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TV Today Network
With companies cutting back on advertising spends in a difficult economic environment, it’s not surprising that TV Today’s revenues slipped just under 16 per cent in the March 2009 quarter. Although Aaj Tak is the market leader in the Hindi news genre, the competition in the space remains keen. And with costs not easing, the operating profit margin slipped sharply to around 10 per cent ---the weakest margins in more than three years. That resulted in a fall in the earnings before interest tax and depreciation(ebitda) of 72 per cent though the drop in the bottom line was less sharp thanks to higher other income and alower taxes. The balance sheet, however, is in good shape with about Rs 130 crore of cash.

While the June 2009 quarter numbers should be much better because the channel would have picked up its fair share of advertising spends during the elections, 2009-10 is unlikely to see very exciting growth. Brokerage SSKI IDFC projects only marginally higher revenues in the current year over the Rs 250 crore posted last year which itself was just an 8 per cent rise over 2007-08.

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TV Today Network
If TV Today has been an outperformer in recent weeks, it’s because the buyback of shares has been in the offing. On Tuesday, the stock rallied all the way to Rs 85.70, but closed much lower at Rs 74.

At this price, the stock trades at around nine times the estimated 2009-10 earnings, which might not seem too expensive given that the flagship ‘Aaj Tak’ channel is the market leader in the Hindi news genre.
But after growing at 22 per cent last year, revenues are expected to grow at just 17 per cent this year and moreover, could taper off to 13 per cent next year, in what is clearly a difficult operating environment.

In the December 2008 quarter, revenues actually fell 6 per cent and the management concedes that it hasn’t been able to use all the inventory it had. Also, while advertising rates haven’t been reduced so far, the broadcaster may have to bring down rates if volumes don’t improve. And subscription revenues will take their time coming.

In the near term, TV Today could be a big gainer because of the forthcoming elections though it’s possible the IPL could take away some advertising. With costs — especially those on carriage fees and employees — unlikely to come down in the near future given the fierce competition in the industry, operating profits which came off a sharp 43 per cent in the December 2008 quarter will possibly fall this year before recovering in 2009-10 on a low base.

Analysts are concerned that TV Today is heavily dependent on Aaj Tak and that it hasn’t really diversified the portfolio beyond the news genre so as to scale up faster. While the company is using some of the Rs 130 crore of cash that it has, to buy back the shares, the money would have been better spent on the business.
source - BS

Besides, it expects subdued growth in net profits over the Rs 33.6 crore reported in 2008-09. Of course, the environment has been challenging and despite that TV Today has managed to post a profit. Aaj Tak has turned into a pay channel in some geographies and is part of the Sony One Alliance. That should help the company earn higher pay revenues this year. While the profitability of the business should start improving the bigger concern that industry watchers have is that the business isn’t scaling up quickly enough, in a cluttered space.

Besides, they point out that the dependence on a single channel doesn’t bring comfort. The company plans to merge the radio business with ---the management believes it can exploit synergies in local advertisements. However, it should have been possible to capture the synergies all along given that the radio business is housed in a group company. Analysts point out that this could hurt profitability in the near term. The company is also investing in building office space with aview to saving on rents. The stock has rallied with the rest of the market and at the current price of Rs 91 trades at 14 times estimated 2009-10 earnings.
source - BS