UMP Plc is is an Indian media and entertainment company with global operations. It is involved in producing films in Hindi and other Indian regional languages, in co-producing with Hollywood, in animation and gaming, as well as in global distribution through various networks and across platforms. It is the company behind recent box office epic hit Jodha Akbar (2008), the acclaimed Rang De Basanti (2006), Mira Nair’s America-set The Namesake (2006) and M. Night Shyamalan’s most recent offering The Happening (2008). The driving force behind most projects of is producer and company director Ronnie Screwalla, one of India’s film entrepreneurs that has been enjoying high profile internationally, even if with occasional controversies involved.
Registered on the Isle of Man, the UMP Plc is the holding company of UTV Motion Pictures (Mauritius) Limited and related to the Mumbai-based UTV.* It floated about 23% of its value on London’s AIM in July 2007 with the ticker UTVM, trading in US dollars. With shares priced at US $2.90 each, the IPO raised capital of US $70 million gross (US$65.7 million net); it allowed the company to reach market capitalization of $302M. The company then changed its name to UMP Plc. in February 2008.
Prior to the AIM admission, UMP was the wholly owned subsidiary of UTV Software Communications Limited (UTV India), a media and entertainment company with interests and subsidiaries in the US, UK and South-East Asia engaged in TV content production, motion pictures, interactive (animation & gaming), broadcasting, advertising production, multi-language dubbing and post-production.
According to Investors Chronicle (January 2008), house broker Jermyn has forecast cash profits before tax of £21m for full-year 2008, and predicts compound annual growth of 40 per cent up to 2010, with a target price of $4.50. A more recent IC article (14 August 2008) is also optimistic, listing several bull points for UMP: high-growth Indian film industry; strong industry relationships, and successful overseas expansion. The bear points, however, include the lack of financial history and tightly held shares.
Having traded now slightly over a year, UMP Plc.’s shares have moved between $3.50 and $1.85 at their lowest point, and at the moment of this writing are at $2.25. The market capitalization in August 2008 is at $263.34M, with 117.04M shares outstanding. The Highlights of the company’s first and only so far Annual report (2007-2008) set the revenue at $40 million, the net profit after tax at $16 million, and the EPS at 0.158.** The statement on shareholding indicates that 77% of the 104,137,931 shares are owned by Promoter and Promoter Group while public shareholding stands only at 23% (24,137,931). Of these, the largest public shareholders include Amoeba Capital Asia Fund 3,448,276 (3.3%) and Deutsche Bank AG, London (3.3%). In addition, during the company’s annual meeting in August 2008, a Special Resolution was passed, which authorizes the directors (without the need for further sanction) to allot and issue up to 21,000,000 ordinary shares of US$0.05 each to such persons and on such terms as they think fit and to grant options to various persons performing services for the benefit of the Company; an arrangement that is to be revisited at the next annual meeting.
Like other Indian players, UMP is working on expanding its interactions with Hollywood, and it has done quite well so far. They have clearly shown that they do not intent to stick to the Bollywood recipe; the general pattern in their work so far has been to make Western style pictures while capitalizing on connections with the large Indian diaspora (writer Jhumpa Lahiri, directors Miar Nair and M. Night Shyamalan, etc.) It has acquired rights to distribute Miramax’s library in South East Asia. Building on the recent success of films such as Jodha Akbar, UMP claims to be among the top 20 distributors operating within the US. They also claim to be the only Indian studio to have projects with major Hollywood studios. Indeed, they co-produced Mira Nair’s The Namesake (which was distributed internationally within the art house circuit) with Fox Searchlight and, with 20th Century Fox, M Night Shyamalan’s The Happening (2008) starring Mark Wahlberg in which UTV reportedly invested over $27 million (about half of the film’s $57M budget). The Happening was hyped up as the most high profile Hollywood co-production by an Asian studio but on release it was considered to have underperformed in comparison with other Shyamalan films (it still made its budget two and a half times over). Most recently, UMP was engaged with the production of a low-budget Hollywood film ($2 million), Ex-Terminators, a Texas-based dark comedy starring actress Heather Graham. There has also been talk of an agreement with Hollywood actor Will Smith’s Overbrook Entertainment to produce two more Hollywood films. Having also co-produced Chris Rock’s I Think I Love My Wife (2007), the UMP are clearly prepared to move on to become a Hollywood player.
