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

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Balaji Telefilms: A rear mirror gaze IV

Dec 11, 2007

This article is the last in our series of annual report analysis of Balaji Telefilms. In an earlier article, we had analysed the FY06 annual report of the company. In this article, we shall analyse the FY07 annual report. Management discussion and analysis:

  • The MDA forecasts robust growth for India's television advertising industry. It expects Balaji Telefilms to be the biggest beneficiary of this trend as it is India's leading television entertainment content provider. More than 40 shows out of the top 100 shows in the Hindi cable and satellite homes were produced by Balaji Telefilms.
  • In FY07, Balaji entered the new businesses of film production and distribution, broadcasting, programming for foreign channels in order to diversify its revenue base and enter a new growth trajectory.

  • It has formed a wholly owned subsidiary M/s. Balaji Motion Pictures for undertaking film ventures. This subsidiary plans to produce films individually as well as in collaboration with leading producers. It also plans to distribute its own films as well as the films of other producers. The company plans to release at least 4 to 5 films a year initially.

  • Balaji entered into a joint venture with Star for launch of channels in regional languages other than Hindi. It also expects to create customized content for regional channels through its exclusive agreement with the Star TV network where it would command prime time slots and also address emerging opportunities in markets like West Bengal, Kerala and Tamilnadu.

  • Balaji through a wholly owned subsidiary in Sharjah viz., 'Balaji Telefilms FZE' caters exclusively to that region and is further planning to expand its reach to other Gulf regions and the Indian subcontinent. This subsidiary will provide programming content to leading channels in that region with limited telecast rights.

Financial highlights:

  • The operating revenues increased by 13% YoY aided by an increase in realizations per hour. The operating margins increased from 33% to 38% in FY07. PAT increased 34% YoY.
    Realisations per hour
    Rs m FY06 FY07 Change
    Commissioned 2.20 2.76 25.5%
    Sponsored 0.33 0.32 -3.0%
    Overall 1.27 1.74 37.0%
  • The overall realisations per hour increased 37% YoY which helped in increasing the topline and the bottomline. The realisations per hour from commissioned programming increased 25% to Rs 2.8 m whereas the realisations per hour from sponsored programming declined marginally by 1%.

  • The programming hours declined by 14% YoY. The company derived 92% of its revenues from commissioned programming and the balance from sponsored programming.

Balance sheet analysis:

  • Loans and advances increased from Rs. 171 m in FY06 to Rs. 430 m in FY07. The Company's principal loans and advances comprised lease deposits for offices and studios, advances to subsidiaries for their business plans.
  • Balaji continued its policy of investing its surplus cash in liquid funds and fixed maturity plans. The market value of such investments was approximately Rs 1,770 m on 31st march 07.

  • The return on capital employed (RoCE) was 26% in FY07, up from previous year's return of 21%.


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