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Balaji Telefilms: The tragedy continues - Views on News from Equitymaster
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Balaji Telefilms: The tragedy continues
Jul 31, 2009

Performance summary
  • Topline declines by 57% YoY during 1QFY10 led by decline in volumes (programming hours).
  • EBITDA margins decline to 8% this quarter, from 35% in 1QFY09.
  • Other income grows by 137% YoY in 1QFY10.
  • Bottomline plummets by 60% YoY during 1QFY10 due to a decline in the topline and erosion in operating margins although higher other income helps.


Standalone financial snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 917 398 -56.6%
Expenditure 598 365 -39.1%
Operating profit (EBDITA) 319 33 -89.6%
EBDITA margin (%) 34.8% 8.3%  
Other income 41 98 136.7%
Depreciation 34 25 -26.7%
Profit before tax 326 106 -67.4%
Tax 104 17 -83.9%
Profit after tax/(loss) 223 90 -59.7%
Net profit margin (%) 24.3% 22.5%  
No. of shares (m)   65.2  
Diluted earnings per share (Rs)*   2.0  
Price to earnings ratio (x)*   25.5  
* On a trailing 12 months basis

What has driven performance in 1QFY10?
  • Balaji Telefilms posted volumes of 145 hours during 1QFY10 (down from 194 hours in the previous quarter) in the commissioned category and 123 hours in the sponsored category (down from 186 hours in the previous quarter).

  • The company presently has 6 out of the top 50 programmes among Hindi cable & satellite channels. During 1QFY10, it launched 1 new show, Pavitra Rishta on Zee TV and 1 new regional show, Brahmamudi. The company currently has 11 serials on air – 5 of which are sponsored serials and 6 of which are commissioned.

  • Balaji Telefilms clocked realisation rates of Rs 2.3 m per hour in 1QFY10, up from Rs 2.2 m per hour in the previous quarter from commissioned programming. In sponsored programming, the company achieved realisation per hour of Rs 0.53 m, up from Rs 0.37 m in the previous quarter.

  • On the cost front, the company witnessed an increase in staff costs of over 6%, both in absolute terms as well as a percentage of sales. Production and telecast costs also went up by 12% as a percentage of sales.

  • Balaji Telefilms has received a demand notice of Rs 635 m plus penalty and interest for service tax relating to FY07 and FY08 regarding exports made to a client. It has also received demand notices under the Bombay Sales Tax for Rs 550 m (including penalty and interest) relating to FY01 and FY04. The company is pursuing legal remedies in these matters.

  • The company has Rs 2.4 bn cash on its books as on 30th June, 2009. It also had investments to the tune of Rs 2.3 bn in mutual funds. Its gross block as on that date is Rs 395 m. It also has a capital work in progress of Rs 512 m towards the construction of state-of-the art studios.

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. 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 51, the stock is trading at a multiple of 25.5 times its trailing 12 months standalone earnings. We hold a negative view on the stock.

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