Balaji Telefilms to sell non-core biz

Balaji Telefilms, a media and entertainment company famous for its television serials, has decided to hive off its three divisions in the ICT domain (information and communications technology). These are the mobile, internet division and education divisions.

The mobile division provided mobile-specific content in audio and video format to telecom companies, through tie-ups. This allowed it exploit its content library and is a fast growing segment, as the mobile user base in India has grown at a fast rate. Also, the youth segment is a keen user of mobile audio and video content, making this a strategic business.
In October 2009, Balaji launched, as an interactive platform for scouting potential talent for the entertainment industry. The portal had involved acting and training institutes, fashion photographers, fashion designers and hair and makeup specialists, with more than 50,000 portfolios uploaded. Singers, voice-over artists, directors, cameramen, dancers, and photographers stood to benefit from such a venture.

As far as the education business is concerned, the company planned to use its expertise and capitalise on the growing demand for media and entertainment as a career option. Its objective was to establish a brand, differentiate itself and globalise its operations.

Annually, Balaji’s domestic business accounts for 80% of the revenues, at Rs 116 crore in 2009-10. Overseas revenues account for the rest. Total revenues were Rs 153 crore for FY’10. Revenues had fallen by almost 50% from the previous year’s level of Rs 295 crore.

The move of Balaji Telefilms may appear a surprise, considering the long-term potential and plans for the business. But these businesses are at a nascent stage and would require additional investments. At the same time, its main business is seeing profitability pressures. The new segments would have further put pressure on margins.

Balaji would be seeking to curtail costs, to protect its net profit margin in the range of 9-10%. Payments to artistes and other wage costs have been rising, as a number of channels set up shop, driving up demand for people. Thus, the company appears to have decided it best to concentrate on its main business of serials and movies.

The company incurred losses in the quarter ended September ’10, though its net profit margin was 9.5% in the previous quarter. Its competitor, Zee Entertainment made profits for the quarter ended September ’10.

The company’s share price rose to a high of Rs 40 on January 14, but closed down by about 1% at Rs 37.

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