From THE HINDU group of publications
Sunday, October 22, 2000


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Balaji Telefilms: Below Average

Score: Below Average

S. Vaidya Nathan

BALAJI Telefilms is a producer of programming content for various television channels.

It has a fairly satisfactory record over the years and has developed some serials that have had a long run in terms of the number of episodes and popularity. But this is by no yardstick can be viewed as attractive from a medium-to-long term perspective. With competing business houses with a similar record or a better one likely to be in the market, the price-earnings multiples accorded to stocks in this sector may well get pegged at lower levels.

The scope for companies producing programming content is immense, given the proliferation of satellite channels and of those in the Doordarshan stable as well. The track record of Balaji Telefilms may also come in handy in lining up new contracts with various channels. At present, there is a high degree of reliance on the Sun network in various languages.

Though this need not be a cause for concern, a more diversified revenue stream in terms of channel sources may be better from a medium-to-long term perspective. The fact that the company has had quite a few serials of note suggests that it may have a reasonably good pulse on the viewer preferences. Getting this aspect right may be the key to success.

The company's decision to invest in the creation of production capacities has to be viewed in positive light. It could plan its schedules better and any slack capacity can also be a source of rental incomes. Some of the programmes have also had a few top-line advertisers. While the track record appears satisfactory, some aspects of concern have to be taken into account.

Foremost is the intra-group transactions and the high level of current assets. This apart, the decline in market fancy for media stocks could mean that the PEM curve may be shifted to lower levels on a permanent basis.

The stock is being offered at a PEM that could be close to 20 times earnings at the floor price range of Rs 125-135 per share. From this level, the scope for appreciation may be limited. The risks associated with an offer in the media sector is also high in terms of business risks as well as quality of disclosures and management, which are largely untested areas for most companies in this sector.

In the light of these factors, an investment can be avoided in the IPO of Balaji Telefilms at this stage. But given its track record, the company could merit a close watch for prospective investment at a later date.

What the company says: According to the offer document:

Balaji Telefilms is promoted by Mr Ravi Kapoor alias Jeetendra, Mrs Shobha Kapoor and Ms Ekta Kapoor.

The company plays to step up growth in providing television content software and set up integrated studios at important locations for this purpose (Chennai, Mumbai, Bangalore and Calcutta).

The project cost is estimated at Rs 57.40 crore with a loan component of Rs 7 crore and the rest to be financed through equity.

The pace of content creation rose from 1.50 hours per week in February 1996 to 30 hours in August 2000.

At present, the company offers serials on Doordarshan, Zee, Sony, Star and the Sun group of channels.

The company has 30 hours of television software per week across various channels.

Some of the serials produced by the company are Hum Paanch, Koshish Ek Asha, Karma, Kanyadaan, Kasamm and Bandhan in Hindi and Pavitra Bandham, Kula Villaakku, Pasamalargal and Itihaas in regional languages. It has contracted to produce a weekly soap Kavita for Nine Broadcasting for telecast on DD Metro.

It has a programming library content of 1398 hours.

The company's revenues rose from Rs 2.97 crore in 1995-96 to Rs 20.09 crore in 1999-2000. Post-tax earnings moved up from Rs 0.22 crore to Rs 4.28 crore.

A For the five-month period to August 2000, it had revenues of Rs 13.14 crore and earnings of Rs 3 crore.

Industry Class :Entertainment Media

Issue Type :Equity

Offer Price :Rs 125-135 per share (floor price)

Offer Size :28 lakh shares (2520 lakh shares book built)

Offer Opens :October 27

Offer Closes :November 3

Listing :NSE and BSE

Lead Manager :JM Morgan Stanley

Equity :Rs 10.30 crore

Promoters :Mr Ravi Kapoor

Section  : Capital Offers
Next     : IT&T: Average

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