Balaji Telefilms Limited

Company Overview
BSE Code 532382
Balaji Telefilms Limited is in Media & BSE Symbol BALAJITELE
Entertainment sector and it is in film production,
distribution & entertainment industry. BTL was Key Highlights
incorporated in 1994 as a private limited Latest Date 17 Sept 2018
company and became listed in the year 2000. Latest Price (Rs.) 106.5
BTL produces Television serial content, Movies 52 Week High (Rs.) 181
and digital content.
52 week low (Rs.) 102
BTL has produced 18000 hours of Television Face Value (Rs.) 2
content since its inception. BTL has produced Market Cap. (Rs. in Cr.) 1112
some of the best television serials in the country Net Worth (Rs. in Cr.) 853
including the famous K series of daily soap: TTM EPS (Rs.) -4.61
‘Kyunki Saas Bhi Kabhi Bahu Thi', ‘Kahani
PE Ratio (x) 0
Ghar Ghar Ki' and more recently created
‘Naagin-1', ‘Naagin-2' a weekend fiction based PB Ratio (x) 1.34
programming. EV/ EBITDA (x) -31.01
Market Cap./ Sales (x) 3.19
Segment Summary
Shareholding Pattern
The company operates in 3 segments. Promoters 33%
FII 18%
1. TV Serial Production DII 35%
The backbone of the company is their TV serial Non-Institutional 14%
production business. BTL is in this business
from the incorporation of the company in 1994. The returns from the TV Business are
steady because the company operates on a cost-plus model, whereby company adds profit
to the whole cost of production and bill that to the broadcaster.

2. Movie Production
The company started movie production in 2001. Movie production business is highly
risky because it requires high investment initially in creating movie and revenue
generation at the release of a movie is not fixed. To decrease risk, the company prefers
pre-sale of distribution rights, satellite rights and music rights.

3. OTT Platform- ALT Balaji

The digital business of the company is in the investing phase right now and the company
is planning to invest Rs. 150-170 Cr. every year in next 3 years, out of which 70% would
be for strengthening content offerings. The company aims to launch 45-50 shows in the
next 2 years. Company follow SVOD model (Subscription based video on demand) for
revenue creation.
 Balaji Telefilms Limited
Industry Outlook
Indian Television Industry

 The TV industry grew from Rs.59,400 Cr. in 2016 to Rs.66,000 Cr. in 2017, a growth
of 11%. In Rs. 66,000 Cr., Advertising revenue is 40% at Rs.26,700 Cr. While
Distribution revenue is 60% at Rs. 39,300 Cr.
 The number of license private satellite non-news channels reached 488.
 As per BARC (Broadcast Audience Research Council) India 2018 report, India
currently boasts 298 million homes, of which 197 million homes have a TV set,
having an opportunity of almost 100 million more TV sets in the country.
 No. of TV viewing individuals grew by 7.2% to 836 million from the previous year's
figure of 780 Million. TV remains the most effective platform for both content
creators and advertisers to reach their audience.

Indian Film Industry

 Indian film Industry grew by 27% in 2017 and reached 156 billion.
 Hindi films contribute 40% of the net Box office collections annually, despite
comprising only 17% of the films made. Films in 29 other languages account for
around 75% of the films released and contribute 50% to the net box office collection
annually.
 Single screens have reduced from 9,710 screens with a 91% share of the total screens
in India in 2009 to less than 71% share in 2017 with 6,780 screens. Multiplexes have
grown at a steady rate of over 10% in the last 3 Years.

Source: FY 2017-18 Annual Report

 In 2017, 39% of revenue came from other than domestic theatricals, which includes
Overseas theatricals, broadcast rights, Digital/ OTT rights, in-cinema advertising.

2
 Balaji Telefilms Limited
OTT Industry

 Over The Top (OTT) is a term used to refer to content providers that distribute
streaming media as a standalone product directly to consumers over the internet
bypassing telecommunication, multi-channel television and broadcast television
platform that traditionally act as a controller or distributor of such content.

 OTT video market in India growing at a CAGR of around 23%, revealed data from
PWC. OTT video revenue in India has been pegged at Rs 2000 Cr. in 2017,
according to PWC report. It is expected to reach Rs. 5600 Cr. by 2022. More than 30
OTT players are in India.

OTT Players in India

ALT Balaji Yupp TV Arre Hungama Play AIB
Netflix Hot Star Voot Eros Now NexGTV
Amazon Prime Zee5 Viu Sony liv sunNxt
HOOQ Ditto TV Spuul TVF Play shemaroo

 OTT Players spent Rs. 1000 Cr. last year for rights of Hindi movies and Rs.680 Cr.
for Hollywood movies. FICCI & EY Report digital/OTT rights currently make up
5.5% of films overall revenue. Rs.2500-3300 Cr. has been committed to creating
original content over 3-5 years across the 30 OTTs in India according to a Deloitte
report.

Source: FY 2017-18 Annual Report

 Online video viewing audience is expected to grow to 50 Cr. viewers by 2020 from
25 Cr. (Currently) in 2017, a 2X growth driven by increase in mobile penetration,
internet speeds, the advent of 4G and falling data charges.

3
 Balaji Telefilms Limited
 At June 2018, 42.5 Cr. wireless broadband subscribers (Mobile internet users) in
India which is around 33% of Indian population.

Revenue and Earning contribution

4
 Balaji Telefilms Limited

Business Segments

1. TV Serial Business
BTL accounts for 16% of India's prime time GEC TV (General Entertainment channels)
rating. In India, prime times occur at 8 PM to 10.30 PM. Present serials on the air in
prime time include ‘Kumkum Bhagya', ‘Kundali Bhagya', ‘Dil Hi Toh Hai' and ‘Naagin'
and out of 6 serials in air 4 serials are in Primetime.

