WITH a broadcast footprint reaching an estimated 22 million homes in over 40 countries, Zee TV is undoubtedly India's most popular private Hindi channel. One look at this statistic should be enough to estimate the performance of a company which produces and supplies the software i.e. is the TV programming to this channel. No wonder then that Zee Telefilms has managed to post an impressive performance for the year ended March 1999, with the net profit up 41.14 per cent to Rs 61.65 crore.

Zee Telefilms supplies the software on a cost plus pricing basis to the Hong Kong-based Asia Today Limited and increased programming for its network of channels has undoubtedly helped boost revenues for the company. In fact, turnover, at Rs 177.44 crore, was up 35.72 per cent compared to Rs 130.74 crore last year. Interestingly, an additional source of revenue for the company is the 15 per cent commission incentive on all ads booked on Zee's various channels. In fact, with gross advertising bookingrising from Rs 296.71 crore to Rs 385.27 crore, commissions for Ambience Space Sellers (which has been amalgamated with Zee) have also improved 16.08 per cent to Rs 49.51 crore. The jump in bookings is commendable especially given the onsalught of other satellite channels, all of which are vying for the same adspend.

Stringent cost control, has helped Zee keep a check over its operating margins, which have improved from 34.04 per cent to 40.64 per cent. Furthermore a minimal exposure to debt, has also helped contain the company's interest burden to a sedate Rs 8.19 crore. All of which has helped buoy Zee's bottomline which at Rs 61.65 crore, was up 41.14 per cent compared to Rs 43.68 crore last year.

But perhaps more interesting than the financial performance, from the shareholders point of view has been the northward spiral of the stock. The scrip which was languishing in April 1998 at around the Rs 250 levels, has since embarked on an unprecedented bull run, piercing new highs daily. In fact, the ZeeTelefilm stock on Tuesday touched the upper circuit for the fourth day running breaching a new high of Rs 1,400, which works out to a price appreciation of a whopping 450 per cent.

Earlier, the price spiral, investors might remember, was due to the market anticipating a buyout by Zee of some of the Star Network channels, which would have undoubtedly enhanced Zee's marketing muscle in the Asian sub-continent. But currently a favourable budget and market rumours about the proposed merger with Zee Multimedia, which was announced recently have driven the stock. The merger with Zee Multimedia should see the emergence of a global media conglomerate with diversified business interests in broadcasting, cable distribution, internet and film production. All of which should continue to have a positive impact on the company's bottomline in the interim.

DAP Subsidy

News reports indicate that the forthcoming elections may lead the government to increase the price concessions on DAP. The acute shortage of thenutrient at the start of the rabi season was largely blamed on faulty policy. As the price concessions announced by the government had fallen short of the industry's expectations, both indigenous producers and importers restricted their operations. This had resulted in the short-supply of DAP during the sowing season of the rabi crop. Consequently, the price support on both indigenous as well as imported DAP was revised upwards but this too appears to have fallen short of expectations. According to reports the Fertiliser Association of India (FAI) has demanded an additional subsidy of Rs 200 per tonne on indigenous DAP and Rs 500 per tonne on imported DAP.

Currently, the price concessions on indigenously manufactured and imported DAP stand at Rs 4,400 and Rs 3,000 per tonne respectively. DAP consumption stands at around 40 lakh tonnes per year and if the government agrees to revise the price support in line with FAI demands, it would mean additional subsidy of a minimum of Rs 80 crore. There is a valid casefor the upward revision of price concessions on DAP considering the increase in the cost of production and imports. Besides, the falling consumption of the nutrient over the years is another cause for concern. Critics point out that the favourable subsidy policy for urea has led to an increase in its consumption and similar results could be obtained for DAP consumption as well. They further point out that DAP suffers a natural disadvantage compared to urea since it is used before sowing while urea is applied after the farmer is acurally able to see the progress of his crop. Therefore, subsidies on DAP should be even more to encourage its usage.

However, the government would do better not to increase subsidies and free DAP pricing, instead. Though this would lead to higher prices, competition would ensure that the price rise is within reasonable limits. Anyway, the fixing of retail prices by the government fails to ensure that the farmer actually gets the nutrient at these prices. It is common knowledgethat the farmer often pays an unofficial ``premium'' to obtain his DAP supplies. Free prices would also be welcomed by the industry as it would mean at least a partial freedom from bureaucratic hassles and delayed subsidy receipts. But this is an option that the government would be unwilling to consider given the political considerations just before the elections.

EMCEE (with contributions from Percy Dubash & Sarad Saraf)