Sun TV Network

Sun TV Network was incorporated in 1985. It started with publishing magazines and then diversified in to television broadcasting.

Financials
The average ROCE of the company over the last ten years has been 38.35% as per the balance sheet of the company and has risen to 48% in the last year. The company is debt-free. The company at the end of FY2011 has net current assets of INR 921.24 Crore and investments of INR 271.67 Crore. The operating cash-flow of the company over the last ten years has been positive. The total income of the company over the last ten years has increased from INR 147.52 Crore in FY01 to INR 2062.16 Crore in FY11. The profit after tax has increased from INR 40.86 Crore in FY01 to INR 769.76 Crore in FY11.

Business
Even though the company has a single business of broadcasting, its revenue source is diversified. The revenue break-up over the last four years is as below:

Source	FY08	FY09	FY10	FY11
Advertising	475.46	605.74	844.96	1053.18
Subscription	229.33	215.14	343.13	515.74
Broadcast Fees	125.63	130.36	134.28	153.78
Movie Distribution	-	28.28	67.49	221.32

This shows that advertising is around 50-60% of the company's revenue, subscription around 25% and 15% comes from broadcast fees and movie distribution. The first two are actually linked together since higher viewership will increase both advertising as well as subscription income.

Promoters
Promoters hold around 77% in the company at the end of FY12. The promoters seem minority shareholder friendly as can been in the dividend distribution of INR 8.5 per share as interim dividend in FY12. The management's fixed salary is 3% (1.5% each to Chairman and Managing Director and Joint Managing Director) of net profit which is a bit on the higher side.

Mutual Fund Holding
Mutual fund holding was pretty dismal till december 2011 quarter. But in the first quarter of 2012, a large number of schemes have bought shares of this company.

Valuations
The book value of the company at the end of FY11 was near INR 60 and may end up being INR 70 after this year's results on Friday, 25 May. At the current market price of INR 250, the share is trading at more than 3.5 times book value. At the current market capitalization of INR 9866 Crore, the share is trading at almost 18 times last five years average profit of INR 540 Crore and 13 times trailing twelve months net profit. The company's IPO came in 2006 when shares were issued at INR 875 which for split/bonus adjustment result in price of INR 218.75 today. So the current price is just 15% higher than the IPO issue price in 2006. The company does not look a compelling buy at this price but can be bought after some decline.

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