Capital expenditure evaluation of Reliance Media Works
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Transcript of Capital expenditure evaluation of Reliance Media Works
The Capital expenditure evaluation of Reliance Media works
Submitted to: Prof. Dr. Paresh Shah
Financial Management
Submitted by:
Prashant Maharshi
ISBE/PGP/SS/2011-13
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Contents• Industry Profile
• Overview of Reliance Media Works
• Capital Expenditure and need for it
• SWOT Analysis
• Growth Analysis
• Financial Profile of RMWL
• Ratio Analysis of RMWL
• Balance Sheet of RMWL for 5 Years
• Conclusions2
Industry Profile• Film Exhibition
1. Single and double screen cinemas
2. Multiplex cinemas• Content production- Film
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2006 Market Size was estimated at Rs. 61,000-crore
Expected to reach Rs. 1,05,200-crore by 2013, at a CAGR of 19%
Maximum growth expected in Television and Film segments
More than 300 national and regional TV channels
Close to 1000 films made every year
Liberal FDI policies across all the segments of the industry
Government is focusing on regulations to give further impetus to the industry.
Overview of RMWL
• Part of Reliance ADA Group
• Established in 1975, as Adlabs Films Limited in Mumbai
• Formed primarily for processing laboratory and catering to the advertising industry
• In 2001, it entered into multiplex business
• Operates Big cinemas with over 543 screens overseas
• RMW’s television venture is among top players in television programming industry
• RMW has presence across three segments film production, exhibition, distribution
• It also works with BPO and is leading global players
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The Network
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London
New York
Mumbai
Chennai
Kolkata
TokyoLos Angeles
Pune
Presence
The company operates the Big Cinemas multiplex chain having over 543 screens across India, the US, Malaysia, Nepal, Japan. .
Off Screen Advertising
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Capital Expenditure
• Is an investment to acquire or upgrade fixed or long lived assets
• Decisions are taken to make profits in future
• It is made up of two processes :
a. Making the decision
b. Implementing it
• It is derived and associated with Strategic Planning
• Is made to maximize shareholder’s wealth
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Evaluation Techniques for CE
• The Net Present Value (NPV)
• The Internal Rate of Return Method (IRR)
• The Equivalent Annual Cost Method
• The Pay Back Method
• The Discounted Pay Back Method
• The Accounting Rate of Return Method (ARR)
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Need for Capital Expenditure
• Expansion
• Maintenance of current level of activity
• Cost reduction or quality achievement
• Replacement
• Modernization
• Research and Development
• Protection of Property
• To meet legal requirements
• Safety and health
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SWOT Analysis of RMWL
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Strengths Weakness Opportunities Threats
Vast customer reach Highly fragmented Emerging concept of movies Piracy
Growing middle class
Lack of cohesive production and distribution infrastructure Poor sections of the society Lack of quality
content
Change in lifestyles
Lack of efforts for media penetration New distribution channels
Technological innovations Rise in viewership
Customer profile and
movie schedule Technological innovations like
animations
Growth Analysis
• Box-office collection of Rs 68,500 million in CY 2009, growing @ 8%
• Growing size of big budget movies, a key revenue driver for multiplexes
• Print size of big budget movies has grown significantly
• Multiplex contribution has gone up from 10% in CY 2006 to around 25 percent of
the total domestic theatrical revenues for the overall Indian film industry and as
much as 60% for Hindi films
• Hollywood : a new source of revenue stream, has grown to 5.5% of Indian box-
office from 2% in 200611
Particulars 2010 2008 IncreaseTop 10 films NBOC (Rs million) 8,080 6,140 32%
No. of big budgets releases 48 35 37%
Growth Analysis cont…..
