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Broadcasting, key to Adhikari fortunes

Nov 15, 2000

Sri Adhikari Brothers was among the first pure content providers to venture into broadcasters. Though this seems a natural vertical integration, the fact remains that broadcasting is a different ball game altogether. This is because for a broadcaster, apart from the quality of programming, the management of time slots is a matter of life and death. For example, till recently, Zee had six to seven programmes among the top ten most watched programmes in the cable and satellite universe. The introduction of a popular game show by Star Plus let loose a cat amongst (Zee’s) pigeons. The company brought in a new game show at the 8.30 pm prime time slot by replacing three of its successful programmes. While its game show has not met with much success, it seems to have lost that particular timeslot to other channels. The result: only three of its programmes figure amongst the top ten currently.

Sri Adhikari has made its mark as a content provider for the state broadcaster ‘Doordarshan’ (DD). The company currently has 2.5 hours a week on prime time on the DD national network and 7.5 hours a week on the regional network. The company launched its channel SABe TV in April 2000. The content for this channel is to be provided by Sri Adhikari Brothers itself. While around 25% of the content is produced in-house, the rest is outsourced by Sri Adhikari and supplied to the channel at a cost plus 15%. The channel is owned by a Mauritius based subsidiary of the company and the management expects it to break even after three years. Thereafter it could be merged with the parent company itself. It reaches around 14 m homes out of a total cable and satellite universe of around 30 m homes.

So far, the channel seems to have got its programming mix alright although it has been jostling for space with other general entertainment channels such as Sony which have also beefed up their programming. (Sony had offered SABe TV, a slot on its distribution trolley, which the latter rejected) It has also been successful in creating newer time slots such as the afternoon slot for its new game show.

However, the fact remains that advertising is slowing down. This seems to be the outcome of a slowdown in rural demand, which has affected the topline growth of most consumer non–durable companies. A recent example is that of Hindustan Lever, which normally spends around Rs 8 bn annually (average Rs 2 bn per quarter) on advertising, has announced a cut in its ad spending to Rs 600 m in the last quarter of the current year. This is bound to affect broadcasting companies in general and the general entertainment channels such as Sri Adhikari Brothers, in particular.

The stock quotes at Rs 283, slightly above it’s 52–week low of Rs 277 (52 week range: Rs 2350/277). Currently, it quotes at an earnings multiple of 12.3 times its estimated earnings for FY01. We feel that it is better to wait until it becomes clear that the channel is holding its own against bigger competitors.

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