Entertainment Network (India) Ltd
NSE:ENIL
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Entertainment Network (India) Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of Entertainment Network (India) Ltd. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Runjhun Jain from EY Investor Relations. Thank you, and over to you, Ms. Runjhun.
Thank you, Jacob. Good evening, everyone. We welcome you to the Q1 FY '24 earnings call of Entertainment Network (India) Ltd. To take us through the results and answer your questions today, we have management team from the company here represented by Mr. Yatish Mehrishi, Chief Executive Officer; and Mr. Sanjay Ballabh, Chief Financial Officer.
The financial results and the presentation have already been uploaded on the company's website and on the exchanges. Should you need any further information, you can reach out to us at EY IR team, and we would be happy to send it over to you.
Before we proceed with the call, a disclaimer. Please do note that anything said on this call during the course of introduction and in the documents, which reflects the outlook towards the future or which should be considered as a certain forward-looking statement, must be viewed in conjunction with the risks that the company faces and may not be updated from time to time.
With that said, I will now hand over the call to Mr. Yatish. Over to you, sir.
Thank you, Runjhun. Good evening, everyone. First of all, I'll extend my best wishes to all of you as our beloved country celebrates the 77th year of independence. On behalf of ENIL, I extend a warm welcome to all of you for joining our Q1 FY '24 earnings call.
I hope you had the opportunity to delve into our quarterly results. However, I would urge you to look at the positive underlying trends and not look at just the overall results. Please allow me to navigate you through the results.
Overall, media industry, if we look at in the Q1 performance, has remained subdued both in revenue and margin terms. This has largely been impacted by the global macroeconomic factors. Media sector performance has been far from good. If you look at television or print, the numbers have not been very, very increasing. In fact, radio shines as a standout performance in the traditional media space as been evidenced by our industry peer results also.
Coming to our performance. To begin FY '24 with our distinctive upswing in profitability gives us enough delight to share the results. There has been a marginal dip in revenues, but we have managed to improve our EBITDA and EBITDA margin significantly. The revenue dip was partly due to the absence of TV properties, which we do in the quarter 4 and which rolls into the quarter 1 also in our solutions business. And also the factor contributing to the subdued revenues in the solutions business has been our deliberate strategy to focus only on profitability and only events which are profitable to us.
Shifting our focus to the core existing business, which is the radio business, which has achieved a healthy 8% growth, predominantly led by a remarkable 17% growth in volume, which has been the story for the last few quarters. As a management team, and in the previous quarters I've been saying, our unwavering focus continues to be on profitability of the business and making our existing radio business more lean and more agile.
In terms of profitability, if we exclude the digital investments, which we have been doing over the last quarters, our EBITDA stands at INR 19 crores, satisfying -- signifying a robust growth of 59% year-on-year growth. The margins have improved to 21.7% against 12.8% in the same quarter last year. This has -- this accomplishment has been result of commitment of stringent cost-saving measures, which we have been doing over the last few quarters.
Our solutions business, though at a lower revenue, has demonstrated an improvement in margins from 34.8% last year to 43.1% this year. Similarly, on -- if you look at our existing business, excluding the digital and DVC, our cost base has undergone a 6% reduction, showing our strategy to make our radio business very agile and lean so that we run an efficient operations.
And that's not it. If you look at our PAT also for the first and last few quarters, we have turned profitable if you exclude our digital investments. We remain committed to invest towards our future towards digital. During this quarter, we infused an additional INR 7 crores on our digital foray, Mirchi Plus, which has been demonstrating good growth on overall all parameters. And this gives us immense satisfaction.
Our focus on sustainable profitable growth extends to our international business as well. To move away from the loss-making ventures which we had, we have closed operations in San Francisco and undertaken regulated cost-cutting initiatives in overall U.S. business. In Bahrain, we have recalibrated our operations at negotiated prices to make it more profitable. As a result, our international business has also turned profitable during the quarter. And it has supported our profitability on a consolidated level.
Our balance sheet remains very, very strong with a cash reserve of INR 248 crores as on June 30, 2023. As we have always promised that our aim remains the maximization of shareholders' value and continue to focus on profitability. And we'll continue taking those measures.
With that, I will hand over to Runjhun to invite for questions. Thank you.
Thank you, Yatish. Jacob, we can open the floor for question-and-answer.
