Alpha Invesco Research Private Limited

BULLSbook
Stock Of The Month : SUN TV Network Limited

December
2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

Editors Desk

Dear Investor,

Here is a brief of what you will come across in this edition of BULLSbook.

First section of this edition contains an introduction on how to read a balance sheet.
Reading financial statement seems rocket science to many ! But it’s not. We have
made it easy for you. Once you know how to read a balance sheet, you can easily
interpret and conclude decisions. Initially learn how to read balance sheet, then in
upcoming editions we will elaborate on the parameters interpreting the balance sheet
from our point of view.

QSR (Quick Service Restaurants) have been a big hit in India & growing rapidly.
Recently CNN covered a detailed article on the same. We have covered the same
article in the second edition. Fast food chains & quick service restaurants are here to
stay, presenting yet another opportunity for investors to invest in this sector.

Third section has the stock of the month. We are recommending SUN TV Network
Limited. SUN is the biggest television network & DTH provider in south India & literally
has a monopoly over the segment. The company is growing steadily & maintains a
competitive edge compared with other players.

All the best.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

Our Approach

Many of us believe that reading a financial statement is a tough job. But if one
understands these basic terminologies, it is surely an easy task to do. In this edition
we will focus on balance sheet. There is a difference between balance sheet and profit
& loss account. The Balance sheet of a company shows the financial position of the
company at a particular point of time. The Profit and Loss account (Income
Statement), on the other hand, shows the financial performance of the company/firm
over a period of time. Take a look at following balance sheet.
Rs. in Cr. 2010 2009 2008 2007 2006
SOURCES OF FUNDS :

Share Capital 5.07 5.07 5.07 5.07 5.07

Reserves & Surplus 17.55 11.47 7.15 5.20 3.82
Total Shareholders Funds 22.62 16.54 12.22 10.27 8.89
Secured Loans 5.27 4.86 4.29 5.58 7.51
Unsecured Loans 1.28 0.81 0.00 0.18 0.23
Total Debt 6.55 5.67 4.29 5.76 7.74
Total Liabilities 29.17 22.21 16.51 16.03 16.63
APPLICATION OF FUNDS :
Gross Block 14.88 14.05 13.06 12.16 11.83
Less: Accum. Depreciation 6.46 5.90 5.28 4.67 4.12
Net Block 8.42 8.15 7.78 7.49 7.71
Capital Work in Progress 0.13 0.00 0.13 0.08 0.05
Investments 0.03 0.03 0.03 0.03 0.03
Current Assets, Loans &
Advances
Inventories 5.30 5.97 4.00 5.42 5.57
Sundry Debtors 19.12 17.02 10.29 9.74 8.25
Cash and Bank Balance 5.57 1.74 1.97 1.68 1.28
Loans and Advances 2.67 1.19 1.74 1.52 1.85
Less: Current Liab. & Prov.
Current Liabilities 10.51 10.90 8.74 9.92 8.02
Provisions 1.56 0.99 0.75 0.13 0.20
Net Current Assets 20.59 14.03 8.51 8.31 8.73
Miscellaneous Expenses 0.00 0.00 0.06 0.12 0.11
Total Assets 29.17 22.21 16.51 16.03 16.63
Contingent Liabilities 8.18 9.35 7.44 6.69 4.94

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What do these sources of funds represent?

(a) Shareholders’ Fund (also known as Net Worth) is the fund coming from the owners
of the company; and

(b) Loan Fund/Total Debt is the fund borrowed from outsiders. When a company/firm
starts operations, its owners, called shareholders, Contribute funds called Share
Capital.
After distributing dividends, a part of the profit is retained by the company for meeting
fund requirements in future. The retained profits accumulated over the years are called
reserves and surplus, which are shareholders’ property.

What is the difference between Equity shareholders and Preferential

shareholders?
Equity Shareholders are supposed to be the
owners of the company, who therefore, have right
to get dividend, as declared, and a right to vote in
the Annual General Meeting for passing any
resolution. Preference shares are part of share
capital of the Company which enjoys preferential
right as to: (a) payment of dividend at a fixed rate during the life time of the
Company; and (b) the return of capital on winding up of the Company.

But Preference shares cannot be traded, unlike equity shares, and are redeemed after
a pre-decided period. Also, Preferential Shareholders do not have voting rights.

