Excellent write up Dhwanil.
I have been holding ENIL for the past 3 years and had been eagerly waiting for phase 3 auctions to take place. The auctions seem to have left them much stronger with ENIL acquiring 2+ frequencies in 11 out of top 12 markets. I think it should add significantly to their pricing power and also to their market share which ultimately will feed to both their inventory and pricing power.
Management has been extremely disciplined in the auctions (which only reiterates one’s faith on their capital allocation skills). Additionally they would probably be the least affected player by the rise in renewal fees which would allow them to hold on to their margins.
My only concern in investing at this price level is that management, in the latest concall, has stated that they will achieve an IRR of 16% (this can be argued to be a conservative estimate, but I will take it at face value) on the investment they have made for phase 3. For a company commanding a premium valuation (PE of 30), and considering that they have invested a large sum of money on auctions as well as acquisition of TV today radio stations, this incremental IRR seems a bit on the lower side. Also, phase 3 operations might take 1.5-2 years to actually become profitable. So I would probably wait for a decent correction before adding more shares.
That being said, I think the company now has levers to grow for at least the next 7-10 years which justify its high valuation.
Thanks again for starting this thread.
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