IMPLICATION OF MCS ON ADLABS

SUBMITTED BY:UMANG DESAI RONAK GOEL BRIJESH ROKAD PRUTHVI RAJPUT NOOR ALI CHAMADIYA HIREN DODIYA

Founder

Manmohan Shetty founded Adlabs in 1975

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, is Indias fastest growing film and entertainment 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

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

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 sensitive information and matters of interest to our stakeholders To demonstrate the highest levels of personal accountability and to ensure that employees consistently pursue excellence in everything they do To comply with all the laws and regulations applicable to the company To conduct the affairs of the company in an ethical manner To promote the interests of all stakeholders including customers, shareholders, employees, lenders, vendors and the community

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). 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 lower transportation cost and is able to stop piracy, this is first of its kind in Asia

Digital Cinema Services

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.

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 multisensory cinema experience in India through a six-dimensional show. BIG Cinemas is thereby the only cinema chain in India which screens films in both 3D and 6D formats. Lowry Digital, an Adlabs subsidiary based in Burbank, Los Angeles is universally regarded one of the best digital restoration facilities. The company utilizes 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, 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

Lowry Digital

Online/telephone Ticket Booking

Profitability and its Impact

Year
2005

Return on Investment
24.12

2006

4.80

2007

10.72

2008

1.8

2009

0.31

Adlabs's revenues have grown substantially after the acquisition of controlling stake by the Anil Dhirubhai Ambani Group (ADAG) in 2005. From around Rs 110 crore turnover in 2005, the company has grown tremendously in last three years and has delivered revenues of Rs 733 crore for the year ended March 31, 2009

ROI
25
20 20.95

15
10

10.9

8.33

9.61

8.21

7.75
4.81

5
0 -5 -10 2009 2008 2007 2006 2005 2004 2003 2002

-6.44

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. 636 million, 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.

Shareholder Value
For year Ending
Face Value

March 2009

March 2008

March 2007

March 2006

March 2005

5.00

5.00

5.00

5.00

5.00

EPS
Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs)

(6.44)
2.00 16.04 38.18

10.9
2.25 10.59 25.99

20.95
2.50 32.19 80.42

8.33
2.50 22.80 58.61

9.61
-18.53 105.20

Expense Centres

Discretionary Expense

Engineered Expense

Advertisement Bank charges Business promotion Rent Rates and taxes Commission and brokerage Travelling and conveyance Labour charges Insurance
HR Marketing efforts

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

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
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 are relatively new and Studio business is still in the investment phase. Creativity is not a quantifiable resource

Processing and Exhibition

BIG Synergy

Corporate Level Strategy

At the corporate level, the issues are

1)
2)

The definition of business in which thee firm will participate 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 business

2)

Unrelated Diversified Firm

Operates in business that are not related to one another

3)

Related diversified Firm

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

Reliance Media Works is a Related Diversified Firm. Big Cinema, Big Synergy, Films & Media Services, Plot Magazine 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.

Business Level Strategy

BIG Cinemas

BIG Synergy

Film & Media Services

PLOT Magazine

Balance Score card Analysis

PERSPECTIVE OBJECTIVE Sales FINANCIAL DESCRIPTION 4852.68 Million Rs till Mar-09 which is higher compared to Mar-08 Rs 2703 million, it is due to success of new ventures so it triggered their sales.

Profitability

Prosperity Quality

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. Increase in investment so less revenue available and hence profit is less.
Excellent Customized products Magaplexes; Digital intermediate services; Digital cinema services; Lowry digital Customer satisfaction for all type of customers Reduction in cycle time due to skilled professionals and technology Linked in Multiple projects Number of new business per year Product performance benchmarking Client satisfaction 35% market share

CUSTOMER

Price New products Support Efficiency in construction New product introduction New business Technology leadership Differentiation Market leadership

INNOVATION

INTERNAL

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 location of 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 of this could probably indicate the pricing power for the company.

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 the earnings 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

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 into small 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% 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

Threat

Bibliography

Books

Management Cantrol Systems By Robart N Anthony and Vijay Govindarajan 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

Internet

Never a dull moment !

Thank You