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Buy Balaji Telefilms

Balaji Telefilms

Cluster: Emerging Star

Recommendation: Buy

Price target: Rs355

Current market price: Rs198

Price target revised to Rs355

Balaji Telefilms Ltd (BTL) and Star entered a 49:51 joint venture (JV) in April 2007 (with BTL having a 49% stake) to launch regional entertainment channels in Telugu, Kannada, Malayalam, Bengali, Marathi and Gujarati. Star transferred its Tamil channel Star Vijay to the JV. Forward integration in regional broadcasting arena (especially south Indian language channels) with a world-class broadcaster like Star (with BTL's expertise in content) promised immense value creation potential for BTL and acted as a trigger for the stock. However the broadcast venture has been considerably delayed, as the first of these channels in Telugu that was to go on air by September 2007 and to be followed by the launch of at least four other regional language channels over a period of time are still to operationalise. The management has cited procedural issues to get the required approvals as the reason for the delay. In the absence of clarity on the timeline for the launch of these channels, the worst-case scenario would be that the JV might be called off. Considering this, we have conservatively revised our estimates and price target for the stock.

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