Music Broadcast IPO crosses halfway mark on day 1 as retail investors tune in

The initial public offering (IPO) of Music Broadcast Ltd, which runs FM radio channel Radio City, crossed the halfway mark on the first day of the issue on Monday, with retail investors leading subscription activity.

The public offering of 10.48 million shares—excluding anchor investors’ portion—received bids for 5.31 million shares, with retail investors' book fully subscribed, stock-exchange data showed.

The quota of shares reserved for institutional buyers did not see any bidding on the first day. The portion set aside for non-institutional investors, such as corporate houses and wealthy individuals, was covered a tad more than 3%.

Music Broadcast's IPO is the first by a radio operator in over a decade. In November 2005, Times Group-controlled Entertainment Network (India) Ltd, which runs Radio Mirchi, had gone public. Entertainment Network commands a market valuation of about Rs 3,966 crore ($595 million), stock-exchange data show.

Music Broadcast, which is majority-owned by Blackstone-backed Jagran Prakashan Ltd, had on Friday raised Rs 146.55 crore ($22 million) through the sale of shares via anchor allotment ahead of its three-day initial public offering (IPO) beginning Monday. The company issued about 4.41 million shares to 17 institutional investors at Rs 333 per share, stock-exchange filing showed.

Those who bought the shares include funds of Morgan Stanley, BlackRock, Franklin India, Nomura and Pictet Mauritius.

Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares and support a public offering. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.

Among Indian asset managers, ICICI Prudential Asset Management Co, Reliance Capital Trustee Co Ltd and Birla Sun Life Asset Management Co also bought Music Broadcast's shares. Birla Sun Life Insurance Co and HDFC Standard Life Insurance Co were also among the buyers.

In the grey market, MBL shares were quoting at a premium of Rs 45-50 per share over the price band.

The grey market is a pseudo, over-the-counter market where IPO shares are traded before the official listing on a stock exchange.

IPO price, valuation

The IPO is priced at Rs 324-333 per share.

The company is seeking a valuation of nearly Rs 1,900 crore ($285 million) through the IPO. It aims to raise about Rs 488 crore through a fresh issue of shares and a sale of shares by promoter group individuals Sameer Gupta and other members of his family.

"Long-term investors seeking to add weight in the M&E sector should subscribe to the issue,” said IIFL Wealth & Asset Management’s research division in a client note on 3 March.

The overall issue will see sales of at 14.67 million shares, of which existing shareholders will offload about 2.66 million. The issue will result in a dilution of 25.71% stake on post-offer equity capital.

Music Broadcast had received final observations from the Securities and Exchange Board of India on 9 February. The parent company had filed draft documents for the IPO of its radio unit on 1 December.

Jagran Prakashan had entered the radio segment with the acquisition of Music Broadcast Ltd in December 2014, from private equity firm India Value Fund Advisors and Star Group, which is part of the Rupert Murdoch-controlled 21st Century Fox. Murdoch also runs News Corp, the parent of this news website.

The company plans to use the money raised through the fresh issue to redeem non-convertible debentures, repay inter-corporate deposits as well as for general corporate purposes.

ICICI Securities Ltd is the sole financial adviser for the issue.

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