Reliance MediaWorks (RMW) started in film processing with a small presence in the exhibition space after it took over Adlabs in 2005. Today, it runs the country’s largest multiplex chain and has presence in film services such as visual effects, film restoration, digital mastering studios and equipment rentals, with facilities in the US and India. The company is also into TV content production. CEO Anil Arjun answers some queries from Swarup Chakraborty. Edited excerpts:

The company has made big investments in the last two years. When do these assets start generating revenues?
We had undertaken two large projects. One is the international-scale media services BPO in Airoli and the second is the integrated studio complex in Film City. Both are long-lead gestation projects, with over 12 months of implementation and an aggregate investment of nearly Rs 200 crore. The media BPO got commissioned this year and the studio complex will be operational within 2011. These lumpy investments are expected to add significantly to revenues and earning over the next 12 months.

Did these investments contribute to last year’s Ebitda?
In the last financial year, we had operating revenues of Rs 672 crore. Of this, nearly Rs 375 crore came from the investments made in the previous two years. This growth momentum continues, as just in the first half of this financial year, we have clocked revenues of Rs 450 crore, nearly 70 per cent of last year’s revenues.

Of the three verticals, what is the contribution of each to revenue?
At present, 55 per cent of our top line is being contributed by the exhibition business (BIG Cinemas), 40 per cent from the media production and services and five per cent from TV production (BIG Synergy). However, the revenue contribution should not be looked at in isolation, as these businesses have different margins by virtue of being business-to-business (TV production and media BPO) and business-to-clients (cinema exhibition business).

Film exhibition has a higher cyclicity, as its fate largely depends on the content, so isn’t there an higher inherent risk in revenue accruals? How do you intend to mitigate that risk, as it contributes the most to your top line?
We have around 150 films that release in a year, so that makes it almost three films to exhibit every week. It is true that footfalls depend on the success or failure of the content but the business is growing, the total number of our screens has grown to 546 globally and we are seeing a higher traction in this vertical. Also the margins are lower in the exhibition space,10-15 per cent, whereas the margins in the sevices space are much higher, at around 40 per cent.

So, despite the higher contribution of the B2C business in the company’s top line, better margins in the B2B businesses mitigate the risks. Also in our TV production business, where we focus on formats and content production for channels, we maintain high quality and profitability.

RMW had a net loss of Rs 42 crore in the second quarter of this financial year. Yet, the stock jumped nearly 10 per cent on five trading sessions. Why?
We do not comment on day-to-day stock prices and market speculation. Market forces might be seeing value in the investments the company has made.

source: Business Standard

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