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Balaji Telefilms: Difficult times continue - Views on News from Equitymaster

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Balaji Telefilms: Difficult times continue

Jan 18, 2010

Performance summary
  • Topline declines by 22% YoY during 3QFY10 on account of a fall in both hours of programming and average realisations per hour.
  • EBITDA margins turn negative this quarter, from 5% in 3QFY09.
  • Other income declines by 30% YoY in 3QFY10.
  • Profit before tax plummets by 95% YoY during 3QFY10 due to a decline in the topline and erosion in operating margins.
  • Topline declines by 51% YoY while bottomline shrinks by 40% YoY for 9mFY10.

Standalone financial snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Net sales 506 393 -22.4% 2,458 1,197 -51.3%
Expenditure 482 395 -18.0% 1,884 1,186 -37.1%
Operating profit (EBDITA) 24 (2)   574 12 -98.0%
EBDITA margin (%) 4.8% -0.6%   23.4% 1.0%  
Other income 43 30 -29.5% 149 182 22.3%
Depreciation 41 27 -35.9% 110 79  
Profit before tax 26 1 -94.9% 613 114 -81.4%
Tax 20 (17)   203 (5)  
Profit after tax/(loss) 6 18 219.7% 409 119 -70.9%
Net profit margin (%) 1.1% 4.6%   16.7% 10.0% -40.2%
No. of shares (m)         65  
Diluted earnings per share (Rs)*         (0.4)  
* On a trailing 12 months basis

What has driven performance in 3QFY10?
  • Balaji Telefilms' realization per hour from commissioned programming reduced from Rs 1.6 m in 2QFY10 to Rs 1.5 m in 3QFY10. On the sponsored programming front, realization per hour reduced from Rs 0.36 m in 2QFY10 to Rs 0.34 m in 3QFY10. In the commissioned category, programming hours stood at 217 hours while in the sponsored category it stood at 177 hours.

  • During 3QFY10, Balaji's direct cost structure deteriorated further. Staff cost increased by 2.6% as a percentage of sales, while production and telecast costs increased by 16.3%.

    Cost break-up
    (Rs m) 3QFY09 3QFY10 % of sale
    Staff Cost 32 35  
    % of sales 6.4% 9.0% 2.6%
    Production & Telecast 300 297  
    % of sales 59.3% 75.7% 16.3%
    Other expenditure 150 63  
    % of sales 29.5% 16.0% -13.5%
    Total cost 482 395  
    % of sales 95.2% 100.6%  

  • 'Pavitra Rishta', a Hindi TV show telecasted on Zee TV achieved No.1 TAM Ratings across the Hindi speaking market towards the end of the quarter. The company launched three new shows during the quarter. Two shows in commissioned category on the Sony - 'Bayttaab Dil Kee Tamanna Hai' and 'Pyaar Ka Bandhan'. One show in sponsored category on Udaya TV - 'Kalyanee'.

  • Balaji Telefilms continued to struggle in terms of successfully sustaining its launches. It took off air three shows in the sponsored category - 'Bramha Mudi' on Gemini TV, 'Kadambarii' on Udaya TV and 'Kalyanee' on Gemini TV. It also took off one show in commissioned category named 'Koi Aane Ko Hai' on Colors.

  • Balaji Telefilms had total investments of Rs 2.2 bn including Rs 300 m invested in a wholly owned subsidiary - Balaji Motion Pictures. Out of the above, Rs 1.9 bn was invested in mutual funds. Loans and advances stood at Rs 0.6 bn as on December 31, 2009. It had cash and cash equivalents of Rs 3.7 bn as on December 31, 2009.

What to expect?
The company's stronghold on the soap category has been eroded by the successful entry of several content providers. The niche that Balaji enjoyed on Star has also ended. The company’s foray into new genres and broadcasters has also not been able to generate the traction it had in its early years, when it came out with several soaps one after the other. In fact, it had to pull out several soaps even in 3QFY10. As such there is very little visibility on the earnings front for the company. The spate of write-offs in debtors, fixed assets and investments and legal troubles tell the tale of the hard times the company has fallen into.

The stock of Balaji Telefilms is currently trading at Rs 65. We hold a negative view on the stock.

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