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Balaji Telefilms- Putting it all together - Views on News from Equitymaster

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Balaji Telefilms- Putting it all together

Dec 13, 2007

Over the past few weeks, we analysed the company's performance on a year-by-year basis starting from FY04. In this 'summing it all up' article in the series, we shall see how <>Balaji Telefilms has evolved over the last four years to become the leading television entertainment content provider. We shall see how its topline, bottomline, margins and return ratios have moved in the last four years.

Rs mFY04FY05FY06FY07CAGR
Sales1,783 1,967 2,804 3,202 21.6%
% growth-4.1%10.3%42.6%14.2% 
Operating profit8686749371,195 11.2%
OPM48.7%34.3%33.4%37.3%
Net profit55441352579312.7%
NPM31.1%21.0%18.7%24.8%
           
Total assets1,288 1,695 2,474 3,478  
Net Debt-11-30-62-78 
Working capital (excl cash)404663451796 
% sales22.7%33.7%16.1%24.9% 
           
ROE44.2%23.1%22.7%26.1% 
ROCE35.0%19.4%21.0%26.0% 
  • Sales have grown at a CAGR of 22% from FY04 to FY07. In the years FY06 and FY07 Balaji has been able to increase its sales primarily due to the increase in realisations per hour. The overall realizations per hour increased 12% YoY to Rs 1.3 m in FY06 and then by a whopping 37% YoY to touch Rs 1.7 m in FY07. The entry of new channels and sustenance in the high TRP ratings of Balaji's programmes has led to an increase in the realizations per hour.

  • Balaji's programming hours have stagnated in the last four years and have even declined YoY in some cases. The company has found it difficult to scale up its operations. Besides this, Balaji's core competence is in mass programming and it has not produced any reality or musical shows, which are increasingly becoming popular.

  • The operating profits have grown at a CAGR of 11% from FY04 to FY07. The operating margins declined from 48.7% in FY04 to 34.3% in FY05 due to the increase in production costs. The cost of producing serials as a percentage of programming revenues increased from 42% in FY04 to 54% in FY05. This increase happened primarily due to the increase in artist's fees and directors and technicians fees. The operating margins have stabilized in the following years.

  • The net profit has increased 27% YoY and 51% YoY in FY06 and FY07 respectively primarily due to the increase in realisations per hour. The net profit margins declined in FY05 due to the increase in the cost of producing serials.

  • The total assets have grown 2.7 times from FY04 to FY07 primarily due to the investment made in studios and post-production equipment.

  • Working capital (excluding cash) as a percentage of sales has declined from 34% in FY05 to 13% in FY06 primarily due to the decline in inventories. Inventory days have declined from 43 days in FY05 to 15 days in FY06.

  • The company does not have any debt and it invests its surplus cash in liquid funds. The investments have grown from Rs 760 m in FY04 to Rs 1,770 m in FY07.

  • Return On Equity (ROE) and the Return on capital employed (ROCE) declined in FY05 due to the decline in profits. The ratios improved in FY07 as profits improved aided by an increase in the realisations per hour.

Future outlook:
Balaji has forayed into the new businesses of film production and distribution, overseas programming and broadcasting. This should help the company to increase its revenues and profits going forward. Besides this, its current business of programming for Hindi general entertainment channels should also do well as the entry of new channels would help in increasing its programming hours and also its realisations per hour.


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