Implication of Mcs on Adlabs Final

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IMPLICATION OF MCS

ON ADLABS

SUBMITTED BY:-UMANG DESAI

RONAK GOELBRIJESH ROKADPRUTHVI RAJPUTNOOR ALI CHAMADIYAHIREN DODIYA

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Founder

Manmohan Shettyfounded Adlabs in

1975

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Introduction

Adlabs was established in 1975 as a processing laboratory

primarily catering to the advertising industry.

Adlabs Films Limited, a member of the Reliance Anil

Dhirubhai Ambani Group, isIndias

fastest growing film andentertainment services company

Adlabs Films also operates India's largest cinema chain with

about 400 screens spread across India, US and Malaysia. It has

a significant presence in the film distribution space with a

nationwide presence across India as well as offices in London,

New York, Los Angeles and Malaysia

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In 2005, Reliance Anil Dhirubhai Ambani Group became a

majority promoter in Adlabs.

Adlabs Films Ltd. has changed its name to Reliance

MediaWorks Ltd. effective October 5, 2009.

Adlabs television venture, Synergy Adlabs, is among the top

players in the television programming industry

There are four separate business run under the banner of

Reliance MediaWorks

BIG Cinemas

Film & Media Services

BIG Synergy

PLOT Magazine

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Goals and Objectives

To maintain the highest standards of transparency in all

aspects of our interactions and dealings

To undertake timely dissemination of all price sensitiveinformation and matters of interest to our stakeholders

To demonstrate the highest levels of personal accountability

and to ensure that employees consistently pursue excellence ineverything they do

To comply with all the laws and regulations applicable to thecompany

To conduct the affairs of the company in an ethical manner

To promote the interests of all stakeholders includingcustomers, shareholders, employees, lenders, vendors and thecommunity

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Impact of Internet or Technological

Innovation on the Company Digital Intermediate Services

Adlabs Digital Intermediate Lab is the only true 4K facility in Asia with real

time grading capabilities. The integrated offerings to clients include Telecine,

Digital Optics, Promo packaging, Complete DI and deliverables (Conversion,

Scanning, HD Recording & Sub titling).

Digital Cinema Services Adlabs Digital Cinema has operated more than 15,000 commercial screenings in

full DCI-compliant 2K cinema and has transmitted over 3K via fiber optic

cables.

With the utilization of this technology Reliance Media Works is able to lowertransportation cost and is able to stop piracy, this is first of its kind in Asia

Mobile Box Office

a GPRS-based application that allows consumers to book tickets on

their mobile phones and easy ticket, the nation's first virtual pre-paid

card in this category.

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6D Formats BIG Cinemas has created iconic destinations such as BIG Cinemas Park in

Agra, a kilometre away from the Taj Mahal, which has pioneered the multi-

sensory cinema experience in India through a six-dimensional show. BIGCinemas is thereby the only cinema chain in India which screens films in both

3D and 6D formats.

Lowry Digital Lowry Digital, an Adlabs subsidiary based in Burbank, Los Angeles is

universally regarded one of the best digital restoration facilities. The companyutilizes proprietary image processing science to deliver superior picture

elements and has developed an unique technology The Lowry Process

which is used to create unsurpassed image quality at every stage of the

workflow for all outputs, including film, broadcast television, commercials,

digital cinema,

Online/telephone Ticket Booking In every city where the adlabs have their multiplex have the facility of telephone

booking. Bigentertainment.com is the website through which we can book

tickets to any shows of any place

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Profitability and its Impact

Year Return on Investment2005 24.12

2006 4.802007 10.72

2008 1.8

2009 0.31

Adlabs's revenues havegrown substantially afterthe acquisition ofcontrolling stake by the

Anil Dhirubhai AmbaniGroup (ADAG) in 2005.From around Rs 110 croreturnover in 2005, thecompany has growntremendously in last threeyears and has deliveredrevenues of Rs 733 crorefor the year ended March31, 2009

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ROI

-10

-5

0

5

10

15

20

25

2009 2008 2007 2006 2005 2004 2003 2002

-6.44

10.9

20.95

8.33 9.61 8.21 7.754.81

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All this expansion and investment has eaten into Adlabs

profits, bringing consolidated net losses of Rs. 513.7 million

over net sales of Rs. 6559.3 million, which has doubled from

revenues of Rs. 3059.7 million in FY 08.

Last year, Adlabs had generated profits of Rs. 474.7 million.

losses rose this year primarily due to its scaling up and high

interest rates.

Net interest expenses and financing charges was Rs. 636million, up from Rs. 148.3 million.

We also remember that Adlabs divested Big FM and its

network of 45 stations to Reliance Unicom, so the results have

not been included in the financials. Expenses shot up to Rs. 5176.3 million from Rs. 2705.2

million in FY08.

