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May 07, 2001

Pritish Nandy Communications

BUY
Market price : Rs 31.75
Market Cap : Rs333mn
52week H/L: 180/15
Average Vol : 6750nos

PNCL is in the thick of action. The stock has hit an upper circuit for the fifth consecutive day. It is currently available at Rs31.75/-- up from Rs 21.3 just five days back.

Pritish Nandy Communications is a diversified media/entertainment company started by Pritish Nandy whose strength lies in creating, marketing and delivering content. The company commenced its operations in 1993 as a company producing TV shows - after the success of Pritish Nandy Show. Over time, it diversified into entertainment and an event company.

During FY01, income from operations rose by 11.2% to Rs136mn. The reduction in cost of content and other expenditure resulted in improved operating margins from 13% in FY00 to 25% in FY01.

The company has lately entered into international films and plans to do 4-6 movies per year. The initial investment is planned to be lower. The risk in movies is being reduced due to prior underwriting commitments. The company will be tying up with reputed players only.

The company earns additional revenue for marketing services provided to Videocon, Levers, Kelloggs and other large companies.

The company has balanced its mix between its two major operations. The operations include, which include

buying time on Doordarshan (DD) and then selling FCT, in which case we retain the IPR

Doing commissioned programmes for other satellite channels, in which the IPR rests with the channel.

Currently the mix is 60:40 in favour of Doordarshan but depending on the profitability criteria at different point of time, the provision is flexible enough to change its mix accordingly.

Apart from programmes, the company will be doing events that could rake in revenues of Rs60-70mn per event.

Of the Rs405.6mn raised by the company by way of issue of shares through its IPO, it has utilized Rs66mn only. The balance amount if utilized as stated in the prospectus is expected to further enhance the company’s performance during FY02.

Some investment concerns

Despite an 11% rise in the turnover to Rs136mn, it is drastically below the projected revenues of Rs493mn. Employee costs have increased by 121% to Rs6.4mn.

The company had projected no Financial expenses but ended up paying Rs2.7mn (up by 237%yoy).

The company is a one man show whose prospects depend mainly on Mr. Pritish Nandy and investment is risky to that extent.

Valuations

Company’s stock price has fallen from a 52-week high of Rs180 to a low of Rs21.3. The stock has witnessed a sharp upward movement since Rs21.3. It hit the upper circuit on 5 consecutive trading days and ended at Rs31.75 as on May 7, 2001. On a fully diluted EPS, PNCL is currently trading at a P/E of 6.3x FY2001.

Contact at : winkle@indiainfoline.com