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Balaji Telefilms: The year of tragic write-offs - Views on News from Equitymaster
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Balaji Telefilms: The year of tragic write-offs
May 14, 2009

Performance summary
  • Topline declines by 10% YoY during FY09.
  • EBITDA margins decline to 15% this fiscal, from 38% in FY08.
  • Other income grows by 8% YoY in FY09.
  • Bottomline plummets by 70% YoY during FY09 due to a decline in the topline, erosion in operating margins and higher depreciation.
  • For 4QFY09, topline falls by 45% while the bottomline turns red.

Standalone financial snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 966 530 -45.1% 3,302 2,988 -9.5%
Expenditure 617 668 8.2% 2,051 2,552 24.4%
Operating profit (EBDITA) 348 (138)   1,251 437 -65.1%
EBDITA margin (%) 36.1% -26.0%   37.9% 14.6%  
Other income 47 25 -45.6% 161 174 8.1%
Interest - -   - -  
Depreciation 34 125 267.6% 127 235 85.2%
Profit before tax 361 (238)   1,285 375 -70.8%
Tax 123 (91)   411 112 -72.8%
Profit after tax/(loss) 239 (146)   874 263 -69.9%
Net profit margin (%) 24.7% -27.6%   26.5% 8.8%  
No. of shares (m)         65.2  
Diluted earnings per share (Rs)         4.0  
Price to earnings ratio (x)         10.3  

What has driven performance in FY09?
  • Balaji produced 1,497 hours of programming during the FY09. The company currently has 13 serials on air on various channels. Its subsidiary, Balaji Motion Pictures, released 4 movies during the year - Sarkar Raj, EMI, C Kkompany and Mission Istanbul.

  • The company reported a realisation of Rs 2.89 m per hour from commissioned programming in FY09 as against Rs 3.27 m in the previous year. Realisation per hour from sponsored programming stood at Rs 0.46 m in FY09 as against Rs. 0.43 m in the previous year.

  • The decline in operating margins of the company was primarily due to an increase in the production and telecast costs from 49% (as a percentage of sales) in FY08 to 61% in FY09.

  • During the year, Balaji provided as bad debt an amount of Rs 183 m due from a general entertainment channel. Further, the additional start up costs (cost of a set constructed exclusively for a serial which went off air) with respect to INX Media has been partly written off to the extent of Rs 95 m. It also provided for Rs 44 m representing diminution in the value of investments.

  • Balajiís movie arm, Balaji Motion Pictures also wrote off Rs 89 m on account of advances made for movie projects which the management does not expect to pursue on account of financial non-viability of the projects. The companyís overseas subsidiary, Balaji Telefilms FZE, has been wound up.

  • Balaji is building a state of art studio at Mira Road, a suburb in Mumbai, to build an art studio for which it has incurred investments to the tune of Rs 338 m.

  • The company had cash and cash equivalents of Rs 2 bn as on March 31, 2009.

What to expect?
The recent developments do not augur well for the company. Its 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 companyís 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. In fact, the spate of write offs in debtors, fixed assets and investments tell the tale of the hard times the company has fallen into.

At the current price of Rs 42, the stock is trading at a multiple of 10 times its FY09 standalone earnings. We hold a negative view on the stock.

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Feb 22, 2018 (Close)


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