Sibar Media

Score: Below average

S. Vaidya Nathan

INVESTMENTS in the IPO of Sibar Media and Entertainment can be avoided as the company has just lined up plans and does not have a track record in similar line of businesses.

The risks far outweigh any prospect of capital appreciation and as such investors can stay away.

What the company says: Sibar Media plans to set up at a cost of Rs. 23.35 crores projects in the area of animation and entertainment. It plans to set up animation studios in Hyderabad, a modern amusement park in Vijayawada on a build, operate, own and transfer basis and an amusement park in Gaunter. A facility of Water World has been inaugurated in May 2000.

The company has a strategic alliance with the Vijayawada Municipal Corporation for acquisition of land on a lease basis. The company has projected revenues of Rs. 5.55 crores for 2000-01 and Rs. 11.11 crores for 2001-2002 and post-tax earnings of Rs. 0.66 crore and Rs. 3.37 crores respectively. The equity base is Rs. 21 crores. The project is almost entirely financed by equity except for a Rs. 2.35-crore loan from Bank of Madura. The projects are scheduled to be completed by end 2000. The company has indicated its intent to hire skilled manpower.

Prospects: As far as the animation studio business is concerned, the company may have to content with quite a few established players. The lack of experience in this line may also prove detrimental. The amusement parks business in Vijayawada and Guntur may take quite some time to deliver revenues of reasonable size. The high degree of reliance of equity is also a disturbing aspect as it could weigh on the valuation of the stock. The track record of the group companies has been of a mixed nature.

The projections made for the next three years seem to be optimistic given the nature of business and competition. In this backdrop, the scope for returns commensurate with risks appears remote. The offer opens on July 3 and closes on July 7 and the lead manager is Fedex Securities. The shares would be listed on the Hyderabad and Mumbai stock exchanges.