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Adlabs Films Limited
Investor Presentation
March 2007
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Forward Looking Statements
This presentation contains statements that constitute “forward looking statements” including, without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to our future business developments and economic performance.
While these forward looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.
These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that we have indicated could adversely affect our business and financial performance.
Adlabs Films undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances.
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A Reliance Anil Dhirubhai Ambani Group company
One of the few listed players in the Indian movie sector
Present across the value chain The leader in film processing A pioneer and one of the leaders in multiplexes Interests in production and distribution of movies, TV content and animation
Experienced management with a 25 year track record Significant goodwill within the industry Operating under a corporate umbrella for over 15 years in the industry
Extremely strong balance sheet
Introduction
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Adlabs – Milestones
1978: Started with ad films processing
1989: Entered main stream cinema processing
2000: IPO and listing on the exchanges
2001: Mumbai’s first multiplex and India’s first & the world’s largest IMAX dome
2001: Select investments in film co-production
2005: Reliance ADAG acquired majority stake in Adlabs
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FY 2004 FY 2005 FY 2006(9 months)
Dec 07CAGR
Revenues 19 22 29 54 47.4 %
EBITDA 8 10 12 17 33.1 %
PAT 4 5 6 13 52.4 %
Net Worth 24 27 77
Debt 3 6 3
RONW (%) 17.0 18.3 7.8
All figures in US $ Million
Infusion of US $ 152 million in FY 2006US $ 50 million as EquityUS $ 102 million by way of FCCBs
Financial highlights
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Manmohan Shetty
Founder – over 27 years of experience in the entertainment industry
Oversees strategic business planning, finance and business development
Chairman of National Film Development Corporation
Member of screening committee – IDBI Institutional film financing
Member of the FICCI committee on entertainment industry
Board of Directors
Manmohan Shetty Pooja Shetty Karan Johar Bergis Desai Shripal Morakhia Gautam Doshi
A management committee steers strategy
The members of this council are senior Reliance ADA executives and members of the Board
Core Management
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One of the fastest growing sectors in India
Currently estimated at US $8 billion, CAGR of 19% over the next five years
Largest film industry in the world More than 1,000 films And the highest number of admissions
at over 3 billion
Demographics and rising affluence driving growth
Source: The Indian Entertainment and Media Industry: 2006 report (PWC)
Indian Media & Entertainment Industry - Overview
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Movies are a dominant influence
Movies central to entertainment in India Music, radio and much of TV content revolves around films Influences Internet, gaming and newer forms of entertainment
Widely fragmented, dominated by family owned and small enterprises Organized capital and corporatization just beginning to enter the industry
Organized retail consumption formats (malls, multiplexes, DVDs) providing strong impetus for consumption-led value growth
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Expand vigorously within the multiplex space A format supported by consumers, distributors and the government Adlabs one of the few companies with multiplex experience Roll out in progress
Maintain pole position in film processing Enhance footprint by expanding into South & East India Expand scope to production infrastructure and services
Invest in content production – movies, television & animation Manage risk on a portfolio basis with risk limits
Invest in overseas distribution channel and select local distribution
Examine new opportunities, as it is a nascent industry
Core Strategy
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Publicity
26
13
26
8
12
15
Processing
Post-production
Studio & Eqpt
Shooting
Above-the-line
(star cost etc.)
176
70
45
509Others
Satellite
Home video / music
Overseas
Indian theatrical
Production cost = 100
(Creation)
Gross retail sales = 350
(Consumption)
Constructed from data across a sample of movies
50%
20%
13%
14%
Value chain elements in content creation and consumption
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Content creation ServicesConsumer
facing
Movies
Television
Animation
Film processing at Mumbai, Chennai (South India), Kolkata (East India)
Expanding portfolio by investing in studios & infrastructure
Exhibition
(Multiplexes)
FM Radio
Distribution
International distribution with presence in USA & UK
Key film territories of Mumbai, Maharashtra, Gujarat, Delhi, UP and Punjab
Adlabs’ presence : from creation to consumption
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Uses
Over the next three years invest around US $180 million
40% in film exhibition
15% in processing and infrastructure creation for production services
20% in content production and distribution
Earmark 25% for new initiatives
Sources
Equity infusion of US $56 million
FCCBs of US $102 million
Internal accruals
Investment Plans : Horizon 2006-2008
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Film Exhibition
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• US $1.6 billion market; flowing from 400 cities/ towns across India
• Top 50 cities (40-45% of all-India box-office) have inadequate screens/ below par customer experience – implying significant growth opportunities, e.g.
