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Balaji Telefilms: A rear mirror gaze - III - Views on News from Equitymaster

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Balaji Telefilms: A rear mirror gaze - III

Dec 5, 2007

We have started a series of annual report analysis of Balaji Telefilms in order to understand how Balaji has evolved to become the largest television entertainment content producer. In an earlier article we had analysed the FY05 annual report of the company. In this article, we shall analyse the FY06 annual report. Management discussion and analysis:

  • This section in the annual report forecasts the robust growth of the Indian television and media industry in the years to come. Advertising spending is expected to grow atleast 5% higher than the GDP growth in the near future. This is expected to translate into a CAGR of 12-14% over the next five years exceeding Rs 94 bn by 2009.
  • The subscription revenues are also expected to increase due to the increase in the number of satellite homes and an increase in the average revenue per user. This would increase the ability of the broadcasters to spend on content, which augurs well for Balaji Telefilms.

  • The company derisked its revenues by reducing its dependence on the Hindi general entertainment space and producing more programmes in other languages. It also plans to enter the new businesses of animation, ad films and mythological programmes.

  • Twenty two serials out of the top twenty five serials on the Hindi cable and satellite channels in FY06 were produced by Balaji.

  • An investment of Rs 131.1 m in captive equipment, three studios and editing infrastructure was made to reduce production costs and improve production quality.

Financial highlights:

  • The operating revenues increased by 43% YoY due to an increase in programming hours and realizations per hour. The operating margins declined marginally from 34% to 33% and PAT increased 19% YoY.
  • The total programming hours increased by 23% YoY due to the introduction of three new shows in the commissioned category and three new shows in the sponsored category. Programming hours of the commissioned variety increased by about 15% YoY whereas programming hours of the sponsored variety increased 32% YoY.

    Programming hours
    (hrs) FY05 FY06 Change
    Commissioned 931 1,070 14.9%
    Sponsored 789 1,045 32.4%
    Total 1,720 2,115 23.0%

  • The overall realisations per hour increased 12% YoY due to the high TRP's enjoyed by the company's serials. The realisations per hour in case of sponsored programming declined by 15% YoY but in case of commissioned programming surged by 24% YoY. Balaji derived 86% of its programming revenues from commissioned programming and thus was able to benefit immensely from the increase in realisations of commissioned programming.

Balance sheet analysis:

  • The debtors increased 26% YoY to 737 m, however the debtor days declined marginally from 97 to 96 days.
  • The investments of the company increased 43% YoY to Rs 1.6 bn as the profits generated were invested in the liquid debt funds.

  • The return on capital employed improved from 19.4% in FY05 to 21.0% in FY06 due to the 19% YoY increase in PAT.


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