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Cinevista: Costly entertainment

Jul 31, 2001

Cinevista has again posted an operating loss, this time in 1QFY02. While revenues have dropped by 57%, operating margins have turned heavily into the red. The sharp fall in operating margins can attributed to the fact that most of the air time slots which the company had bought from DD remained unsold due to slump in demand for advertising on DD. Further, the company also had to withdraw some of its programs from air due to ongoing litigation with DD.

(Rs m) 1QFY01 1QFY02 % change FY01
Sales 138 59 -57.3% 397
Other Income 6 6 7.6% 39
Expenditure 111 75 -32.3% 544
Operating Profit (EBDIT) 28 (16) -157.1% (147)
Operating Profit Margin (%) 20.0% -26.8% -37.1%
Interest 3 1 -59.8% 4
Depreciation 1 4 144.6% 8
Profit before Tax 29 (14) -148.4% (120)
Extraordinary Income - - -
Tax 8 - -100.0% 0
Profit after Tax/(Loss) 22 (14) -165.5% (120)
Net profit margin (%) 15.7% -24% -30.3%
No. of Shares (eoy) (m) 10.1 10.1   10.1
Diluted Earnings per share 2.2 (1.4)   (11.9)
P/E (at current price) NA    

While the company had to book the production and telecast costs in both the cases, the revenues did not match up, resulting in an operating loss. Production and telecast costs have eaten up almost the entire revenues, as shown in the table below.

(Rs m) FY99 FY00 FY01 1QFY02
Sales 215.1 439.2 396.7 590.9
Production/Telecast cost 135.5 261.3 394.1 583.3
Production/Telecast cost
as % of sales
63.0% 60.0% 99.0% 99.0%

Cinevista, has also missed out on all its IPO projections. While there have been cost overruns in terms of land & equipment purchase as well as on the issue expenses, the web casting and overseas production center projects have run into rough weather.

The current market price of Rs 35 is at 86% discount to its IPO price of Rs 255, leading to an erosion in market capitalisation of more than Rs 2.2 bn. This is certainly a heavy price investors have paid for the kind of entertainment provided by the company. Given that the company was heavily dependent on DD, the only way to mop up revenues in the current year, is to have reruns of existing software on other satellite channels.

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