.0

Current Assets 0.0 0.0 0.0 0.0 0.0

Current Investments 0.0 189.0 207.3 152.8 243.6

Inventories 16.4 24.2 31.5 32.4 33.0

Trade Receivables 71.5 77.1 78.0 79.1 93.3

Cash & Bank Balances 27.1 35.7 43.5 28.4 26.0

Short-Term Loans & Advances 25.9 29.3 12.0 12.4 23.1

Other Current Assets 0.0 6.2 6.1 9.9 18.3

Total Current Assets 141.0 361.5 378.6 315.0 437.3

Total Assets 330.2 532.9 581.5 628.6 774.3



Page 32

Year Ending March 2011 2012 2013 Current

Key Cash Flow Metrics

Free Cash Flow (` Crores) 27.8 26.6 73.0 70.6

FCF As % Operating Revenue 5.4% 4.5% 11.5% 9.7%

FCF As % EBITDA 31.8% 27.9% 64.8% 46.7%

FCF As % Market Cap 3 Month Post FY End 2.7% 2.9% 7.8% 6.2%

FCF As % Enterprise Value 3 Month Post FY End 3.3% 3.9% 11.6% 9.8%

Year Ending March; [` Crores] 2011 2012 2013 2014

Cash Flow Statement

Cash Flow From Operating Activities

Profit Before Tax 76.2 91.7 114.0 154.6

Adjustment For Depreciation & Amortization 16.4 19.4 21.7 21.6

Adjustment For Non Operating (Income) / Expense -2.9 -1.4 -15.1 -21.2

Adustment For Working Capital Changes -13.4 -13.3 -11.5 1.1

Direct Taxes Paid -19.1 -24.2 -28.4 -42.8

Net Cash Flow From Operations 57.1 72.3 80.7 113.3

Cash Flow From Investing Activities

Capex -29.3 -45.7 -7.7 -42.7

Net (Investment) / Divestment In Financial Assets -157.9 -31.5 -66.6 -90.9

Income From Financial Assets 1.9 17.5 16.6 16.1

Divestment Of Assets 0.0 0.7 0.2 0.1

Net Cash Flow From Investing -185.3 -59.0 -57.5 -117.3

Cash Flow From Financing Activities

Issue Of Equity 270.0 0.0 0.0 0.0

Buback Of Equity 0.0 0.0 0.0 0.0

Issue Of Debt 20.4 5.8 -23.1 17.1

Repayment Of Debt -135.0 0.0 0.0 0.0

Equity Issue Expense -13.8 0.0 0.0 0.0

Interest Expense -4.6 -2.7 -5.0 -5.2

Dividend Paid 0.0 -7.3 -8.8 -8.8

Tax On Dividend 0.0 -1.2 -1.4 -1.5

Net Cash Flow From Financing 137.0 -5.4 -38.3 1.6

Change In Cash & Equivalents

Net Increase In Cash & Cash Equivalents 8.8 7.8 -15.1 -2.4

Cash & Cash Equivalents At Beginning Of The Year 26.9 35.7 43.5 28.4

Cash & Cash Equivalents At End Of The Year 35.7 43.5 28.4 26.0



Page 33

Top Shareholder % Ownership

Promoter HT Media 75.0%

Reliance Mutual Fund 8.4%

HDFC Mutual Fund 2.9%

Azim Premji 1.2%

Kotak Mahindra Mutual Fund 1.0%

Others 11.6%

Total 100.0%

Shareholder Category % Ownership

Promoter HT Media 75.0%

Mutual Funds 13.0%

Financial Institutions / Banks 0.8%

Foreign Instiutional Investors 1.5%

Corporate Bodies 5.8%

Individuals 3.5%

Total 100.0%

Shareholding Details as of June-2014

Source: Company Filings

Disclaimer: This report is intended for the use of AnalyseWise Investment Advisor’s clients only. No part

of this report can be reproduced, retransmitted without the consent of AnalyseWise Investment Advisors.

Any party found guilty of breaching the copyrights will be subject to proceedings under Copyright

Infringement Act.

Year Ending March 2011 2012 2013 2014

Working Capital Efficiency

Inventory Turnover 9.3x 8.1x 8.2x 9.1x

Recievables Turnover 6.7x 7.6x 8.0x 7.8x

Payables Turnover 2.9x 3.9x 4.4x 3.9x

Inventory Days 39.4 44.8 44.7 40.0

Recievables Days 54.5 47.7 45.4 46.7

Payable Days 124.2 92.7 83.2 92.6

Cash Conversion Cycle (Days) -30.4 -0.1 6.8 -5.9

Return Ratios

Return On Beginning Equity 71.1% 17.2% 19.5% 21.9%

Return On Average Equity 23.6% 16.1% 17.9% 19.9%

Return On Ending Equity 14.1% 15.1% 16.6% 18.3%

Pre-Tax Return On Average Capital Employed 43.4% 40.1% 44.4% 58.9%

Pre-Tax Return On Capital Employed 40.6% 37.2% 44.3% 55.2%

Post-Tax Return On Capital Employed 26.4% 24.2% 28.8% 35.9%

Actual Post Tax Return On Capital Employed 28.6% 26.5% 32.8% 39.7%

Du Pont Analysis

PAT Margin 10.4% 11.0% 13.3% 15.2%

Asset Turnover 1.0x 1.0x 1.0x 0.9x

Leverage 1.4x 1.3x 1.2x 1.3x

Return On Equity 14.1% 15.1% 16.6% 18.3%

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