Net Pix Shorts Digital Media coming with an IPO to raise upto Rs 3 crore

17 Nov 2020

Net Pix Shorts Digital Media

  • Net Pix Shorts Digital Media is coming out with an initial public offering (IPO) of 9,00,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share.
  • The issue will open on November 18, 2020 and will close on November 23, 2020.
  • The shares will be listed on SME Platform of BSE.
  • The share is priced 3.00 times higher to its face value of Rs 10.
  • Book running lead manager to the issue is Aryaman Financial Services.
  • Compliance Officer for the issue is Akanksha Sharma.

Profile of the company

The company is a technology based entertainment company operating in the niche segment of online short film contents and publishing the same on various digital online portals and OTT platforms. The online digital media industry is a continuously evolving technological industry and it endeavours to exploit these technological advances to reach audiences in India and globally with entertaining, socially relevant and heart-felt content.

The company’s objective is to offer a platform for enabling digital online entertainment by creating and/or procuring short content in order to make its platform a preferred choice for short content audiences. It started its online content distribution through the internationally renowned ‘YouTube’ portal and its channel - ‘Net Pix Shorts’ went live on January 08, 2018. Currently, it has released 10 titles consisting of 12 videos on its YouTube channel aggregating to 154.94 minutes of content, which has received approximately 314.68 lakh aggregate views as on November 06, 2020. It has also received the Silver Creator award from YouTube for crossing 1,00,000 subscribers and currently, it has having approximately 2.46 lakh subscribers to its channel. It has recently launched its own music channel on YouTube - ‘Net Pix Raw Music’ which went live August 14, 2020. The idea behind the music channel is to invite new and young musicians to showcase their talents on a global platform, where it offers them an online platform through its channel partners and OTT platform arrangements.

Proceed is being used for:

  • Acquisition of workshop & Godown and Writer’s Lounge on a long term lease basis.
  • Further augment company’s digital media content library.
  • General corporate purpose.

Industry overview

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making significant strides. Proving its resilience to the world, Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenue. The industry has largely been driven by increasing digitisation and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people. Media is consumed by audience across demographics and various avenues such as television, films, out-of-home (OOH), radio, animation, and visual effect (VFX), music, gaming, digital advertising, and print. The Indian advertising industry is projected to be the second fastest growing advertising market in Asia after China. At present, advertising revenue accounts for around 0.38 per cent of India’s gross domestic product. By 2021, Indian media and entertainment industry will reach Rs 2.35 trillion.

The digital segment continued to be the torchbearer of growth of the industry in FY19, with a 43.4 per cent growth taking the overall segment (including digital advertising and subscription revenues from OTT video and audio) to Rs 173 billion in FY19. The rapid growth in infrastructure led to a spurt in demand for content and the resultant consumption was driven by an equal focus on the supply of digital content by platforms. Within the digital segment, the advertising sub-segment grew by approximately 38 per cent in FY19, with digital now forming a key part of media strategies across industry verticals. The growth in regional consumption also led to the emergence of new avenues for digital advertising. The digital subscription sub-segment is also starting to emerge as significant, especially for the fast growing OTT video. The digital market in India is set to become the second largest within media and entertainment by FY22 when it reaches Rs 386 billion. It will move ahead of print and be behind TV in its aggregate revenue. By FY24, the digital market will be half that of TV in the Indian economy.

Of the digital content landscape in India, the OTT video sub-segment has seen the maximum traction in the last couple of years. With more than 30 OTT video platforms in the country, and a rapid growth in video consumption, the landscape has evolved rapidly across the entire value chain. Whether it is large broadcasters global digital video majors, traditional content creators or telecom companies, everyone has jumped onto the OTT bandwagon, in order to acquire the elusive digital customers who can potentially yield great value over the long run. The subscription revenues have registered a nearly 3x increase in FY19, totalling Rs 12 billion, with contributions from both direct subscription revenues of OTT platforms, as well as those from the telco partnerships. Direct subscriptions contributed around 65-70 per cent and the rest were realizations from telco partnerships.

Pros and strengths

Strong intellectual property including diverse and growing content library: The company has a diverse content library, which is growing continuously with the addition of new releases. This enables it to distribute to platforms catering to a wide range of audiences. The company currently has a content library consisting of 10 titles and 9 music videos. All its current contents are created by it i.e, through outsourcing the production activities. Its major focus is on bringing the innovation in its content, give crystal clear message and making it audience focused. Its library has content which will appeal to audiences of varied demographics in India and outside India. It has endeavoured to touch on various social subjects in today’s society, including loneliness, motherhood, love & romance and LGBT relations, to name a few, and will continue to address these topics through the digital media platform. Also, certain of company’s short films have received nominations and were the official selection at various film festivals and academies. The company has also diversified its content by recently launching a dedicated music channel in the name and style of Net Pix Raw Music on YouTube. With this channel, the company has undertaken to embrace all the content made by the budding artists with open arms and no biases, except for quality of the content. This music channel is an open platform for offering budding talents an opportunity to display their content of songs and music videos made with fresh ideas and ambitions.

