Balaji Telefilms readies measures to boost margins

Weighed down by shrinking margins, Balaji Telefims, a Rs 378-crore firm promoted by Ekta Kapoor, is initiating a slew of measures including cost efficiencies such as faster production techniques and reduction of staff by 10-15 per cent.

The premier television production house recently ended its exclusivity contract with the Star Group.

PERKING UP

The TV production house recently ended its exclusivity contract with the Star Group

 

The operating margins of Balaji could slip from 35 per cent in the first quarter of FY09 to 32 per cent this quarter

 

Balaji will not sign any exclusivity contract with any other broadcaster

 

 

It will ramp up the number of shows to 12-13 by the year-end from nine now

 

The production costs have gone up 4-5 per cent, the company said

Sandeep Jain, CFO of Balaji, said the operating margins could slip from 35 per cent in the first quarter of FY09 to 32 per cent during this quarter.

But the third quarter would be much better with the company taking steps to face the challenge.

Jain said Balaji will not sign any exclusivity contract with any other broadcaster and will ramp up the number of shows to 12-13 by the year-end from nine now. “We have the infrastructure to produce almost 18-20 shows and will scale up our production further in due course of time,” he said. The production house plans to launch two fiction and one reality show by the year-end.

Analysts said the margin pressure will also be due to a sharp dip in realisation, higher production costs due to higher payments to artists/directors and addition of high-budget shows and higher contribution from lower margin movie business. Jain said the production cost has gone up 4-5 per cent.

In 2004-05, Balaji Telefilms, which has produced chartbusters such as Kyunki Saas Bhi Kabhi Bahu Thi and Kahani Ghar Ghar Ki among others for Star Plus, entered into an agreement with the channel. Under this, Balaji was not allowed to produce shows for any other Hindi general entertainment channel in the 8 to 9 p.m. and 9.30 to 11 p.m. time band.

In turn, the channel paid Balaji a premium (according to some estimates, nearly 200 per cent over the market rates) but with the exclusivity contract not being renewed, the rates are being re-negotiated. It derives 65 to 70 per cent of its content revenues from Star alone.

Media analysts said even though Balaji has the option of making shows for other channels, the new shows are estimated to fetch a 30-40 per cent discount on Balaji’s current rates.