FY22 emerges most profitable for Yash Raj, Dharma despite Covid-19

Results sourced from RoC show YRF reported highest profit in seven years, while Dharma recovered nearly all its pre-Covid profit; listed peers Balaji, Eros in red

The 2020 and 2021 pandemic triggered by the coronavirus brought the Indian film industry, which is amongst the largest in the world, to a grinding halt. The domestic film business slumped and movie-makers and goers were deprived of the joy of in-theatre entertainment, as social distancing was the norm.

Amid the Covid-19 storm, movie production companies Yash Raj Films (YRF) and Dharma managed to sail through in terms of profitability, even as listed peers such as Balaji Telefilms and Eros Entertainment were in the red.

Regulatory filings with the Registrar of Companies (RoC) show that YRF, which is currently in the spotlight for the movie Pathaan, starring Shah Rukh Khan, reported its highest net profit in seven years in financial year 2021-22 (FY22) at Rs 106.48 crore. This was even as it released only one film in FY22, namely, Bunty Aur Babli 2, which flopped at the box office.

Dharma Productions, led by producer-director Karan Johar, on the other hand, recovered almost all its pre-Covid profit at Rs 27.1 crore in FY22. Dharma's FY20 net profit stood at Rs 27.8 crore. And YRF's bottomline in FY20 was Rs 80.55 crore.

While Dharma did have a hit in Akshay Kumar-starrer Sooryavanshi, which released in theatres on November 5, 2021, its two other FY22 film releases, Gehraiyaan, starring Deepika Padukone, and Shershaah, featuring Sidharth Malhotra, were done directly on over-the-top (OTT) platform Amazon Prime Video. Brahmastra, the big release from Dharma, was out in theatres on September 9, 2022 and therefore part of the 2022-23 financial year (FY23).

Eros and Balaji Telefilms, on the other hand, reported a net loss of Rs 7.6 crore and Rs 132.3 crore each in FY22, data from Capitaline compiled by BS Research Bureau shows.

In terms of topline, YRF was almost back to pre-Covid levels in FY22, reporting net sales of nearly Rs 632 crore. In FY20, net sales of YRF was Rs 666.2 crore. In contrast, Dharma and Eros had recovered less than half of their pre-Covid sales revenue in FY22 and Balaji was close to 60 per cent of its FY20 revenue, at Rs 336.9 crore, in FY22.

Mails sent to YRF and Dharma Productions seeking answers to the growth seen in profitability in FY22 elicited no response till the time of going to press. But conversations with film industry experts, analysts and investment bankers reveal that the two companies managed to play on key strengths during the pandemic.

"YRF has a strong library of movie titles which it has leveraged well over the years with tie-ups with groups such as Sony Pictures Networks earlier and then Disney-Star (since 2019)," says a consultant with one of the country's top four audit firms, who has closely followed the media and entertainment industry.

"During the Covid-19 pandemic as digital adoption grew, YRF tied up with platforms such as Amazon Prime Video for its library of movie titles. That helped it maintain topline and bottomline in FY22, when theatrical revenues were down," he says.

YRF, according to ratings agency Acuite, has four main revenue streams including film production, talent management, film licensing and home entertainment. Of these, film production and film licensing, say experts, have been key revenue generators for it. Acuite says YRF's talent management wing, which works with actors such as Ayushmann Khurana, Anushka Sharma, Arjun Kapoor and Bhumi Pednekar, was largely unaffected by the pandemic.

Dharma, on the other hand, was quick to tap the digital opportunity in entertainment well before the pandemic began. It launched a subsidiary called Dharmatic Entertainment in 2018 to make fiction and non-fiction shows for OTT platforms. In the last few years, it has released two seasons of The Fabulous Lives of Bollywood Wives on Netflix, season 7 of Koffee with Karan on Disney+ Hotstar and Madhuri Dixit's digital debut The Fame Game on Netflix, all of which were top web shows, according to trade experts.

According to Shailesh Kapoor, founder and CEO of Mumbai-based consultancy Ormax Media, India’s OTT audience universe has grown rapidly since 2018, with a boost during the pandemic years of 2020 and 2021.

"India's OTT audience universe, which is defined as those who have watched a digital video at least once in the last one month, was at 423.8 million at the end of 2022. The growth from 2021 to 2022 stood at a healthy 20 per cent, with 70.6 million new audiences entering the universe," Kapoor says.

India's OTT penetration now stands at 30 per cent, up from 25.3 per cent last year, Ormax Media says.

According to Karan Taurani, senior vice president, research at Mumbai-based brokerage Elara Capital, film production houses such as YRF and Dharma have key releases this year such as Tiger 3, starring Salman Khan (from YRF), Selfie, featuring Akshay Kumar and Emraan Hashmi (Dharma), and Yodha, starring Sidharth Malhotra (Dharma).

"The success of YRF's Pathaan and Dharma's Brahmastra has shown that Bollywood studios can adapt to the tastes of the post-pandemic viewer. Calendar year 2023 could see these movie studios raise the bar further in terms of entertainment," he says. And that could rub off positively on both topline and bottomline.

Film production houses: Financial performance over the last few years
(figures in Rs cr)
Yash Raj Films	FY16	FY17	FY18	FY19	FY20	FY21	FY22
Net Sales	220.05	725.5	621.2	683.24	666.2	241.76	631.78
Net Profit	15.53	68.39	56.23	26.62	80.55	13.51	106.48
Dharma Prodn	FY16	FY17	FY18	FY19	FY20	FY21	FY22
Net Sales	254.2	426.7	53.4	273.2	735.1	118.4	278.05
Net Profit	15.7	30.7	12.8	31.0	27.8	6.9	27.1
Balaji Telefilms	FY16	FY17	FY18	FY19	FY20	FY21	FY22
Net Sales	292.8	418.7	413.3	427.7	573.6	293.7	336.9
Net Profit	-3.6	-28.2	-45.2	-97.4	-58.8	-118.9	-132.3
Eros International	FY16	FY17	FY18	FY19	FY20	FY21	FY22
Net Sales	1,582.7	1,399.7	960.2	1,031.3	813.6	262.0	373.1
Net Profit	238.7	257.5	229.3	269.1	-1,405.2	-180.3	-7.6

Source: RoC/ Capitaline