[Operator Instructions] The first question is from the line of Deepan Sankara Narayanan from Trustline PMS.
So firstly, from my side, so what would be the contribution of platform business alone in this quarter? And what is the contribution of digital for the overall business?
Okay. Deepan, you have follow-up further question or...
Sir, this is one of the main questions for me.
So Deepan, to answer you, our digital revenue has been almost INR 7.86 crores as a total digital contribution. And then if you look at a percentage of radio revenue, it's been about 11.9%.
Okay. So in that, how much is the platform and how much is the YouTube and other digital revenue?
So the Mirchi Plus platform, which is our own app, we have still not started monetization on it. But if you look at pure digital revenues, it would be INR 5.7 crores and INR 2.09 crores, INR 2.09 crores comes from other components. And if you look at -- and if you want some more perspective, the revenues from YouTube amounts to about INR 1.35 crores. Syndication revenue comes to about INR 3 lakhs. And the M-Ping revenue, which we have been discussing with you over the previous quarter, is almost about INR 1.6 crores.
M-Ping, how much did it contribute previous quarter, Q4?
Last quarter?
Yes.
Just give me 1 second. Last quarter, it's about INR 2 crores. This quarter, it's been INR 1.6 crores.
Okay. So on the scalability of M-Ping business, so nowadays, we are able to see a lot of ads coming up in Spotify also. So like this, we are planning to extend this to further to all other Internet platforms as well. So what is the kind of scalability possibility here? And what is the kind of market share we have in this business currently?
So Deepan, to answer on this, yes, we're looking at more and more tie-ups and more and more partnership with all audio OTT players. That's what we have been aiming to. And that's the reason if you look at our performance on M-Ping, has been up. And we partner all onboard, everybody came -- most of the partners that are now onboard, which came in last part of Q4 and the current quarter. So now we have almost -- if you look at the major OTTs, we've almost covered 90% of the inventory.
From a competition point of view, there is one player which is there, which is a small player. But they're the only player in this space if you look at independent players. Now I'm not counting Spotify and their own revenues or any platform selling their own revenues. In the third-party competition, there's only one competition in this space. Having said so, the margins are very, very healthy as we speak right now. And we believe as the markets open up and because there has been -- the overall market condition were not so great. But as we speak, I think the numbers can be in 2x or 3x of these numbers.
Okay. So if not Spotify, then what are the kind of platforms are we selling M-Ping currently?
Sorry?
Other than Spotify, what other platforms are we selling M-Ping currently?
So there are many. If you look at, there is Spotify, there is JioSaavn, there is Pocket FM. There are a lot of gaming companies. So there's a lot many. There's [indiscernible]. There is Wynk. So there are many, many guys. So we have aggregated all -- most of the all audio OTT players. And our focus remains largely on the audio segment.
Okay. And on the solutions business, so the current quarter, solutions business is around INR 20.87 crores, right?
Yes.
So it has been down -- fallen from the previous quarter. So otherwise, outdoor has been doing well for most of the players. So any specific reason?
Yes. So as I -- in my opening remarks, if you remember, I put it across. Our solutions business constitutes the TV property business, which we largely do in the quarter 4. But there is always an overflow, which flows into the -- a lot of revenues flow into quarter 1 also.
And if you remember in the quarter 4 revenues, we did do our major properties, which are the Mirchi Music Awards, in various languages, simply because we believe in profitability of running a business and not just gaining revenue. The impact of that not doing the event has gone into Q1. But if you look at overall solutions business, barring that, the growth remains quite encouraging. But the good part is the margins keep improving on that business also.
Okay. Lastly, from my side, so this 7.8% growth in radio business, that is mostly from volume growth itself or -- and also, are we seeing any scope for increase in yields in near future?
So the price is -- good part is the price has stabilized. It doesn't look like going further down, and definitely not -- we don't want to look at any local pricing going down. There have been marginal growth in the metro markets. But the second frequency station and the batch 1 stations still lag behind but still very, very marginal.
I would not comment very heavily that there has been a very great improvement. Yes, you're right, the major growth has come through volumes. But at least, the price has stabilized, not going down. Compared to last year, the price is stable. If I look at 8 stations, which are the top 8 metros, the price has gone up by 1.5% to 2%.
[Operator Instructions] The next question is from the line of [ Suresh Shetty ], an individual investor.
