Adlabs Films Ltd, the Anil Dhirubhai Ambani Group (ADAG) promoted firm, is re-crafting its various business verticals. The Rs 800-crore company has decided to de-merge its radio business under a new entity, Reliance Unicom (RUL), and freeze all film production activities. The move is expected to provide sustainable revenue and improve profitability.
Adlabs has received a no-objection certificate (NoC) from the ministry of information and broadcasting, allowing the promoters to transfer operations of the FM radio licence to RUL. Operating under the banner of BIG 92.7 FM, the radio station is currently operational in 44 cities.
This move will improve Adlab's profit margins. Operational losses from the radio business will be removed and the amortisation costs which is around Rs 16 crore, will not suppress the overall profitability of the company. The radio business contributed Rs 141.61 crore (20%) to Adlabs' topline in first nine months of FY09. However, the business has been in investment mode and suffered losses of Rs 34.74 crore in the period.
Adlabs is focussing on expanding its film exhibition business (locally as well as globally). It expects to add around 123 screens and 49 screens in FY10 and FY11, respectively, from the current 473 screens. Around 70% of the currently operational theatres are multiplexes, which provide significant operational efficiencies as some costs are semi-fixed. This enables the company to spread costs over a higher revenue base and add to the profitability.
Adlabs' presence in the international domain not only de-risks its regional concentration but also gives an edge because of its presence in the most significant international market in terms of Hindi /south Indian Box Office Collections. Adlabs is also adding a new business vertical to its operations and is coming up with a new state-of-the-art studio facility at Film City in Mumbai.