Since inception, about 18000 hrs. of production and more than 150 shows across
numerous languages (Hindi, Tamil, Telugu, Kannada, Malayalam) has been created by
the company.

Revenue from TV serial segment growing at 16% CAGR and EBIT growing at 26%
CAGR. Average realization per hour grew by 13% and reach to Rs. 33 Lac in FY 2018
from Rs. 29 lac in FY 2017.

Year FY 2015 FY 2016 FY 2017 FY 2018 CAGR

Revenue 233 260 282 312.5 16%
EBIT 31 45 62 72 26%
EBIT % 13% 17% 21% 23%

In the TV serial segment, the company earns by selling content to the broadcaster. The
company follows a cost-plus model. So according to model, the company adds his profit
margin on the cost incurred by the company to produce content and then bill it to the
broadcaster.
TV serial production is providing steady income and it is around 75% of the revenue of
BTL. Minimal capital expenditure is required in near future.

Details of shows in air are given below.

episodes
Aired ( As of 5 Weekday/
Name Network on Aug) Weekend Time
Yeh Hai Mohabbatein Star Plus Dec-13 1537 Weekday 22.30-23.00
Kumkum Bhagya Zee TV Apr-14 1158 Weekday 21.00-21.30
Kundali Bhagya Zee TV July 17 279 Weekday 21.30-22.00
Naagin (Season 3) Colours June-18 19 Weekend 20.00-21.00
Dil Hi Toh Hai Sony TV June-18 35 Weekday 22.00-22.30
Qayamat Ki Raat Star Plus June-18 14 Weekend 19.00-20.00
Kasautii Zindagii Kay Star plus Sept-18 0 Weekday 20.00-20.30

BTL follows a strategy of launching high cost and high impacted initial episodes. The
cost moderate as the show stabilizes.
Compare to weekday shows revenue contribution of weekend shows are less.

5
 Balaji Telefilms Limited

2. Movie Business-Balaji Motion Picture Limited

BTL started movie production business in FY 2001 and transfer business to subsidiary by
creating wholly owned subsidiary Balaji Motion Picture Limited in FY 2007. In FY 2018
movie production business transfer to the parent company and BMPL will concentrate in
Movie distribution segment.

Total 36 movies produced till now. Some of its past movies include ‘Shootout at
Lokhandwala', ‘Ragini MMS', ‘Once Upon A Time In Mumbai', ‘Kya Cool He Hum',
‘The Dirty Picture'.

No. of Movie produced detail

FY 2010 2011 2012 2013 2014 2015 2016 2017 2018
No. Of
film 2 1 4 1 5 2 1 4 2

The company has planned 3 movie releases in FY 2019, ‘Veere di wedding', ‘Mental hai
kya' and ‘Lailla Majanu'. Rs.60 Cr. was been committed in terms of production cost and
further Rs.15 Cr. take for Promotion & advertisement. The company already locked in
60% to 65% revenue for all 3 movies. It should be from the pre-selling of distribution
rights, satellite rights, Music rights. The company have to recover only 35% of the Box
office.

The movie business was making losses continuously in the previous 5 years except in FY
2018. Accumulated losses are more than Rs. 100 Cr.

It has borrowed Rs.227 Cr. (inclusive of interest) from holding company. Holding
company has given a loan at 6% interest rate. Rs 128 Cr. is borrowed in FY 2016.

FY 2015 FY 2016 FY 2017

Film Produced 2 1 4
Total Income ( Rs. In Cr.) 111 23 128

Common size statement

FY 2015 FY 2016 FY 2017

Total Income 100 100 100
Cost of film produce 93 135 115
Employee Benefit Exp. 5 19 3
Financial cost 0 48 10
Other Expenses 7 35 6
Net profit -5 -139 -35

6
 Balaji Telefilms Limited
Major Expenses in Film Production (Rs. In Cr.)
% of total Avg. Cost for
Expenses FY 2016 FY2017 Total exp one film
Total Cost of film produce 114 108 222 100% 44.4
Artist, Director & other
technician fees 25 34 59 26% 12
Shooting & location Exp 11 15 26 12% 5
Line Production cost 52 10 62 28% 12
Marketing & Distribution Exp 9 33 42 19% 8
Remaining 17 16 33 15%
The Total cost of film 114 108 222 100%

3. ALT Balaji
ALT Balaji platform launched with 6 original shows (5 in Hindi & 1 in Tamil) in April
2017. It was incorporated in July 2015 as a wholly owned subsidiary company of BTL.

The Company is in the B2C digital content business and will operate a subscription-based
video on demand (SVOD) over the top (OTT) platform.

Through the digital vertical, the company aim to create IP ownership and exploit new
avenues of monetization. They are working towards building a strong and valuable B2C
brand that will take the company to its next level of growth. It is to leverage the group's
position and creative abilities in television and film content.
Management intends to invest Rs300 to Rs.400 Cr. in ALT Balaji. The focus is on
original and never seen before original content.

Management is hoping that by FY 2020, revenue split is equally between TV, Movie and
Digital and By FY 2025, they expect ALT digital to be bigger than both their TV &
Movie businesses.

Source: FY 2016-17 Annual report

7
 Balaji Telefilms Limited
A. Content of ALT Balaji

Content made is targeted towards urban Indians and Indian Diaspora. More than 150
hours of original content streaming on ALT Balaji.

