The company has five business verticals, which includes TV content production & services, motion pictures, broadcast, interactive and new media. It has diversified across all major media platforms and has created highly scalable business models for each of the existing business verticals. This makes it the most respected integrated media companies in India.

UTV Software is looking to scale up its broadcasting and gaming business. In console gaming business, the company has invested around $70 million so far. It would induct a strategic partner in the subsidiary, for divesting as much as 50% stake to ensure good synergy for distribution and marketing of its games. Cash generated through divestment would be used to retire some of its debt to raise its flexibility in the future.

Company has plans to launch 12 movies this year, of which two movies - 'I hate luv stories' and 'Rajneeti', have already hit the cineplexes. They are expecting projected revenue of Rs.450 crore for the financial year 2010-11, which will be 95 percent up from Rs.230 crore revenue in financial year
2009-10.

At Current market price of Rs486, the stock is available at a P/E of 18.35x of its FY11E earnings, and 15.2x of its FY12E earnings. We recommend a BUY with target price of Rs597, given that company’s future shows potential.

UTV Sof ftware Comm munications is an integra s ated media and entertainm ment company. It was incorpo orated in the y year 1990 and got listed in 19
998.

The comp pany is engage in the produ ed uction and licen nsing of televis sion content a and broadcast ting, motion pictures, interactive progra ams including a animation and gaming. It has content creation abilities acr s ross platforms and genres

The comp pany has strate egic alliances w Hollywood studios like F with d Fox, Walt Disney, Sony, Will Smith`s Over rbrook, and is the largest mo ovie studio from South Asia.

Company has reported a PAT of Rs. 40.25 crore for the first quarter ended June 30th 2010, up from the Rs. 31.75 crore losses in the corresponding quarter last year. The improvement in performance is on the back of a substantial increase in Revenue – Rs. 208.2 crore, compared with Rs. 91.04 crore, largely due to an increase in revenue from the motion pictures business. A quarterly comparison is perhaps not justified, since the company is invested heavily in the films and gaming business, where costs tend to be taken on initially, and revenues are often lop sided. In terms of revenue contribution, Movies and TV continued to dominate revenues for UTV.

During FY10, the Net sales of the company witnessed an increment of 9.48% to Rs 664.05 cr as against Rs 606.55 cr during the corresponding period last year. Correspondingly the PBIDT of the company worked out to be Rs
69.22 cr increased by 293.74% as against Rs 17.58 cr over last year. During the year, operating profit margin surged by 753 bps to 10.42% over last year.

Net profit after tax registered a growth of 7.53% to Rs 50.17 cr as against Rs 46.52 cr over the corresponding period last year. The interest cost of the company witnessed an increase of over 421% to Rs 40.16 cr as against Rs 7.7 cr.

The broadcasting business of the company, which comprises of UTV Bindass, UTV Movies, UTV Action and UTV World Movies, accounted to revenues of Rs 151 cr in FY2010 and operating loss of Rs 3.63 cr. The Company deployed Rs 425 cr of capital in its broadcasting sector.

Company’s further investments will be directed towards building library and catalogue of Hindi, Hollywood and world movie titles for multiple years. UTV holds multiple year rights for approximately 1,000 movies for channels and in some cases the right to syndicate.

For the FY 2010-11 UTV foresee to achieve Rs 220.0 cr of revenue with 80% of this from Advertising and 20% from subscription.

The Gaming business of the Company reported revenues of Rs 95.09 cr and the New Media verticals posted Rs 11.97 cr as the revenues for the FY2010.

'Studio Approach' to Movie Production and Distribution

Company believes in a 'studio approach' in movie production and distribution business. This involves retaining a strong portfolio of movies under production at all times and is achieved by entering into long-term multiple movie contracts with prominent directors and artists to develop and release movies that appeal to wide audience bases.

‘Pre-Selling’ Business Model

Company proceeds by pre-selling the music rights and satellite rights and secure the funds from the unexpected performance at the box office. In FY11, company gives the guidance of releasing 9-11 movies during the year.

Company’s broadcasting provides programming tailored to specific audiences. Their target audiences are defined which keeps broadcasting costs low and helps in capitalizing the high demand for special interest content.

Produce a Wide Array of Television Content

Company has a strong footing in exploring diverse forms of audio visual entertainment and to produce television programmes across a broad range of genres, like comedy, drama, thrillers and reality programming.

Focus on Quality in Airtime Sales:

Company is taking intense measures to increase the airtime sales business, by concentrating on quality more than quantity by having better performing shows.

GAMING

Creating proprietary Games Content

In Games Content, company strategically moved from B2B to a B2C business model by shifting the focus from pure publishing to core Games Content product development. As a result, they have begun to develop console, mobile and online games through its subsidiaries Ignition, India games and True Games.

The management expects revenue of Rs 160 crore from television segment in FY11 against Rs 100 crore in FY10. The company has many shows to be launched in 2nd and 3rd quarter on GECs (general entertainment channels). Based on number of shows on air, the company is expected to be the leader by Q3 FY11.

.. UTV currently operates four channels – UTV Bindass, UTV Action, UTV Movies and UTV World Movies and is further looking at two or three speciality channels with set criteria of low capital employed that can break-even in 18 months.

.. The group's interactive arm, UTV New Media, has forayed into celebrity aggregation in the digital space and has tied up with 17 celebrities across cinema and sports. Company will make money through advertisements on the web and mobile Internet, there will be a subscription fee ranging from Rs 5 to Rs 30 on voice and SMS. Company is targeting 10-15 million subscribers across a variety of products.

.. Company is offering games on various platforms like DTH, online and iPad/iPhone. In the international market, its game Bruce Lee has come in Top10 Games on iPad/ iPhone–across USA/UK/Japan/EU. In UTV True games, company will launch 3 games in USA in FY11. UTV Ignition, company's first in house developed AAA game El Shaddai - Ascension of the Metatron will be sold this year while one other is ready for sale this year or early next year. Thus, company has potential games in its basket which would drive the growth of its gaming segment.

.. Company’s Broadcasting revenues had boost up, driven by an increase in inventory utilization and ad rates. It is expected that the broadcasting business will outperform during FY11E.

The Company operates in highly competitive environment that is subject to innovations, changes and varying levels of resources available to each player in each segment of business.

.. Certain parts of Companies business like production of television content, post production and dubbing are highly fragmented with competition ranging from other organized large players to individual producers.

.. Acceptance of the company's film and television programming by the public is difficult to predict, which could lead to fluctuations in revenues, and the Company's business of film production and distribution involves high level of risks.

.. Most of the activity undertaken by the Company is creativity driven and Company’s long-term profitability is dependent on its ability to attract and retain creative and technical talent.

.. The Company's business is significantly regulated and segments of media and entertainment changes in regulations could adversely affect its operations.

.. In broadcasting space, company is competing not only with established players having deep pockets but also a whole host of new players planning a foray into the space. The Company believes that there are risk factors inherent to such a new venture, such as execution risk, competitive risk and the risk of unpredictability in viewer reactions.