Mukta: Near term bonanza - Views on News from Equitymaster

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Mukta: Near term bonanza

Nov 9, 2000

Hindi film producers, at least the top notch ones, never had it so good. Gone are the days when the producer would struggle for finances to complete his film and queue up in front of distributors who would pick and choose which film to choose and promote. Now even before a single reel is canned, the music rights, satellite rights and overseas rights are gobbled up by the music and television companies. The banks and financial institutions are also not averse to funding movie production. And it is distributors who now queue up in front of the producers! It is in this scenario that Mukta Arts made an IPO offering at Rs 150 (for a Rs 5/- paid up share).

While the stock has tumbled from a high of Rs 260, which it touched after being listed, to a level of Rs 188 now, the company seems to be doing well for itself. And this, despite the fact that no movie release is planned for the current year (For a film producer, the financial numbers improve dramatically in the year of release and Mukta’s last release ‘Taal’ was in 1999).

This is where a change in the underlying business has helped content companies such as Mukta. The company sold only the music rights of ‘Yaadein’ for Rs 80 m to Tips Industries. And Mr. Ghai is reportedly quoting a price of over Rs 200 mn for the satellite and overseas rights put together. And this does not include the domestic theatrical distribution rights, cable rights and DVD rights which could fetch the company a similar amount!. (The cost of making the entire movie is around Rs 150 mn). Also, in the current year, the rights of the company’s past movies have been sold for a one time telecast to a private channel for Rs 140 m.

We expect the company to report a net profit of over Rs 350 m. This implies a per share earnings of around Rs 21. Perhaps, the only grey area is the increasing interest of unwanted elements in the movie distribution business. This increases the risk for investors since the companies are dependent on one or two personalities who run the show. The challenge for production houses would be to set up organisational set ups that can survive and thrive even when the founders are not in the scene.

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Sep 21, 2020 03:35 PM


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