At present, content includes,

Original shows 21 shows- 20 in Hindi, 1 in Tamil & 1 in Bengali
TV shows 2 shows -1. Dil Hi To Hai 2. Box Cricket League Match
Kids Shows 13 shows- 2 in Hindi, 8 in English
Stand up comedy In 6 regional languages & avg 5 shows in each of Avg 5 minute
Movies 10 Movies

Details of original shows in Annexure I

Source: company quarterly updates

Average 3 shows are launched in every quarter. The management plans to do 24 shows in
FY 2019 and cost will be about Rs.110 Cr. Length of the season will be 12-16 shows of
22 minutes each episode and doing more season 2. Season 2 coming in this year for ‘Dev
DD', ‘Ragini MMS', ‘The Test case'.

Till March 2018, Rs 100 Cr. has been spent on content. The company ended up making
18 original shows, 3 kid shows until March 2018. For Hindi content, the spending of Rs
60 lac per hour is done and for Non-Hindi it is not more than Rs15 Lac per hour.

70% of the produced content is outsourced. The test case series produced by ‘Endemlo
Shine India', Bose: Dead/ Alive produced by ‘Big Synergy Media'.

Content also dubbed in 6 regional languages viz. Tamil, Telugu, Malayalam, Arabic,
Bahasa Indonesia, Bahasa Malaysia. Dubbing in Sinhala for Sri-Lanka, and Bengali will
be available before Sept 2018.

Management says that they will probably end this year with 24 new shows taking the
library to anywhere between 40 and 45 shows across two financial years. The company
currently have 50 concepts under various stages of development out of which 11 are on
the floor of production and 39 are in the writing stage.

8
 Balaji Telefilms Limited
B. Subscription Base
( Subscriptions in Million)

Source: company quarterly updates

Subscription base already reached to 0.33 Cr. paid subscribers except for Reliance Jio
subscribers, which was 0.12 Cr. at the end of FY 2018. Management target is to make 0.8
Cr. subscriber base till FY 2020 and reach break even at ARPU of Rs.20.

C. Revenue from ALT Balaji

Revenue in FY 2018 is Rs. 6.8 Cr. from nil in FY 2017 because ALT Balaji was launched
in April 2017. Management estimates that revenue in FY 2019 will be around Rs 85 Cr.
in FY 2019.

Company follow SVOD ( Subscription based Video On Demand), model. In this model,
company charge subscription fees to users and earn revenue. The company established
ALT Balaji application on which user need to subscribe for a period and he could watch
all the content there for that period.

There are about 30 Million Indian abroad who could consume ALT Balaji original
content. By dubbing content in foreign local languages like Bahasa Malaysia, Bahasa
Indonesia, Sinhala in Sri-lanka, company plans to target the foreign local public to
consume ALT Balaji content.

Management says that 60% to 70% of the value is generated by Telecom. partners.

D. Partnerships

Through partnership companies, BTL can reach to customers of partners and by that, the
company can save on marketing expense for reaching to the mass public.

The partnership works on a revenue share basis, so typically a partner's revenue share
model can range anywhere from 1.5% to 30% revenue sharing. In case, of a large deal
involving more than 5 Lac customers, the ARPU ( Average Revenue per User) varies
depending on volume.

9
 Balaji Telefilms Limited
Type Partners
OEM Micromax phone, Sony TV
Telecom. Vodafone, Airtel, Reliance Jio
ISP / DTH Act Fibernet
Payment Partners Paytm, Mobikwik, PayU, UPI, Paypal
Streaming Partners Amazon fire TV, Yupp TV, Roku, Apple TV

OEM Partners

By OEM (Original equipment manufacturer) partnership ALT Balaji app is pre-installed

on equipment. When a user of that equipment subscribes for the app and pays
subscription fees, both the OEM Partner and ALT Balaji get benefitted. Deals are done on
a revenue sharing basis.

Telecom. Partnership

At now 80% of traffic on ALT Balaji is of Telecom. subscriber and 70% of the revenues
are generated by Telecom. subscribers.

All content of ALT Balaji is available on telecom. app. Telecom. subscribers need to use
Telecom. app for watching content. Content is coming from ALT Balaji server only.

If the customer watches content on the Telecom. app for the certain number of seconds
that person is billed to the company at a certain rate and this billing is done on a monthly
rate bases. Monthly ARPU (Average revenue per user) is in double-digit but what exactly
the rate is not disclosed but management said that Telecom. user ARPU is around Rs.15.

Telecom. partnerships providing content of ALT Balaji free to their customer on Telecom.
app and on behalf of their customer Telecom. partners pay to ALT Balaji. Management
said that ARPU will not be at the same rate if Telecom. partners not giving free content to
Telecom. subscriber.

In the International market, Telecom. partners of Balaji Telefilms include XL Axiata

(Indonesia), Dialog ( Sri Lanka), Celcom (Malaysia), Ooredoo (Oman), Telkomsel
(Indonesia).

ISP (Internet Service Provider) Partnership

To subscribe ALT Balaji subscription, a customer of ACT Fibernet can visit ACT Fibernet
website and select ALT Balaji as value added service. Through this customer can pay a
unified bill every month.

Currently, ACT Fibernet is giving 1-month free subscription of ALT Balaji and then
Rs.35 per month.

10
 Balaji Telefilms Limited
Payment Partners: Through this partnership, the company gives payment options to
subscribers.

E. International Market

In FY 2019 company focus is in the International market to get connected with about 200
Million users who are having internet connection in Indonesia by dubbing existing
content in Bahasa and also Bahasa Malaysia.

In the international market, company focuses on volume in Indonesia, Malaysia and

Bangladesh and focuses on value will be in the US, UK.