What is the difference between secured and unsecured loans under Loan
Funds?
Secured loans are the borrowings against the security i.e. against mortgaging some
immovable property or hypothecating/pledging some movable property of the
company. This is known as creation of charge, which safeguards creditors in the event
of any default on the part of the
company. The unsecured loans are other short term borrowings without a specific
security.

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What is meant by application of funds?

The funds collected by a company from the owners and outsiders are employed to
create following assets:

Fixed Assets: These assets are acquired for long-terms and

are used for business operation, but not meant for resale.
The land and buildings, plant, machinery, patents, and
copyrights are the fixed assets.

Investments: The investments are the financial securities created by investing surplus
funds into any non-business related avenues for getting income either for long-term or
short-term. Thus incomes and gains from the investments are not from the business
operations.

Current Assets, Loans, and Advances: This consists of cash and other resources which
can be converted into cash during the business operation. Current assets are held for a
short-term period for meeting day-to day operational expenditure. The current assets
are in the form of raw materials, finished goods, cash, debtors, inventories, loans and
advances, and pre-paid expenses.

Miscellaneous Expenditures and Losses: The miscellaneous expenditures represent

certain outlays such as preliminary expenses and pre-operative expenses not written
off. Though loss indicates a decrease in the owners’ equity, the share capital can not
be reduced with loss. Instead, share capital and losses are shown separately on the
liabilities side and assets side of the balance sheet, respectively.

What do the sub-headings under the Fixed Assets like ‘Sundry Debtor’, ‘Gross
block’, ‘Depreciation’, ‘Net Block’ and ‘Capital-Work in Progress’ mean?
Sundry Debtor is an entity from who amounts are due for goods sold or services
rendered or in respect of contractual obligations

The total value of acquiring all fixed assets (even though at different points of time) is
called ‘Gross Block’ or ‘Gross Fixed Asset’. As per accounting convention, all fixed
assets except land have a fixed life. It is assumed that every year the worth of an
asset falls due to usage. This reduction in value is called ‘Depreciation’. The Companies

December 2011
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Act 1956 stipulates different rates of depreciation for different types of assets and
different methods calculating depreciation, namely, Straight Line Method (constant
annual method) and Written Down Value Method (depreciation rate decreases over a
period of time).

The worth of the fixed assets after providing for depreciation is called ‘Net Block’.
The capital/funds used for a new plant under erection, a machine yet to be
commissioned etc. are examples of ‘Capital Work in Progress’, which also has to be
taken into account while calculating the fixed assets as it will be converted into gross
block soon.

Why Inventory Is Especially Important to Investors?

When looking at a company's current assets, you need to
pay special attention to inventory. Inventory consists of
merchandise/products a business owns but has not sold.
It is classified as current assets because investors assume
that inventory can be sold in the near future, turning it
into cash. Large or increasing inventory over a period of
time is a red signal for investors, since it indicates that the company is not able to sell
its products consistently.

What are ‘Current Liabilities’, ‘Provisions’, ‘Net Current Assets’

& ‘Contingent Liabilities’ in the balance sheet?
A company may receive many of its daily services for which it does not
have to pay immediately like for raw materials, goods and services
brought on credit. A company may also accept advances from the
customer. The company thus has a liability to pay though the payment is deferred.
These are known as ‘Current Liabilities’. Similarly the company may have to provide
for certain other expenses (though not required to be paid immediately) like dividend
to shareholders, payment of tax etc. These are called ‘Provisions’. In short, Current
Liabilities and Provisions are amounts due to the suppliers of goods and services
brought on credit, advances payments received, accrued expenses, unclaimed
dividend, provisions for taxes, dividends, gratuity, pensions, etc. Current Liabilities and
Provisions, therefore, reduce the burden of day-today expenditure on current assets by
deferring some of the payments. For

December 2011
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daily operations the company requires funds equal to the current assets less the
current liabilities. This amount is called ‘Net Current Assets’ or ‘Net Working Capital’.

Contingent liabilities are liabilities that may or may not be incurred by an entity
depending on the outcome of a future event such as a court case. These liabilities are
recorded in a company's accounts and shown in the balance sheet when both probable
and reasonably estimable. A footnote to the balance sheet describes the nature and
extent of the contingent liabilities. The likelihood of loss is described as probable,
reasonably possible, or remote. The ability to estimate a loss is described as known,
reasonably estimable, or not reasonably estimable.

How is balance sheet summarized?

A balance sheet indicates matching of sources of funds with application of funds.

Thus in a balance sheet,

Total Capital Employed = Net Assets.

