Raj Television Network Ltd.

Company background

• Raj Television Network Ltd. (RTL) was incorporated on 3 rd June, 1994.The company is a regional satellite television broadcaster in Tamil Nadu, running entertainment and media channel ‘Raj TV’ and ‘Raj Digital Plus’. It is regional pay channel network in Tamil Nadu.
• The Raj TV network provides programs like films, serials, game shows, classical concerts, discourses by spiritual gurus and programs related to spiritual tourism.
• The company utilizes its most resources in producing their own serials, films/non-film based programs.
• The revenue stream consists of Advertisement Revenue, Pay Channel Subscription Income, Air Time Sales and Content Syndication.
• Advertisement Income accounted for 47 % and 45 % of total income, export revenues accounted for 2 % and 5% of total income, content syndication accounted for 14 %and 13 % of our total income during the period ended 31 st December 2006 and the Financial Year ended March 2006 respectively.
• Subscription revenues accounted for 37 % of our total income during the period ended 31 st December 2006.
• As there is no published data on viewership numbers, considering the revenues earned from the pay channel subscriptions received in December 2006 the subscription numbers is 10.22 Lakhs as on December 2006.
• Post issue shareholding of the promoters will reduce to 72.5% from 100%.

Objective

• Strengthen production facilities, enhancing content and content acquisition.
• Launching a new television channel.
• Broadcast of existing channels in the international market.
• To produce short-films/tele-films.
• Acquisitions and export of films in international market.
• To construct new studio premises.
• To finance general corporate purposes.
• To meet issue expenses.

Strength

• India is the third largest television market in the world today. There are over 119 million television households, which comprise only about 60 per cent of the total households in the country. Of these 119 million television households, about 50 million receive cable television services, leading to a penetration of only about 42 per cent cable TV households to total TV households and 25 per cent cable TV households to total households in India. As can be seen from these low penetration percentages, there exists a huge untapped potential for growth in this industry.
• Most of the serials and other programmes are produced by RTL, therefore, they also hold the proprietary rights for the most of the content produced by us.
• RTL is able to increase revenues due to their model of producing our own content by way of cost control and higher margins in advertising revenues.
• RTL has predominantly positioned themselves as a regional player. They enjoy good brand value and positioned us as one of the leading Tamil satellite regional television network, primarily due to their focus on the Tamil speaking population.
• Currently the company holds the broadcast rights for spiritual programs of more than 1000 hrs and the rights for approximately 1300 tamil films that are shown in the prime slot.

Weakness

• Revenue from advertisement is a major source for RTL.Being a regional channel in Tami nadu, it may not be able to attract large national & international advertisers.
• RTL holds a small portion of the market in Tamil nadu and has tough competition from Sun TV, which holds major share, K TV and Jaya TV.

Valuations

• The revenue of the company has grown to Rs 33.79 cr at CAGR of 6.9% over the period FY 2002 to FY 2006. The revenue for the nine-months ended December 31, 2006 was Rs 30.72 cr.
• The net profit has grown to Rs 3.56 cr at CAGR of 4.24% over the period of FY 2002 to FY 2006.The net profit for the nine-months ended December 31, 2006 is Rs 9.87 cr.
• The RONW in March 31, 2002 was 15.39% that reduced to 10.27% in March 31, 2006. The RONW in December 31, 2006 was 22.19%.
• Debt-equity ratio of the company stood at 6.96 for FY 2002 that reduced to 0.73 for the nine months ended December 31, 2006 on account of issuance of bonus shares in September 2006 in the ratio of 5:1.
• The book value per share on March 2006 was Rs 194.41 and Rs 41.54 on December 1, 2006 due to issuance of bonus shares in the ratio of 5:1.
• EPS as on March 31, 2006 was Rs 3.33 and on December 31, 2006 was Rs 9.21. Post issue annualized EPS is Rs 10.14.
• Pot issue PE is Rs 21.8 at the lower end of the price and Rs 25.34 at the upper end of the price. Industry average is 45.30.