F. Future Prospects

In FY 2019, cash burn will be Rs.165 Cr. out of which content will be about Rs.110 Cr.
Revenue target for FY 2019 is Rs.85 Cr. with 5 million subscribers at ARPU is Rs 20.
The break-even target is at 0.8 Cr. subscribers at ARPU of RS.20 and So, top-line will be
at around Rs160 Cr. at the end of FY 2020.

G. Subscription charges & facilities

Subscription charges are Rs 100 for the quarter, Rs.180 for 6 months and Rs 300 for Year.
With one Subscription 5 user can log in. A subscriber can also download videos.

H. Peers Comparison

More than 30 OTT players exist in India. OTT players can be differentiated in many
categories which are described below.

I) Business Model

OTT players follow two business models.

1. SVOD ( Subscription based Video On demand)
2. AVOD ( Advertise based Video on Demand)

No.of
Type Players
SVOD 9
AVOD 6
SVOD & AVOD 4

Source: FY 2016-17 Annual report

11
 Balaji Telefilms Limited

II) OTT Player Indian & Overseas

Indian International
ALT Balaji Netflix
Spuul Amazon
Hotstar Viu
Sony Liv Eros Now
VOOT HooQ
ZEE5

III) Original & Library

No.of
Type Players
Original 1
Library 3
Both 8

Source: FY 2016-17 Annual report

IV) Content Category

No.of
Type Players
Shows 9
Movies 10
Sports 2

Source: FY 2016-17 Annual report

12
 Balaji Telefilms Limited
V) Peer companies Subscription charges & facilities

Subscription charges
Name Remark
Monthly Yearly
Quarterly Rs.100 & Rs.180 half
ALT Balaji - 300 yearly and 5 log-in in 1
Subscription.
Rs. 299 per year plan for Only All
HOTSTAR 199 999
sports. Single subscription
30 days free trial available. 2
Amazon Prime 129 999
log-in are available
1 log-in is available but with
premium package of Rs.650-2 log
Netflix 500 - in and of Rs.800-4 log-in is
allowed. First month free
subscription allowed
Many content is free while for
Zee5 99 499 premium content subscription is
required. Single subscription

VI) Subscription base of Peer companies

Source:Article of Economic Times

Hotstar is leading with the highest subscription, Hotstar has a big library of TV serial &
movies and many sports covered live. 80% of content is given free and earning on the
base of advertising and 20% premium content for which subscription is required. VOOT

13
 Balaji Telefilms Limited
is providing content totally free. So the trend seems is Indian public like free content and
not ready to pay for the subscription.

While Amazon has the highest monthly active subscription in SVOD model 11 million.
Amazon service includes prime video, prime music, and fastest delivery of packages.

VII) Peer Companies original content data

Amazon Prime

Amazon market cap is Rs.70 lac Cr. ($ 1 trillion). Amazon acquired digital telecasting
rights for more than 2 dozen films for its OTT platform. Amazon Prime Video has
committed the largest stake through an investment of Rs 2,000 Cr. to acquire the rights of
Bollywood films and produce local original content. Amazon Prime Video will end the
year with six originals including ‘Breathe’, ‘Inside Edge’, and its comedy reality series
‘Comicstaan’. In 2019, the company will produce ten new originals.

Amazon has 77 original shows of which 4 shows are Indian origin.

Details of original shows in Annexure I

Netflix

Netflix Indian library has 4706 titles. Netflix earmarked about Rs.500-600 Cr. spent on
Indian original shows and plan is to produce 8 to 10 Indian origin feature films per year.
Netflix is not currently available in mainland China. Netflix CEO says that the next 100
million users could be from India. Netflix monthly paid subscriber is between 3 lac to 5
lac. Netflix cannot enter to China market because of government restriction and because
of that second highest population is in India so they could invest a heavy amount to
capture the Indian market.

Netflix currently has 3 India originals.

Details of original shows in Annexure I

Hotstar

HOTSTAR application has 50,000 Hrs of TV Content and movies across 8 languages and
every major sport covered live. Hotstar owns streaming rights to the vast majority of
cricket tournaments played in India and by the Indian cricket team. In India, Hotstar
stands No.1 on subscriber base with 75 Million subscribers. Hotstar launched SVOD
service in US and Canada at a monthly charge of $10.

Hotstar has 3 original shows and 19 original movies in Cineplay.

Details of original shows in Annexure I

14
 Balaji Telefilms Limited
Zee5

Zee5 has a plan to make 90 original shows in FY 2019. It was launched on Feb 2018.
18 shows are launched. Most of the content is converted into regional languages. It also
has a large collection of movies & TV serials.

Details of original shows in Annexure I

VOOT

VOOT is a digital arm of Viacom 18. Total 12 Hindi and English originals shows & all
colour channels, MTV; 35000 Hrs of content. It has the largest Kid's content. It
completely works on AVOD model. VOOT content is completely free for watching.

Details of original shows in Annexure I

VIII) Telecom. Partnerships of Peers

No
. Reliance Jio Airtel Vodafone
1 Arre Eros Now Netflix
2 ALT Balaji HOOQ Amazon prime
3 Amazon
Eros Now Prime ALT Balaji
4 VB ALT Balaji Arre
5 Dice Media Eros Now
6 Cheers Hooq
7 Hungama play
8 Yupp TV
9 Ditto TV

On Airtel TV app, prepaid and postpaid costumers of Airtel have ALT Balaji and most
content is free till 30 December 2018. One year Amazon prime free subscription is
available to Airtel postpaid plan of Rs.499 and more..

Vodafone is also giving free access of content in Vodafone play to there prepaid and
postpaid customers but Netflix & Amazon prime content is not on Vodafone play but they
have postpaid plans through which they give a free subscription of Amazon Prime and
Netflix. A subscriber of Vodafone red plan of Rs.399 and above get Amazon prime
subscription for 12 months and plan of Rs.999 and above get Netflix and Amazon both
1-year subscription.