We will cover the remaining components of balance sheet in the coming editions. Now
that you know most of the basic things on how to read a balance sheet, read the one
which is given in this section & you will understand it as easily as we do !

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

BULLSbook Corner

In this section we will keep you updating about latest sector updates, market updates,
interviews & thoughts of investing legends, significant events & much more.

India: The next 'Fast Food Nation'?

At the DLF Place mall in the upscale South Delhi neighborhood of Saket, shoppers
and employees sit more or less side-by-side in a new “desi” food court, digging into
traditional Indian dishes ranging from biryani to dosas to seekh kebabs.

There's something for everybody

— at many tables three
generations are sitting down
together. But that's not the
reason these traditional upstarts
have succeeded in storming what
was once the bastion of western
brands like McDonald's and Pizza
Hut. Some of the city's most
famous restaurants are
represented here — some of them a century old — transformed by smart uniforms,
cheery signage and shining show kitchens to look every bit as clean, efficient and
modern as their multinational competitors. Welcome to the future of Indian fast
food.

“[Quick Service Restaurants or] QSRs are quite successful in India,” said Arun
Chanda, founder of New Delhi-based Mint Hospitality Consultancy. “Over the last five
years, a lot of Indian companies have started getting into the franchising model and
expanding into different cities.”

Credit marketers at DLF for inducing popular brands like Karim's, Nizam's, Moti
Mahal, Nathu's Sweets, Rajdhani and Sagar Ratna — which had already launched
multiple sit-down restaurants around New Delhi — to experiment with nascent fast-
food franchises.

But the revolution is already underway across the country, as global chains seek to
woo a broader cross-section of customers by incorporating traditional spices and

December 2011
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ingredients into their menus. And local upstarts have begun to attract deep-pocketed
financiers in the bid to build nationwide fast-food chains of their own.

“Even people who are into the five-star hotel business are thinking of getting into
the QSR concept,” said Chanda.

According to Euromonitor and market-research firm RNCOS, India's $13 billion fast-
food market is already growing 25-30 percent a year, and global players like
Domino's, McDonald's and Yum Brands (KFC and Pizza Hut) are pushing into second-
and third-tier cities.

Hardcastle Restaurants, development licensee for McDonald's in India, is planning a

massive expansion, doubling its India stores over the next three years with an
investment of $100 million. Meanwhile, Yum Brands plans to open 1,000 outlets — half
of them KFC restaurants — on its way to $1 billion in revenue from India over the next
four years.

Other multinationals like Burger King, Cinnabon,

Dunkin Donuts, and Starbucks are not far behind —
with stores already on the ground or aggressive
launch plans underway. With 60 percent of the Indian
population currently under 30, it's no mystery why.

Call it irrational exuberance if you want, but this summer Indian investors judged
Jubilant Foodworks — which owns the franchise rights to Domino's and Dunkin
Donuts in India and sold about $150 million worth of pizzas last year — to be nearly
as valuable as the U.S.-based parent company.

“We've now been in India for over 15 years, and we've actually seen the change
right before our eyes,” said Amit Jatia, vice chairman of McDonald’s India. "The
market is changing very significantly. People are eating out far more often than
before, and I think the availability of international QSR brands has brought about
that change.”

But as the success of DLF's “desi food court” suggest, the future of fast food in India
isn't about pizza and burgers. In deference to Indian religious sentiments,
McDonald's doesn't even offer its signature Big Mac here, or any other beef or pork
products. Instead, it offers the Chicken Maharaja Mac and items like the McAloo Tikki

December 2011
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burger (a mashup of potatoes and peas, deep-fried and served in a bun), the
McVeggie and the Paneer Salsa Wrap — along with the Filet-O-Fish, McChicken
sandwich and Chicken McNuggets.

Similarly, Domino's and Pizza Hut don't offer any

beef toppings, and offer a wide range of pizzas
that incorporate traditional Indian ingredients
and spices, such as the Domino's Kheema Do
Pyazza pizza, with onions, spicy minced goat
meat and jalapenos, or Pizza Hut's Kadai Paneer
pizza, with onions, green pepper, paprika, coriander and tofu-like unaged farmer's
cheese. Food industry experts say these flavors are here to stay.

“We believe that we must respect the local culture. Therefore, around the globe we
do products that are relevant for the local consumer,” said Jatia. “But we want
uniquely McDonald's products. For example, we don't anticipate making a McDosa,
but we have a Spicy Paneer burger. That has resonated very well with the Indian
consumer. I feel that for global brands, a blend of local and international is the way
forward.”

