Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Balaji Tele: Going is tough - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 12, 2003

    Balaji Tele: Going is tough

    Balaji Telefilms’ June quarter results were nothing to write home about. The company managed to post a 12% growth in bottomline on the back of a similar topline growth. However, the operating margins of the company took a hit.

    (Rs m) 1QFY03 1QFY04 Change
    Net Sales 398 446 12.1%
    Other Income 0 25 -
    Expenditure 187 234 24.8%
    Operating Profit (EBDIT) 210 212 0.8%
    Operating Profit Margin (%) 52.9% 47.6%  
    Interest 0 0 -
    Depreciation 9 15 60.9%
    Profit before Tax 201 222 10.2%
    Tax 74 80 8.0%
    Profit after Tax/(Loss) 127 142 11.6%
    Net profit margin (%) 31.9% 31.7%  
    No. of Shares (m) 10.3 51.5  
    Diluted Earnings per share*   11.0  
    P/E ratio   6.6  
    (* annualised)      

    Before we analyse the results, it must be noted that with effect from October 03, 2002, the company’s equity shares of the face value of Rs 10 each have been sub divided into five equity shares of Rs 2 each credited as fully paid up. Hence, the difference in the number of shares in the table above.

    Revenue mix
      1QFY03 % Share 1QFY04 % Share % Change
    Commissioned programs 343 86.1% 365 81.8% 6.5%
    Sponsored programs 55 13.9% 81 18.2% 46.9%
    Total 398 100.0% 446 100.0%  

    The revenue mix of the company is tilted favourably towards commissioned programmes. In the commissioned programs, the company doesn't bear any risk and assumes responsibility to deliver content to the broadcaster. Here the company enjoys assured operating margins from the broadcaster. However, the IPR of the content gets transferred to the broadcaster. Whereas, sponsored programs on the other hand are the ones where the company takes the risk. Interestingly, the sponsored program list consists mainly of non-hindi based programs, which ideally are dubbed from the existing Hindi programs and hence the costs here are already covered.

    The expenditure witnessed a spurt of 25% in the quarter due to a rise in two components. While the cost of production and telecast fees increased from 39% to 44% of net sales YoY, the administrative expenditure also increased from 5% to 7% of net sales.

    Operating margins - Not a good sign
      1QFY03 1QFY04 Change
    Commissioned programs 59.8% 55.3% -8%
    Sponsored programs 39.4% 37.2% -5%

    The effect of the rise in expenditure was reflected in the deteriorated operating margins of the company, which registered a fall of 530 basis points. However, another important cause for the fall in margins could be attributed to the fact that the margins on both fronts, commissioned as well as the sponsored programmes, took a hit. (See table above).

    It must be noted that the inherent advantage of depending on commissioned programs is the fact that any upward revision in rates for these programs directly translates into bottomline increase for the company. And since Balaji Telefilms’ programmes have strong TRP ratings, the company is in a comfortable position to bargain with broadcasters for the rates offered to the company. Just to put things in perspective, as on August 2, 2003, the company’s programmes continued to dominate 9 of the top 10 programmes and 26 of the top 50 programmes in Hindi Cable & Satellite Channels.

    However, off late the company has been facing competition from other channels like UTV. Moreover, the company’s top family soap operas seem to be attaining a saturation point amongst the audience. Infact, a couple of serials have already been called off-air. Also, now that the soap operas have been on-air for quite a while now (over 2 years), people’s preferences and tastes seem to be shifting to different kind of viewing including comedy and game shows. All of the above could have affected the bargaining power of the company and consequently the operating margins.

    At Rs 72, the stock is trading at a P/E multiple of 6.6x its 1QFY04 annualised earnings. This implies that the stock is trading at the lower end of its P/E band and the downside from the current levels seems limited. Going forward, the company should improve upon its performance as the programming hours are set to increase. However, at the current juncture, there seem to be more concerns than positives surrounding the company’s growth prospects.

    For one, the company should concentrate on improving, or rather, diverging into different kinds of programming also (apart from operas), keeping in mind the audience tastes and preferences, so as to continue to be in a leading position. Moreover, in the near-term, introduction of the Conditional Access System (CAS) could see pressure on the company's advertising revenues on sponsored programmes as consumer response to the purchase of set top boxes could be lukewarm in the initial stages of its launch. Further, considering the current margins of the company there is little room for improvement and with competition getting smarter the company will be hard pressed to maintain its current margins.



    Equitymaster requests your view! Post a comment on "Balaji Tele: Going is tough". Click here!


    More Views on News

    Zee Ent: GST Short term Negative but Long term Positive (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The management believes that GST will aid the advertising spends in the long-run.

    GTPL Hathway Ltd. (IPO)

    Jun 21, 2017

    Should one subscribe to the IPO of GTPL Hathway Ltd?

    S Chand and Company Ltd. (IPO)

    Apr 26, 2017

    Should you subscribe to the IPO of S Chand and Company Limited?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


    • Track your investment in BALAJI TELEFILMS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts