Prime Focus Technologies (PFT) subsidiary of Prime Focus, the visual entertainment services provider has signed a definitive agreement to acquire DAX.
Vikas Rathee, Group COO, Prime Focus said acquiring the Californian based DAX would help them grow significantly in the biggest media market in the world that is the US. It would extend the company's reach to North America he said in an interview to CNBC-TV18's Nigel D'Souza and Reema Tendulkar.
Prime Focus Technologies (PFT) subsidiary of Prime Focus, the visual entertainment services provider has signed a definitive agreement to acquire DAX. The California-based DAX provides cloud-based production workflow and media asset management applications to the entertainment industry. PFT bought DAX for a base consideration of USD 9.1 million or Rs 56 crore in a uniquely structured performance linked transaction
DAX is a profitable company with revenues north of USD 4 million and so, their combined businesses in the US would grow considerably, he said.
Rathee is confident that over the next 12 months the company will be able to bring down the debt significantly from current levels. The current operating cash flows help support growth both on the asset side as well as business side, he said.
Out of the USD 9 million for the acquisition on USD 2 million would be upfront payment and the rest would be paid over a period of three years. It is a performance linked structure, said Rathee.
Below is the transcript of Vikas Rathee’s interview to CNBC-TV18’s Nigel D'Souza and Reema Tendulkar
Nigel: Could you take us through the contours of the purchase you have done?
A: Prime Focus Technologies is buying DAX; it is a company that provides additional daily solution to some of the top broadcasters, to the top movie production studios and television production studios in the US.
We are buying it for about Rs 56 crore or about USD 9 million of which only about two million is upfront, the rest is over a period of three years and a performance linked kind of a structure. We very enthused about it, the product is cloud-based; it extends our reach to North America and allows us to grow significantly in the biggest media market in the world.
Reema: Can you tell us what the revenues of DAX were say in the previous financial year and will this deal be EPS accretive for you all?
A: It is a closely held small private company and has north of USD 4 million revenues; it has been profitable all through. They have grown revenues of about 70 percent over the last two-three years. It is profitable all the way down to the net income level.
Nigel: What is the current debt on your books because last time you said that your debt levels are likely to come down? So what is the current debt level that you all are sitting on?
A: From a consolidated group level we have kept our debt level flat over the last year. We announced our numbers not too long ago, we have increased our revenues significantly, we have increased our EBITDA significantly in the 20 percent plus range and our debt has stayed flat. We expect to continue to reduce our debt. What you are seeing is that the operating cash flows that are coming through from the business are helping support the growth both on the asset side as well as the business side. So you should expect that over the next 12 months our debt levels should be significantly down from where they are today.
Reema: How are you planning to fund this Rs 56 crore over the next three years?
A: It is a very small upfront payment, we actually only about paying USD 800,000 equivalent in cash; there is about USD 1.3 million of working capital facilities which we are taking over supported by a bank letter credit. The remaining payments are structured on a quarterly basis for small amounts over the next three years and then there is a small bullet at the end.
The business is profitable, our combined businesses in the US is going to grow significantly and even at current levels can support the cash needed for the payment of this purchase price.
Prime Focus stock price
On September 30, 2014, Prime Focus closed at Rs 48.80, up Rs 0.05, or 0.10 percent. The 52-week high of the share was Rs 58.35 and the 52-week low was Rs 23.75.
The company's trailing 12-month (TTM) EPS was at Rs 2.56 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 19.06. The latest book value of the company is Rs 25.55 per share. At current value, the price-to-book value of the company is 1.91.
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