Eyeing 20-22% EBITDA in FY16; aim to pare debt: Prime Focus

Rathee is very confident of a very strong topline and bottomline performance in FY16. Revenues for the company are likely to be around Rs 1800-2000 crore in FY16 and they hope to achieve EBITDA margins in the range of 20-22 percent, said RatheeThe company also aims to reduce debt  going forward, which currently stands at around Rs 1000 cr, said Rathee.Prime Focus is into digital content management and distribution services. They also offer video/audio post-productions.Reliance Mediaworks owns around 44.86 percent stake in the company. The company has also acquired VFX company Double Negative Holdings in July, 2014.Below is the transcript of Vikas Rathee’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18. Ekta: I was just glancing at your numbers, and it seems as though there was an exceptional loss of around Rs 159 crore which pulled down your entire bottom-line. Can you just tell us what was it on account of and what might we see as your full-year bottom-line for the fiscal? A: You are right. The overall exceptional loss for this last fiscal year was about Rs 250 odd crore. This is something we have spoken about before on your channel as well. We had divested our non-core operation in London called Prime Focus London PLC. We had taken a provision for this already in the standalone books as of the end of last fiscal year. And now, with the divestiture of the company, it actually came and hit us on the consolidated financials. So, that is what is dragging down the results overall. Also, there is, as you know, over the last 12 months, we have been fairly acquisitive. We have added DAX in the US, we added Double Negative in the UK, a smaller company in Canada as also the merger or transaction with Reliance Mediaworks where we acquired their film and media services businesses. So, obviously a lot of that operations that came on, that they have a restructuring charges of about Rs 60 odd crore in relation to that. So, that is Rs 180 odd crore towards the divestiture of London PLC and about 60 is on account integration redundancy charges. And we do not expect to see these, obviously going forward. There will be some in the way of integration charges through the course of this fiscal, but if you see the operating part of our results, we crossed Rs 500 crore of revenue for the first time in our history and we are working forward on our integration plan actually ahead of plans. So, we expect to deliver strong results on the top-line and the bottom-line for fiscal year, 2016. Anuj: So, that is what your shareholders would want to know because the feedback we get is that you for almost every movie, Prime Focus is involved, but somehow that is not reflected on your financials so far ever since listing. Going forward, what kind of top-line trajectory and what kind of earnings before interest, taxes, depreciation and amortization (EBITDA) trajectory can the shareholders expect? A: We have spoken in the past as well. We have been targeting EBITDA margins at rate 230-22 percent and I have been consistent on that for the last several quarters. That is what we expect for FY16. We already are actually very close to those numbers. We delivered about 21 percent EBITDA margins for the current quarter. They were slightly higher in the previous quarter. So, on the EBITDA margin side, we are absolutely progressing well on our integration plan. Again, on the revenue side, we delivered like you said, more than Rs 500 crore for the quarter for the first time history. I am not saying we are going to do Rs 500 crore every quarter, but that should give you a sense of what we expect for the fiscal 2016. You should see us deliver revenues in the Rs 1,800-2,000 crore. Ekta: So, what is the quarterly run-rate of revenues that we might expect maybe in the foreseeable future in the next one to two quarters based on the amount of projects and the number of projects that you are working on, what your deliverables would look like as well? A: There is some seasonality in the business given the timing of Hollywood releases, you are absolutely right. We have been involved in almost every big budget movie you see not only in India but overseas as well; from Mission Impossible to Terminator, Avengers and the bunch of the new Bond that is going to come out, Jason Bourne movie that is going to come out, Huntsman, Alice, we frankly have more orders in our pipeline than we have ever had, even as separate companies in the past. So, from a revenue trajectory perspective, we are very confident, we have a very strong order book both on a creative business as well as technology business. So, when I talk about Rs 1,800-2,000 crore, that gives you a sense of what we are looking at. There will be some quarters which will be five, seven, ten percent down and others which will be five, seven, ten percent up just like I said, from a seasonality perspective. But, we are confident delivering a top-line of more than Rs 1,800 crore with EBITDA margins of 20-22 percent for fiscal 2016. Anuj: And do you have any more acquisitions planned apart from the ones that you have done? Or is it going to be about consolidation for some time now? A: I think, we have enough on our plate right now. The integration process, it is again not an easy task, we are obviously adjusting all of this, we are very happy that the progress we made is pretty substantial already. Consolidation does continue on the industry. Just last week, Technicolor announced the acquisition of a UK company called The Mill at pretty robust multiples on both the revenue and the EBITDA perspective. So, there is consolidation that is happening. The studios want to deal with the players who can deliver a full bouquet of services as opposed to try to buy for or cater to across too many people. So, all that is obviously helping us. We have stayed ahead of the curve again. We have been leaders in the consolidation side. We have all that we need to basically already be recognised as one of the leading houses globally on the services. So, no real plans of any more acquisitions in the near-term. Ekta: Your finance costs were around Rs 73 crore for the entire fiscal. And if you look at it, year-on-year (Y-o-Y) or maybe even what you did in this quarter, it was around Rs 25.5 odd crore. What does you balance sheet look like? A: If you look at it, our revenues grew almost 80 percent from last fiscal 12 months to current, comparable to 12 months. Even EBITDA jumped by about 45 percent. If you look at on a debt perspective, frankly our debt was about Rs 850-900 crore as of 12 months ago. It is only gone up by about Rs 100 odd crore or Rs 150 crore. So, we have been pretty judicious in terms of how we have gone and financed these transactions. We have leaned more towards equity and have payment structures which are deferred in nature so that there is a buy-in from the selling shareholders who are coming into our business as well. So, we are very focused on our production and hope to continue to reduce that. Ekta: So, where does your debt stand at right now? A: It is about a little over Rs 1,000 crore.