At the same time, Indian entrepreneurs are cracking the fast-food franchise model.

“We wanted to get the fundamentals right

before we started expanding,” said Kiran
Nadkari the CEO of Kaati Zone, a
Bangalore-based chain. “Once you've got
the back-end in place, you can expand
rapidly. But during those early stages
there's not much investment capital. So,
for example, I bootstrapped for three
years, from 2004 to 2007.”

Now, though, homegrown fast-food companies are expanding rapidly, and some are
beginning to attract funding from venture-capital and private-equity firms. For
instance, Kaati Zone — which sells Kolkata-style kathi rolls (spiced goat, chicken or
vegetarian fillings wrapped in fried flatbread) — plans to add 80-plus new outlets to
its 17 existing stores by 2013, with venture capital financing from Accel India,
Draper Investment Company and Erasmic Ventures.

December 2011
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Mumbai-based Jumbo King — a 43-store franchise business that

offers Maharashtra's famous vada pav (spicy, deepfried mashed
potato on a bun) — plans to open 250 outlets this year. And Sagar
Ratna — a 25-year-old South Indian food chain which bridges sit-
down restaurants and fast-food outlets — recently sold a controlling
stake in the company to New York-based India Equity Partners for
$36 million. It plans to add 200 outlets to its 70 existing restaurants over the next
three or four years.

“Even Jubilant took 15 years between when they started and their IPO,” said
Nadkari. “Now, the valuation of Jubilant [which this summer nearly matched that of
NYSE-listed Domino's Pizza Inc.] is showing investors that anything that's touching
Indian consumers is hot, and they can get extraordinary returns from this.”

That makes India a burgeoning fast-food paradise — where you can get a six-course
Rajasthani “thali,” or set meal, in 5 minutes flat, and then dash up the stairs or
across the street to top it off with a McFlurry.

But it also means that someday soon, if all goes well, you just might be seeing some
of these brands — or at least these flavors — at a shopping mall or street corner
near you.

“We already export some of our products to the Middle East,” said Jatia. “We've
done a lot of innovation work in vegetarian products, and there's a lot of interest
across the McDonald's countries.”

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

Stock Of The Month

SUN TV Network Limited

BSE : 532733 BSE Group :A

NSE : SUNTV ISIN : INE424H01027

Market Cap : 10368 Cr Face Value :5

Dividend : 75% PE Ratio : 14.49

CMP : 275 52 Week H/L : 556.90/214

BULLSbook Target : 750

Holding Period : 24 to 30 Months

BUYING STRATEGY

We recommend accumulating SUN TV at current levels of 275. Keep room for

averaging if the stock declines further towards 220 levels. SUN TV has had a rapid
growth in the last decade & has established itself as the largest television media
company in India, having a very stronghold in south India. With stable growth
expected to remain for next decade, SUN TV is an attractive buy at current valuations.
Long term investors with a 5 years+ view, can consider buying the stock & expect even
more higher levels.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

ABOUT THE COMPANY

Sun TV was incorporated as Sumangali Publications in

1985. It was later renamed Sun TV in 2000 and the
company filed its IPO in 2005 and raised 600 crores. It
primarily operates regional television channels and has a strong
presence in Tamil Nadu, Karnataka, Andhra Pradesh, and Kerala.
The flagship channel Sun TV corners more than 70% market share
in the Tamil GEC (General Entertainment Channel) genre. The
company earlier operated only Tamil and Malayam channels; it
added Kannada and Telugu to its bouquet with the acquisition of
Gemini TV and Udaya TV. It was the first channel to introduce mega
soaps in South India and also the first to use digital broadcasting.
Apart from the television broadcasting business, the company has a
strong presence in radio broadcasting and ventured in to film
production in FY09. It presently airs 43 FM radio stations across the
country. The film production business is structured as a division of
the company.

Sun TV is the leading player in South India with a bouquet of 20

channels across four States : Tamil Nadu, Karnataka, Andhra
Pradesh, and Kerala. Its flagship channels—Sun
TV,Gemini TV, and Udaya TV—lead their respective
markets with a good premium over the second player. Strong foothold in competitive
southern market poses tough entry barrier. The company benefits from a conducive
distribution environment, since Sun Direct (a promoter group company), has
considerable presence in South India’s distribution (DTH) market. In the overseas
market, the company’s channels are carried in countries such as Malaysia, Singapore,
Canada, Sri Lanka, UK, and US. The company’s direct costs are exceptionally low as it
has successfully managed to run a sponsored programming model. Sun TV ventured
into the movie production business in FY09. The company can leverage on its strong
market share in broadcasting to monetize movies.

