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Balaji Telefilms Ltd.

BSE: 532382 Sector: Media
NSE: BALAJITELE ISIN Code: INE794B01026
BSE 00:00 | 03 Apr 39.35 2.75
(7.51%)
OPEN

36.60

HIGH

39.85

LOW

36.60

NSE 00:00 | 03 Apr 39.10
(%)
OPEN

38.20

HIGH

40.00

LOW

36.55

OPEN 36.60
PREVIOUS CLOSE 36.60
VOLUME 9116
52-Week high 86.95
52-Week low 28.00
P/E 8.01
Mkt Cap.(Rs cr) 398
Buy Price 39.35
Buy Qty 125.00
Sell Price 41.85
Sell Qty 100.00
OPEN 36.60
CLOSE 36.60
VOLUME 9116
52-Week high 86.95
52-Week low 28.00
P/E 8.01
Mkt Cap.(Rs cr) 398
Buy Price 39.35
Buy Qty 125.00
Sell Price 41.85
Sell Qty 100.00

Balaji Telefilms Ltd. (BALAJITELE) - Chairman Speech

Company chairman speech

Dear Shareholders

It gives us great pleasure to present to you Balaji Telefilms AnnualReport 2017-18. This report highlights many notable achievements made by your Companythrough the year in a dynamic and evolving environment. We are proud to celebrate thesesuccesses in our continuous pursuit of "Creating Value by Creating Content"across

Television Movies and our foray into the Digital medium ALTBalaji.

We began the FY2017-18 with three objectives. Our first and perhaps themost critical task was to launch our digital B2C business -ALTBalaji. The second was tocontinue our market leadership position in television content by creating relevantstorylines with memorable characters. The third was to restore the profitability in ourmovie

business by making conservative investments and adopting a morede-risked approach to movie making. We are proud to say that we were able to achieve allthe objectives beyond the set targets at the end of the financial year.

ALTBalaji has had a very positive start in its first year of launchbecoming the number 1 repository of original Indian content. Our viewers have wellreceived the shows and in addition to our viewers we have also had critical acclaim fromvarious participants in the wider entertainment ecosystem such as content producers andcreative talent. We ended the year with over 1.2 million subscriptions with 800 millionminutes of content watched and numerous awards for our shows.

During the year we benefited from the increase in availability of the

internet faster internet speeds reduced data costs and cheaperhandsets in the country all leading to higher consumption of video on the internet.However digital content viewing and subscription- based content are still in a nascentstage in India. Technology is already ushering in rapid changes and penetration ofbroadband among the masses through low- cost solutions will only increase the size of thedigital entertainment market. At ALTBalaji we look at all these changes as an opportunityand are always ready to make use of innovations to connect better with our customers.

In addition to the Indian market ALTBalaji also had an immediateimpact on the global media and entertainment landscape and we have acquired customers inover 90 countries. Balaji's content has always connected with the Indian diaspora outsidethe country and ALTBalaji now allows them to reconnect with original and exclusive contenton the App.

ALTBalaji's content is centred on creating original and exclusivestories for individual consumption. India is predominantly a single TV market with lessthan 5% of households having access to a second screen; therefore television content needsto appeal to a family watching the television together. This has lead to the content on TVbecoming more mass and one- size-fits-all. We believe the growth of the Internet andsmartphones has created OTT as a viable and much needed second screen in households. Thissecond screen allows us to tell individual stories and explore new genres and format ofstorytelling. Our first year has

seen us create successful shows such as " The Test Case" and"Bose: Dead / Alive" that appeal to a premium urban audience Karrle Tu BhiMohabbat that is an upgrade to television content while using well-known television starsRagini MMS is a spine- tingling horror series and Class of 2017 for the younger audiences.We will continue to add more such entertaining content solidifying our position asIndia's number 1 destination for original shows.

Our TV business remains a stable and cash-generative business. Ourtelevision shows continue to lead the charts and we receive

incentive fees based on Television Rating Point achieved. During theyear we launched a spin-off series of our long-running show Kumkum Bhagya called KKundaliBhagya which has also done very well. Both these shows have consistently been ranked inthe top 5 shows during the year. FY2018 also saw us complete Season 2 of Naagin one ofIndia's most- watched weekend fantasy fiction dramas. Our popular shows such as Yeh HaiMohabbatein and Kasam Tere Pyaar Ki continue to run through the year with Yeh HaiMohabbatein recently completing 1500 episodes.

In our movie business our primary focus is to restore the segment backto profitability after a couple of loss-making years. We have carefully decided to investin scripts and projects where we believe we can pre-sell the content to satellite anddigital platforms. In addition to pre-sales we are also working collaboratively withother creative talent and co-producing movies thereby bringing in fresh creative inputsand cost efficiencies into our projects. Our pipeline for FY2019 looks very attractivewith movies for different audiences and we have managed to pre-sell a significant portionof the costs associated with these movies thereby protecting our bottom line.

