Baweja Studios
- Baweja Studios is coming out with initial public offering (IPO) of 54,00,000 shares of Rs 10 each in a price band Rs 170-180 per equity share.
- The issue will open on January 29, 2024 and will close on February 1, 2024.
- The shares will be listed on NSE Emerge platform.
- The face value of the share is Rs 10 and is priced 17.00 times of its face value on the lower side and 18.00 times on the higher side.
- Book running lead manager to the issue is Fedex Securities.
- Compliance Officer for the issue is Nidhi Gajera.
Profile of the company
Baweja Studios is a technology-based content production house that specializes in all formats of commercial films with an aim to push the boundaries of storytelling and technology advancements in its field. As the business process, the company engages in research & development of scripts, end-to-end production of content, Intellectual Property creation and monetization of rights. The company is one of the players in the media and entertainment sector with a proven track record of producing high quality content. The company’s strength lies in its approach which revolves around sourcing of content either through in-house story developments, content acquisition, remake rights or adoption of books. After which a thorough selection process is carried out at various levels before starting the project for production. The company’s management committee then selects an appropriate model (production or co-production) for the project. In case of production, the company undertakes the entire production activity of the film while retaining all the rights, titles, interests, copyrights, intellectual property rights, exploitation rights and all other ancillary rights of the films. Production model increases the risk related to a single project as production studio has to bear all expenses and to look after complete financing. The company remains the sole owner and thus is solely responsible for activities such as marketing, promotion, distribution among others and accrue all the revenues.
Whereas in co-production, the company serves as line producers wherein it produces the movies and deliver it to the clients (including the ownership and copyrights) as per the agreement for a pre-agreed fee ensuring predictable profits. After that it becomes a collaborative process between the platform/studio and the company. Whereas the distribution of the content is the sole responsibility of the co-producer. In some cases, it does enter into profit sharing arrangements with its clients. This helps in decreasing the risks related to a single project as the financing is generally taken care by the co-producers as per terms of the agreement while it focuses and use its expertise in production of quality content. At every stage of completion of the film, basis the production agreements, it earns its revenues thereby ensuring the predictability of revenues.
The company has diversified into digital films, web series, animation films, Punjabi films, advertisement films and music videos. Baweja is a long-standing brand with an aim to be an industry leader in terms of production quality and film-making across all formats. The organization has consistently delivered high quality multi-format content to the industry, as well as promoted newcomers, exceptional singers, filmmakers, and others who have the potential to contribute to the Indian entertainment industry. The company accomplished this through the firm belief of Harman Baweja, that “new talent brings in a new approach and a more fired up team”. It has partnered with some of the top names in the industry across geographies in its quest to develop ground-breaking movies and technical innovations. These include project wise collaboration with a variety of corporations and international award-winning studios.
Proceed is being used for:
- Meeting working capital requirements.
- General corporate purposes.
Industry Overview
Indian media industry has tremendous scope for growth in all the segments due to rising income and evolving lifestyle. The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making significant strides. The increasing availability of fast and cheap internet, rising incomes, and increasing purchases of consumer durables have significantly aided the industry. India’s media and entertainment industry are unique as compared to other markets. The industry is well known for its extremely high volumes and rising Average Revenue Per User (ARPU). This significantly aided the country’s industry and made India leading in terms of digital adoption and provided companies with uninterrupted rich data to understand their customers better. India has also experienced growing opportunities in the VFX sector as the focus shifted globally to India as a preferred content creator. 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. According to a FICCI-EY report, the advertising to GDP ratio is expected to reach 0.4% by 2025 from 0.38% in 2019.
India’s media and entertainment (M&E) industry is expected to report revenues amounting to INR 1.6 trillion in FY24 as television (TV) and print media is expected to witness a rebound in advertising revenues. The TV industry is expected to see Rs 73,500 crore in revenue next year, followed by print media at Rs 29,300 crore and digital at Rs 28,700 crore. Additionally, the film exhibition segment’s market size will reach Rs 25,000 crore in FY24, as the sector’s recovery will be led by higher average ticket prices and spending per head, an improvement in occupancy levels. Additionally, digital media will reach growth levels above pre-pandemic levels. The launch of 5G and the further availability of inexpensive internet data will push online video consumption in the country, allowing digital ads to grow and become the second-biggest medium of advertising.
The Indian M&E industry is on an impressive growth path. The industry is expected to grow at a much faster rate than the global average rate. This can be majorly credited to rising incomes, increasing internet penetration and a growing push toward digital adoption. In the long run, growth is the M&E industry is expected in retail advertisement on the back of several players entering the food and beverages segment, E-commerce gaining more popularity in the country, and domestic companies testing out the waters. India’s rural regions are expected to be the next regions for growth. India has also gotten on board with 5G and is already planning for 6G well ahead of the future. This push towards digital adoption especially in the rural regions will provide advertisers and publishers with an immense opportunity to capture untapped markets and help grow India’s media and entertainment industry forward.
