NDTV: Shining bright

The media house plans to get into global consulting and monetise its knowledge

The shares of NDTV gained 85 per cent in calendar 2007 compared with Sensex's 48 per cent, despite being an underperformer between July-end and October-end.

With the announcement last week that promoters were buying out 7.7 per cent stake held by a foreign institutional investor, the shares rose by 6 per cent and are now trading at around Rs 462. The promoters are making an open offer at Rs 439 a share, in line with SEBI regulations.

NDTV's results over the past few quarters have been poor. In the September 2007 quarter, it turned in an operating loss of Rs 16.6 crore and a net loss (pre-ESOP) of Rs 22.7 crore, partly because of start-up expenses incurred on four new channels.

The broadcaster, which has English and Hindi news channels, is de-risking by getting into new genres such as lifestyle and general entertainment. It will thus enjoy a larger audience and package its inventory in a better manner. NDTV is also diversifying into media software and media process outsourcing.

NDTV's strategy of having an online presence, getting into global consulting and monetising its knowledge is a sound one.

There could be further value creation as the non-news initiatives start contributing to the company's profits. Besides, the subscription revenues will undoubtedly grow as DTH and CAS find more takers.

However, this will take time and till then, investment costs will continue to be a drag on the balance sheet. Moreover, with the industry witnessing keen competition from nearly 100 new channels, the advertising revenues are getting increasingly fragmented.

NDTV hasn't been able to generate strong revenues in some quarters despite being a strong, credible brand. The competition is particularly fierce in the Hindi news space and this will surely put pressure on NDTV's margins.

While the stock will have support till the open offer is completed, all fundamental upsides are captured in the prevailing price. But there could be a price appreciation if the promoters sell stake to a strategic investor.

Pfizer: Cash-rich

Pfizer India announced on Monday that it would receive Rs 214.85 crore for the sale of four brands in its consumer healthcare business-Listerine, Benadryl, Caladryl and Benylin-to Johnson & Johnson (J&J), as a part of its parent's global decision.

While J&J and Pfizer closed the acquisition in the US a year ago, the Indian arms of both companies took a longer time. There have been uncertainties regarding this sale.

While some analysts were expecting a sale of the entire consumer healthcare business, the company has ended up selling just four brands.

Analysts said that the consumer healthcare division accounted for about 22 per cent of Pfizer's 2006 revenues at about Rs 145 crore. The four brands accounted for about half of those revenues. Pfizer has realised about 3 times FY06 revenues for the sale, which is good.

The company will continue with other consumer brands such as Gelusil, Nebasulf and Selsun.

The sales in consumer healthcare business were sluggish in the quarter ended August 2007 due to the uncertainties surrounding divestment. This resulted in a 3.5 per cent decline in the pharma division's top line.

However, the operating profit margin expanded by 60 basis points y-o-y to 26.3 per cent. Pfizer sold its Chandigarh property earlier this year at a pre-tax profit of Rs 274 crore. In the previous year, the company had made a profit on the sale of its Hyderabad property worth Rs 11.8 crore.

After the sale of brands, the company is sitting on a large cash pile, which could be used for VRS, dividends, buybacks and possible acquisitions in the country.

The shares of Pfizer gained one per cent to Rs 805 after the announcement and trade at 20 times estimated FY07 (year end November 2007) earnings, excluding the profit on sale of property and the brand sale.