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Shareholder Value

For year

EndingMarch 2009 March 2008 March 2007 March 2006 March 2005

Face Value5.00 5.00 5.00 5.00 5.00

EPS (6.44) 10.9 20.95 8.33 9.61Dividend Per

Share 2.00 2.25 2.50 2.50 --Operating Profit

Per Share (Rs) 16.04 10.59 32.19 22.80 18.53Net Operating

Profit Per

Share (Rs)38.18 25.99 80.42 58.61 105.20

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Expense Centres

Discretionary Expense

Advertisement

Bank charges

Business promotion

Rent

Rates and taxes

Commission and brokerage

Travelling and conveyance

Labour charges Insurance

HR

Marketing efforts

Engineered Expense

Cost of Application software

Film Production & Distribution

Right

New multiplex in India and

abroad

Attendance and punctuality in

the department

Departmental productivity -response time to complaints

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Risk Involved in the Business

Cinemas

Scheduled implementation of the proposed projects

If the film industry fails to produce content which has widespread

appeal

Anti-piracy laws are not adequately enforced in India

Processing and Exhibition

Advancements in the digital cinema business may affect the demand for

movie prints thus impacting the film processing business.

The equipment rentals, Digital Cinemas and DI Lab businesses arerelatively new and Studio business is still in the investment phase.

BIG Synergy

Creativity is not a quantifiable resource

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Corporate Level Strategy

At the corporate level, the issues are

1) The definition of business in which thee firm will participate

2) The deployment of resources among those business.

In terms of their corporate level strategy companies can be

classified into three categories

1) Single Industry

A firm operates in one line of business2) Unrelated Diversified Firm

Operates in business that are not related to one another

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3) Related diversified Firm

Operates in several industries, and the business units benefit from acommon set of core competency.

Reliance Media Works is a Related Diversified Firm.

Big Cinema, Big Synergy, Films & Media Services, PlotMagazine are the business are the entity which it operates.

These firms business are connected to each other through

operating synergies

The film producing and displaying motion pictures in the

multiplex halls i.e. the common synergy is Entertainment.

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Business Level Strategy

BIGCinemas

BIGSynergy

Film &

MediaServices

PLOTMagazine

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Balance Score card AnalysisPERSPECTIVE OBJECTIVE DESCRIPTION

FINANCIAL

Sales 4852.68 Million Rs till Mar-09 which is higher compared to Mar-08 Rs 2703million, it is due to success of new ventures so it triggered their sales.Profitability Return on Net worth has been decreased from 6.76 to -5.48 in march-09, it

is due to invested in new technology which is highly costly and increase

in Selling expenses.Prosperity Increase in investment so less revenue available and hence profit is less.

CUSTOMER

Quality ExcellentPrice Customized productsNew products Magaplexes; Digital intermediate services; Digital cinema services; Lowry

digitalSupport Customer satisfaction for all type of customers

INTERNAL

Efficiency in

construction

Reduction in cycle time due to skilled professionals and technologyNew product

introductionLinked in Multiple projects

New business Number of new business per year

INN

OVATION

Technology

leadershipProduct performance benchmarking

Differentiation Client satisfactionMarket leadership 35% market share

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SWAT

Strengths The company is focused in increasing multiplexes across the

country with close to 100 screens in the next couple of years from

the current 33 screens. This will increase the seat size by 3 times

The biggest strong point for the company is the current locationof its theatres. They are mostly centrally located. Also, unlike its

competitors, they have 8 properties with 7 in Mumbai giving free

rental cost (only opportunity cost involved)

The company has a strong experience in building and

construction. They have a premium theatre too. The utilization ofthis could probably indicate the pricing power for the company.

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Weakness

High dependence on distributor for showing films in every

theatre and for every film. This gives a very unstable business

model when one compares with Adlabs which are in the other

end of the value chain

The biggest weakness for any investor, which is mentioned

rightly in the risk factors is the capital structure. It is so unfair for

the retail investor. The bonus issue last year has diluted theearnings in a very big game. Further, there is also an issue of a

preference share issue at no cost. This has diluted the earnings

even further.

The promoters have been investing in multiple business' streams.

The promoters' are willing to enter into many areas with a

motive of profit. The promoters have more than 25 different

companies, partnerships etc and only 4 are operational

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Opportunity

There is a big demand for theatres across the country given the

poor quality currently in existence across places. Also, most

theatres are willing to open in Sec B and C cities and move intosmall towns too

They are willing to work on different model for pricing tickets

depending on time/day

The contribution of Multiplexes has been increasing constantly

and is close to 20%

Threat

Success of theatres are movie specific and this can tilt towards

failure with poor movie scripts

Alternate sources of entertainment such as DTH, DVD can lead

to lower sales

Removal of entertainment tax benefits can risk profitability if

lower pricing power is not passed to the customer

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Bibliography

Books Management Cantrol Systems By Robart N Anthony

and Vijay Govindarajan

Internet http://www.adlabsfilms.com/

http://www.money.rediff.com/

www.adlabsfilms.com/aboutus.asp

www.adlabsfilms.com/magazine.asp

http://www.moneycontrol.com/financials/reliancemedi

aworks/balance-sheet/AF27

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Never a dull moment !

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Thank You