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Gramophone: Making waves

Poornima Kavlekar

THE stocks from the information technology and media industry continue to attract interest. In fact, many small and medium-cap stocks from these segments such as Abacus Computers, Cinerad Communications, Frontier Information and Advent Computers have gai ned considerably in the last fortnight.

Apart from these two segments, the two leading players from the express industry have also witnessed a sharp rise over the fortnight. The share price of Blue Dart Express increased by Rs. 67.55 and closed at Rs. 406.10. The stock of Elbee Services shot u p by Rs. 147.95 and closed at Rs. 297.90.

From the media industry, the share price of Gramophone Company of India increased considerably in the last one year. During the fortnight, this stock shot up by Rs. 575.80 and closed at Rs. 1,901.25. Gramophone Company has shown indications of a merger w ith two group companies - RPG Music International Ltd and Gramco Music Publishing Ltd.

Gramophone has a strong presence in the Indian music market through HMV and is trying to establish itself in the UK markets through its subsidiary Saregama Plc (which is listed in the UK). It is also in the process of expanding its presence in the southe rn markets.

The company is likely to come out with a public issue or private placement in the domestic or international markets (with a possibility of a Nasdaq listing) to raise Rs. 125 crores. The company intends to use the proceeds of this issue to retire debts, i nvest in new business and acquire music libraries.

On the operational front, the company has entered into a fresh 25-year agreement with EMI Records, UK, for using the HMV brand name. The company markets a large catalogue of Hindi music under this brand name. Besides this, it also has a presence in the d evotional and classical music market. This was through the takeover of Master Recording Company which gave Gramophone access to more than 2,000 titles under the Sangita catalogues.

Besides the Indian music market, the company is trying to establish itself in the global markets. Recently, the company began aggressively marketing its products abroad through Saregama. This subsidiary, listed in London, was incorporated to manufacture and market Indian CDs and music cassettes in the UK, Europe, the US, South Africa and Canada. It also has the rights to use all future musical acquisitions of Gramophone.

This subsidiary has already got into manufacturing arrangements with two CD manufacturers in the US and UK from the Carlton Communication group.

Gramophone Company has also floated a new brand `Gramophone' parallel to the HMV label. This music label is owned by Gramophone Company, unlike HMV. This new music label, Gramophone, will market live recording and other special products.

For the nine months ended December 1999, the company has registered a 20 per cent increase in the sales to Rs. 93.51 crores from Rs. 78.11 crores. The operating margins improved sharply to eight per cent from around two per cent in the corresponding prev ious period.

The post-tax earnings increased to Rs. 3.22 crores from Rs. 2.08 crores, up by 55 per cent. On an equity base of Rs. 7.27 crores, the annualised earnings per share stand at Rs. 6.