Peer comparison: Reliance Media World vs ENIL

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Peer comparison: Reliance Media World vs ENIL

CNBC-TV18’s Ekta Batra reports on how Reliance Media World should be benchmarked against Entertainment Network India Limited (ENIL).

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CNBC-TV18's Ekta Batra reports on how Reliance Media World should be benchmarked against Entertainment Network India Limited (ENIL).

Below is a verbatim transcript of her comments on CNBC-TV18. Also watch the accompanying video.

ENIL has similar number of shares as compared to Reliance Media World, which is around 4.7 crore to 4.6 crore shares. However, the market cap of ENIL is around Rs 1,000 crore and Reliance Media World is inching up to Rs 600-700 crore.

In terms of net debt, ENIL is way lower than Reliance Media World. It is around Rs 93 crore, whereas Reliance Media World is Rs 250-260 crore. Concerning enterprise value, Reliance Media World stands at around Rs 800 crore, whereas ENIL stands at around Rs 1,100 crore. Therefore, on an enterprise value (EV) basis, for FY10, ENIL is around 2.44 and Reliance Media World is around 4, which is almost 30-40% premium on EV to sales ratio against ENIL.

Therefore, there is a definite premium despite the fact that the financials of the company and the business model differs. Despite better fundamentals of ENIL, there is a sort of similar premium, which is being given to Reliance Media World as compared to ENIL. 

ENIL's radio business contributes around 50% and Reliance Media World contributes around 90%. ENIL, which operated Radio Mirchi, has a 40% market share and is focused on tier I cities. However, Reliance Media World has around 22% market share and is focused strongly on tier II and tier III cities.
 
If net sales for FY09 were anything to go by, then ENIL stood at Rs 426 crore, whereas Reliance Media World stood at Rs 200 crore. It has incurred a loss of Rs 98 crore and ENIL's net loss was around Rs 60 crore.

ENIL's radio business is profit making and has broken even for the past four years, whereas Reliance Media World is expected to break even next year on an FY11 basis and operationally this year. Therefore, despite the fundamentals being stronger for ENIL, Reliance Media World is getting a premium to ENIL.