Investors who purchased entertainment stocks last fiscal because of their low valuations have reason to smile, with these stocks outperforming the benchmark 30-share Sensex.
Companies in this sector have outperformed the Sensex by posting a 96 per cent increase in market capitalisation over the last fiscal. In contrast, the aggregate M-Cap of the Sensex rose by 90.5 per cent during 2003-04. Amongst the 24 listed media companies, 18 have reported significant increases in share prices during the period under review. The industry acknowledges this optimism that has taken the market in stride.
The biggest media gainers in terms of prices are Television 18 International (342%), Pritish Nandy Communications (183.30%), Adlabs (180%), Zee Telefilms (114.70%), Crest Communication (68.16%) and Balaji Telefilms (53.41%).
“The general feel-good factor triggered by a robust economy has helped the media industry and the investor,” said V Devarajan, CFO, Balaji Telefilms. A decrease in the cost of electronic goods like television sets, music systems etc, growing number of multiplexes, increased spending potentials etc will only propel future revenues generated by this industry, he illustrated.
“This uptrend is a direct reflection of a strong Sensex, which has risen by 70 per cent over the last nine months,” an analyst tracking the IT, communication and entertainment sector indicated.
A study titled The Indian Entertainment Industry: Emerging Trends and Opportunities made by the Federation of Indian Chambers of Commerce and Industry its entertainment committee in collaboration with Ernst And Young speaks of a 15 per cent growth in the entertainment industry. The growth is estimated at Rs 19,200 crore during the year 2003. The report further anticipates a compounded annual growth rate of 17 per cent to Rs 42,300 crore from the entertainment industry by the end of financial year 2008.
The return on sales (PAT to Sales ratio) of Pritish Nandy Communications (PNC) has increased to 16.99 per cent during the period April to December 2003 from the level of 0.43 per cent during the corresponding previous year.
Commenting on the appreciation of his company’s stock prices, Pritish Nandy averred: “Our movies are doing well, stimulating a lot of consolidation activity in the company. We believe in making movies with low budgets.”
Stocks of popular production houses like Mukta Arts, Padmalaya Telefilms and Galaxy Entertainment failed to grab the investor’s interest due to dreary quarterly performances. Mukta Arts, with no major hits this year, disappointed both its viewers as well as investors. Its returns on sales hit a low of 0.81 per cent during the period April to December 2003 as compared to 31.99 per cent reported during the corresponding period of pervious year.
During the last fiscal, the state and central government took several progressive initiatives such as rationalisation of entertainment tax and CAS (Conditional Access System) which was subjected to controversies. The government also appointed Telecom Regulatory Authority of India (Trai) as a regulator of broadcasting and cable services to trigger growth in the television segment which amounts to 67 per cent of the media industry.
In 2004, the government has plans to introduce high-end technologies such as Direct-to-Home (DTH), which will further open diverse investment opportunities in this sector. A number of mutual funds are expected to be launched in the current fiscal to cash in on this booming sector, market sources point out.