One of India’s most successful production houses is evaluating options to induct strategic or financial investors as it looks to add value to its businesses.
Balaji Telefilms, backed by the “queen of soap operas” Ekta Kapoor, is exploring how it can make the most of the successful run of its shows during the coronavirus lockdown, especially in the fast-growing Over The Top (OTT) vertical, according to people familiar with the matter
“This year has been one of the best years for Balaji Telefilms despite the partial impact of COVID-19 towards the end of March 2020,” said Shobha Kapoor, MD of Balaji Telefilms, as part of the company’s fourth-quarter FY20 performance update released on July 22, 2020. “We continue to focus on creating good content and growing our digital platform. We are witnessing huge opportunity within the digital space due to COVID-19 and we are gearing ourselves to exploit this opportunity.”
The company, which has produced shows such as Class of 2020 and Kehne Ko Humsafar Hain, said its board has appointed IDFC Securities as advisors 'to explore various financial and strategic opportunities'.
Reliance Industries owns 24.92 percent of Balaji Telefilms, which has seen its share price soar by more than 55 percent in the past three months. The firm has a current market cap of around Rs 905 crore and the promoters hold a 34.33 percent stake.
Talk About Timing
“These are early days and as of now, Balaji Telefilms has kept all options open. There is no clarity yet on the quantum of fundraising and if it will be done via stake sale at the parent or subsidiary level. The main attraction is the OTT segment, the fast-growing ALTBalaji, but the company is also open to investors who are willing to access the TV and movie segments as well,” one of the persons cited above told Moneycontrol.
A second person said Balaji Telefilms is a big beneficiary of the digital drive and the firm is uniquely positioned as in terms of size and scale, it is equally adept at television, movies and OTT.
Indian have been binge-watching on OTT platforms during the COVID-19 lockdown. ALTBalaji, one of the top five paid apps in India, dominates the mass OTT segment and dominates the original Hindi subscription video on demand (SVOD) space.
A report released by Boston Consulting Group in March 2020 said the Indian OTT market, which has players such as Netflix, Amazon Prime, Hotstar, Sony LIV and VOOT, is expected to reach $5 billion in size by 2023. This growth is being driven by rising affluence, increase in penetration of data into rural markets and adoption across demographic segments including women and older generations. Up to 48 percent of India’s internet users (~650 million by 2023) are expected to be from rural areas, the report said.
A third person familiar with the financial plans of Balaji Telefilms said macro consumption trends are in the company’s favour. “ALTBalaji memberships have gone up substantially during the lockdown period, especially in non-metro and tier two and tier three cities and towns compared with some of its peers that target urban audiences. Its library of 62 original shows is one of the largest in the country and that makes it valuable for investors looking to tap the local OTT market.”
The second person quoted above said global or domestic investors can add value in terms of overseas exposure, distribution edge, financial support. “There is no immediate pressure on the balance sheet to raise funds and Balaji Telefilms will look at a significant premium for the proposed transaction.”
All three individuals spoke to Moneycontrol on the condition of anonymity. Moneycontrol has sent a detailed email query to Balaji Telefilms, has sent reminders. This article will be updated as soon as we hear from the company.
Successful OTT Platform
ALTBalaji revenues grew at 88 percent at Rs 77 crore in FY20 from a year ago. A content alliance with Zee5, which has been live for half the year, is driving growth for both partners.
Direct subscription revenue on the platform has grown over 100 percent year on year, with 44 percent of the consumers from the 8 big cities (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Pune) and 56 percent of consumers from non-metro and tier 2/tier 3 towns and cities. Out of its library of 62 original shows, seven shows are running into multiple seasons.
Thanks to its parent, ALTBalaji has two advantages. Firstly, it can leverage the Balaji ecosystem of TV and films to promote shows and acquire consumers via lower marketing spends. Secondly, a deeper library of original shows allows ALTBalaji to tap customers at a lower cost.
“ALTBalaji is well-positioned to minimize cash burn and develop a profitable and scalable, direct-to-consumer business,” Balaji Telefilms said as part of its results update.
The TV Business posted an EBITDA of Rs 88 crore compared with Rs 21 crore in FY19 due to cost control measures. The movie business BTL Movie also fared well, driven by pre-sales strategy. Its EBITDA stood at Rs 37 crore compared with a loss of Rs 7 crore in FY19.
As a combined entity, Balaji Telefilms reported a narrowing of consolidated loss to Rs 19.84 crore in the fourth quarter ended on March 31, 2020. It had posted a consolidated loss of Rs 27.97 crore in the same quarter of the preceding fiscal.
Revenue from operations during the quarter under review stood at Rs 107.68 crore as compared to Rs 88.86 crore in the year-ago period, it added. For the fiscal ended on March 31, the company said its consolidated loss was at Rs 58.96 crore. The same was at Rs 97.75 crore in the previous year.
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