Anand Rathi has recommended a 'Subscribe – Long Term' rating for the Amagi Media Labs IPO, citing the company's strong positioning in the media streaming technology sector and recent profitability turnaround.

Company Profile and Business Model

Founded in 2008, Amagi Media Labs operates as a software-as-a-service company that connects media companies to their audiences through cloud-native technology. The company's platform enables content providers and distributors to upload and deliver video content over the internet through smart televisions, smartphones, and applications, replacing traditional cable or set-top box services.

The company also provides targeted advertising services to help content creators monetize their streaming content. Amagi's technology infrastructure has supported the streaming of several high-profile events, demonstrating its scalability and reliability:

• 2024 Paris Olympics
• Union of European Football Association tournaments
• Academy of Motion Picture Arts and Sciences Awards (Oscars)
• 2024 U.S. Presidential debates

Valuation and Financial Performance

The IPO pricing and financial metrics present a mixed but promising picture for potential investors:

The company's transition to profitability in H1 FY26 marks a significant milestone, supported by strong operating leverage that positions it well for sustained profitability in FY26.

Investment Rationale and Outlook

Anand Rathi's positive recommendation is based on several key factors that strengthen Amagi's market position. The company continues to invest in research and development to enhance scalability, automation, performance, and user experience. These investments reinforce its positioning as the "industry cloud" for video in the media and entertainment space.

Despite the positive fundamentals, Anand Rathi notes that the IPO appears fully priced at current valuation levels. However, the brokerage maintains its 'Subscribe – Long Term' recommendation, suggesting that while immediate gains may be limited, the company's strong fundamentals and market position make it attractive for long-term investors.

The recommendation reflects confidence in Amagi's ability to capitalize on the growing shift toward streaming services and cloud-based media delivery solutions, supported by its proven track record with major global events and continued technology investments.

Amagi, a cloud-based media technology company built in India and deployed globally, is preparing to test public markets with an IPO that reflects both the company's unique positioning and current market realities. The company operates a cloud-based system that enables media companies to run, distribute and monetize TV channels without owning broadcast infrastructure, serving primarily US and European markets which account for nearly 90% of its revenue.

Valuation Reset Reflects Market Conditions

Amagi's IPO pricing demonstrates a significant valuation adjustment from its private market peak. The company has set a price band of ₹343-361 per share, resulting in a valuation of approximately ₹7,810 crore at the upper end.

This pricing represents a substantial discount from the $1.4 billion valuation achieved in 2022 when the company raised $100 million from General Atlantic. At roughly 5.5 times annualized H1FY26 revenue, the valuation reflects more conservative market conditions and investor focus on profitability.

Financial Turnaround and Operating Metrics

Amagi achieved a significant financial milestone by turning profitable in H1FY26 after nearly nine years of operations. The company reported net profit of ₹6.50 crore during this period, marking a dramatic improvement from the ₹66.00 crore loss recorded in H1FY25.

The company's net revenue retention of 127% in H1FY26 exceeds the industry benchmark of 120%, indicating strong customer relationships and expansion within existing accounts. This metric reflects clients onboarding more channels, filling additional ad inventory, and expanding into new geographies driven by growing adoption of free ad-supported streaming television.

Strategic Focus and Technology Integration

Amagi plans to enhance operating leverage through expansion of higher-margin offerings including live TV, ad-tech and analytics tools. The company is implementing agentic artificial intelligence across its platform to reduce operating costs in high-volume channels, improve ad yields and enhance analytics capabilities.

The AI integration focuses on several key areas:

• Content preparation optimization
• Auto-scheduling systems already live and improving productivity
• Training AI models on proprietary data from hundreds of managed channels
• Enhanced analytics for client scaling decisions

Market Position and Growth Outlook

Amagi operates in a niche with few direct comparables, spanning the full cloud value chain of media distribution. Cloud-based operations currently represent just 10% of the global media and entertainment market but are projected to expand to 40-60% over the next three to five years according to company projections.

Risk Factors and Concentration

Despite strong operational metrics, Amagi faces concentration risks across multiple dimensions. The top five customers contribute approximately 30% of revenue, while the US market accounts for nearly three-fourths of sales. Additionally, about 25% of revenue is advertising-linked, creating sensitivity to US advertising cycle fluctuations and cost per impression variations.

The company's unlisted shares are currently trading at roughly 12% premium to the ₹361 upper price band in grey market trading, indicating healthy investor appetite despite the identified risk factors and unique market positioning challenges.