| The association between the channel and the content provider has been a long one "" over five years "" and a strong one "" almost 65-70 per cent of Balaji's Hindi Cable & Satellite revenues come from Star. |
| In return for some highly saleable content, Balaji extracted its pound of flesh in terms of premium rates and grew both in stature and size. Net profit in FY04 was Rs 55.4 crore on sales of Rs 178 crore. |
| The stake sale is a sign that Balaji is looking for a more stable revenue stream, admitting that it will be difficult to turn out popular serials forever. Apparently, Star will not have the first right of refusal for a serial, so that leaves Balaji an option to sell freely to other channels. |
| What Balaji needs to do is with the cash is to hedge its bets. Perhaps it could grow the business by setting up an animation studio or diversify it in some manner by teaming up with a partner. The management has hinted that there could be some more news on this front. |
| At the current price of Rs 88 the stock commands a trailing P/E ratio of 8. The stock has seen a run-up in its price in the past three months and could see a further re-rating but only after investors know how the cash is going to be spent. |
| If well-spent, the chances of a re-rating are high. The next few episodes could be exciting. |
| Cement exports |
| Renewed demand from the Middle East has pushed up export prices of cement by $10-$15 to around $40-$44 per tonne. |
| Companies such as Gujarat Ambuja Cement, Sanghi Cement and UltraTech CemCo, who have manufacturing facilities near ports in Gujarat will be the main beneficiaries of the increase in demand and export prices. |
| Exports realisations at the current freight on board prices are around 16 per cent higher, compared with domestic ex-factory prices in Gujarat, which are in the region of Rs 80 per 50 kg bag. |
| Exports incentives like duty waivers on coal or furnace oil also lead to a lower cost of production, resulting in better margins. |
| A stronger export market also provides an outlet for the excess supply in Gujarat, reducing pressure on domestic prices. |
| In the first four months of the current fiscal, exports have been in the region of 3.2 million tonne, including clinker exports of 1.87 million tonne. The current year could see exports up to 9 million tonne, close to a 100 per cent increase compared to last year. |
| Gujarat Ambuja is the largest exporter of cement in the country, while UltraTech CemCo and Sanghi mainly export clinker. |
| Gujarat Ambuja exported 1.72 million tonne of cement in the year to June 30, 2004, 15 per cent of the country's total exports of 3 million tonne. |
| While half the company's exports were to the Middle East and Gulf region, a substantial amount of cement was exported to Sri Lanka. The company is expecting to export around 2 million tonne of cement in the current year. |
| Duty cuts on oil products |
| Even as crude prices continues to hit new highs, the government has softened the blow for oil marketing firms and attempted to keep retail prices in check. |
| The pure refiners stand to lose because the cut in import duties on oil products by five per cent will lower the end prices of their products. |
| Moreover, since the duty on crude has been left untouched, their input costs do not come down. Thus, their gross refining margins will be impacted adversely. |
| The lower excise duties on petrol and diesel by three per cent and that on kerosene by four per cent will help bring down the extent of under-recovery on account of the subsidies on kerosene and LPG. |
| More important, this will ease the pressure on retail marketing margins of petrol and diesel which are believed to have turned negative in August. |
| For instance, prior to the duty cut the loss on petrol was between 15-20 paise per litre; this will now turn into a profit of 85-90 paise per litre. |
| Similarly, the loss on diesel was Rs 1.10 per litre which will now turn into a marginal gain of 15 paise per litre. The biggest gainer will be BPCL because among the three marketing companies, its share of petrol, diesel, kerosene and LPG to total sales is the highest at 72.6 per cent compared with 70.1 per cent for HPCL and 51.7 percent for IOC. |
| The losers are the stand-alone refiners, Chennai Petro, Kochi Refineries and Reliance. They will actually see lower profits as a result of these changes in duties. For consumers, the cuts are a temporary respite: if oil prices remain high, we may yet see a price hike in September. |
| With contributions from Shobhana Subramaniam and Mansi Kapur |
Top Section
Explore Business Standard