Balaji Telefilms has reported revenues of Rs 153 m for 1HFY02. Operating margins of the company leapfrogged to 35%, a jump of 800 basis points over the corresponding period last year. For FY01, operating margins had dropped due to change in accounting policy for write off in production expenses.The company has now changed the method of accounting and has provided for entire production expenses in the year in which it has been incurred.
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Balaji Telefilms continues to maintain its niche in providing high quality, multi-lingual content which has helped in creating a strong bargaining power for the company. Balaji has 4 out of the top 10 serials on air, in all C&S (cable and satellite TV) homes. The company's most popular soap 'Kyunki Saas…' continues to top the TRP charts.
The company's weekly programming output of around 33 hours across 10 different channels compares favourably with other prominent content providers. The revenue mix of the company is changing in favour of commissioned programs, which are expected to account for around 45-50% of the total revenues. The company earns assured margins of around 35% on commissioned programs but has to part with the IPR of the content. Apart from Hindi, other linguistic soaps of the company also figure in the top TRP list.
At the current market price of Rs 265, the stock is trading at 9x 1HFY02 annualised earnings. There is no doubt that Balaji has become in a leader in content creation in a short span of time. The success of the company is something which is unparelled in the industry. Going forward the company needs to maintain its content quality to maintain its leadership position in the industry. The operating margins may inch up a bit further, as further utilisation of IPO funds is likely to result in cost savings. However, the company's diversification in the past into areas like event management and film production remain a cause for concern.
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