15
 Balaji Telefilms Limited

4. Other subsidiaries of BTL

Subsidiary Business segment

Create & produce cutting-edge TV concepts across

mainstream & regional Television.
Bolt Media Limited
It is proposed to cover genres like youth, reality, factual
entertainment besides exploring brand solutions and
short-form programming.

Chayabani Balaji
Entertainment Private Ltd.
Creator & producer of Bengali content
Marinating films private
Creator of Intellectual property rights & producer of
limited
reality shows & events
Event Media LLP
Creating promotional and other entertainment related events

BOLT
Chhayabani Marinating Event Media Total
Media
Incorporated 2013 2016 2016 2015
Ownership 100% 50% 99.87% 51%
Capital Invested (Rs. in Cr.) 0.05 1.88 9.24 0.005 11.18
Loan by Parent Company 2.86 0 0 0.88 3.74
Total Revenue (Rs in Cr.) 20 8 31.49 11 70.49
Total Profit/ Loss (Rs. in Cr.) -2 -1.31 -6.07 -0.72 -10.1
ROCE -69% -70% -66% -81% -68%
Merged in Exit from
Present Status Exist Exist
BTL Partnership

5. Other Ventures
A) Brand EK
 It is comprising of women Indian ethnic wear and excusite jewellary which is
available online space & through TV shopping network. The range ensembles the
designs worn by TV celebrities on the popular TV shows.
 Leverage social media such as Twitter, Facebook and Instagram to increase visibility
of the brand.

B) Hoonur
 It launched in FY 2010. It is a platform for media professionals & entertainment consumers
used in both online & mobile space.

16
 Balaji Telefilms Limited

Key Management

Joining Industry
Name Designation Past experience
BTL Experiance
Grey Group India, HMV (now Saregama
Sunil Lulla Group CEO 2018 30 Years Ltd.), MTV India, Sony Entertainment, The
Time Group
Group COO,
Nachiket BBC, Walt Disney (India), Fox Television
ALT Balaji 2015
Pantvaidya CEO studio, Sony Entertainment,
ALT Balaji
Sunil Nair COO
2015 11 Years Nautanki Tv, Star India
Manav ALT Balaji
2017 15 Years Askme.com
Sethi CMO

Positive Aspects
1. TV Business of BTL is giving stable revenue and working on cost plus model.

2. ALT Balaji have Telecom. Partnerships, who are giving content free of cost to their
customers, which is helping to reach mass audience and cut down the marketing expenses.
It also contributes 70% of revenue of the ALT Balaji.

3. Reliance Industry hold 24.9% stake in company and having two board seats. Because
of this probability of improvement in management efficiency and integrity.

Risk Factors

1. High investment plan to ALT Balaji venture

BTL plan to invest Rs.300 to Rs.400 Cr. in ALT Balaji venture which is 35% to 45% of
overall net worth of Rs. 850 Cr.. So if ALT Balaji venture fails in future it is going to
reduce share capital drastically.

2. Own Production by Telecom. partner

As per articles, Reliance JIO, Telecom. partner of ALT Balaji, is planning to come with
its own production of short films and web series for their Jio subscribers. It could result
into low bargaining power, decrease in viewership and in worst scenario, exit from
partnership.

3. Telecom. subscription cannibalize Direct subscription

ALT Balaji original exclusive content is given free by all 3 Telecom. partners. It will
heavily cannibalize direct subscription. Management believes that B2C and B2BC
approaches cannot cannibalize each other. Management is of the opinion that Telecom.

17
 Balaji Telefilms Limited
subscribers cannot download content but on Vodafone Play app., but in reality it can be
downloaded.

4. International companies in OTT Market

OTT players includes International players like Netflix, Amazon prime. Their capacity to
spend on content creation is far greater than ALT Balaji and they are also concentrating in
creating Indian original content in Hindi. Netflix target is 100 million subscribers from
India and planning to create 100 hrs of Indian origin content while Amazon prime came
with budget of Rs.2000 Cr. for production of Indian original content.

5. Outsource of ALT Balaji production

70% production is outsourced, so dependency from suppliers is high. Many OTT players
are outsourcing production work like Big synergy is slated to create 6-7 web series for
platform such as ALT Balaji, Netflix, Amazon prime, Vuclip, Voot. Because of this cost
of production could rise and supply could be delay. Company does not seem to have
pricing power.

6. Dilution of Share capital

For ALT Balaji OTT business, BTL raised Rs 150 Cr. through preferential allotment of
10.72 million shares to foreign portfolio managers in FY 2016 and Rs 413 Cr. through
preferential allotment of 25.2 million shares in FY 2017 which diluted 36% stake of share
holders. Promoters holding decrease to 32% from 47%. Before Dilution of share capital
total shares were 65 million and after that 101 million.

7. Cash balance disclosed in demonetization

In FY 2016-17, BMPL, a subsidiary of BTL reported Rs.7720 Cr. as closing cash balance
on December 30, 2016 for disclosure required for disclosure on Specified Bank Notes
which is at least 15X of revenue of holding company and at the end of the year FY 2017
cash & cash equivalent balance around Rs. 4 Cr.. This incident raises a question on
management integrity.

Source: Annual report FY 2016-17

Snapshot is of Rs.7720 Cr. cash in hand balance from FY 2016-17 Annual report (page
No. 224).
We have mailed to the company for clarity on above cash in hand balance and the
management replies that one should consider Rs.7,72,000 as closing cash in hand as
on December 30,2016 and not consider ‘Rs in lacs’ described above table.

