If it leads to firm allotment in retail category then once again after cox n kings it shud be a mini lottery for retail investors.

pl highlight all the points being raised by gujarat samachar against their main rival

Teddies Please apply.For retail investors its another lottery on like of cox n kings.Just see the oversubscription figures

Here are the arguments of "gujarat samachar" why retail investors should not subscribe to DB Corp

1. DB has debt of 563 crores.
2. There are 97 promoter companies of db corp with which it has businesses and no proper disclosure would be there for investors.
3. Claims of bhaskar group's db corp have been challenged by their own family members
4. Promoters of db corp have 41 criminal cases pending against them.
5. diligent media a subsidiary has loss of 450 crores.
6. Out of total funds raised by IPO, a subsidiary of warburg pincus will take away 116 crores and the rest will be utilised to pay off debts of 563 crores of db corp and its subsidiaries.

There are some more arguments as well but I find it tedious to translate from gujarati.

I personally dont have any views having not studied the ipo prospectus. As a policy, I dont subscribe to IPOs unless very compelling because I find that there are much better bargains to be had from secondary market.

The company is simply over-leveraged. Though Gujarat Samachar is not a newspaper I would attribute much credibility to, their arguments against their new rival seems to be spot on.

It seems to be very common among family run newspapers in India to have plenty of related party transactions. It dates back from the days of the permit control raj when newsprint quotas were allotted by the government and imports of newsprint were "canalised".

Many newspapers set up subsidiary companies to trade in newsprint since it was a scarce commodity. (I am sure many of them mis-declared standard white paper as newsprint and released the same in the open market.)

Consequently, every new edition was launched under a different company with different ownership pattern to beat the law. The practice is to have the title of the newspaper registered with family of the promoters. Since the only real asset of a newspaper is the title, investors in newspaper IPOs much look out for the fine print as to who owns the title of the newspaper. Readers buy the title and only the title, the promoter, editor, reporter, etc are incidental.

Also since land for the newspaper and media offices were often obtained from state governments at throw away prices, it helped to have separate real estate companies as well to manage the properties. Often the real estate companies also could rent out the properties to non-media houses and earn good income for the promoters.

Companies owned by promoters also were/are useful if the management wants to buy printing presses and other equipment. A very cosy relationship exists between equipment suppliers and buyers.

Since, newspapers as a rule enjoy good cash collection on a daily basis once they are established, it helped the promoters set up finance companies as well. Cash essentially came from circulation sales and classified ad sales. Display ads routed through ad agencies paid by cheque and after 30 to 60 days from insertion of ad. I know of some marwadi newspaper companies in Maharashtra which still force hawkers to queue up outside distribution outlets at 5 every morning come rain or shine with cash in Rs 100 denominations to pick their quota of copies.

But then again to make these gains, a newspaper has to be established in a market for two decades or more. Typically, a new entrant in any market bleeds for five to ten years before the real profit comes in.

The country's biggest newspaper group with multiple editions earns much of its revenues and profits from just one title in a single city while a second city earns decent profits after a bruising battle that is still continuing. Every other of its editions are on investment mode for the past several years.

So the newspaper business is not really the easiest of business to be in in terms of revenues. The political clout for the promoters is disproportionately large.

But that should not really be the concern of us retail investors.


Edited by shivkumar - 18/Dec/2009 at 11:40pm