London calling: UTV Soft plans to float on AIM

MUMBAI: First it was real estate, now it is Bollywood. After the rush by builders to get listed on Alternative Investment Market (AIM) of the London Stock Exchange, Bollywood is now sensing an opportunity.

UTV Software is transferring all its film production activities, both domestic as well international, into one of its overseas subsidiaries. This wholly-owned subsidiary would get listed on the AIM, as per BSE press release. It will be the second Bollywood company seeking an AIM listing. In July ’06, Eros International Plc, a Bollywood overseas distribution company had come out with an IPO of $42 million and got listed on the AIM.

“Nasdaq listing would have been time-consuming and listing at London made geographical sense,” says Ronnie Screwvala, CMD of UTV Software. AIM typically lists smaller growing companies and is know for its simpler admission process. For instance, it does not stipulate minimum requirements for revenue, market capitalisation or a profit track record.

Around 62% of UTV software revenues in ’06 (Rs 218 crore) were from films. In FY07 it is likely to make Rs 100 crore of revenues from its film’s division. While the company is yet to announce the amount, sources indicate raising $60-90 million (Rs 250-400 crore) by listing its film subsidiary in London.

This is expected to happen by issuing 20-25% of the film company’s equity. Expectations are to get a market valuation of at least $200 million (Rs 900 crore) or even more. Back home in India, the parent UTV Software commands an m-cap of Rs 670 crore, which is the combined valuation of its entire business of movies, television as well as new media initiatives.

The management expects higher valuation to be reflected from its scaling up of operations in the next three years. The management is targeting revenues of Rs 350 crore from films alone by 2010 and has already slate of 20 movies.

Eros International, which earns 90% of its revenues outside India, has a m-cap of $750 million. It is quoting at around 50 times its annualised ’07 earnings. Eros’ revenues for ’06 was $44 million, which is lesser than UTV Software’s. UTV currently gets 25% from its international operations.

The listing is expected to give UTV higher visibility enabling smoother alliances with major US studios. The company already has strategic relationships with Disney and Newscorp (Fox) and have co-produced and distributed movies with them. Some of the international co-productions include Mira Nair’s Namesake (with Fox), Chris Rock’s I think I love My Wife (with Fox), M Night Shyamalan’s The Happening (with Fox) and those with Will Smith (with Disney).