Indian capital market regulator Securities and Exchange Board of India (SEBI) has issued final observation on the draft red herring prospectus (DRHP) submitted by Amar Ujala Publications for an initial public offering (IPO). The Noida-based company plans to raise INR50 crore (USD7.81 million) through fresh issue of equity shares. In addition, existing investors plan to sell 26.9 lakh shares through an offer for sale (OFS). The issue will be managed by Axis Capital and IDFC Securities Deutsche. The company had filed its DRHP with the market regulator on 30 March 2015.
Use of funds
Majority of the proceeds will be used towards purchase of printing machines for expansion of its existing capacity. The newspaper company plans to invest INR31.49 crore in new machines while another INR7.9 crore will go towards boosting its OOH advertising solutions. Nearly INR87.5 lakh will be invested in its digital businesses.
The issue is primarily an exercise to allow an exit route to existing investors. Important among these are the company promoters Rajul Maheshwari and Sneh Lata Maheshwari which are selling 8.5 lakh shares each. Pun Undertakings Network Private Limited also plans to sell half of its stake (9.87 lakh shares) in the OFS.
What to watch out for
Newspapers publish stuff which may not be of liking to everyone and thus, they are often targets of defamation cases. Amar Ujala is no exception and currently has 37 civil defamation actions and 56 criminal complaints against itself, its promoters, directors, editors, resident editors, publishers, printers, reporters and correspondents.
It is also worth noting that a total of 49.73 lakh shares or 45.31% of promoters’ aggregate shareholding in the company is pledged. In addition, entire shareholding of promoter firms Northern India Media Private Limited and Antarctica Finvest Private Limited which currently hold 28.97% and 14.02% in Amar Ujala is pledged. These shares are pledged in relation to a non convertible debenture (NCD) trust deed. In its DRHP, Amar Ujala has mentioned its promoters intend to repay the NCDs.
First published in the late 1940s in Agra, Uttar Pradesh, Amar Ujala is now published in 19 editions in states of Uttar Pradesh, Uttarakhand, Himachal Pradesh, Jammu & Kashmir, Punjab and Haryana as well as union territories of New Delhi and Chandigarh. However, its biggest markets continue to be Uttar Pradesh and Uttarakhand. The company claims to be one of the fastest growing daily newspapers in India with a growth in circulation with an average circulation of approximately 1.95 million per day during January-June 2014.