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Balaji Telefilms: Research meet extracts
Aug 10, 2006

We recently met with the management of Balaji Telefilms to discuss the performance of the company over the past year and the growth prospects going forward. Here are the key takeaways.

What is the company’s business?
Balaji Telefilms is one of the leading television software producers in India. Its software production spans four languages i.e., Hindi, Tamil, Telugu and Kannada. The company’s leadership is vindicated by the consistent dominance of its programmes on the Television Ratings Points (TRP) charts. This can be gauged from the fact that as on 1 July 2006, the company’s programmes dominated 29 of the top 50 programmes amongst Hindi Cable & Satellite (C&S) Channels. Further, Balaji’s programmes collectively account for nearly 55% of the total programming points of the entire C&S segment. The company already has a rich content library, which has a high re-run value. Further, Balaji Telefilms has forayed into the film production arena, seemingly having derived experience from its sister concern, Balaji Films, which has been producing films for some time now.

Commissioned programs: Commissioned programs will be the key growth driver for Balaji. Major part of the company’s revenue comes from these programs, whose share in total turnover constitutes about Rs 300 m to Rs 320 m with the rest coming from sponsored programs. As indicated by the managemnet, revenues from commissioned programs mostly come from the Hindi belt.

The sponsored program segment, on the other hand, is not performing well. Revenues from these programmes basically come from the southern states. The company has, however, said that it expects this segment to grow at a rate of 15% per annum in the next few years. Towards this, it is coming up with more shows directed at the southern audience (Chennai and Hyderabad).

Film production: Balaji is planning to get into joint ventures with big production houses for the purpose of producing more films in the future. In the coming years, the company is planning to produce 5 to 6 movies with an expenditure of Rs 300 m.

Genres: Going forward, Balaji is planning to increase its programming hours by bringing in new contents in the Genres segment. In the month of September, the company is coming out with a new program named ‘Karbon Copy’. Similarly the company has plans to introduce other new programmes in this segment.

Targeting international markets: Balaji is planning to set up its offices in Sharjah and Dubai. The programmes shown there will be commissioned programs. For this project, the company has outlined a small investment of Rs 0.4 m, and plans to start these operations by November 2006.

Capex plans: Balaji’s capex for FY07 is expected to be around Rs 300 m to Rs 320 m, which will largely be utilised towards its new studio and equipments. Beside this, the company is going to spend Rs 100 m to Rs 150 m in expanding its reach in the Hyderabad and Chennai regions.

What to expect?
At the current price of Rs121, the stock is trading at a price to earnings multiple of 12.8 times our estimated FY07 earnings. The management has indicated that revenues from the commissioned programs will continue to remain key growth driver for the company in the future. Also, increased focus on sponsored programmes will help it in sustaining the growth. Moreover, initiation of operations in the Gulf region is expected to add to the overall growth of the company. However, volatility in performance, as seen during the past few quarters, and intensifying competition from players like UTV, are concerns that investors need to consider.

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