Mukta Arts is an entertainment conglomerate with diversified business in education, exhibition business. The company is involved in various areas of film making such as production, distribution, exhibition, and education.
The company was incorporated by Shubhash Ghai as a film production house by in 1982. They gradually expanded into the film exhibition business and education segment. The expansion turned out to be fruitful,as these businesses generate majority of the revenue for the company. The education business (WWI) delivers 30% of the consolidated revenue whereas, film exhibition generates 40%-50% of the consolidated revenue.
The education business, Whistling woods (WWI) has grown substantially in the past but there is limited scope from this segment as the maximum present capacity for the students ranges from 1300-1400. They have 1045 students studying in the campus. After exploiting their maximum potential the segment might consolidate until they increase their capacity in future.Furthermore, Content Business of the Company generates about 20% margins for the consolidated books of Mukta Arts.
Margins of the company:
The management indicated that margins of the company are dependent on the deals they make during the year. Earlier, Mukta Arts had sold a large catalogue of 38 movies under its banner to Zee TV in FY14-FY15 the deal generated revenue of Rs. 37-38 crores, payable upfront by Zee TV. The revenue was recognized in the company’s books in one go. Furthermore, the Deal with Zee TV will end by FY20. The company expects the renewal or if any other buyer shows interest for the same deal then the revenue recognition will depend on the terms and margins might fluctuate. Also, the company expects around Rs. 50 crores for this deal.
Recently, Mukta Arts signed a deal with TIPS Industries Limited for extension of all audio and video rights of Rs. 9 crores and 63 lakhs.
|Market Cap||113.94 Cr.|
|52 week High||72.10|
|52 week Low||32.10|
Mukta Arts one year stock Performance
Volatile Top line:
The programming business of Mukta Arts in FY14 was carried over by the company’s subsidiary, Mukta VN Films Limited, which is jointly held by the Company along with VN Films Private Limited, a subsidiary of UFO Moviez. The programming business (Mukta VN Films Ltd) used to have a major contribution in the top line as it was a commission business, but the impact on the bottom line was less.
Prior to this, Mukta Arts used to book the entire box office (i.e. revenue, cost and commission) of the programming business under the group company but after FY14 the company only books the commission received from their subsidiary, not the entire box office. Moreover, the company only books commission. This led to a drop in the revenue numbers for Mukta Arts.
Whistling Woods International (WWI):
In Whistling woods, the fees per student are Rs. 5 lakh per year. The company increases its fees on a yearly basis. This year they increased the fees for their Animation, Film making and fashion designing courses. As compared to their other peers in this segment WWI charges the highest fees from the students. Further, the management indicated that they won’t launch short term courses for undergraduate students. For professionals, they do have short term courses. As a policy, they don’t offer.
Further, in terms of capacity, Whistling woods can go up to 1400 students. If they could add more capacity the student count can go up to 2500 students. The company has to turn away 3 out of every 4 students due to lack of space. Further, WWI can take small incremental steps in increasing the capacity of students but they cannot double the student capacity due to lack of space. This business of the company after a certain point is likely to consolidate.
In addition to this, WWI has been expanding its focus to the different areas such as the School of Design which has commenced operations in July 2017 with its first program – BA in Visual Communication & Design. This school was opened in conjunction with ECV in Paris and it remains a key growth program for WWI.
WWI own 5.5 Acres of land on lease. Besides this, the company has asked for the entire 20 acre land for WWI. Cabinet had passed a notice in their favour for 5.5 acres of land to be given to WWI. However, Current dispensation of the entire 20 acres from the government seems favourable according to the management. But the decision on this is still pending.
Film Exhibition Business:
The company’s Film exhibition business started in the year 2011. Mukta art caters to affordable movie viewing mainly in Tier 2 and Tier 3 cities. They have limited exposure in Tier 1 cities. In addition to this, the average ticket Price (ATP) charged is Rs. 140. In comparison to its peers i.e. PVR and Innox charge ATP ranging from Rs. 200- Rs. 250. At present, the company had company has a total of 64 screens under operations across India.
