Phantom Digital Effects coming with an IPO to raise Rs 29.10 crore

Phantom Digital Effects

• Phantom Digital Effects is coming out with a 100% book building; initial public offering (IPO) of 30,63,600 Equity Shares of face value of Rs 10 each in a price band Rs 91-95 per equity share.
• The issue will open for subscription on October 12, 2022 and will close on October 14, 2022.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.10 times of its face value on the lower side and 9.50 times on the higher side.
• Book running lead manager to the issue is Corporate CapitalVentures.
• Compliance Officer for the issue is Pallavi Tongia. 

Profile of the company

The company was formed in the year 2016. Today, the company is a creative VFX studio, specializing in Film, Web series and Commercial. It has delivered more than thousands of shots for Domestic and International feature films (Hollywood), Web Series & commercials in the past few years. Apart from working for film production and commercials, the company periodically takes up subcontracts from larger visual effects studios as well. It is a Certified Trusted Partner Network (TPN) company, full-fledged creative VFX studio, based in India with offices operating in US and Canada. The company is not having any office in US and Canada. Presently, it is operating in US and Canada through Agencies only for procuring orders. It provides high-end visual effects solutions for commercials, feature films, and Web series globally. It offers all sorts of creative VFX works, ranging from Final Compositing and Roto to creating 3D Elements, Photo real creatures and Environments, 3D, match move, and Animations. The company supports production houses by providing end to end services.

The company conducts its operations with focus on to provide reliable, cost-effective and high-quality VFX shots at competitive price for the US and European markets. It has the flexibility to work on any kind of project, either small or large, with faster turnaround and scalability to generate long-term value for the company. Phantom has a team of creative-driven professionals, who are capable of managing all sorts of VFX production tasks every single step of the way to deliver high-quality, industry standard content for the client. The team of talented and passionate creatives at Phantom are capable of handling projects of any scale and complexity employee experience. To emerge as the best VFX company producing quality content for both International and Domestic markets, it aims to build a work environment that is not only productive and efficient but also more exciting, fulfilling, meaningful and fun, creating the best.

Proceed is being used for:

• Capital expenditure for setting up of studios.
• General Corporate Expenses.

Industry overview

The global visual effects (VFX) market attained a value of $26.64 billion in 2020. The market is further expected to grow in the forecast period of 2022-2027 at a CAGR of 11% to reach almost $ 49.83 billion by 2026. The global market is being led by North America, majorly being driven by the increasing use of VFX in Hollywood movies. Visual effects or VFX refer to special effects that deeply reflect the story’s visual representation and are used in films in one way or another almost since the earliest films. Since then, visual effects have often been used and not only for special effects. Many films used matte paintings to create ceilings that did not exist on the sets. Visual effects have evolved in order to deliver sights that cannot literally be filmed. This procedure involves the incorporation of live-action footage as well as the imagery created to create realistic scenes. VFX with CGI is widely used to produce movies, commercials, games, and television shows.

One of the main factors driving the rise of the global VFX market is the growing demand for high-quality content. With the increasing use of digital video streaming outlets like Amazon Prime Video, Netflix and Hulu, high-quality content and VFX are becoming more important. Smart devices like smartphones, tablets, laptops, and HD TVs are increasingly being used to promote the development of digital video streaming services. Many video services and studios utilize VFX in films and TV shows. Moreover, studios are stiffly competitive with providers of video streaming services by designing high-quality feature content, such as VFX. Consumers who are increasingly looking for high-definition (HD) VFX experiences will have huge business opportunities in the VFX market in the next few years.

The Indian VFX industry has been gradually climbing up the ladder with adaptation of world-class techniques and innovative technology. The content creators are upping their storytelling with marvelous VFX advancements. Statistics by the recent FICCI EY report confirm the exponential growth of India’s M&E space with VFX and post production facilities moving up the value chain. In 2021, the Indian VFX sector grew by 103 per cent to reach Rs 38.2 billion, while post-production grew by 49 per cent to reach Rs 14.4 billion.

