Infomedia 18

Company Banks On Rights Issue, Advertising Revenues To Clear Debt For Turnaround

IN THE past 11 months, Infomedia 18, the company especially known for publishing special interest magazines, has barely given 2% returns to its investors. The company's stock has hardly moved from the Rs-70 mark. On Friday, the scrip closed at Rs 71.25. The share was trading at close to Rs 70 as of January 1, 2009.

   Besides the major development wherein Television 18 took a controlling stake in the company, Infomedia 18 recently announced the approval of its board for a rights issue to raise around Rs 100 crore.

   This announcement has brought the stock on the investors' radar. On Friday, the stock touched an intra-day high of Rs 91.4 and closed at Rs 71.3. The company is offering a 2:3, i.e. for every two shares of Infomedia 18, investors will get three shares. The issue has been priced at Rs 33.5 per share. The company has fixed December 21, 2009 as the record date for deciding the entitlement of the rights issue of equity shares. The issue will open on December 29, 2009 and close on January 15, 2010.

   Infomedia 18, which is one of the leading printers of magazines and directories in India, has been making losses for nearly three years now. Over the past few years, revenues from printing services have stagnated and publishing now accounts for nearly 70% of its revenue.

   In the past four financial years, printing has stagnated at around Rs 40-45 crore per annum, while revenues from publishing grew from Rs 60 crore in FY02 to Rs 105 crore in FY08 before falling to Rs 88 crore in FY09.
   Besides, revenue stagnation and poor profitability, the company is also struggling with a huge debt load.

   As of FY09, the company's debt equity ratio was 3:1. It has a total debt outstanding of around Rs 103 crore by the end of last year. This has forced the company go for financial restructuring. As a first step it has written off Rs 24 crore worth of its investments in subsidiaries and joint ventures.

   The company now seeks to use the proceeds from the rights issue to clean up the balance sheet and start its growth trajectory afresh. But it will take at least two to three years for the benefits to start showing on the company's balance sheet and its P&L account. In the interim, shareholders can only hope for a revival in the advertising market which will boost its publishing division.