December 2011
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Company owns 48.9% stake in RED FM, through which it has more than 35
FM radio stations across India & 7 regional radio stations in South.

Company mainly gets its revenue from following segments:

Advertising Revenue : Advertising income and broadcast fees are recognized when the
related commercial or programme is telecast on any of its TV channels.

Subscription Income : Subscription income represents subscription fees billed to cable

operators and Direct to Home (‘DTH’) service providers towards pay-channels operated
by the Company, and are recognized in the period during which the service is provided.
Subscription income from DTH customers is recognized in accordance with the terms of
agreements entered into with the service providers.

Income From Movie Distribution : Revenues from sale of movie distribution / sub-
distribution rights are recognized on the theatrical release of the related movie, in
accordance with the terms of agreements with customers. Revenues from the
theatrical distribution of movies are recognized as they are exhibited, based on box
office collections reported by the exhibitors after deduction of taxes and exhibitor’s
share of collections.

December 2011
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BOARD OF DIRECTORS

Sr. No Name Designation

1 Kalanithi Maran Chairman & Managing Director

2 Kavery Kalanithi Joint Managing Director
3 M K Harinarayanan Director
4 J Ravindran Director
5 Nicholas Martin Paul Director
6 S Selvam Director
7 R Ravivenkatesh Director
8 R Ravi Company Secretary

FINISHED PRODUCT

Product Name Unit Value Qty % Sales

Turnover
Advertisement Revenue NA 970.2 N.A. 50.43
Aircraft charter services NA 5.74 N.A. 0.3
Broadcasting Revenue NA 153.74 N.A. 7.99
Cable Distribution Revenues NA N.A. N.A. N.A.
Income from content trading NA 1.45 N.A. 0.08
Income from movie distribution NA 221.32 N.A. 11.5
Income from Pay Channels NA N.A. N.A. N.A.
License Fee Income NA N.A. N.A. N.A.
Programming Revenue NA 69 N.A. 3.59
Subscription Income NA 502.26 N.A. 26.11

DIVIDENDS
Announcement Date Effective Date % Dividend Dividend Type

Nov 03, 2011 Nov 08, 2011 75 Interim 2

May 26, 2011 Sep 08, 2011 75 Final
Aug 01, 2011 Aug 05, 2011 50 Interim
Jan 28, 2011 Feb 02, 2011 100 Interim
May 28, 2010 Jul 22, 2010 120 Final
Jan 20, 2010 Jan 28, 2010 30 Interim
Jun 24, 2009 Aug 20, 2009 20 Final
Jan 27, 2009 Feb 02, 2009 30 Interim
Jun 30, 2008 Aug 12, 2008 50 Final
Jun 28, 2007 Jul 23, 2007 20 Final
Jan 29, 2007 Feb 13, 2007 30 Interim

December 2011
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INDUSTRY OVERVIEW

The media and entertainment industry is one of the fastest growing sectors in the
world. The emergence of new technologies in recent years has radically redefined the
way media impacts households and corporations alike. The Indian Media and
Entertainment Industry (M&E) has been no exception to the global trends. The key
components of M&E industry in the country include film, television, radio, advertising,
print media, and music. With the increase in TV penetration, the share of television in
M&E has become significant in value terms. The Television Industry with increased
hours of mass entertainment programming during prime time and better coverage of
popular events like sports and elections has seen an explosive growth in consumer
mindshare. Its status as the preferred mode of entertainment of the people is obvious
from the fact that it now contributes more than 60 percent of the entertainment
industry's revenues. Television, the major contributor to the overall industry revenue,
is estimated to grow at a steady rate over the next five years with increased
viewership thanks to a wider range of channels. The television industry is now ready to
advance to the next stage of its evolution, leverage off a whole host of newer
technologies and completely change the way home entertainment is delivered. Over
the next few years, cable and satellite, along with emerging delivery platforms like DTH
and IP-TV are expected to revolutionize the industry. With increasing numbers of TV
households getting digitized, the revenue potential of large broadcasters, hitherto lost
through rampant underreporting, gets fully realized through the devices installed at
customer premises.

