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G. Madhan

MEDIA stocks rode piggyback on IT stocks during the boom year 2000. While there has been a recovery of sorts for mainline IT stocks since then, the media stocks, however, continue to languish at the bourses.

The market returns of the top 16 entertainment companies (companies that have net sales of Rs 5 crore per annum and above are chosen) have been a marginal 3.4 per cent while the tech stocks have grown by 28.5 per cent. In other words, an investor who had put his Rs 100 in a basket of entertainment company stocks a year ago and held on to it till now would have seen his portfolio grow to Rs 103.4. But if the investor had invested the same sum in BSE IT index stocks, he/she would have seen his/her portfolio grow in value to Rs 128.50.

Drop in the stock prices was particularly significant in the case of Saregama, Creative Eye, Crest Communications and Galaxy Entertainment. Other losers include Padmalaya Telefilms, Tips Industries, Television Eighteen, Pritish Nandy Communications and Khyati Multimedia. However ETC Networks managed to buck the trend and rose significantly by 416 per cent, while Sri Adhikari Brothers went up by 88 per cent.

The ETC stock has risen from a relatively small value of Rs. 11.25 to Rs. 58.10 during this period. Balaji Telefilms, known for its saas-bahu serials, has also given a significant 45.8 per cent return to its stockholders. Other gainers include Adlabs Films, Mukta Arts and CMM Broadcasting.

If ever there was a case of market valuing the stocks based on fundamentals, the trend in media stocks is it. Net profit of top 21 listed companies in this business declined by 29.1 per cent in the half-year ended September 2002 compared to the same time last year, while the drop in the top line was marginal this time around. The decline was more profound in leading media companies such as Zee Telefilms, Saregama India, Television Eighteen and Mukta Arts etc.

What does the industry think are the reasons for the poor show? Saregama appears to be still haunted by the piracy blues, while lacklustre advertising revenue appears to have put a dent on Zee Tele's bottom line.

Among the top-rung companies, Zee's subsidiaries, ETC Networks and Padmalaya Telefilms have done reasonably well both in terms of net profit as well as sales. The net profit has also improved for Balaji Telefilms and Adlabs Films. Adlabs foray into film production and theatre management from film processing is expected to improve its top and bottom line further. Interestingly, Sri Adhikari Brothers, which has registered a 22.8 per cent drop in the net sales, registered a significant 63.5 per cent growth to its net profit.

So, what does the future hold for the entertainment industry? Saregama plans to set up a separate division for producing films to improve both the top line and bottom line, while Tips is moving towards acquiring new Hindi films at a fair cost, as the cost of acquisition of films is coming down.

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