Pros and strengths

Well equipped with advance technology: The company is well equipped with all the advance equipment’s as needed in the Industry. This provides the company with the edge over its competitors.

Experienced promoters and technically sound operation team: The company’s Promoters have significant industry experience and have been instrumental in the consistent growth of the company. Its management and technical professional teams combine expertise and experience outlines plans for future development of the company and ensures successful execution of the plans.

Marque clientele: The company has worked with large number of marque clients which includes KJR Studios, DRP-Gunaa Teamworks, Zoic INC, RaajKamal Film International, Retrophiles, MatchBox Shots LLP, VFX Cloud, Sun TV Network, 24AM Studios, Eros International Media, The Vermillioan World, Konidela Production Company and Slingshot Creations.

Risks and concerns

Business dependent on contractual arrangements: The company enters into contracts with its clients which impose several contractual obligations upon it. If it is unable to meet these contractual obligations and / or its clients perceive any deficiency in its services, it may face legal liabilities and consequent damage to its reputation which may in-turn adversely impact its business, financial condition and results of operations. There are also some contracts, which terminable by its clients in writing upon committing any breach or non-observance of any conditions of the Agreements entered into viz. fraud by the company or any misconduct of its associate employees which could adversely affect the reputation of its clients. While, it considers all factors internally prior to entering into such contractual agreements, it cannot assure that such clients may choose to terminate their agreements with the company based on the terms stated above.

Intensified competition: The company faces intense competition from both Indian and foreign competitors, many of which are substantially larger and have greater financial resources than the company. Growth in entertainment industry in recent years has attracted new industry participants and competitors. The entry of such competitors may change the media and entertainment industry in ways that may not favour the company. Domestic competitors of a scale similar to or greater than its own may impact its ability to attract creative and technical talent and other scarce resources including content, which could have a material adverse effect on its business, prospects, financial condition and results of operations.

Substantial working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards employee cost. As on June 30, 2022, it has taken unsecured loan of Rs 23.44 lakh. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high inventories and outstanding amount due from its debtors which may adversely affect its cash flows and business operations.

Outlook

Incorporated in 2016, Phantom Digital Effects is a Certified Trusted Partner Network (TPN) company, full-fledged creative VFX studio, based in India with offices operating in US and Canada. As a TPN Certified studio, PhantomFX offers a wide range of VFX services. The company's specializations include: Completing a Shot with final compositing, Creating 3D elements, photoreal creatures, and environments, Rig/Wire removal, paint cleanup, rotoscopy, 3D matchmove, 3D animation (storyboard, animation), Pre-visualization Game cinematics, Fire / water Fx and other natural phenomena 3D ride animation. Phantom Digital Effects provides high-end visual effects solutions for commercials, feature films, and Web series globally. The company has two studios located in Mumbai and Chennai. On the concern side, the company operates in the entertainment industry which involves a substantial degree of risk, including rapidly evolving changes in technology, digital content platforms and consumer tastes. Besides, the company requires various statutory and regulatory licenses, permits and approvals to operate its business. It needs to make compliance and applications at appropriate stages of its business to continue its operation.

The issue has been offered in a price band of Rs 91-95 per equity share. The aggregate size of the offer is Rs 27.88 crore to Rs 29.10 crore based on lower and upper price band respectively. On performance front, total revenue increased by Rs.1,556.83 lakh and 230.15% from Rs. 676.44 lakh in the fiscal year ended March 31, 2021 to Rs.2,233.27 lakh in the fiscal year ended March 31, 2022. Net Profit increased by Rs. 487.35 lakh and 17022.62% from profit of Rs. 2.86 lakh in the fiscal year ended March 31, 2021 to profit of Rs. 490.21 lakh in the fiscal year ended March 31, 2022. Meanwhile, the company is maintaining long term relationship with its customers. It aims to achieve this by adding value to its customers through the use of latest and updated technology, quality assurances and timely delivery of results. Also, it focuses on maintaining strong relationship with existing clients which will help it to gain competitive advantage in gaining new clients and increasing the business.