MUMBAI: While the company’s Q4 net profit may be down 51 per cent to Rs 132.20 million (Rs 13.22 crores) due to a rise in production costs coupled with losses from its broadcasting, gaming and new media divisions, UTV Software Communications remains bullish on its movie production business.
A corpus of Rs 9 billion (Rs 900 crores) will be invested in movies of which Rs 2.30 billion (Rs 230 crores) will be in Hollywood movies, Rs 4.20 billion (Rs 420 crores) in Indian language films and Rs 2.5 billion (Rs 250 crores) in inventories/debtors of released movies plus unexploited rights of recent releases.
The company’s revenue in the January-March period rose 7.5 per cent to Rs 2.08 billion (Rs 208.68 crores). For the full fiscal year ended March, 2009, UTV’s net profit rose 30 per cent to Rs 1.01 billion (Rs 101 crores). The company’s movie business was the largest revenue contributor accounting for 48 per cent of the total revenue in Q4. However, as compared to the same quarter in the previous year, the revenues from movies fell almost 26 per cent from Rs 1.18 billion (Rs 118 crores) to Rs 874.20 million (Rs 87.42 crores) in Q4.
On the other hand, the company’s AIM listed entity UMP Plc, reported total revenues of $35.13 million for the year ended 31 March, 2009. The operating profit stood at $11.28 million, whereas net profit after tax was $10.99 million.
While movies do remain the largest contributors, they have not managed to translate to the company’s bottomline. UTV Software Communications chairman Ronnie Screwvala explains, "Some of our movies are cash profitable in the same year and many of the others are profitable over a longer period because the ancillary rights specially satellite TV rights has had a deferred revenue model. Moreover, this deferred model has kicked in only in 08-09 and so the impact is mostly felt in 08-09 itself. Furthermore, we do admit that cost for producing movies had risen only due to market conditions and free flow of equity money and that hiked cost has also put pressure on our margins. UTV has not been immune to this industry wide hike in costs but we believe we have brought this under control. However, the benefits of total cost rationalization to pre-2007 days would only be partly felt in 09-10 as many of our productions were already on the floor but will be fully realized and corrected from 2010-11 onwards."
The company’s forthcoming movie slate for 2009-2011 comprises films like Kaminey, Main Aur Mrs. Khanna, Agyat, What’s Your Rashee, Hook Ya Crook, Delhi Belly (Aamir Khan Productions), Wake Up Sid and Jihaad (Dharma Productions), A Wednesday (Tamil & Telugu remake with Kamal Hassan), Yahoo, Film City, Ex-Terminators, Rajniti (Prakash Jha Productions), Hawai Dada (Walt Disney), Aage Se Right, Pan Singh Tomar, Season’s Greetings, Peter Gaya Kaam Se, Chillar Party, Sanjay Leela Bhansali’s next with Hrithik Roshan and Aishwarya Rai Bachchan, Anuraag Basu’s next and Anees Bazmee directed comedy starring Akshay Kumar along with two animation films namely Arjun, Alibaba & 41 Thieves.
Screwvala says, "In movies, for a sustained studio model with a strong and forward slate, the margins would need to be at an average of 25-30 per cent, which will be a combination of present slate exploitation and annuity income from growing library."
Looking forward, the company expects the movie business to record good growth as its slate for the year is larger than 08-09 both in terms of number of releases as also the size of the movies. Additionally, the company’s core focus will be to improve the margins but it will be challenging as a correction needs to be seen in areas such as TV rights and the new syndication model, which has seen a slow down.