The company’s YouTube Channel providing it global presence: In the business of Digital Media Publishing, a strategic marketing approach is important which is focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience and ultimately, to drive profitable customer action. As a start-up Company, it still has a global presence, mainly in the South Asian region. Further, the company’s channels, Net Pix Shorts and Net Pix Raw Music have been accepted into the YouTube Partner Program by YouTube which is worldwide streaming video application. Once it uploads its videos on its channels in YouTube it can be viewed by anyone across the world. As of this Prospectus, it has approximately 2,47,700 subscribers on its YouTube Channels. Besides, certain of its videos & short films are also available the other platforms like Hungama Play, Sony Liv, Shorts TV, MX Player and Hotstar, and they can be viewed by viewers across many countries worldwide as they are available on the online through the internet.

Scalable business model: The company’s business model is technology driven and comprises of optimum utilization of its ability to put together a successful team for its creative short films, efficient working of its marketing team, management expertise in identifying scripts, acquiring new OTT platform and online digital partners and customers, budgeting the production of the short films and achieving consequent economies of scale. This business model has proved successful and scalable for it not only since its incorporation but also in the Erstwhile Proprietorship firm. It can scale upward as per the requirement generated by company. The business scale generation is basically due to the exponential online digital possibilities open to it.

Risks and concerns

Revenues, profitability directly linked to monetization of company’s content: Monetization of content means deploying content on distribution platforms so as to enable them to generate view based, advertising & other related revenue from company’s content. The revenue is then shared by distribution platforms with it. Its profitability is significantly linked with the monetization of the content. The actual monetization of the content acquired by it may vary from estimates for factors which may be beyond its control. In certain contents, it may not be able to monetize adequately to recover the costs associated with such contents. Further, being a digital media publishing company it derives revenues from various types of digital content including but not limited to music, videos, short films, web series, etc. There is no specific process to compute which video or specific digital media item generated how much revenue, as some of the times these contents are even sold / hosted as a bundle or that they may be used with interlink ages. Hence it may not be able to specifically project the expected revenues from a specific media content, which it may propose to create or acquire from the Net Issue Proceeds.

Depend on relationships with platform owners for monetization of content library: The company’s distribution platforms include various digital online portals and OTT platforms and they play a significant role in digital media. The company has entered into an agreement with various industry players to provide the platform and the said relationship is established through its existing network formed by experienced team. It has currently entered into an agreement with Google (YouTube), Hungama, Hotstar, MX Player, Amazon Prime Music, Jio Saavn and Gaana to name a few for short films and music (including music videos). Any failure to maintain these relationships with the aforementioned platform owners or to establish and capitalise on new relationships, could harm its business or prevent its business from growing, which could have a material adverse effect on its business prospects, financial condition and results of operations.

Revenue dependent on few customers: Since the company is recently started its operation, it derives its entire operational revenue from a few customers. These customers are domestic and international media online platforms. If it unable to add additional online media partners to its portfolio, it will affect its financials adversely. Any perceived decline in its quality standards, growing competition and any change in demand may adversely affect its ability to retain the existing or acquire new customers and consequently affect its financials. The viewership of company’s content depends significantly on the success of these third party online portals and OTT platforms. It cannot assure that it shall generate the same quantum of business, or any business at all from its existing customers, and any loss of business from it may adversely affect its revenues and results of operations. While it is constantly striving to increase its customer base and reduce dependence on any particular customer and also launch an OTT platform of its own, there is no assurance that it will be able to broaden its customer base in any future periods or that its business or results of operations will not be adversely affected by a reduction in viewership of its content or the popularity and acceptance of its customer’s platforms.

Outlook

Incorporated in 2019, Net Pix Shorts Digital Media is a Mumbai-based technology entertainment company. The company prepares online short film content and publish it on the digital media channels and OTT platforms. It started content distribution through its channel 'Net Pix Shorts' on the 'YouTube' portal. It has a writer lounge, where it invites professional and potential writers who are members of the Screenwriters Association and they can use this lounge at free of cost. The company is a concise organization with its Directors and other Key Managerial Personnel taking the lead in day to day business activities. On the concern side, the company is dependent on third parties and certain related parties for carrying out the line production activities to create new content and is exposed to risks relating to fluctuations in availability, cost and skills of such third parties. Further, it does not have any long term agreements with any of the professionals, technicians, actors, etc. Besides, it requires several statutory and regulatory permits, licenses and approvals to operate its business. Many of these approvals are granted for fixed periods of time and need renewal from time to time.

The company is coming out with an IPO of 9,00,000 equity shares of Rs 10 each at a fixed price of Rs 30 per equity share to mobilize Rs 2.70 crore. On the performance front, revenue from operation for the year ended March 31, 2020 amounted to Rs 18.36 lakhs which was primarily on account of licensing fees of its content and income from channel partners. Profit after tax the year ended March 31, 2020 amounted to Rs 2.28 lakh which is 12.41% of the total revenue. With increasing content and with an aim to increase company’s revenue, it intends to develop its own application for an OTT platform, where all its videos, music videos and short films will be available to view or download based on a periodic subscription fee. It intends to further increase the brand recognition through brand building efforts, communication and various initiatives, like participation in industry events, public relations and investor relations efforts.

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