Pros and strengths
Long-standing relationships in the industry: As a well-established company in India’s entertainment industry, the company has been able to retain and grow its goodwill across the industry. This has resulted in repeat business transactions for content acquisition with well-known names in the industry. As part of its business expansion and endeavors, the company plans to preserve its long-standing relationships within the industry and will attempt to build new relationships. It has access to content across many mediums thanks to its collaboration with various film and television creators.
Diverse and growing content library: The company has a diverse Content Library, which is constantly expanding as new releases are added. Its main goal is to innovate its material, deliver a crystal-clear message, and make it audience-focused. Its library contains material that appeals to a wide range of demographics in India and overseas. Through its foray into Animation it is catering to a large and relatively untapped kids’ market, followed by content for the Digital age or Millennials as they are commonly known. It is making content for mass consumption as well the theatre going audiences. As a Company, one of its key strengths is the diversity of its content pipeline.
Scalable business model: The company’s technology-driven business model entails making the best use of its ability to assemble a successful team for its creative films, efficient marketing, management expertise in identifying scripts, acquiring new OTT platform and online digital partners and customers, budgeting film production, and economies of scale. The company strategy has proven profitable and scalable for it not only since its incorporation, but also in its previous proprietorship firm. The company has the ability to scale up in response to the company’s needs.
Risks and concerns
Dependent on relationships with theatre operators to exploit film content: The company generates revenues from the exploitation of film content in various distribution channels through agreements with commercial theatre operators, in particular multiplex operators, and with retailers, television operators, OTT platform, digital platform, telecommunications companies and others. The company’s failure to maintain these relationships, 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.
Very limited experience in releasing films produced by it: The company has released its last own production Bollywood film on November 11, 2016, which failed to recover its costs, in its first year of theatrical release, due to implementation of demonetization in India on November 08, 2016. Given that the company has not released any Bollywood movies for over 6 years, to the extent it undertakes to produce films under its own banner and release own productions in future it may be exposed to greater risks in relation to such productions than would be faced by a more experienced solo producer. The company’s in experience may also make it more difficult to attract and retain creative talent for its own productions, and to obtain external financing for such projects. There can be no assurance that future own productions will be completed on time or at all or that they will recover their costs, which could have a material adverse effect on its business, prospects, financial condition and results of operations, and harm its reputation.
Piracy of its content may adversely impact revenues and business: The company’s business is highly dependent on maintenance of intellectual property rights in the entertainment products and services it creates. Piracy of media products, including digital and internet piracy and the sale of counterfeit consumer products, may decrease revenue received from the exploitation of its products. Consumer awareness of illegally accessed content and the consequences of piracy is lower in India than in Western countries and the move to digital formats has facilitated high-quality piracy in particular through the internet and cable television. Notwithstanding the anti-piracy measures it takes, there can be no assurance that it will be able to prevent piracy of its products. Piracy of its films and music content and sales of counterfeit media or platform and continued or increased Bollywood used use of its proprietary and intellectual property could result in lost revenue, result in significantly reduced pricing power and could have a material adverse effect on its business, prospects, financial condition and results of operations.
Outlook
Baweja Studios Limited is a production company, producing Hindi and Panjabi films such as Chaar Sahibzaade, Love Story 2050, Qayamat and Bhaukaal. Also, the Company is in the business of trading movie rights. They purchase rights from producers and sell them to exhibitors and streaming platforms. The company has diversified into various areas including digital films, web series, animation films, Punjabi films, advertisement films, and music videos. On the concern side, the company’s revenues and profitability are directly linked to the exploitation and growth of its content Library. Any failure to source content could adversely affect its profitability and business growth. Moreover, the company require working capital funds for content acquisition and the failure to obtain additional financing in the form of debt or equity in a timely manner or on terms commercially favorable to it or at all, may adversely affect its content acquisition and its future profitability.
The company is coming out with an IPO of 54,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 170-180 per equity share. The aggregate size of the offer is around Rs 91.80 crore to Rs 97.20 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 81.26% to Rs 7,379.05 lakh for Fiscal 2023 from Rs 4,071.02 lakh for Fiscal 2022. The company witnessed a significant year-on-year increase in revenue from operations, attributable to revenues realized from a number of movies completing various stages of development and the acquisition/signing of new movie contracts during the year. Moreover, the company’s profit after tax increased by 188.79 % to Rs 796.91 lakh for Fiscal 2023 from Rs 275.94 lakh for Fiscal 2022.
The company intends to release at least 5 new films (theatrical, digital, series, animation etc.) every year, with a mix of high, medium, and low-budget films, allowing it to leverage its new releases across numerous OTT platforms. Most of its big-budget films are made under a co-production approach, in which it agrees on the screenplay, cast, primary crew, budget, and cash flow as part of a comprehensive shooting plan with a reputable co-producer, and then let the co-producer make the picture within the mutually agreed guidelines. This allows it to work on many large-budget projects at the same time with varied talent, allowing it to scale up. It has several films, web series and animation films which are either complete & awaiting release or currently under various stages of production.
