>Hindustan Media Ventures Ltd.: IPO NOTE

■ Hindustan - 3rd largest read Hindi daily with readership of 9.9mn
HMVL prints and publishes ‘Hindustan’ – the 3rd largest read newspaper in India with
readership of 9.9mn (source: IRS Q1 2010). Hindustan has strong presence in 6 out of the
14 Hindi newspaper markets, with leadership in Bihar & Jharkhand markets. Hindustan has
seen consistent and highest growth in readership over the last 5 years taking itself from 8th
largest to 3rd largest in terms of readership. We believe that the launch of new editions would further grow the readership which would result in healthy ad-revenue growth, going forward.

■ Ad-market revival and strong GDP growth provide healthy opportunity
Economic revival and expectations of strong GDP growth provides very healthy environment for growth in advertisement revenues. While the industry advertisement revenues are expected to grow by 12% CAGR over FY10-12E, we believe that the vernacular print medium would outperform the industry growth. Recent ad-rate increase of over 10% together with volume growth recovery would result in strong ad-revenue growth for the company.

■ EBIDTA and PAT to grow by 45% and 48% CAGR over FY10-12E
We expect HMVL to register 11% revenue CAGR despite 16.4% ad-revenue CAGR due to
the impact of cover price cut on the circulation revenues. With steady newsprint prices and
high operating leverage in the business, we expect EBIDTA and PAT CAGR at 44.5% and
48% over FY10-12E. The high growth of HMVL over its peers can also result in valuation
premium to peers, in our view.

■ Valuation at reasonable discount to peers - SUBSCRIBE
Since the Hindi newspaper business under the brand Hindustan was transferred from HT Media to HMVL w.e.f. 1st Dec-2009, the financial performance of HMVL is not the right indicator of the business performance and potential. Based on our estimated PAT of Rs781mn & Rs993mn for FY11E & FY12E respectively, the issue is priced at 12x and 12.8x our estimated earnings at lower and upper price band for FY12E respectively. Considering the reasonable discount of 14-21% v/s the market leader Jagran Prakashan, we recommend investors to SUBSCRIBE to the issue.

To read the full report: HMVL