Actually, you are sitting on cash around INR 250 crores. But why you can see the balance sheet in loan of INR 250 crores, sir?
Thanks, Suresh. Could you just specify again?
Actually, your report, you are sitting on cash around INR 250 crores in the investor presentation. But in financial statement, you had borrowings around INR 250 crores. What is the difference between that? I'm not understand that thing.
I'll ask Sanjay to help me with this answer.
So yes, you're right on the cash and cash equivalent, we have INR 248 crores as on 30 June 2023. However, what you are currently seeing as liability is not actually a financial liability. It is the impact of Ind AS, Indian Accounting Standard-related accounting impact, which we had to take as per the accounting. There is no real loan or anything or debt we have -- the company has taken, either in the current quarter or in earlier quarters. The company remains completely debt-free.
Debt-free.
Yes, it is completely debt-free. Since 2019, the company is completely debt-free.
Sir, one more question. Sir, actually, last time, there was some person calling, what is the opinions of investors in the business side, is a survey of asking the question. And so I will give us some opinions. But sir, you know Saregama Carvaan. ENIL also have so many programs conducted. The type of -- and a little bit, the type of events that you can have more profitability is -- there are actually some new conducted presentations and programs [indiscernible] small event, you will see the type of -- you can understand a little bit [indiscernible].
Okay. Suresh, can I take this question?
Yes, sir.
Okay. So I think you are mixing a couple of things. Saregama and the product launched by [indiscernible] is a completely different segment and different business. Being a listed company, we are not apprized to talk about their performance and their financial numbers. If you have any specific question and query about our performance on our numbers, you can mail it to us through the mail IDs given in the investor presentation.
The next question is from the line of Subrata Sarkar from Mount Intra Finance.
Yes. So sir, my question is what we are seeing from your performance as well as a few of your other competitors, radio ad volume is now back to pre-COVID level. In terms of volume, I am talking about. But in terms of the ad rate, we are still far below that. So what is our take on that? Are we thinking of raising the rate? And if so, from what time period we are looking for raising and at what quantum, if you can throw light on that.
Thanks, Subrata. So if you look at, yes, the business has been driven by volumes. The volumes are not for us. The volumes are higher than pre-COVID levels. We remain always the best in the industry in terms of running less volumes and more -- and playing more music. So we still have a lot of headroom in terms of the volumes available. If you look at the capacity utilization also right now, we are about 70% of the capacity we have.
On your question on pricing, yes, the pricing remains subdued. It's a function of supply and demand. Generally, pricing in media is improved in the second half of the year. And we believe some bit of pricing improvement you will see in the quarter 3 and quarter 4. We believe that we should look at quarter 3 and quarter 4. Good part is the pricing has now stabilized. It's not going down at all. And we believe it would be improved price in quarter 3 and quarter 4.
Okay. And sir, second question on the -- more of a generic question was on the digital side. So again, our performance has been improving in terms of viewership and all those things. So what is our detailed plan on monetizing it, to be very frank? What are the multiple levers we can have? And how -- and what is our priority on this side and how we are planning it?
Yes. So on our digital foray, if you just look at app -- see, there are two verticals for the digital strategy. If you look at, there is an [indiscernible] and there is an app. [indiscernible], we've been monetizing through our multimedia solutions and using that. But if you look at pure app, which is our Mirchi Plus app, we believe in building the content right now, we still have about 3,000 hours of content.
We would ideally want it to take it to 10,000 hours of content, build us a very, very good base of consumers and then look at monetizing. So we keep doing experiments in terms of looking at subscription models and both high revenues. And based on that, as we have a critical mass of content available in various languages, we will get into the monetization part. I hope that answers your side.
Yes. And sir, last question on our event and outdoor activity, what is the current situation right now? Because it was muted to be very honest. And sir, one thing, previously, you were sharing each of the verticals, like revenue or growth. Now we have margin to radio and others almost. So if you can share that data, it will help us. And as I told you, outdoor activity, are we anticipating -- Q4 was very weak. So are we anticipating real pickup on that side?
Yes. So if you look at -- yes, if you would have gone through other industries' earnings call and all, every company is now very, very bullish about doing heavy spend both in media and activation. If you read maybe Dabur or Unilever, everybody is looking at increasing the spend. And we believe we're also very bullish in the event segment that the second half will be much more -- much better than even last year and for sure, first half.