Financial highlights

Balaji Telefilms Limited had a good FY2018 with few notableachievements during the year- the launch of ALTBalaji a massive fund infusion into theCompany and the completion of a corporate reorganisation.

The television production business had a reasonably flat yearconcerning the number of hours of content produced and revenue growth but we continue tomeasure this business on two

important metrics - the revenue per hour and gross margin both ofwhich have grown this year. Our average revenue per hour has increased to ' 0.33 crores ascompared to ' 0.29 crores in the previous year a growth of 14%. The gross margins haveimproved by 300bps to 29.7% from 26.7%.

Our standalone revenues were ' 416.6 crores as compared to previousyear's ' 408.5 crores. EBITDA grew an impressive 19 times to ' 53.1 crores from ' 2.8crores on the back of a de-risking strategy to the movie business achieved via pre-salesof distribution rights and co-production of movies. Our profits after tax and exceptionalitems on a standalone basis decreased to ' 16.3 crores from ' 29.4 crores due to theimpact of deferred tax and exceptional tax items. Please note that FY2017 PAT waspositively impacted by the creation of a deferred tax asset of ' 27.8 cr due to the mergerof our movie production business and BOLT Media into Balaji Telefilms Limited. Thisincreased the PBT of ' 2.26cr to ' 29.4 Cr. FY2018 including normal tax of ' 2.1 Cr oncapital gains tax on completion of assessments for earlier years of ' 7 Cr. and deferredtax charge of ' 21.2 crores with an additional ' 9 crores of exceptional item towards theprovision of income tax. However if we were to look at a normalised PAT i.e. profittaxed at the normal income tax rate excluding any impact of deferred tax and exceptionaltax items it would reflect a good PAT performance of ' 36.5 cr in FY2018 as against ' 1.5cr in FY2017.

This year also saw the commercial launch of ALTBalaji and we expect tobe in an investment phase for the next 2 to 3 years. ALTBalaji will help positionourselves for further success in the coming years and ride on the growth of digitalcontent consumption for

individual audiences worldwide. We expect to maintain our cash spendson ALTBalaji at ' 100 cr to ' 150cr a year for the next 2-3 years while revenue scales upexpecting to break even within the next three years.

Coming to vital corporate developments during the year

Reliance Industries Limited (RIL) showed trust in your Company and itsstrategy to build its IP library and a B2C business; it invested ' 413 crore to acquire a24.9% stake in Balaji Telefilms Limited in the month of August 2017. The transaction wasstructured as a preferential allotment at ' 164 a share. This is one of the largest-everfund infusions for the Company and this investment will help ALTBalaji become India'scontent powerhouse as it scales up content creation for ALTBalaji.

To streamline the group structure the Company merged the productionbusiness of its wholly owned subsidiary Balaji Motion Pictures Limited and BOLT MediaPrivate Limited into the parent company Balaji Telefilms Limited. This streamlining ofgroup structure will help build up efficiencies and combine similar business interest intoone corporate entity resulting in operational synergies a focused management anoptimisation of group structure and an efficient administration. The final approval forthis reorganisation was received during the year and operationally all functions have alsobeen merged into Balaji Telefilms Limited.

Going forward we will continue to deploy our financial resources inopportunities that have the most favourable risk-return profile. Our TV business remains avery stable and cash generative business. We do not foresee any significant capitalinvestments in this business during the coming years.

In our movies business we will be judicious with deploying freshcapital and are looking to improve the financial health of the movie business by workingon pre-sales and co-production models. Our slate for FY2019 has already been pre-sold to alarge broadcaster and this gives us confidence and flexibility in the way we operate.

We believe ALTBalaji is the future of the Company and we will makesizeable investments in this segment. We will make continuous

but controlled investments in the digital platform and are well fundedto make these investments. The company today is debt free and has over ' 442 crores inmutual fund investments which will allow us to pursue growth without raising freshcapital.

Overall as a business Balaji Telefilms Limited has robust processesand controls that allow us to seamlessly shift from a content production business to acontent IP and consumer

ownership business. I along with my team are taking all the necessarysteps to build on this strong foundation and grow Balaji Telefilms Limited to greaterheights for the foreseeable future.

We thank all the shareholders employees clients viewers and boardmembers for their support and encouragement during the year and showing the confidence inour management business model and strategy.

Sanjay Dwivedi

Group Chief Financial Officer

Nachiket Pantvaidya

Group COO and CEO of ALT Digital Media Entertainment Limted