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IPL team to turn a profit in three years: Sun TV

T E Narasimhan/Chennai 28 Nov 12 | 12:46 AM

Media tycoon Kalanithi Maran-owned Sun Television Network has said its investment in buying Hyderabad franchise of Indian Premier League cricket will become a perceptual annuity, with regular after-tax income of around Rs 60 crore from the sixth year and making a profit from the third year.

Recently, the management told analysts that, at worst, the company would see a first-year loss of around Rs 30 crore, in 2013-14, to drop to Rs 4-6 crore in the second year. In the third year, it expects profit of at least Rs 16 crore and then, in the fourth and fifth year, to Rs 24 crore and 45 crore, respectively.

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S L Narayanan, group chief financial officer (CFO), said the company was not likely to incur any losses in the current financial year, as the season would begin only towards the end of 2012-13.

After the first five years, the company hopes the franchise shall consistently bring in profits of around Rs 60 crore after tax, he said, not sharing the details of expected expenses. It also stated the business had huge opportunities to increase the revenue.

Ads, radio
As for the year in general, the company has said it was optimistic and expected to post double-digit growth, as advertisers have started showing positive signs. Narayanan said real momentum had started coming back and the mood had begun changing. The year began with some negative sentiment due to food inflation, high interest rates and so forth but the change in mood could be seen in the second quarter.

The growth in the advertisement was led by fast moving consumer goods, 55 per cent of the advertisement revenue for Sun. Automobiles, consumer durables and other sectors have also started showing positive signs, with the exception of banking and other financial sectors.

The company's radio business had started turning around by reporting a Rs 1 crore profit, said Sun TV’s CFO, V C Unnikrishnan. He said the business reported a top line of around Rs 50 crore and expected 10-15 per cent growth. The earnings before interest and tax was Rs 11 crore.

DTH, capex
Sun Direct, the direct-to-home arm of Sun TV, has reported sales growing by three times, due to the digitisation programme. Narayanan said the sector in Chennai used to sell 300-400 connections a day and this was now up three-fold. He added the company was betting high on digitisation, especially the Phase-II implementation, expected to bring around 11 million people under the programme in the strongholds of Sun’s market. Sun also signed a deal with the Tamil Nadu government-run Arasu Cable Corporation, which increased its ratings. The company is expecting around Rs 7 crore revenue.

One major concern is power cuts in both Tamil Nadu and Andhra Pradesh, impacting the prime time shows.

The company says it invested around Rs 200 crore during the first half of 2012-13 on acquisition of movies and said it would continue to invest Rs 80-90 crore on an average for each of the next three quarters on this head.

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