ENILNSEQ1 FY 2022August 16, 2021

Entertainment Network (India) Limited

9,567words

71turns

12analyst exchanges

3executives

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Management on call

Prashant Panday

MD & CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR

N. Subramanian

EXECUTIVE DIRECTOR & GROUP CFO

Sanjay Ballabh

HEAD OF FINANCE

Key numbers — 40 extracted

44%

was still a very bad quarter. Compared to the last year’s quarter one, the revenues have grown by 44% on a like-to-like basis, underlying EBITDA has grown by 39% approximately, and PAT has also grown

39%

arter one, the revenues have grown by 44% on a like-to-like basis, underlying EBITDA has grown by 39% approximately, and PAT has also grown by approximately 24%. So, it was a better quarter than the

24%

basis, underlying EBITDA has grown by 39% approximately, and PAT has also grown by approximately 24%. So, it was a better quarter than the same quarter last year, clearly because the lockdowns this

71%

same quarter in the pre-pandemic period of time, like I mentioned to you, the revenue growth was 71% lower than two years ago. And instead of EBITDA profit of Rs. 33 crore, reported EBITDA was minus

Rs. 33 crore

oned to you, the revenue growth was 71% lower than two years ago. And instead of EBITDA profit of Rs. 33 crore, reported EBITDA was minus Rs. 18.7 crore. So, clearly, the operating leverage that the radio ind

Rs. 18.7 crore

lower than two years ago. And instead of EBITDA profit of Rs. 33 crore, reported EBITDA was minus Rs. 18.7 crore. So, clearly, the operating leverage that the radio industry works under was in play in this quar

oved compared to last year, largely because of the growth of volume. In fact, pricing was down by 5% at an overall level at the network level. Volumes were up by about 60% odd at the netwo

60%

icing was down by 5% at an overall level at the network level. Volumes were up by about 60% odd at the network level, so it was clearly volume led. But again, that is something that we have

140%

formed last year have come back in a big way. The biggest category for us is FMCG which was up by 140% in ad volume. Health and pharma is the second biggest sector for radio, was up by 157% in volumes

157%

was up by 140% in ad volume. Health and pharma is the second biggest sector for radio, was up by 157% in volumes. The third biggest sector this time was auto, which was up 135% in this quarter for ra

135%

r for radio, was up by 157% in volumes. The third biggest sector this time was auto, which was up 135% in this quarter for radio industry. Also categories like e-commerce which have become very big we

700%

quarter for radio industry. Also categories like e-commerce which have become very big were up by 700%, so approximately 8x in volume compared to last year. But government and political continue to be

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Guidance — 20 items

Prashant Panday

opening

“As always, I will make a few opening remarks and then we will be happy to take your call.”

Prashant Panday

opening

“And we believe that if the third phase were not to come, then the recovery will be far stronger this year compared to what we saw last year.”

Prashant Panday

opening

“But even so, we expect that lower margin to still remain in the mid-30s, or even the highest 30%, it was 53% in the first quarter.”

Prashant Panday

opening

“But if you were to look at steady state growth of FY 2023 and FY 2024, chances are that that growth will be somewhere in the region of 5% to 7% per annum, which in India would be called a sluggish growth.”

Prashant Panday

opening

“So, we have a feeling that FY 2023 and FY 2024 will be strong year for traditional radio.”

Prashant Panday

opening

“And I will just restate over here that the company plans to invest a substantial portion of its reserves in the digital businesses going forward, not in the radio businesses.”

Prashant Panday

opening

“But they will be adjacencies to the strengths of Mirchi, we don't want to blindly invest in digital opportunities, but we want to invest in opportunities which is around the area of operation of Mirchi, where Mirchi can either lend its brand name or Mirchi can lend its relationships with the film fraternity, music fraternity or brand name or its people and/or wherever the synergies can be put to play is where we will also look at external opportunities.”

Prashant Panday

opening

“So, at the right time, we will come back to you with more information on what we are doing with the cash and what will be our dividend declaration policy in the future.”

Rohith Potti

“If I remember, in the last call we had mentioned that we are getting the approval from the Board on our strategy in the Platform business and we will be getting a detailed update on the same in this call.”

Rohith Potti

“So, it will be helpful if you can share your thoughts on this right now.”

Risks & concerns — 12 flagged

But government and political continue to be a drag on the volume performance of the industry and the company.

— Prashant Panday

And the reason I say this is that it is expected, and you will agree with me, that FY 2023 and FY 2024 will remain years of economic slowdown in India, even after the pandemic has receded and gone away.

— Prashant Panday

And we have seen that whenever there is an economic slowdown then radio gets consumed.

— Prashant Panday

And you know that there are uncertainties even today with respect to the pandemic and with respect to any economic slowdown which may follow.

— Prashant Panday

And as you can know, these are very difficult discussions, we have ad consultants who are working for us.

— Prashant Panday

Are we seeing any pressure in being able to hold back on the talent, which is there, is there something that we should be worried about?

