Himmatwala

The company has shown guts to not only come out with an IPO in these turbulent markets but also make fanciful projections

PATMALAYA TELEFILMS (PTL) is a Hyderabad-based entertainment software company. G S R Krishna Murthy, chairman, started his career as a film actor in the Telugu film industry and has acted in more than 315 Telugu films. He has also directed 13 films. G Adisesha Giri Rao, managing director, has over 25 years of experience in film production in Hindi (Himmat-wala, Justice Chowdhary, etc.) and Telugu.

The promoters have interests in other ventures like Padmalaya Studios, Padmalaya Vision, Padmalaya Enterprises and Priyadarshani. Padmalaya Studios, a privately held company, is one of the largest studios in Hyderabad for film production with a profit after tax of Rs 15.97 lakh for the 1999 fiscal. PTL sold the distribution rights of films to Padmalaya Studios for Rs 1.2 cr in FY 1999-2000 out of its total sale of distribution rights of Rs 7.65 cr.

PTL is engaged in the making of telefilms and television software. It has two mega serials to its credit — Jai Veer Hanuman and Buddha. They were telecast in 1996 on Sony.

The company had allotted a total of 20 lakh equity shares at par to Reliance Capital (15 lakh shares), Kothari Pioneer Mutual Fund (2.5 lakh shares) and Reliance Vision Fund (2.5 lakh shares) in Oct ’95 and Jan.’96.

PTL has an integrated studio in Hyderabad. It has some ideas which are ready at a pre-production stage like British Rule in India (a drama to be produced in joint venture with a foreign partner), Dashavthara (a 200 episode mythological), Karna (another 200 episode mythological) and Swapnasundari (a 100 episode folklore serial).

The company also provides a one-hour programme to DD-8 for evening telecast five days a week. Also, it provides Telegu films to DD-I for Sunday afternoon telecast. PTL has a library of more than 200 Telugu films.

It has a technical arrangement with PentaMedia Graphics for consultancy, supply of software and training to set up a 2D/3D studio at Hyderabad. It also has a memorandum of understanding (MoU) with indiainfo.com to design web pages for entertainment and advertisement.

PTL has signed another MoU with Inhouse Production, a private limited company, for marketing of television software in Mumbai and Delhi as well as the global market. The company plans to promote a Telugu music channel in JV with Inhouse and two other companies.

The present issue is to enhance production facilities with an on-line digital production system and addition of new production units (the estimated cost is Rs 17.75 cr), to augment the working capital resources of the company (Rs 19.8 cr), to support the Penta Media tie-up (Rs 3 cr), to set up an integrated television software studio (Rs 4.5 cr), to set up marketing offices in India and the US (Rs 2 cr), procure Telugu and Hindi films for the library (Rs 5 cr) and to meet the issue expenses (Rs 2.2 cr).

PTL has forecast a net profit of Rs 25.67 cr and revenues of Rs 70.29 cr for the financial year ending Mar. 2001. These figures are too fanciful to believe. For the year ended Sep.’99, PTL had reported a net profit of Rs 3.64 cr on revenues of Rs 15.99 cr. For the period ended 20 Feb. 2000, it reported a net profit of Rs 2.61 cr on revenues of Rs 5.82 cr, which itself is an unnatural growth. The year-end will be changed from September to March.

While PTL can cater to the needs of the Telugu audience, it may find it difficult to compete on a national scale. The other area that PTL needs to develop is the marketing network, which it intends to do with part of the proceeds of the issue.

PTL has a distinct advantage when it comes to Telugu programming as it is a dominant player in the region. It also has good contacts with various regional channels like Gemini, Vijay and Udaya. This augurs well for the company as more and more Telugu regional channels are poised to enter the fray. Also, PTL has MoUs in place with Penta Media and indiainfo.com. Three more strategic alliances are expected in the near future. This gives the company a steady revenue stream over a period of time. PTL has been a profit-making company right from 1995.

The media sector was the most fancied sector in the recent past and Cinevista Communications’ issue was oversubscribed 200 times even though it was at a P/E multiple of 100. But, with the meltdown in prices, the P/E ratios have come down significantly. PTL has posted a net profit of Rs 3.64 cr for the FY ended Sep.’99. The earning per share on the post-issue equity capital of Rs 10 cr is Rs 3.6. At a price of Rs 100, the P/E multiple is 27.5. The industry TTM P/E of 99 is mainly influenced by Zee’s P/E multiple of more than 200. Excluding Zee, the P/E falls to 21. With a number of big media houses lined up for IPOs, the P/Es of media companies are unlikely to improve significantly even if the overall market picks up.