Wednesday, November 30, 2011

Sanraa Media Q2 Profits Down 98%, Revenue Down 79%

Sanraa Media Ltd (BSE: 531312) has announced its standalone second quarterly results on BSE today. 

Year-on-year, for the quarter ended September 30th, net profit dipped to just Rs. 5.83 lakhs, from Rs. 4.30 crore in Q2FY’10, which amounts to a dip of 98%.

Total revenue in the quarter dipped to just Rs. 4.44 crore, from the corresponding period of last fiscal’s Rs. 21.20 crore, marking a dip of 79%.

Unable to service its huge equity base of 119.61 crore shares from the meagre Rs. 5.83 lakhs of profit, earnings per share (EPS) dipped to zero, from the year-ago period’s Rs. 0.04.

Apart from the outrageous dip in performance, what is really shocking in the results is that more than 70% of Q2 EBITDA profits - amounting to Rs. 1.06 crore - has been eaten up by the interest outgo, possibly on its Rs. 26.80 crore of loan funds.

Ironically, this is even while Sanraa Media had made almost Rs. 66 crore of outside investments in unlisted, undisclosed entities with no interest income ever reported from it.

Another 26% of EBITDA (Earnings Before Interest, Taxes, Deprecation, & Amortization) was gobbled up by deprecation, at Rs. 39 lakhs.

Segment-wise break-up of revenue and profits show that near 100% of the revenue as well as profits are from Sanraa Media’s business segment of ‘Entertainment & Electronic Media’, which is known to accommodate its main animation business. 

It may be recalled that Sanraa Media is now believed to be undergoing a process of hiving-off this only revenue-generating, profit-making business of animation, through an attempt at slump-sale of this division. However, the company hasn’t disclosed the results or even the progress of its attempt, even after many months of procuring a postal ballot mandate in favour of this proposed sell-off. 

The only other reported business segment - E-Learning - delivered zero revenue and zero profits. It is not clear what all constitute this E-Learning business, and whether it includes the company’s plans to get into IT Training activity. 

However, this E-Learning segment accounted for 34% of capital employed, at Rs. 51.22 crore, with the remaining CE of Rs. 99.37 crore or 66% going into the segment of ‘Entertainment & Electronic Media’.

Sanraa Media had obtained shareholder mandate for animation division hive-off at not less than the book-value of the animation division, and it remains to be seen whether with this kind of depressing performance, the book-value is being significantly eroded.

It has been alleged by various market observers that a hive-off or slump-sale of a division - as against a court directed de-merger of the same - gives the company managements too much flexibility in fixing the sell-off price. One way this can be misused by promoters is by selling off profitable divisions at low valuations to unlisted entities of the promoter group itself.

Sanraa Media had delivered a noted work in the world animation stage, 'THE 99', which is a cartoon series on fictional Islamic superheroes, based on the noted work of the same name by Dr. Naif Al-Mutawa, a Kuwaiti clinical psychologist. The series was produced by Teshkeel Comics and Endemol through a multi-million dollar contract. The actual work was executed by Sanraa Media. However, what kind of revenues and profits Sanraa Media got from work contract of 'THE 99' is not known. 

Sanraa Media has not published its Share Holding Pattern (SHP) for the last two quarters - Q1 & Q2 - which is a clear violation of BSE’s listing norms, against which the Exchange may take regulatory action including suspension in trading, if the situation continues. Sanraa Media has not published its Annual Report for FY'2010-11, nor called for its Annual General Meeting (AGM) for last fiscal.

Sanraa Media share which has been lying at its 52-Week Low of Rs. 0.10 for some time now, is India’s least priced share by absolute price, and is proving to its investors why it remains so with such shocking results, non-transparent funds usage, bloated equity base, and low promoter holding of 2.58% of which 42.30% remains pledged even at these abysmal price levels. 

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