You ain't heard nothing yet." forget al Jolson, those words could well have been uttered by a D-street sharp trying to gull an investor into putting his little all into media and entertainment stocks. Given us Indians' proclivity to suspend that disbelief some, and then more, entertainment stocks should be hot. Last year, 1,000 motion pics, in 10-odd languages vied for our attention. As did countless soaps across 25-odd channels. Surely, all those numbers must translate into something tangible on the bourses?

They don't, not even when we stretch that definition a bit and include media stocks. Not that there are all that many. The best media companies are unlisted: Bennett, Coleman & Company Limited, Kasturi & Sons, Living Media India, The Malayala Manorama Group, Dainik Jagran, you name it, they're unlisted. That's a sharp contrast to global markets where most large media and entertainment companies (read that without a pause, for the best of them, globally, are conglos) are listed: AOL Time Warner, Walt Disney, Viacom, News Corp, and Sony.

Indian publications then, may be among the best in the world, but investors can't partake of that. Indian motion pics such as Lagaan (Tax) and Kabhi Khushi Kabhi Ghum (Sometimes Happy, Sometimes Sad) may do well in global markets, but that's of no relevance to investors. And Information & Broadcasting Minister Sushma Swaraj-with her view on foreign direct investment in print media she is actually part of the problem, not the solution-may lead a delegation of 40-plus to the Cannes festival, but investors won't benefit from it.

The media domain can at least boast of some pan-Indian corporate entities; the Indian motion picture industry can't. Dominated by independent producers-the studio system hasn't worked-and financed by funds of uncertain origin, its status as an industry is in itself suspect.

"Transparency, honesty, and integrity in dealings are the first steps it needs to exhibit to be termed an industry and taken seriously as one by investors," says Anoop Bhaskar, Associate Vice President (Research), Pioneer iti Mutual Fund.

Apart from Zee Telefilms-and it has a clutch of problems all its own-there is little choice for investors. Most listed companies are those that provide software to broadcasters. Entry barriers in this business are low and with the notable exception of Balaji Telefilms, the companies don't amount to much in terms of either market capitalisation or revenues. Indeed, the aggregate market capitalisation of Adlabs, Mid-Day, Balaji Telefilms and Mukta Arts still falls short of Zee's. So there.

You Ain't Seen Nothing Yet

That's not to suggest the media and entertainment businesses are fundamentally flawed. Rather, private channels rule the roost in the broadcasting business. Last year, 75-80 per cent of the Rs 3,600 crore companies spent on advertising went to these channels.

Then there is the possibility of raking in subscription revenue once the regulatory regime related to conditional access becomes clearer.

Last year, broadcasters earned Rs 1,000 crore through this avenue, no chump change whichever way you look at it. "We expect subscription revenues ro rise over the next five years," says Ramachandra Hegde, a media analyst with ENAM Securities. "With better reporting by cable operators, broadcasters will get a larger share of a larger pie."

Broadcasting may be the mother lode but there are other, smaller, significantly lucrative avenues.

We've profiled some, not all of them. Still, it would do you a world of good to remember two things. One, most initiatives in the entertainment space involve huge capital expenditure-upfront.

And two, factor in a certain amount of sector-risk when you invest in entertainment stocks. "Concerns on cash flow, corporate governance, and the sustainability of earnings are factors that have limited our exposure to the industry," says Bhaskar. Read on, and Caveat Emptor.

Zee Telefilms

It is the largest listed media company and one of the Big Three Indian broadcasters. The channels, the cable venture Siticable, and the film-and music-label all come under Zee Telefilms. The channel may be trailing on most fronts-Star Plus is the leading entertainment channel, AajTak (part of the India Today Group that owns Business Today), the leading news one-but the ratings game, especially among entertainment channels, is unpredictable. Even now, thanks to its regional channels and niche English language ones, advertisers find it difficult to ignore it. Zee's revenues from subscription services were Rs 120 crore last year and likely to go up to Rs 150-170 crore this year. And advertising revenues in 2001-02 stood at a not insignificant Rs 640.02 crore.

This is a must-have stock in your portfolio, but the scrip has a tendency to be volatile, so maybe it wouldn't hurt to wait for the next crash and then pick it up.

Mukta Arts

It's a script that would do a Bollywood flick proud. After churning out an almost unending (the key word is almost) series of hits, man decides to do his bit to improve the image of the Indian film industry and lists his production house.

Then, like a true Russian tragedy things go wrong. That's the story of Subhash Ghai and Mukta Arts.

Still, Mukta remains the only option for investors to grab a piece of the silver screen. Ghai's last motion picture, Yaadein, may have flopped in the domestic circuit but it did pretty well in the NRI-one.

Don't evaluate this company on a quarterly basis, warns Nikhil Vora, a research analyst with Alchemy Share & Stock Brokers, in his recent report on the company. "As Mukta consolidates its business model and revenue streams, the potential re-rating could far outweigh the present risks."

Ghai may have managed to sell his library of blockbusters to Sony for Rs 16.1 crore, but motion picture production remains a risky business and Mukta has made no efforts to hedge its risks by diversifying. Consider it only if you consider yourself brave.

Balaji Telefilms

The name that is on everyone's lips, Balaji, may be the maker of the programmes with the highest ratings across channels, but does that warrant a price-earnings multiple in excess of 20.

At Rs 600-plus, the stock does seem a trifle over-valued, but the company's financials are healthy and there are no obvious competitors in sight. Inexplicably, the company seems to have got its soap-assembly-line working just fine-one block-buster after another rolls off it.

"Volume growth will take a back-seat to value-growth," says Vora, but he believes the company is still a good buy. So go ahead and buy this stock but take it slowly.

Adlabs

Blame your reading habits if you haven't heard of Adlabs. It is the largest film processor in the country and has now ventured into the business of multiplexes.

It also proposes to diversify into film production. However, the new ventures do carry considerable risk. The multiplexes, for instance, involve considerable capital expenditure: the company is estimated to have burnt Rs 50 crore on them already. Strictly for the brave.

Mid-Day

The publishing industry is far more professional than the business of film-making (accepted, we're biased). And people are, as a rule, reluctant to change their reading habits.

Unfortunately, the Indian publishing industry has only two options on offer to investors, Gujarat Samachar and Mid-Day. The first is a great value buy, but is plagued by poor institutional interest and low investor awareness. Mid-Day is more visible but has two fledgling businesses, fm radio, and outdoor advertising to nurture. Besides, it could face competition in the afternoon-paper category from BCCL and the India Today Group. Wait and watch.