— Arpit Ranka

— Prashant Panday

It is not so much at the higher level that we have found, but it remains a problem, it remains a concern, but then it is going to be a concern for all the company.

— Prashant Panday

95 crore last year, in FY21, the government part of it was there was impact of growth in cost in tower rentals and all those kinds of things and there was hardly any reduction on the license fee.

— Prashant Panday

I am asking are we going to, it is a third one or content creation going to become the large piece of this in that we are going to move towards being largely a content producer for channels with the risk that come with it but with the upside as well?

— Nagraj Chandrasekar

Even last quarter when we took the impairment, we had explained that this was a conservative approach that management had taken considering the impact the pandemic had had in FY21 and the likely impact the pandemic could have in FY22 and possibly the slowdown in FY23 as well.

— Prashant Panday

I think we will hit our previous revenues for sure, whether it is in early part of FY23 or later part of FY23 is difficult to say at this stage.

— Prashant Panday

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Q&A — 12 exchanges

Sir, my first question is on the Platform business. If I remember, in the last call we had mentioned that we are getting the approval from the Board on our strategy in the Platform business and we will be getting a detailed update on the same in this call. So, it will be helpful if you can share your thoughts on this right now.

Prashant Panday

So, Rohith, we have been in discussions internally and with our Board on the digital strategy, but it is work-in-progress even as we speak. And what I can tell you for a fact is that we are working on launching our web and app platforms. What I can also tell you is that it will happen towards the end of this calendar year or the early part of the next calendar year. We will be starting many product lines including audio product, video product, etc. But specific product lines and specific strategy pieces are still to be finalized with the Board. So, a couple of follow-up questions on this. In t

I have a question about capital allocation on what you mentioned, the web and the app platforms. If you would have a sense of how much something like that should cost, right, in your head right now, how much should that be, a ballpark number? Because the problem with an app platform is, it's just another app that is on someone's phone, once they are cluttered a number of apps that are only there, I mean, your sister company Gaana already has a very good app that is already likely on someone’s phone or there might be a Saavn or there might be Wynk app, and then definitely YouTube. So, it is jus

Prashant Panday

Yes, good question, Nagraj. And that's precisely what I meant when I said that these are the strategy points that need to be closed with the Board. You are very right in asking where is the place for another app? We are fully seized of that matter. Which is why we need to look at what kind of positioning we are going to be adopting for the platform, what kind of content we are going to be placing on the platform, how are we going to be finding synergies with other group assets that we have, and so on and so forth. These are all things which are work-in-progress. We have an idea about the inves

I just have one question. Say, what we are planning to do in few things in digital, it seems like what Times Internet is also doing, a direct-to-consumer from their different properties like MensXP and like many other social commerce you want to do. So, why would, say, if I am a Bennett Coleman and want two companies doing almost something similar? Or are we doing something very different which Times Internet cannot do, please explain?

Prashant Panday

Okay. So, let me attempt to answer that. And again, like I have been saying, Manish, it is work- in-progress, so don't take my answer as a definitive answer. But see, think about it, what is it that we can do which no other group company can do? Or in fact, no other company outside of our group also can do as well as we can do? I think the whole music and entertainment piece is something that we have very deep roots in. We are probably the only company which does concerts, which does music shows on television, which does radio, which does activation which relates to music and entertainment, an

Broadly my questions have been answered. It was just to understand how your strategy would stand within the Times Group internet piece which I think you alluded to in the last question. My questions have been answered. Thank you.

Management

I just have one question on the original content creation side. In the presentation we have mentioned that we have created some content for MX player. So, first if you can explain, I mean what is the team strength when it comes to original content creation on the OTT side and how is the pricing done and what kind of margins do we need on such content. And going ahead, two, do we plan to create content for some outside third-party OTT platform or will we stick with in- house company which is a MX player?

Prashant Panday

Of course, we will not stick to only MX Player. We are already talking to outside platform. But this platform has a different requirement of content. Some platforms won’t long form content, some platforms want a mix of long and short form, some platforms want IP transfer to them, some platforms are happy to let the IP remain with you and they just want licensing of the content. So, some platforms do not want any brands build into the content. Some platforms are okay with branches. So, it is a mix lay of the land out there. To answer your question, we are looking at all of those platforms. Now,

Just wanted to know, like what was roughly the capacity utilization this quarter for our old stations as well as our new stations?

Prashant Panday

Shikar, nice to have you on the call. Like I mentioned the 8 legacy stations the capacity utilization was about 31% for the next 27, so we have 35 legacy station. For the next 27 it was about 33% and for the phase III which is batch 1 and batch 2 both was approximately 16%- 16.5%. So, very low-capacity utilization. And how do you foresee them for the next 6 months, like any ballpark number? See, I was mentioning that July has seen a good recovery, August has seen an even stronger recovery and if the festive season is fortunately spared of any other waves, then I think that the capacity utiliza

Sir, just wanted to understand one thing, there is a restructuring that is going on at Times Group, so just wanted to get a sense on is there any read across for our business and will their shift to digital and that pivotal shift that will have a ramification here because we are also trying to do the same? So, just wanted to get a sense on that, if there is any linkage there?

