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Balaji Telefilms: Not a pretty picture - Views on News from Equitymaster
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Balaji Telefilms: Not a pretty picture
Oct 16, 2009

Performance summary
  • Topline declines by 61% YoY during 2QFY10 on account of a fall in both hours of programming and average realisations per hour.
  • EBITDA margins turn negative this quarter, from 22% in 2QFY09.
  • Other income declines by 17% YoY in 2QFY10.
  • Bottomline plummets by 94% YoY during 2QFY10 due to a decline in the topline and erosion in operating margins.
  • Topline declines by 59% YoY while bottomline shrinks by 40% YoY for 1HFY10.

Standalone financial snapshot
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales 1,034 407 -60.7% 1,952 805 -58.8%
Expenditure 803 426 -47.0% 1,402 791 -43.6%
Operating profit (EBDITA) 231 (19) -108.2% 550 14 -97.4%
EBDITA margin (%) 22.3% -4.7%   28.2% 1.8%  
Other income 64 53 -17.1% 105 151 43.5%
Depreciation 35 28 -20.6% 69 52  
Profit before tax 260 7 -97.5% 587 113 -80.8%
Tax 79 (4) -104.7% 183 13 -92.9%
Profit after tax/(loss) 181 10 -94.4% 404 100 -75.3%
Net profit margin (%) 17.5% 2.5%   20.7% 12.4% -40.0%
No. of shares (m)         65  
Diluted earnings per share (Rs)*         1.4  
Price to earnings ratio (x)*         50.0  
* On a trailing 12 months basis

What has driven performance in 2QFY10?
  • Balaji Telefilms derived 83% of its revenues during 2QFY10 from commissioned programs and 17% from sponsored programs. It produced 209 hours of commissioned programs (301 hours in 2QFY09) and 185 hours of sponsored programs (106 hours in 2QFY09) during 2QFY10.

  • Currently, 11 serials of Balaji Telefilms are on air. The company launched two new shows during the quarter – ‘Bairi Piya’ on Colors and ‘Kadhaparayum Kaavyaanjali’ on Surya TV. Two new serials were launched in October on Sony: Bayttaab-Dil Kee Tamana Hain and Pyaar Ka Bandhan. However, 2 serials were taken off air during the quarter – Kitani Mohabbat Hai on NDTV Imagine and Koi Aane Ko Hai on Colors.

  • Balaji Telefilms’ average realisations per hour from commissioned programs stood at Rs 1.6 m during 2QFY10, a fall of 14% QoQ. Its average realisations from the sponsored programs category stood at Rs 0.36 m per hour during the quarter, a fall of 24% QoQ.

  • Income from investments declined by 17% during the quarter.

  • Balaji Telefilms has received cancellation orders against sales tax demands to the tune of Rs 550 m (including interest and penalty) pertaining FY01 to FY04.

  • The company had invested an amount of Rs 308 m in land for building its studios. There is now a dispute between the original owner of the land and RNA Builders, who claim to have purchased the same land at an earlier date. Balaji Telefilms is now being made a party to the dispute.

  • Balaji Telefilms capitalized the land it purchased in Mira Road, Mumbai to the tune of Rs 480 m during 2QFY10. As on September 30, 2009, capital work-in-progress stood at Rs 34 m while it has debtor days of 97.

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. In fact, it had to pull out two soaps even in 2QFY10. As such there is very little visibility on the earnings front for the company. The spate of write-offs in debtors, fixed assets and investments and legal troubles tell the tale of the hard times the company has fallen into. At the current price of Rs 71, the stock is trading at a multiple of 11 times its FY12E earnings. We hold a negative view on the stock.

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