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Film processing
53%
Cinemas33%
Film prod14%
FY 2006
Revenues: Rs 1,250 million(USD 26.6 million)
Film processing13% DI
2% Eqp rent2%
Restoration6%
TV prod5%
Cinemas72%
Revenues: Rs 6,720 million(USD 143 million)
FY 2010
82% from businesses created in last 4 years 56% from businesses in last 2 years
• Operations in Mumbai only
• 8 theatres (32 screens)
• 14 professionals with > 10 years’ experience
FY 2006 FY 2010 (60% CAGR over 4 years)
• New businesses added, to Yield further results FY 2011 onwards
• Market leader in every business• Operations in 118 cities, 5 countries• 156 professionals with > 10 years’
experienceProjects under implementation in 2011:
• Studios, TV Post
Production Value Chain
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Financial Profile of RMWLKey Financial Indicators
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Particulars Units 2010 2008 Increase
Revenue Rs million 3,157.7 6,918.9 7,310.4
EBITDA Percent 37.6 22.4 9.5
PAT Rs million -428.8 -570.5 -1,447.9
PAT margins Percent -13.6 -8.2 -19.8
Revenue growth Percent 47.1 64.3 5.7
EBITDA growth Percent 39.7 -2.0 -55.2
PAT growth Percent n.m. n.m. n.m.
Gearing Times 1.9 2.7 7.8
RoCE Percent n.m. 3.6 n.m.
RoE Percent n.m. n.m. n.m.
Shareholding Pattern (%)
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Particulars June 2010
Sep 2010
Dec 2010
Mar 2011
Promoters 62.2 62.2 62.2 62.2
FII 2.9 4.2 5.7 4.0
DII 1.6 1.2 0.4 0.3
Others 33.33 32.4 31.7 33.5
Promoters62.23%
Others33.50%
FII3.97%
DII0.30%
Share holding (As on Mar 31, 2011)
Ratio Analysis
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Particulars March 31, 2007
March 31, 2008
March 31,2009
March 31,2010
March 31,2011
A. Profitability Ratios:Operating Profit Margin(%) 40.03 38.89 17.61 19.43 -10.73Gross Profit Margin(%) 48.44 0.64 -6 6.2 -24.56Net Profit Margin(%) 22.42 15.42 -5.71 -20.77 -50.09Return on Total Assets 78.19 147.01 117.59 93.14 36.91Earnings Per Share 21.46 9.95 -6.44 -22.63 -55.55
B. Liquidity Ratios:Current Ratio 0.86 1 1.19 0.86 0.74Quick Ratio 3.03 2.79 6.41 5.88 5.58
C. Leverage Ratios:Debt Equity Ratio 1.87 1.36 2.24 4.18 11.24Long Term Debt Equity Ratio -- 0.59 0.92 1.25 3.17Interest Cover 21.72 2.17 0.09 0.47 -0.55
D. Turnover Ratios:Inventory Turnover Ratio 235.84 183.91 206.5 151.88 132.54Debtors Turnover Ratio 6.09 2.6 2.48 1.97 2.36Fixed Assets Turnover Ratio 1.25 0.65 0.63 0.46 0.46Total Assets Turnover Ratio 0.42 0.22 0.33 0.24 0.27
Balance Sheet of RMWL for 5 years
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(Currency: Indian Rs. In millions)
March 31, 2007
March 31, 2008
March 31,2009
March 31,2010
March 31,2011
Sources of Funds
Shareholder’s Funds 3,111.86 6,780.84 5,548.28 5,464.05 5,432.43
Loan Funds 5,834.17 9,226.85 12,147.30 17,951.27 19,128.80
Deferred tax Liabilities (net) 128.62 - - - -
9,074.64 16,007.69 17,695.58 23,415.32 24,561.23
Application of Funds
Fixed Assets 3,399.45 8,333.48 8,543.72 10,353.74 10,156.43
Investments 816.52 2,441.99 233.46 1,325.18 726.84
Current assets, loans & advances 6,661.49 7,369.59 10,196.17 12,369.49 12,043.92
Less: Current liabilities & provisions - 1,802.82 - 2,137.37 - 1,401.91 - 1,800.93 - 2,095.90
Net Current Assets 4,858.67 5,232.22 8,794.26 10,568.56 9,948.02
Profit & Loss Account - - 124.14 1,167.84 3,729.94
9,074.64 16,007.69 17,695.58 23,415.32 24,561.23
Conclusions
• Fastest growing film and entertainment exhibition & Services Company
• BIG Cinemas has 10 to 15% of Indian box office contributions of big ticket films.
• Big Synergy is the leader in the field of non-fiction programming
• There has been a huge loss to the group of Rs. 2562.10 million this year
• Investment and funds from different sources has decreased to a great extinct
• Need for Capital Expenditure to overcome losses
• Has diversified business into different segments
• RMW is planning rights issue of Rs 500 crore in March 2012
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