N. Subramanian

Chetan, this is Subramanian. I don’t think whatever Times Group does has any impact on what we do, All the business in the group are run independently and not am I aware of any restructuring at the Times Group. But irrespective of all of that I don’t think it will impact Mirchi in any way. So, our strategy what we put in place will go through as we envisage it going forward? Right. The management of this company will evaluate what is right to do for this company and will present before the board and if the board is convinced, they will approve it. I don’t think the Times Group’s plans will in

Two questions from my end, first one is on our ability to retain the talent basically. So, radio continues to save headwinds while pandemic has kind of helped say TV and OTT kind of scaled business. And one other thing we tried over is 250-300 creative people who work for us. So, what is their efficient rates, how they have shaped above the last year? Are we seeing any pressure in being able to hold back on the talent, which is there, is there something that we should be worried about?

Prashant Panday

Arpit, you are very right that there is pressure on the attrition front and like you rightly identified because there were headwinds in radio while television and OTT were growing, so yes, there is pressure on attrition. However, we have ways to handle it. And one of the most important ways to handle it is to provide the diversity of growth opportunities internally. So, because we are growing our digital business, we are growing our audio content, our video content piece very strongly, we are able to keep people engaged and we haven’t seen too much attrition amongst our key people. We see more

Sir, you mentioned Nykaa earlier as one of an example of a company that grew in the niche within e-commerce that is growing. But in the media entertainment space which we want to focus on, are there any examples across the world which are sort of examples of what we are looking to do, or closely approximately and have been successful?

Prashant Panday

Well, we are not at all interested in this space. But I will just give you an example, which is all your ticketing portal, whether it is ticket master in the US or BookMyShow in India these are also basically in the same space, in the music and entertainment space they do degree of e- commerce and they have built a community. But like I told you we are not at all interested in that space, but that is just one of the things. But there are other things which you can aggregate. The whole idea is to aggregate audiences, we believe that we got 50 million people to consume our digital content on You

Sir, I wanted to understand, last quarter you provided around 97 crore – 98 crore for Mirchi Love and Cool FM, and combining your comment that pricing will take two years to revive. So, I wanted to understand do we expect any provisions from our investment made in the Mirchi stations itself. So, it would be great if you can throw some light on that?

Prashant Panday

First, let me clarify. Even last quarter when we took the impairment, we had explained that this was a conservative approach that management had taken considering the impact the pandemic had had in FY21 and the likely impact the pandemic could have in FY22 and possibly the slowdown in FY23 as well. So, it is a conservative approach in the sense that we have bitten the bullet, we have swallowed the bit of pill but it is not that our efforts has veined on Mirchi running Cool, so we continue to with our efforts over here. To answer your question, in all honesty I don’t think there should be any m

Just one question. So, what is happening in the startup space, see I am not talking about very small startup but mid-size and they are doing 5 crore-10 crore and they are in 2-3 cities, but they are expanding so fast and going to many cities and obviously they will not advertise on television or any traditional media maybe paint. So, our solution actually fits so well with that. So, it is going to be a huge opportunity for years to come, it may go up and down, so are we focusing targeting that thing, anything, your thoughts on that?

Prashant Panday

Yes, absolutely. So, what we have seen, Manish, is that when startups find it very appealing to, we develop solutions for startups and they find it very appealing. Actually, when they become very big, then they find television etc. to be more economical. So, all the big e-commerce or Fintech players spend a lot on television as you know and their spent on radio relatively becomes small. But start up typically they work very well. We try to develop solutions for them and that is an active area for us as well.

No, as always if there are any further queries, we would be very happy to address them and the contact email address is mentioned in the presentation, you can please reach out and we will be very happy to respond to you. Thank you very much.

Management

Speaking time

Prashant Panday

Moderator

Arpit Ranka

Rohith Potti

Nagraj Chandrasekar

Manish Gandhi

Manan Patel

Participant

Shikhar Mundra

Chetan Thacker

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Opening remarks

Prashant Panday

Thank you, Rutuja. And welcome to the conference call, dear investors. As always, I will make a few opening remarks and then we will be happy to take your call. With me is N. Subramanian, who is the Group CFO and Mr. Sanjay Ballabh, Head of Finance. We have sent you the investor presentation but allow me to touch upon a few highlights of the quarter gone by. The quarter was a mixed quarter in the sense that there was growth compared to the same quarter last year. However, compared to the pre-pandemic levels, it was still a very bad quarter. Compared to the last year’s quarter one, the revenues have grown by 44% on a like-to-like basis, underlying EBITDA has grown by 39% approximately, and PAT has also grown by approximately 24%. So, it was a better quarter than the same quarter last year, clearly because the lockdowns this year were more staggered, it was more local, and there were less restrictions than last year. But compared to the same quarter in the pre-pandemic period of time, li

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Entertainment Network (India) Limited

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