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Balaji Tele: Living on past glory
May 4, 2010

Balaji Telefilms has announced its FY10 results. The company has reported a 45% YoY and 42% YoY decline in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline declines by 45% YoY during FY10 on account of a fall in both hours of programming and average realisations per hour.
  • EBITDA margins fall from 14.6% in FY09 to 6.5% in FY10.
  • Other income grows by 26% YoY in FY10.
  • Profit after tax plummets by 42% YoY during FY10 due to a decline in the topline and erosion in operating margins.


Standalone financial snapshot
(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 530 447 -15.6% 2,988 1,640 -45.1%
Expenditure 668 348 -47.8% 2,552 1,534 -39.9%
Operating profit (EBDITA) (138) 99   437 106 -75.7%
EBDITA margin (%) -26.0% 22.1%   14.6% 6.5%  
Other income 25 34 33.7% 174 220 26.4%
Depreciation 125 24 -80.6% 235 103 -56.1%
Profit before tax (238) 108   375 223 -40.7%
Tax (91) 74   112 71 -36.9%
Profit after tax/(loss) (146) 34   263 152 -42.3%
Net profit margin (%) -27.6% 7.6%   8.8% 9.3%  
No. of shares (m)         65  
Diluted earnings per share (Rs)         2.3  
Price to earnings ratio (x)         24.5  

What has driven performance in FY10?
  • Balaji Telefilms’ realization per hour from commissioned programming reduced from Rs 2.9 m in FY09 to Rs 1.7 m in FY10. On the sponsored programming front, realization per hour reduced from Rs 0.47 m in FY09 to Rs 0.39 m in FY10. In the commissioned category, programming hours stood at 763 hours, down from 929 hours in FY09. In the sponsored category it stood at 638 hours, up from 568 hours in FY09.

  • Pavitra Rishtaa, a Hindi TV show on Zee TV regularly achieved No. 1 TAM ratings across the Hindi speaking market and was one of the few shows to be able to tide the IPL wave.

  • During 4QFY10, Balaji’s direct cost structure marked an improvement. Staff cost increased by 7% as a percentage of sales, while production and telecast costs decreased by 30% as a percentage of sales.

    Cost break-up
    (Rs m) 4QFY09 4QFY10
    Staff Cost 21 49
    % sales 4.0% 11.0%
    Production & Telecast 416 218
    % sales 78.6% 48.9%
    Other expenditure 230 81
    % sales 43.4% 18.0%
    Total cost 668 348
    % sales 126.0% 77.9%

  • Balaji Telefilms has invested an amount of Rs 308 m in land in Mira Bhayander, Mumbai for the purpose of building studios. It has been made a party in the dispute between the original owner of the land and a buyer. The matter is subjudice at the Thane Civil Court.

  • The company has received a service tax demand notice for an amount of Rs 635 m plus interest and penalty FY07 and FY08 on exports made to a client. The company has filed an appeal and is awaiting a revert.

  • Balaji Telefilms has formed a New Media division. It has started work on creating mobile and internet based entertainment. The company has also launched a online talent showcase website called hoonur.com.

  • The company’s subsidiary – Balaji Motion Pictures released the movie ‘Love, Sex Aur Dhoka’ during the year. It plans to next release ‘Once Upon A Time in Mumbai’ shortly.

  • As on 31st March, 2010, the company had a gross block of Rs 842 m, investment of Rs 2.1 bn. Debtor days stood at 100 days, up from 62 days in the previous year.

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. 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 57, at a multiple of 9 times its FY12 estimated earnings. We hold a negative view on the stock.

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