Besides Ronnie Screwvala (50) who is also the founder of the UTV Company, UMP’s other directors include Andrew James Carnegie (44) a specialist in corporate finance and CEO of the media advisory firm India Media Partners Ltd, Charles Vanderpump (58) a financial specialist who acts as a director of various Isle of Man-based companies, and the CEO Siddharth Roy Kapur (33) who has prior experience in advertising, marketing, PR and corporate communications from Newscorp’s Star Network television operations in India, Middle East and Hong Kong. Carnegie and Vanderpump are also on the board of directors of UTV Mauritius, and hold respectively 90,000 and 10,000 shares in UMP.
So what is my two minutes narrative on what I think of UMP as a possible investment? Hmmm… On the one hand it looks promising. It is a company that clearly aims to expand by going beyond the narrow Bollywood niche and seeks to enter more dynamic relations with Hollywood and diversify. Energetic Ronnie Screwalla is most likely a plus. Unlike the IFC, the UMP is clearly looking beyond the typical Bollywood formula for entertainment, and thus it has better chances for growth.
On the other hand, however, the lack of transparency is staggering. The volume at which this stock is traded is small, with little liquidity. The target price of $4.50 sounds over optimistic to me. The authorization to issue a 21 million extra shares at a fraction of the share market price is worrying, it would likely impact the capitalization and the cashflow. A search for Indian Media Partners on the Internet produces only a log-in portal with no public information or an accessible site whatsoever. Less than 25% of the shares are publicly traded, which means that shareholders have next to no say in the affairs of the company and cannot possibly influence the way it is run.
Unlike the Indian Film Company the shares of which have never risen beyond the price of their IPO, the UMP has seen a rise of $0.60 or nearly 22% at their highest point. On the other hand, UMP’s EPS after a year of trading stand at $0.158 which compares negatively with the EPS reported by the IFC at 3.56p. But at the end of the day, it comes down to accountancy standards, and it is difficult to judge where only one annual report is available for each company so far. Neither company pays dividend.
According to information from Investors Chronicle’s, UMP comes out ahead of other Indian film related companies due to its advancement in diversifying its operation, and this indeed may be the case. Over a year the shares have made a loss of -23.5% ($2.95; -$0.68) but there have been shorter term gains of +8.10% over 3 months ($2.10 ; +$0.17) and of +4.37% over 6 months ($2.17; +$0.10). This suggests that if timed correctly, an investment in UMP could be profitable. Only it is difficult to say what impacts the timing for purchase into this company, as there seems to be no clear link between their films and the share price: the shares have tumbled by more than 35% precisely during the period when their most profitable film up to date (Jodha Akbar) was enjoying the biggest ever release given to an Indian film in February 2008.
Thus UMP may be a good purchase for insiders who would get the tip when to buy but not for retail investors.
© Dina Iordanova
21 August 2008
* Related companies: UTV Motion Pictures (Mauritius) Limited is an India-based global movie operation which was incorporated in the Republic of Mauritius on 12 October 2004 and houses the movie production business of the entire UTV group. UTV-Mauritius initially carried on the business of movie distribution in regions outside North America, UK and India; however, it has recently acquired the rights to exploit Bollywood, Hollywood, Indian regional language and animation movies throughout the world. The Mumbai-based operation, UTV India, began as a television content company in 1990 and has developed into an integrated entertainment content production and distribution company with three business streams: content (movies and television), new media (animation and gaming) and broadcasting. It is an established corporate entity in Indian movie making and it is listed on the NSE and the BSE. In the financial year ended 31 March 2006 it had gross revenues of Rs 2,130 million (approximately $48 million).
** According to the IC’s January 2008 article, the meantime, UMP expects to generate $250m in gross box office revenues in the 2008-2009 financial year.