(4 May 2009 7:00 pm)

MUMBAI: A steep increase in operational costs has bruised Raj Television Network's (RTN) net profit for the year ended March 31 2009, putting the Chennai-based company under pressure to significantly up its revenues in the current fiscal as it marches into diversified initiatives like film production.

Operating costs went up from Rs 162 million in FY'08 to Rs 288 million in FY'09, largely led by investments of Rs 100 million towards film production. The company also launched a Kannada music channel, Raj Musix, in March, 2009.

The last quarter of 2008-09 saw losses to the tune of Rs 30 million. This quarter also had an operating income of Rs 195 million, by far the highest for any quarter in FY'09.

Even though RTN suffered losses in the fiscal, it ended the year with an improvement of 11.6 per cent in its operating income which rose from Rs 538.6 million in FY'08 to Rs 601.3 in FY'09.

So why did the profits dip so steeply? A close look at the figures suggests that operating costs played the spoilsport. A look at the operating profit margin over the years from FY'07 to FY'09 shows how much the margin has been eroded this year.

Year			Operating profit margin
FY 06-07			41.76
FY 07-08			43.34
FY 08-09			16.36

Operating profit margin has, thus, skid to 16.36 per cent in FY'09 compared to 43.34 per cent a year ago.

A look at the operating income, expenditure and profit before tax over the last year also paints an interesting picture as is shown in the table and graph below.

As the above graph shows, the operating income and profit saw a significant fall over the first three quarters while the expenditure saw a gradual rise during this period. In the last quarter, however, there was a steep rise in the operating income. But the expenditure during this period experienced a steeper rise. The result: RTN took a Rs 30 million loss in Q4.

A lot of RTN's health in FY'10 would depend on the fortunes of the movies which are set for release this fiscal. The company's maiden movie venture bombed, but the company is hopeful that the subsequent releases would perform better.

If the flicks click at the box office, RTN would be able to curtail rising operational costs while improving profit margins.