Key Points on TV 18 from Leading Stock Broking Firm:
TV18 has acquired a 40% stake in Infomedia India (Infomedia) for Rs225 a share. The stake was acquired from ICICI Venture that held 62.74% stake in Infomedia.
The company has made an open offer to the shareholders of Infomedia for a further 20%stake in the company at Rs237 a share, as TV18 intends to increase its stake in Infomedia atleast to 53%.
Infomedia operates in three key business verticals- publishing, printing and publishing outsourcing. These verticals contribute 53%, 21% and 24% respectively to the company's revenues.
Infomedia is a leading publisher of special interest magazines and has a portfolio of eight business-to-consumer (B2C) and 12 business-to-business (B2B) titles. To further augment the magazine segment, the company has tied up with global majors such as Reed Elsevier, Ringier and Vogel Burda.
Infomedia is a dominant player in the Yellow Pages business in India with over 40% market share. While its Yellow Pages network currently covers 22 cities, the company targets to cover 48 cities by 2010 along with expanding the portfolio of product offerings.
To leverage on its strengths in content and search in print media, Infomedia targets offering them across emerging media platforms such as mobile, SMS, and Internet.
Infomedia has presence in global publishing outsourcing business with front-end offices in US and UK and back-end facilities in Noida and Bangalore. While the company would focus on acquisition-led strategy for growing the outsourcing business multifold, the business has a potential to grow by 30% annually.
We believe TV18's strength in electronic media provides a strategic fit with Infomedia's presence in directories and magazines. There is also a possibility for TV18 to exploit synergies with Infomedia especially in new media verticals.
We maintain our buy recommendation on TV18 based on our existing sum-of-the-parts price target of Rs571
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