Mukta Arts: Lacklustre quarter - Views on News from Equitymaster

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Mukta Arts: Lacklustre quarter

May 2, 2002

Mukta Arts has recorded a revenue of Rs 15 m and Rs 57 m profits for the first quarter of 1QFY03. The net profit was fuelled by heavy other income. The performance of the company is not comparable YoY as both revenues and net profit tend to fluctuate heavily depending on new film releases. The company has entered into an agreement for the sale of its content library.

(Rs m)1QFY021QFY03
Sales 19 15
Other Income 14 65
Expenditure 11 16
Operating Profit (EBDIT) 8 (0)
Operating Profit Margin (%)43.6%-2.9%
Interest 0 0
Depreciation 5 8
Profit before Tax 17 57
Tax - -
Profit after Tax/(Loss) 17 57
Net profit margin (%)86.7%371.5%
No. of Shares (eoy) (m)21.022.6
Diluted Earnings per share*3.210.1
P/E (at current price) 11.5

Mukta Arts has assigned satellite telecast rights of its 11 films library to SET India Pvt. Ltd, for a period of 5 years for a consideration of Rs 161 m. Further, the company has also sold satellite telecast rights of film 'Badhai ho Badhai' to SET India Pvt. Ltd for a period of 5 years. While the amount of Rs 161 m is expected to be recorded in the company's books in the next quarter, the amount for 'Badhai ho Badhai' satellite rights would be recorded in the year in which the movie would be released.

Mukta Arts is expected to release 'Badhai ho Badhai', in the current year. The company has also commenced two more medium-budget movie projects, to be directed by Mr. David Dhawan and Mr. Satish Kaushik. The company is also signing up other directors in its attempt to broadbase its film production business. Mukta Arts is also expected to launch a music album in the next calendar year. However, the content production initiatives for the small screen seems to be going slow.

The stock has moved up sharply in the last few days on the back of anticipation of its proposed library sale. The sale value of the library is much below our expectations. The recent performance of movies from the company's stable on the box office has not been encouraging. The company needs to restore its high quality content creation capabilities to regain its bargaining power. Volatility in financials also remains a cause for concern. The company’s entry into distribution of its film may further add to the volatility. However, investors can expect the volatility to witherout partially (at least on a yearly basis), as the company attempts to consistently launch 3 movies annually. The TV content production and music album segments are also highly competitive. Content production for the small screen would actually test the company’s ability considering that it is a relatively new area for them.

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