DEN Files For IPO

Leading cable group Digital Entertainment Network (DEN), which operates a pan-Indian cable distribution network and a distribution JV (Star DEN) with Star India, is looking to raise Rs5 bil./US$110 mil. from an IPO led by Deutsche Bank.

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In an August 7 filing, the company said it would invest Rs2.1 bil. to invest in digital infrastructure and develop new cable TV services; a modest Rs250 mil. to develop cable broadband services; Rs100 mil. for content and rights; and Rs400 mil. for loan repayment.

The IPO, MPA analysts believe, is the first significant step in the second round of cable recapitalization which will see other group such as Hathway, WWIL and InCable armed with new public and private capital.

DEN has a majority interest (typically 51%) in 62 cable operators serving ~10 mil. homes and plans to grow its business further in the future through DTV upgrade, GePON broadband rollout, relevant low-cost content acquisitions and industry consolidation. The company has more than 0.3 mil. DTV users.

The company is 45% owned by group chairman and proven media financier Sameer Manchanda and related parties; 16% by Lucid Systems; 10% by RRB Investment; and 8% by Standard Chartered IL&FS Asia. Following the IPO, Manchanda’s stake is expected to dilute to below 35%. The IPO will see the issue of 20 mil. new shares though DEN is also considering a pre-IPO placement of 5 mil. shares.

Fundamentals 
For FYE March 2009, DEN generated consolidated sales of Rs7.2 bil., which compares against Rs8 bil. and Rs4 bil. for similar sized cable counterparts Hathway Cable & Datakom and WWIL. DEN also reported a loss after tax and minority interest of Rs151 mil.

More than half of its sales base in FY 09 was generated from Star-DEN, which earns revenue through subscription fees received from various distribution platforms and placement fees received from five channels. Sales from DEN's pure-play cable TV business reached Rs3.5 bil. in FYE March 2009. Content costs represented 61.1% of its total sales for FYE March 2009.