BUY
CMP: Rs228.25
BSE Sensex: 4112.69
52-week H/L: 353.50 / 147.10
Average Daily Volumes: 200,000

What is its Business?

Starting off in 1985 with a serial ("Maano Ya Naa Maano") on Zee TV, Balaji Telefilms has graduated to becoming one of the few producers of quality television serials and soaps in Hindi and some South Indian languages. "Hum Paanch" was the first super hit from their stable and was telecast on Zee. Besides "Kyunki Saas Bhi Kabhi Bahu Thi", other serials that enjoy huge popularity are "Itihaas" on DD, "Koshish – Ek Aasha" on Zee, "Kanyadaan" on Sony and "Kahani Ghar Ghar Ki" on Star Plus. The TRPs of "Kyunki…" and "Kahani…" were high as they followed the hugely successful KBC in the prime time. But the serials have now managed to get an independent fan following so much so that even guys are hooked onto these two serials.

Currently, Balaji is providing 30-32 hours of software programming per week to various channels, which include DD, Star, Zee, Sony, Sun, Gemini and Udaya. These programs comprise the entire gamut – sitcoms, soaps, game shows, suspense, thriller et al. It came out with an IPO in October 2000 to set up an integrated studio in Mumbai and go in for advanced equipment. A day prior to its listing on BSE (22.11.2000), Balaji merged Nine Network Entertainment India Pvt. Ltd. (a wholly owned subsidiary of Nine Broadcasting India Pvt. Ltd.) with itself in the ratio of 65:200. It was a all-share deal. Nine Broadcasting is a 51:49 JV between Himachal Futuristic and Publishing & Broadcasting Ltd., a wholly owned company of the Kerry Packer group. Nine Broadcasting handles the ‘Nine Gold’ block of programming on DD Metro and Balaji had been commissioned to do television software for it. Nine Entertainment was also into producing similar software, hence the synergy.

Who is the Management?

The trio of film actor Jeetendra, his wife Shobha Kapoor and their daughter Ekta Kapoor are behind the company. Ekta Kapoor (Creative Director) is the public face of the company. Nine Broadcasting CEO, Ravina Raj Kohli and Anthony Klok, Country Manager of Nine Broadcasting have joined the Board after the merger of Nine Entertainment with Balaji. Sanjay Doshi is the CEO of Balaji.

Whither Cash Flows?

The high TRPs enjoyed by serials produced by Balaji ensure that it gets better rates from advertisers and ad agencies. It has a high composition of sponsored programs, which ensure that the company gets better revenues as the popularity of the program goes up. The company has also appointed a well-oiled marketing machinery to sell itself to advertisers and ad agencies. The company has been in operation for the last six years and has shown consistent growth in this period. Except for a blip in 1998, the bottomline of the company has also been keeping pace. This has resulted in a decent cash flow for the company, which is likely to continue.

Why should I Buy?

As mentioned earlier, Balaji has a high composition of sponsored programs, which ensure that the company gets better revenues as the popularity of the program goes up. So we come back to the why we started this investment idea in the first place – "Kyunki Saas Bhi Kabhi Bahu Thi" and Mihir Virani. The phenomenal success and hysteria generated by this program and the character should ensure that the company gets higher billings as it launches a new serial. Balaji’s success in the television software market is attributed to its early entry into the business and localized presence in the regional markets. The company can also be credited for recognizing market pulse and public demand in good measure. Its presence across the spectrum and a cordial relationship enjoyed with most channels ensures that the company will continue to grow at a fast clip. Its investment in own studios and equipment of a higher quality also ensure that the expenditure side is contained. Lastly, it is a fataka stock. It means that the stock has the potential to rise with an intensity that can be termed as truly amazing.

Where can I go Wrong?

It is a fataka stock yaar, and its fortune in the stock market is inevitable linked to the public perception of the sector and operator interest in the counter. The merger of Balaji with Nine Entertainment was mid-wifed by Triumph International, as an advisor to both parties. The connection of Big Bull operator Ketan Parekh with Triumph, Himachal Futuristic and Kerry Packer is known to all. Although fundamentals are strong in the company, operator driven stocks like Balaji sometimes tend to outperform or underperform the fundamentals by a huge margin. We have seen this happening in the past and the future could also be no different. Either way, you could become a devotee of Tirupati Balaji by buying into the counter.

Murali Iyer