18
 Balaji Telefilms Limited
Financial Information

Balance sheet (Rs. In Cr.)

FY 2015 FY 2016 FY 2017 FY 2018
Shareholder’s Fund 382 524 504 850
Total debts 48 76 131 100
Total Liabilities 430 600 635 950
Non-current assets
Property, Plant, Machinery 27 35 45 34
Intangibles 2 2 2 10
Investments 32 32 40 32
Long term loans & advances 64 78 9 9
Other non current asset 6 7 77 104
Total Non- current Assets 131 154 173 189
Current Assets
Inventories 30 119 98 128
Current Investments 145 171 157 442
Cash & cash equivalents 11 17 16 23
Short term loan & advances 34 44 0 4
Other current assets 79 95 191 164
Total Current Assets 299 446 462 761
Total Assets 430 600 635 950

Profit & loss Account (Rs. In Cr.s)

FY FY FY FY
2015 2016 2017 2018
Total Income (Rs. In Cr.) 357 315 439 432
Expenses
Cost of production & acquition 296 227 335 323
Marketing & distribution 0 0 36 55
Employee Benefit Exp. 15 20 28 31
Depreciation 8 9.5 13 18
Other Exp. 29 40 39 55
Total Exp. 348 297 451 482
PBT 9 18 -12 -60
PAT 3 16 -29 -46

19
 Balaji Telefilms Limited
Common size Profit & Loss Account
FY 2015 FY 2016 FY 2017 FY 2018
Total Income 100 100 100 100
Expenses
Cost of production & acquition 83 72 76 75
Marketing & distribution 0 0 8 13
Employee Benefit Exp. 4 6 6 7
Depreciation 2 3 3 4
Other Exp. 8 13 9 13
Total Exp. 97 94 103 112
PBT 2 6 -3 -14
PAT 1 5 -7 -11

Cash flow Statement ( Rs in Cr.)

Particulars FY 2015 FY 2016 FY 2017 FY 2018
Cash flow from Operating Activity -1.84 -106.8 -12.75 -104
Cash flow from Investing Activity 9.81 -22.19 11.80 -275
Cash flow from financial activity -4.72 134.92 0 391

Return on capital employed

Average ROCE of last 5 years from FY 2014 to FY 2018 (Rs. In Cr.)
TV ALT
Serial Movie Balaji Unallocated Total
Capital
Employed 78 123 44 301 545
Sales 248 128 3.4 380
EBIT 42 -11 -91 -24 -84
ROCE 53% -9% -205% -15%

Capital Expenditure Plan

Segments Type Amount

TV Serial Business Minimal Rs.1.5 Cr. Per Month
Movie Business No Fresh Nil
allocation
ALT Balaji Maximum Rs. 400 Cr.

20
 Balaji Telefilms Limited
Valuation

Estimation for FY 2020 onward

Scenario 1 (Base case scenario)

ALT Balaji Segment

 Revenue from Operation

1. Telecom. Subscribers
Assumption 1. At present awareness of content of ALT Balaji is available free to the
users in India through Telecom. networks but it will going to increase in next 2 years.

Assumption 2. Young population is more familiar with video content on mobile and most
content is also created for them. So it is assumed that 40% percentage of youth will watch
at least 1 show in 10 to 12 shows produced in year.

Age group 17-31 32-41 42-61

Population (in Cr.) 36.3 19.0 28.4
Estimated 1 show watching population in
year %
(considering Telecom. subscriber getting it
free to watch) 40% 20% 5%
Estimated watching population (in Cr.) 14.4 3.8 1.4
Revenue generate by company ( In Cr.) @
ARPU of Rs.10 144 38 14
Total revenue generated 196 Cr.

2. Indian Diaspora

Assumption1. NRI public would like to see Indian content and subscription charges are
reasonable for them. It is assumed that NRI public would like to see at least 1 show he
like and for that they subscribe for 1 month.

Assumption 2. NRI in US, UK & Canada is 78 Lac out of which assuming only 4% will
subscribe for one month. In other countries NRI are 222 lac out of which assuming only
4.5% will subscribe.

Indian Diaspora (as per Wikipedia December 2017 report) 300 lac
NRI in US, UK & Canada 78 Lacs
Estimating subscribe for 1 month in year 3 lacs
Revenue generated at Rs70 subscription charge ( $ 1) 2 Cr.

21
 Balaji Telefilms Limited
NRI in Other countries 222 Lacs
Estimating subscribe for 1 month 10 Lacs
Revenue generated at Rs.30 subscription charge 3 Cr.
Total revenue generated 5 Cr.

Note- Subscription charges for developed countries is $ 1 while for other countries it
taken at similar rate of India.

3. Foreign Subscribers

Company is also targeting foreign audience by dubbing content in there languages.

Assumption1 When content is available in their local languages people would like to
watch content, so from whole population assuming 0.01% population will subscribe for 1
month.

Country Language Population

(in Cr.)
Indonesia Bahasa Indonesia 26
Malaysia Bahasa Malaysia 3
Oman Arabic 0.44
Sri Lanka Sinhala 2.1
Total 31 Cr.
Revenue generated
Estimating 30 Lac Population watch for 1 month.
Subscription charges Rs.30 per month 9 Cr.

Total Revenue generated from 3 sources

( Rs. In Cr.)
Telecom. Subscribers 196
Indian Diaspora 5
Foreign Subscribers 9
Total 210

 Expenses of ALT Balaji

1. Production cost

Per Hour production cost 60 lac

Episodes in 1 show 16 episodes
Frequency of 1 episode 22 minutes
Hours of production of 1 Show 5.87 hour
Cost of 1 show production 3.52 Cr.
Shows in 1 year 12
Cost of content production 42 Cr.