Mobile TV is yet another exciting prospect, involving live video streaming directly on to
a handset, which in turns unleashes a range of customer applications ranging from
education to entertainment to life saving interventions through telemedicine. Sun TV
Network Limited (Sun Network) maintains its dominant position in the southern states
of India as one of the largest television and radio entertainment Company in India with
a portfolio of 20 channels spread across four languages and in six genres of GEC, news,
music, movies, kids and comedy. Sun Network also has a large network pan India in
the FM Radio broadcasting segment with 44 FM licenses along with its subsidiaries. Sun
Network continues to consolidate its leadership position, built over the years, by its
hold over key aspects of pricing and access to quality content.

December 2011
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STRENGHTS, OPPORTUNITIES & THREATS

Sun Network is the preferred choice for content providers as it is the only player with
maximum reach in the areas it operates. Sun Network has a distinct advantage in the
southern regional markets on account of its understanding of the regional preferences
and with key competitive strengths including that of a large movie library of regional
languages.

The Media & Entertainment industry is on the threshold of phenomenal growth,

influenced by many factors such as the meeting of TV, mobile telephony and the
internet. The fact that significant households of India are still without television
connectivity highlights the scope of growth in the segment. The majority of the
revenue generated in the television industry is through advertisements, followed by
subscription. Strong growth projected in DTH segment would result in substantial
increase in subscription revenue over the years to come. Increasing interest in regional
content among Indian population across the borders, results in increased overseas
viewership thereby attracting foreign investment. Radio broadcasting in India which is
still in its early years is evolving to be a revenue spinner in the coming years

Risk/Threat Factors

Advertising income continue to be the major source of Sun Network’s revenues, which
could decline due to a variety of factors. The commercial success of Sun Network
depends on their ability to cater to viewer performance and maintain high audience
shares which could be affected.

The competition and increasing prices can adversely affect SUN’s ability to acquire
desired programming and artistic talent.

Sun Network is a regional broadcaster, which may limit their opportunities for growth
as well as their attractiveness to advertising customers and others.

Technological failures could adversely affect SUN’s business.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

SHAREHOLDING PATTERN

shareholding

Promoters 77%
Public 23%

Public Shareholding Pattern :

FII’s & Mutual 16.04%

Funds/UTI/Financial
/Financial
Institutions/Banks/Insurance
Companies
Corporate Bodies 1.25%

Individual Shareholders up to 1 0.78%

Lac Rs share capital
Individual Shareholders more 4.59%
than Rs 1 lac share capital
Others ( NRI’s, Clearing 0.35%
Members)
Total 23%

Promoters hold majority stake in the company.

company Their shareholding has gone down
slightly from around 79% to 77% over the last few years. Promoters have pledged
nearly 17.22% shares of their holding out
out of 77%. That means nearly 13% shares of
SUN TV are pledged as on date.

Company declared bonus in the ratio of 1:1 in September 2010.

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BALANCESHEET

in Cr. Mar Mar Mar Mar Mar

2007 2008 2009 2010 2011
SOURCES OF FUNDS :

Share Capital 68.89 197.04 197.04 284.84 290.44

Reserves & Surplus 1,094.89 1,251.53 1,504.59 1,688.54 2,056.64
Total Shareholders Funds 1,163.78 1,448.57 1,701.63 1,973.38 2,347.08
Secured Loans 86.55 64.47 0 0 0
Unsecured Loans 0.14 5.01 71.61 0.14 0.14
Total Debt 86.69 69.48 71.61 0.14 0.14
Minority Interest 4.11 60.43 38.48 37.06 31.54
Total Liabilities 1,254.58 1,578.48 1,811.72 2,010.58 2,378.76

APPLICATION OF FUNDS :

Gross Block 620.04 1,027.12 1,514.69 1,918.14 2,656.57

Less: Accum. Depreciation 350.84 473.63 676.81 990.35 1,450.20
Net Block 269.2 553.49 837.88 927.79 1,206.37
Capital Work in Progress 217.21 221.79 157.2 314.85 20.47
Investments 0.08 180.34 180.52 227.95 271.67

