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Sunday, September 20, 2009

Adlabs Films Ltd:Management speaks about future prospects

What was the thought behind de-merging the radio business?

We have made two important decisions as regards operations. First, we would not take any new production projects (movies). Second, we have de-merged our radio business. These two decisions make sense considering the losses these divisions have been making. In FY09, the radio business reported losses to the extent of Rs 25 crore. This had a negative impact on the Adlabs basis and thus depressed our stock price. Under the new arrangement, our radio brand – Big 92.7 FM – which has 45 radio stations, would be housed under Reliance Unicom, one of our subsidiaries. This way its will no longer weigh down our balance sheet. We plan to list the radio business separately.

As for film production, all new projects would be undertaken by our parent company, Big Entertainment (Big Pictures). So, our endeavour is to make Adlabs a dominant player in the film services space right from providing equipment, studio, processing films, and developing visual quality of content.

How would you convince an investor on investing in Adlabs Films?

Investors must understand two things. First, we are in a phase of heavy investment in our businesses and on a path of completely overhauling sort of an exercise, which would result in a de-risked business model. We have in a way exited our loss making divisions. Our radio business was making losses, we de-merged it and as regards production business, we have stopped taking a new movie projects. Right now whatever verticals we are in would be revenue generators for in few years. Our subsidiary Big Synergy is widely regarded as a leader in non-fiction programming in adapting international formats for Indian viewers. In FY 2008-09, BIG Synergy has produced serials such as Aap Ki Kacheri with Kiran Bedi which has received both critical and commercial acclaim. Its recent production includes India''s Got Talent on Colors.Our film services division has been going steady. We are the only company offering 4K facility in Asia with real time grading capabilities. BIG Cinemas has now a network of 428 screens spread across India, US, Malaysia and Mauritius. In India, BIG Cinemas expanded its network to 201 screens spread across 60 cities.It contributes 11-15% to the box office in India and 25-35% of box office collections of the large hindi films from the US and over 70% of US collections of Tamil and Telugu films. During the current year, BIG Cinemas will expand footprint into Netherlands in Europe and Nepal. These divisions have good revenue potential and it would take few quarters for these divisions to become substantial contributors to our revenues.

Could you give details about your foray into film restoration business?

We have received an order from National Film Archive to restore and digitise 1,000 films. On an annualised basis, the company expects revenues to the extent of Rs 100 crore from this new initiative. We had acquired Lowry Digital, a US-based company that restores films digitally and is set to benefit from expertise the company offers.

Could you give us a perspective about margins each of your company''s business is generating across different verticals?

On the processing of content front, we are generating margins in the range of 40-45%. On the television services front, we are able to generate around 30% margins, while on the exhibition front, margins have been in the range of 6-8%. On the production front, it would be difficult to come to a definite number considering the content, cast and other factors of a film. However, it would have a return on investment of around 20%.

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