22
 Balaji Telefilms Limited
2. Other cost ( in Cr.)

Estimated FY 2018
Empyee cost 15 14.2
Marketing Expenses 30 42
Legal & professional charges 5 8.5
Rent including lease rent 1.3 1.3
Digital space charges 1.8 1.8
Software expense 0.5 1.8
License & hosting fees 3.4 3.4
Director sitting fees 0.09 0.09
Other Miscelleneous 0.5 2.22
Total cost 57.60 75.30

Estimated profit from ALT Balaji

Revenue from operation 210 Cr.

Expenses of ALT Balaji 100Cr.
Estimated EBIT 110 Cr.

TV business Segment
Assumption: Expected Revenue growth rate in FY 2019E & FY 2020E is taken at
CAGR of 16% and EBIT margin of 25% in FY 2019 and 27% in FY 2020.

Year FY 2015 FY 2016 FY 2017 FY 2018 CAGR FY2019E FY 2020E

Revenue 233 260 282 312.5 16% 361 418
EBIT 31 45 62 72 55% 90 113
EBIT % 13% 17% 21% 23% 25% 27%

In FY 2020 estimated EBITDA of Balaji Telefilms Limited

Segment Rs.
Commission programming EBIT 113 Cr.
ALT Balaji EBIT 110 Cr.
Total EBIT 223 Cr.
Depreciation 19 Cr.
EBITDA 241 Cr.

23
 Balaji Telefilms Limited
Equity shares of company in FY 2020 on EV/EBITDA basis

EV/EBITDA EV/EBITDA
10X 8X
EBITDA 241 Cr. 241 Cr.
EV 2410 Cr. 1928 Cr.
Market cap 2388 Cr. 1906 Cr.
No. Of shares 10.11 Cr. 10.11 Cr.
Share Price 236 188

Equity shares price of company in Scenario 1 Base case scenario in FY

2020 on PE ratio basis

Particulars Amount
EBIT 223 Cr.
Less: Tax @ 30% 67 Cr.
PAT 156 Cr.
EPS 15.43
P/E 15
Share Price 231

Scenario 2 (Worst case scenario)

ALT Balaji Segment

 Revenue from Operation

1. Telecom. Subscribers
Assumption: It is possible that assumptions in Base case scenario not work out in that
proportion so on conservative basis decrease percentage of watching population.

Age group 17-31 32-41 42-61

Population (in Cr.) 36.3 19.0 28.4
Estimated 1 show watching population in year %
(considering Telecom. subscriber getting it free to
watch) 20% 10% 1%
Estimated actively watching population (In Cr.) 7.26 1.9 0.28
Revenue generate by company ( In Cr.) @ ARPU
of Rs.10 72.6 19 2.8
Total revenue generated 94.4 Cr.

24
 Balaji Telefilms Limited
2. Indian Diaspora
Assumption: It is possible that NRI public have many options to view Indian content and
decrease in subscription so on conservative bases around 50% decrease in subscribers.

Indian Diaspora (as per Wikipedia December 2017 report) 300 lac
NRI in US, UK & Canada 78 Lac
Estimating subscribe for 1 month 1 lac
Revenue generated at Rs70 subscription charge ( $ 1) 0.70 Cr.
NRI in Other countries 222 Lac
Estimating subscribe for 1 month 5 Lac
Revenue generated at Rs.30 subscription charge 1.5 Cr.
Total revenue generated 2.2 Cr.

Note- Subscription charges for developed countries is $ 1 while for other countries it
taken at similar rate of India.

3. Foreign Subscribers
Assumption: It is possible that foreign population may not respond as described in Base
case scenario. So on conservative basis decrease subscribers to 10 lac.

Country Language Population

(in Cr.)
Indonesia Bahasa Indonesia 26
Malaysia Bahasa Malaysia 3
Oman Arabic 0.44
Sri Lanka Sinhal 2.1
Total 31 Cr.
Revenue generated
Estimating 10 Lac Population watch for 1 month.
Subscription charges Rs.30 per month 3 Cr.

Total Revenue generated from 3 sources

( Rs. In Cr.)
Telecom. Subscribers 94.4
Indian Diaspora 2.2
Foreign Subscribers 3
Total 100

25
 Balaji Telefilms Limited
 Expenses of ALT Balaji
Production cost
Per Hour production cost 60 lac
Episodes in 1 show 16 episodes
Frequency of 1 episode 22 minutes
Hours of production of 1 Show 5.87 hour
Cost of 1 show production 3.52 Cr.
Shows in 1 year 12
Cost of content production 42 Cr.

Other cost ( in Cr.)

Estimated FY 2018
Employees cost 15 14.2
Marketing Expenses 30 42
Legal & professional charges 5 8.5
Rent including lease rent 1.3 1.3
Digital space charges 1.8 1.8
Software expense 0.5 1.8
License & hosting fees 3.4 3.4
Director sitting fees 0.09 0.09
Other Miscellaneous 0.5 2.22
Total cost 57.60 75.30

Estimated profit from ALT Balaji

Revenue from operation 100 Cr.

Expenses of ALT Balaji 100Cr.
Estimated EBIT 0

B. Estimation of Balaji Telefilms TV business income

Assumption: Expected Revenue growth rate in FY 2019E & FY 2020E is taken at
CAGR of 16% and EBIT margin of 23% as in FY 2018.
Year FY FY FY FY CAGR FY2019E FY 2020E
2015 2016 2017 2018
Revenue 233 260 282 312.5 16% 361 418
EBIT 31 45 62 72 55% 83 96
EBIT % 13% 17% 21% 23% 23% 23%

26
 Balaji Telefilms Limited
In FY 2020 estimated EBITDA of Balaji Telefilms

Segment Rs.
Commission programming EBIT 96 Cr.
ALT Balaji EBIT 0
Total EBIT 96Cr.
Depreciation 19 Cr.
EBITDA 115 Cr.