Current Assets, Loans & Advances

Inventories 0.19 0.27 0.13 2.7 1.41
Sundry Debtors 207.07 257.57 241.17 329.19 430.03
Cash and Bank Balance 649.35 429.71 365.4 436.72 603.02
Loans and Advances 111.57 204.61 285.88 278.17 347.76
Less: Current Liab. & Prov.
Current Liabilities 153.58 152.7 209.71 230.06 328.5
Provisions 46.69 116.71 46.82 276.78 173.47
Net Current Assets 767.91 622.75 636.05 539.94 880.25
Miscellaneous Expenses not w/o 0.18 0.11 0.07 0.05 0
Total Assets 1,254.58 1,578.48 1,811.72 2,010.58 2,378.76
Contingent Liabilities 0 0 19 59.37 72.5

Company is funding its growth mainly from internal accrual, and has no debt on its
balance sheet. In a highly competitive industry, where nearly all its competitors are
struggling with high debt, this gives a company significant edge to expand & to do
acquisitions in the times to come. Company has had a massive capacity expansion by
way of acquiring various media contents & video library during last 4 years. This will
fetch benefits in the years to come.

December 2011
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PROFIT & LOSS ACCOUNT

in Cr. Mar Mar Mar Mar Mar
2007 2008 2009 2010 2011
INCOME :
Sales Turnover 677.96 869.93 1,039.36 1,452.84 2,013.46
Other Income 41.11 56.74 66.8 34.95 48.7
Stock Adjustments 0 0 0 2.66 -1.82
Total Income 719.07 926.67 1,106.16 1,490.45 2,060.34

EXPENDITURE :
Raw Materials 0 0 0 6.18 0.59
Excise Duty 0 0 0 0 0
Power & Fuel Cost 4.67 7.39 14.08 14.03 19.02
Other Manufacturing Expenses 88.47 87.76 123.14 132.81 148.41
Employee Cost 23.3 30.93 41.35 59.8 63.12
Selling and Administration Expenses 61.56 89.75 110.27 114.69 170.77
Miscellaneous Expenses 25.74 56.58 13.77 37.13 31.87
Less: Preoperative Expenditure Capitalised 0 0 0 0 0
Profit before Interest, Depreciation & Tax 515.33 654.26 803.55 1,125.81 1,626.56
Interest & Financial Charges 6.43 15.91 13.79 4.94 2.25
Profit before Depreciation & Tax 508.9 638.35 789.76 1,120.87 1,624.31
Depreciation 121.84 123.89 220.45 320.91 480.46
Minority Interest before PAT 0 0 0 0 0
Profit Before Tax 387.06 514.46 569.31 799.96 1,143.85
Tax 140.12 201.46 229.27 299.05 383.1
Profit After Tax 246.94 313 340.04 500.91 760.75
Minority Interest after PAT 0.85 -13.69 -28.11 -18.16 -5.52
Profit/Loss of Associate Company 0 0 0.18 0.83 3.49
Profit after Minority Interest & P/L of Assoc. Co. 246.09 326.69 368.33 519.9 769.76
Adjustment below Net Profit 83.05 43.73 0 8.93 0
P & L Balance brought forward 232.06 464.62 683.08 892.43 1,019.64
Appropriations 96.58 151.96 158.98 401.62 478.74
P & L Bal. carried down 464.62 683.08 892.43 1,019.64 1,310.66
Equity Dividend 60.08 98.52 98.52 295.56 344.82
Preference Dividend 0 0 0 0 0
Corporate Dividend Tax 9.6 16.74 16.75 49.32 56.7
Equity Dividend (%) 50 50 50 150 175
Earnings Per Share (Rs.) 34.33 7.87 8.92 11.94 18.09
Book Value 168.93 36.76 43.18 47.85 57.19
Extraordinary Items 0.03 0.08 9.74 0.25 -1.83

From the P&L account we can observe;

SUN TV has tripled its revenue in the last five years. Operating profits & net profits are
showing the same trend, reflecting company’s operational effectiveness & ability to
control costs during high growth. Company is regularly paying out dividends as well.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

Half Yearly Performance for Financial Year 2011-2012;

in Cr. September March September March September

2009 2010 2010 2011 2011
Net Sales Turnover 608.04 786.97 865.22 1,058.49 905.25
Other Income 25.7 16.81 20.53 26.26 35.91
Total Income 633.74 803.78 885.75 1,084.75 941.16
Total Expenses 140.87 143.59 173.03 192.79 173.9
EBITDA 492.87 660.19 712.72 891.96 767.26
Depreciation 112.07 173.37 205.51 241.87 223.74
EBIT 380.8 486.82 507.21 650.09 543.52
Interest 0.81 0.39 0.44 1.54 0.99
PBT 379.99 486.43 506.77 648.55 542.53
Tax 129.63 169.41 168.38 214.72 174.79
Net Profit 250.36 317.02 338.39 433.83 367.74
Equity 197.04 197.04 197.04 197.04 197.04
Basic EPS 6.35 8.04 8.59 11.01 9.33
Face Value 5 5 5 5 5

