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UTV: A sneak peek... - Views on News from Equitymaster
 
 
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  • Apr 11, 2007

    UTV: A sneak peek...

    UTV Software Communications Limited (UTV) was incorporated in 1990 as a content provider for Doordarshan and production of ad films. It is a fully integrated media and entertainment company. It is now one of the largest producers of television programming in the country. Having set up a state-of-the-art post-production and computer graphic facilities, UTV was one of the first entities to venture into animation content production. Its first daily soap titled 'Shanti' on Doordarshan was a big hit. Its distribution network reaches 13,500 screens in India and 47,300 screens overseas.

    Operations Analysis:
    UTV is associated with the business of television, films, animation allied services and broadcasting.

    Films:
    UTV has pioneered the studio model in India. UTV has shown impressive performance in movie production and distribution segments. In less than five years' span, UTV has created unique synergies in the Motion Picture space translating into strong all-India and growing worldwide distribution capabilities. UTV has produced films such as 'Swades', 'Lakshya' and distributed blockbusters like 'Bluffmaster' and 'Kya Kool Hain Hum'. UTV is a leading distributor of Indian films worldwide and owns a huge library of foreign films for domestic markets. The company has also forayed into rapidly growing home DVD rental market.

    Television:
    Over the past 15 years, UTV has become the largest television content houses in India due to its creative capabilities. UTV has produced programmes for almost all major channels in India. The Company has strong hold over its market across different genres and regional languages. 'Bhabhi' and 'Bombay Talkies' are among the popular programmes created by UTV. In the airtime sales business, UTV currently markets around 24 hours of programming per week in 4 different languages.

    Animation:
    UTV has invested significantly in expanding its animation facility in order to scale up operations in this business area. The Company is producing content for domestic as well as international markets. The company earns stable revenue and margins by servicing outsourcing requirements of its international clients. Its current order book consists of 30 episode TV series, 15 DVD features and 1 theatrical feature film.

    Allied Services:
    UTV has vertically integrated itself by foraying into postproduction and visual effects. The company has made significant investments in expanding its postproduction, digital intermediary and visual effects services. UTV has been nominated for the best visual effects at various award ceremonies.

    Dubbing:
    The Dubbing division has a talent bank of over 500 voices across genres and languages. It has dubbed Hollywood blockbusters like 'Titanic', 'Independence Day' and the 'Star Wars Trilogy'. The company provides dubbing services to channels like 'Disney', 'National Geographic Channel', 'The History Channel' and various other 'Star Network' channels.

    Broadcasting
    Launched in 2004, kids channel 'Hungama TV' provided an entertaining mix of animation and local live action content. In less than two years, 'Hungama TV' had firmly established itself among the top 3 channels for the age group of 4-14 years. Later, the aforesaid channel was sold to 'Disney' and UTV plans to launch a youth channel and a global film-viewing channel.

    Financial Perfomance:
    Between FY03 and FY06, the topline has grown by 23% CAGR while the bottomline has declined by 45% CAGR during the same period. Margins had dropped severely in FY06 and remain a concern. The company has a debt to equity ratio of 0.21 and interest coverage ratio of 2.72, which shows that the company is not highly leveraged. The overall financial performance does not look good and one needs to wait and watch until the company posts its further results.

    (Rs m) FY03 FY04 FY05 FY06 CAGR* (%)
    Net Sales 949 978 1,535 1,729 22.15%
    Operating Profit 147.9 116.6 215.1 24.6 -45.01%
    OPM (%) 15.50% 11.92% 14.00% 1.42%  
    Interest 52.3 26.7 20.4 27  
    PBT 55.6 82.9 181.7 23.9  
    Tax -27 11.7 47.6 23.5  
    PAT 82.6 71.1 134.1 0.4 -83.08%
    NPM (%) 9.54% 7.42% 10.12% 1.69%  

    * FY03-FY06

    Future plans:
    Retaining its leadership position, the company shall continue to produce television shows in both the fiction as well as non-fiction space. As the importance of different genres and regional channels is increasing, there is huge scope for the company to expand its operations. Considering the fact that entertainment industry is rapidly growing, the company has acquired two gaming companies- India Games and Ignition. The company wants to decrease its exposure to film distribution, which is relatively riskier than film production. In the near future, the company will also produce films in South India and develop full-length animated movies. The home entertainment space in films is expected to be a key area of growth in the coming years. The company is also exploring opportunities for expansion in existing and new businesses through the mergers and acquisitions route. However, a lot of small-unorganized production houses in both the films and the television segments remain a matter of concern.

     

     

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