Equity shares price of company in FY 2020 on EV/EBITDA basis

EV/EBITDA EV/EBITDA
10X 8X
EBITDA 115 Cr. 115 Cr.
EV 1150 Cr. 920 Cr.
Market cap 1128 Cr. 898 Cr.
No. Of shares 10.11 Cr. 10.11 Cr.
Share Price 111 89

Equity shares price of company in Scenario 2 Worst case scenario in FY 2020 on PE

ratio basis

Particulars Amount
EBIT 96 Cr.
Less: Tax @ 30% 28.8 Cr.
PAT 67.2 Cr.
EPS 6.64
P/E 15
Share Price 100

Conclusion
TV business of the company is growing at a stable rate and has high growth potential in
ALT Balaji venture. Key management player have good industry experience and good
qualification. Promoter holding has decreased from 47% to 33% but Reliance Industries
holds 24.9% stake in company and has 2 board of director seats. Company after ALT
Balaji Venture launch in FY 2018 started Con-call at every quarterly result.

Competition is high in OTT Market in India but because of Telecom. Partnership, viewers
can watch these shows free of cost and company gets reasonably paid by Telecom.
partners. So it seems that the company could get high Telecom. subscriptions. Other than
this, India diaspora and foreign market are also reasonable sources of revenue.

27
 Balaji Telefilms Limited
So it seems that company could get benefit of growing OTT Market and have increasing
TV business revenue.

In coming 3 to 4 years, company could improve its top-line and bottom-line and get good
valuation and we could see increase in Balaji Telefilms Limited share price.

Disclaimer

I am not a SEBI registered Research Analyst. No recommendations are given for the
company discussed in the report. I do not hold any share of the company, neither am I a
beneficiary to any shares of the company.

Authored by Vikas Parikh

Head of Research: Tejas Jariwala

For further information, please contact me on:

parikh.vikas9063@gmail.com

Sources
1. Annual reports
2. Con-calls
3. Investor Presentation
4. Articles for OTT platform
5. TRAI website
6. Census India website

References
1. Sunil Lulla you tube video-"creation of MTV concept"- Listening for ideas - Sunil
Lulla | Prism Talks

2. You Tube-Key Note Address: OTT TV Market Evolution in India by Sunir Nair, COO
ALT Balaji- published in June, 2017

28
 Balaji Telefilms Limited
Annexure I
Original Shows details

1. ALT Balaji
Avg.
Frequency (IN
No Name of the show Episodes MINUTE)
1 HUM 12 20
2 GANDI BAAT 4 35
3 RAGINI MMS 12 24
4 DEV DD 11 22
5 HAQ SE 20 20
6 KEHNE KO HUMSAFAR HAIN 15 24
7 THE TEST CASE 10 24
8 CLASS OF 2017 20 18
9 KARRLE TU BHI MAHOBAAT-SEASON 1 15 26
10 KARRLE TU BHI MAHOBAAT-SEASON 2 14 23
11 BOSE 9 22
12 BEWAFA SI WAFAA 10 23
13 ROMIL AND JUGAL 10 22
14 GALTI SE MIS-TECK 10 5
15 BOYGIRI 10 22
16 CYBER SQUARE 10 25
17 FOUR PLAY 6 22
18 PM SELFIWALI 7 21
19 PAMMI AUNTY 10 4
20 SEEING IS NOT BELIEVING- Tamil Language 16 20
21 DHIMANER DINKAAL- Bengali Language 10 20

2. Amazon Prime

Release Frequency (in

Name date Genre Language Episodes Minutes)
Breathe Jan 2018 Crime thriller Hindi 8 38
Inside edge July 2017 Politics of cricket Hindi 10 43
Comicstaa Comedy reality
n July 2018 TV series Hindi 8 55
The Remix March Reality
2018 competition Hindi 10 60

29
 Balaji Telefilms Limited
3. Netflix

Release Frequency
Name Genre Language episodes
Date (in minutes)
Love per Romantic
square foot Feb 2018 comedy Hindi Movie 133
4 Short
Lust stories June 2018 Anthology Film Hindi movie 120
July
Sacred Games 2018 Thriller Hindi 8 60

4 Hotstar

Frequency
Release
Name Genre Language Episode (in
Date
Minutes)
Sarabhai Vs
Sarabhai May 2017 Comedy Hindi 10 24
News
Tanhaiya Feb 2017 Comedy Hindi 9 22
As I m Tamil,
suffering from Romantic Telugu,
pyaar June 17 comedy Hindi 10 20
Hindi &
Cineplay Movies Regional 19 Movies

5. Zee5

Name of Original Shows

Lal Bahadur
Zero KMS Dhatt Teri ki Appa chellam
Sastri Death
Babbar ka
Aranya debs Tamashree Mehman
tabbar
Sone bhi do Horn OK
Lockdown The Story
yaroo Please
Karanjit Kaur Lift man Jashn e Jindagi
America
Badalte chahere Table No. 5
mappillia

30
 Balaji Telefilms Limited

6. VOOT

Frequency
Name episodes
( In Minute)
Kaisi yeh yariya 13 20-30
Time out 6 24-34
Stupid Man smart
9 22-32
phone
Yo ke hua Bro 5 20-28
Untag 7 18-26
It’s not that simple 7 20-26
Shadi boys 8 20-30
Badman 4 19-24
Soadies 6 10-13
Sinskari 1 13
Feet up with the star 1 1

31