Net sales have gone up by just 5% compared to September 2010 & have fallen nearly
14% as compared to March 2011 half yearly figures. Clearly, overall economic
slowdown has impacted SUN TV’s growth & growth has slowed down in current year.
Generally advertisers cut their budgets during slowdown. However, with the revival
expected in the industry & consumer demand remaining strong for E&M segment, the
revenues should resume their growth back to 15 to 20% till 2015.

During the second half of the year, we expect SUN TV to post a moderate growth of
10% compared to March 2011. SUN TV shall grow at the rate of 15 to 20% from
Financial Year 2012.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

RATIOS
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

Debt-Equity Ratio (x) 0.22 0.06 0.04 0.02 0

Long Term Debt-Equity Ratio (x) 0 0.03 0.04 0.02 0
Current Ratio (x) 2.12 3.34 3.39 2.54 2.41
Fixed Assets (x) 1.42 1.06 0.82 0.85 0.88
Inventory (x) 3,874.06 3,782.30 5,196.80 1,026.74 979.79
Debtors (x) 4.47 3.74 4.17 5.09 5.3
Interest Cover Ratio (x) 61.2 33.34 42.28 162.94 509.38
Operating Profit Margin (%) 76.01 75.21 77.31 77.49 80.78
Profit Before Interest And Tax Margin (%) 58.04 60.97 56.1 55.4 56.92
Gross Profit Margin (%) 75.06 73.38 75.99 77.15 80.67
Cash Profit Margin (%) 54.4 50.22 53.93 56.57 61.65
Ajdusted Net Profit Margin (%) 36.42 35.98 32.72 34.48 37.78
Return On Capital Employed (%) 43.77 37.45 34.4 42.12 52.22
Return On Net Worth (%) 33.41 23.39 20.93 27.35 36.16

Debt to equity ratio is completely under control. Zero debt allows the company to
expand or acquire aggressively in times to come.

Profitability is increasing with each year. Operating profit margins & net profit margins
both are getting stronger. Return on capital employed is stable & in upward trend,
giving higher returns to the shareholders.

We expect 15 to 20 % growth per annum in sales for the next 5 years. Even if we
consider conservative estimates, SUN TV should post a sales turnover / net sales of
2150 crores in financial year 2011-12, 2500 crores in 2012-13 & around 2800 crores in
2013-14. Company’s OPM (operating profit margin) is most likely to stabilize around
75%. Net profit margins are expected to remain the same at around 36 to 38%. By
this logic, SUN TV will post a net profit of around 800 crores in 2011-12 & around 940
crores in 2012-13 & around 1040 crores in 2013-14. It shall post earnings per share of
20 rupees in 2011-12, 24 rs in 2012-13 & 27 to 28 in 2013-14.

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

WHY INVEST IN THIS COMPANY

SUN TV enjoys a monopoly in the Entertainment & Media, segment in south India. It
has the largest bouquet of channels under its control in all 4 southern states. Its
presence across genres like general entertainment, movies, music and news ensure
continued and sustained viewership.

SUN TV Network is completely debt free while its competitors are struggling with high
debts. This enables sun to expand rapidly & acquire other players for growth.

The company enjoys one of the highest operating profit margins in the industry.

Management has been able to deliver strong growth while maximizing shareholder
wealth. With good days ahead for the industry, SUN TV is all set to capture the growth
for its shareholders.

The stock is trading at attractive valuations & the downside looks limited from the
current levels even in the times of volatility ahead. The stock shall trade at premium
valuations once the market recovers due to various competitive advantages it has.

Financial Year Stock EPS PE Stock Price

2011 SUN TV 20 15 300
2012 SUN TV 24 15 to 20 420 to 450
2013 SUN TV 27 20 to 25 700 to 800

December 2011
Alpha Invesco Research Pvt Ltd www.bullsbook.com

Notes :

DISCLAIMER:- The views/opinions expressed in this report are personal opinions. Calculations and estimates are based
on certain assumptions. It should be noted that the information contained herein is from publicly available data or other
sources believed to be reliable. The user assumes the entire risk of any use made of this information.

December 2011