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Gramophone: On the right track

Apr 10, 2000

Gramophone Company has reported a 45% growth in net profit on a 16% topline growth for the full year ended March 2000. This was primarily due to improved gross profit margins, which increased from 9% last year to 11% in the current year.

(Rs m) FY1999 FY2000 Change
Sales 1,232 1,433 16.3%
Other Income - - 0.0%
Expenditure 1,121 1,281 14.2%
Operating Profit (EBDIT) 111 153 37.7%
Operating Profit Margin (%) 9% 11%  
Interest 44 56 26.5%
Depreciation 18 24 28.8%
Profit before Tax 48 73 51.5%
Other Adjustments 6 7 20.3%
Tax 3 9 200.0%
Profit after Tax/(Loss) 39 57 44.8%
Net profit margin (%) 3.2% 4.0%  

Gramophone Company sells its music under the HMV brand name. It has a tie–up with the international major EMI, which holds around 9% of the company’s Rs 79.7 million equity. The company has a library of music rights of almost 4500 Hindi movies (including the music rights of recent blockbuster ‘Kaho Na Pyar Hai’).

During the last quarter the company has bagged the rights of two other big banner movies Yash Chopra’s ‘Mohabbatein’ and JP Dutta’s ‘Refugee’ apart from the exclusive rights of six forthcoming A. R. Rahman releases. Besides, the company also placed 0.7 m shares of the company at Rs 1785 per share (the share currently rules at Rs 1430). It’s the value of the company’s catalogue which has led to the re–rating of the share in the past.

The company is now digitising its catalogue that will make it possible for its customers to order custom made CDs either from its site or the kiosks placed at music shops. Besides, it is also exploring tie–ups with other websites to enhance its presence on the net.

A combination of valuable content and a well thought out strategy seems to have put HMV on the right track.

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