• Ahmedabad, Surat: 170 people per seat
• Lucknow: 110 people per seat
• Chennai: 90 people per seat
• Over 8,000 active screens but only about 1,000 provide acceptable consumer experience
• Dominant players: PVR (80 screens), Adlabs (66), INOX (55), Shringar (36)
• Capital intensive business
0
500
1000
1500
2000
2500
3000
3500
US EMEA Rest of AsiaPac
India
0
20
40
60
80
100
120
140
Ireland France US India
No. of Admissions (in million)
No. of Screens (per million)
Source: The Indian Entertainment Industry: 2005 report (PWC)
Market overview
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Focus on prolific film markets: Hindi, Tamil and Telugu
Expansion based on a 2 pronged strategy Link to film markets: theatres across India – A chain
Focus on key cities based on consumer spend surrogates
Engineering and project management skills to execute – low to high capex
per seat – driven by consumer paying capacity
Acquisition of existing single screens for remodeling/refurbishment
Strategy
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Location (Cumulative)
Screens
(Cumulative)Admits (in millions)
March 05 4 17 3 million
March 06 8 31 5 million
March 07 16 66 9 million
March 08 65 165 17 million
March 09 130 315 44 million
Utilize scale to negotiate contracts: Capex, Opex, F&B, promotions, movies
Focus on profitability per consumer
Expansion
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Film Processing and Production Services
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In India, film processor serves the following roles Often funds film feedstock required by producer (1-10% of costs)
Keeps finished film in trust till distribution rights are sold
Releases film to distributors only after financiers are repaid
Is a financier, a custodian and a service provider
The commercial ecosystem – the producer, the financiers and the
distributors – repose complete faith in the processor
Processors develop long and deep relations within the industry
Film Processing : An Introduction
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Market leaders with over 70% share in the Hindi movie segment
Only dominant lab to be certified Kodak Image Care
Geographic expansion: Chennai (Tamil and Malayalam movies) and
Kolkata completed
Digital distribution of content being actively considered Metamorphose analogue processing lab into a digital lab
Intend to build high quality studio infrastructure Enhance footprint to cover end-to-end production services
Services : The Path Ahead
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Content Production and Distribution
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Successful track record: Bluffmaster, Apaharan, Taxi 9211, Nishabd, Namastey London etc.
Tie-ups with established directors in the industry
Strong line up of 6-8 films to be released across different genres every year
Co-production with MTV to produce youth centric movies
Co-production with Hyde Park to produce Hollywood films
Strong international and domestic distribution set up: prestigious movies released – Krrish, Baabul, Janeman, Vivah, Guru etc.
A portfolio approach: financial limits on movie risk
Content Creation : Movies
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Television
Majority ownership in Siddhartha Basu’s Synergy Communications
Track record of highly successful shows : Mastermind, Jhalak Dikhhla Jaa, Kaun
Banega Crorepati etc.
Leverage strengths of pedigree, track record and scale to provide quality content
Building expertise in the kids, lifestyle and fiction genres
Animation
Entry into the segment with two prestigious projects Tamil/ English project featuring Rajinikanth
Movie around a well known kids’ brand – Gini and Jony
Content Creation : Television and Animation
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Largest FM radio network – launching 45 stations across India
Take FM radio as a medium of entertainment into virgin markets beyond metros
Has capacity to touch every fifth Indian across the country, every third urban Indian and every eight Indian in rural India
Value pick in terms of cost per license: Rs 3 crore per license (USD 670,000)
Over 13 stations launched
Initial consumer feedback encouraging
In the process of being demerged from Adlabs Films
Big FM
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Reliance Communication
Largest wireless operator in India with 30 million subscribers
Over 80,000 route-km of optic fiber network implemented
Reliance Capital
Ranks among the top 3 private sector financial services and banking companies
Reliance mutual fund has a presence in over 115 cities in the country and an
investor base of over 3.1 million
Reliance Energy
Distributes more than 21 billion units of electricity
Serving over 25 million consumers in Mumbai, Delhi, Orissa and Goa
Reliance – ADA Group
25
Never a dull moment
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Contacts
Manmohan Shetty, Chairman & Managing Director, Adlabs manmohan.shetty@adlabsfilms.com
Pooja Shetty, Wholetime Director, Adlabspooja.shetty@adlabsfilms.com
Anil Arjun, Senior Vice President, Reliance Capital anil.arjun@relianceada.com
Venkat Devarajan, Chief Financial Officer, Adlabsvenkat.devarajan@adlabsfilms.com
Our website : www.adlabsfilms.com
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