The Revenue share generation in terms of the box off collection according to the weeks is around Rs. 42 cores in the 1st week Rs. 47.5 distributed in week 2. Rs. 42.5 in week 3 and 30-35 in the week after.
Further down the line if the company finds a suitable buyer they might sell their cinemas, if not then the management indicated that they will continue to grow this segment organically. After reach a certain capacity level the company is looking for dilution of their cinema business
The company has to push the advertisement revenue up so as to generate higher profits. Also,the member of the company indicated that being tied in relation to the UFO is what is holding the advertisement revenue. But, according to him, the management believes that the company is still not huge enough to have its own team. If the company handles its advertisement revenue independently revenue might increase. The advertisement revenue is 3%-4% of the total box office revenue. Whereas; Innox generates 16%-17% revenue from advertisement to the total box office.
Recently, the company’s focus has moved more towards off-screen advertisement where the company has done the deal with the UFO in July 2018. Earlier UFO was paying Rs. 25,000 per screen per month to the company. Thus, from July 2018 the UFO has started paying per admit.
Since the beginning of FY18, the company was in talks to redevelop their 2 properties in Bandra. One of the properties is in Gurunank Park and the other is in behtoshi. The redevelopment process has been met with some issues as the 2 tenants have certain objections due to which the process is stopped. The company said that both these properties are worth Rs. 25 crores each.
Debt of Mukta Arts:
The company has total debt in their book is of Rs. 75 crores. Out of this Rs. 40 crores is a debt against building and audios It is the debt taken on the building that they had constructed for the studio, but later shifted to WWI. Further, the company has leased out 45% of the building to a developer and the remaining 55% of the building is given on rent/lease and the interest received from them is used to pay off the interest on loans. Moreover, the interest received is around Rs.6.5 crores. So, the balance debt of Rs.22 crores – Rs. 30 crores is for cinema business i.e. equipment and other assets.
Mukta Arts expects 8% EBITDA Margins by FY20 in Exhibition segment. The company expects to add 20 screens till that will bring their total screen count to 84 screens by FY20. Out of the 20 screens, six screens will open in April 2019-May 2019 the rest will be laid down in the rest of the year subject to licensing approval. In terms of occupancy, the company expects Q4FY19 to have slightly revived in terms of occupancy in the exhibition segment. Furthermore, the company expects higher occupancy ratio in Q4FY19.
The management expects Whistling business will show a drop in margins in the coming quarter. The WWI reported 28% EBITDA Margins in Q3FY19. The company expects it to be lower for the whole year as in Q2FY19 they recognized all the admission fees collected which increased their revenue as well as margins in Q1 and Q2FY19.
On the Exhibition Front, the Company expects healthy revenues in Q4FY19 as compared to Q1, Q2 and Q3FY19.
Challenges in Exhibition business:
In the film exhibition segment, real estate development and licensing requirements still remain one of the challenges for the company. The real estate development and licensing requirement duration were 3 years for Aurangabad region and in Maharashtra, it is even more stringent. Dehradun is where the company received a license in 3-4 months.
In Q3FY19 the total revenue increased by 33.2% YoY from Rs. 30.5 crores to Rs. 40.7 crores. Further, Segment wise revenue break-up, Whistling Woods International (WWI) posted a 19% growth in the revenue at Rs. 10.17 crores on a YoY basis. Further, Mukta Arts A2 Cinema (Exhibition business) reported 43% YoY growth in terms of revenue at Rs. 19.7 crores.
Management and board of directors:
Mr.Rahul Puri is the Managing Director of Mukta Arts. He is an ex-investment banker. Mr Subhash Ghai is the Executive Chairman. In addition to this, he is also the chairman of Whistling Woods International. The company’s board of directors includes Mrs. Monika Shah, Mr. Manmohan Shetty, Mr. Keval Handa, Mr. Parvez A Farooqui, Mr. Rahul Puri, Mr. Subhash Ghai and Mrs. Paulomi Dhawan.