Generally, the event business is skewed towards the second half of the year. So we believe the event business should be back in the second half of the business. And on the investor deck, all the data is available. We have not merged it. It remains that -- you might have to just look at it again. If there is anything specific you want to know, please do write to us. We'll be very happy to share that.
Okay. Sir, my last question on the government ad side. So is there a traction that is coming back? Because for other media, there are some traction we are observing, number one. And number two, sir, since election is due next year, first half, so are we expecting very good ramp-up on that side in the Q3, Q4 and Q1 -- so H2 and Q1?
Yes. So there are two aspects to it. One, we believe the pricing in government, which has not been raised for the past few years, we believe that will lead to a change. So that will also have an impact on overall government revenues. We believe that should happen in a quarter or so. On the government, yes, you're right.
Whenever there's election period and a year prior to the election, the government spend goes up and also the political spend come up. In fact, not just central government elections, even the state government elections, we believe in MP, Chattisgarh, Rajasthan, we believe -- and even Andhra and Telangana, we believe there will be a ramp-up in government and political spend. So yes, in the second half, we anticipate a good amount of government and political spend to happen.
[Operator Instructions] The next question is from the line of Deepan Sankara Narayanan from Trustline PMS.
Sir, I'm just trying to reconcile revenue number for Q1. So radio is INR 67.83 crores and solutions is INR 20.87 crores. But overall, digital is INR 7.86 crores. So the rest of that contributed by which part, sir?
Yes. Once again, we'll come back to you in a moment. So basically, what happens, Deepan, that when we report the digital numbers, the digital revenue is generally distributed among many other revenue streams. So a direct addition of the numbers may not always give you the arithmetically correct answer. Let me tell you the numbers for the current quarter.
So digital content solutions in this quarter, the revenue was INR 2.75 crores. And digital components, which was available in other segments, which was present in other segments, that was about INR 2.09 crores. My digital platform, including M-Ping, et cetera, we earned about INR 3.02 crores. So total was INR 7.86 crores.
Total was INR 7.86 crores. So in that, there is -- so in the investor presentation, you mentioned the non-FCT plus the digital platform. Then you have given non-FCT separately. And if I take only the digital platform, that is around...
Yes, yes. So you're right, absolutely right, Deepan. So the non-FCT portion, which we have mentioned, that does not -- on the first slide, which has been uploaded today, will have non-FCT plus digital platform. And at that rate, we have not separately mentioned digital platform, the numbers which I have called out right now.
Okay. So rest of the digital revenue forms part of FCT revenue?
Yes, some of it, not necessarily all of them, some of them.
Okay. Perfect.
And just to clarify you, there is no FCT component in the digital component. Just to remove that out, that in the digital revenue when we report that, we do not -- there is no FCT component which is included in that.
Did you get it, Deepan?
No, still not clarified. The INR 7.89 crores plus if I add -- so the solutions include these digital components also in solutions?
Yes, yes. So given the explanation, pure digital component is about INR 2.09 crores. In our solutions business, when we do multimedia solutions to a client, there is a digital component of that also. So that is about INR 5.77 crores and also our original content properties. So when you look at solutions, there is a digital component and then there's a pure digital play also, which is the YouTube revenue, syndicated revenues and M-Ping revenues.
The next question is from the line of Ankit Patel from HSBC Securities.
My question was regarding the radio business. So compared to, say, history, FY '19 or FY '20, if we compare the radio business EBITDA generation, we are fairly off from there. So just want to understand the management's outlook in terms of how you see the radio business recovering.
What part of the recovery do you think has already come through? By when do you see it recovering? And to what extent will it actually be able to recover in terms of those three levels of EBITDA generation? And the second part is you also have cash on the book. So are you looking at any ways to bump up this radio business in any way?
So thanks, Ankit. First, I'll answer your last question. Yes, we do have cash. We keep evaluating opportunities available in the market, both in traditional and digital space. As and when we get the right opportunity at the right feasibility, we will look into it. So that, I would answer that on the investment part to look at it.
If you look at, yes, the EBITDA percentage numbers have been good. The problem has been largely the revenue. The revenue has been down because the price deals have gone down and the volumes have gone up. So as we get the right mix of pricing and volume when the business goes up in radio, you will see that number coming back to pre-COVID levels.
And also, if you look at on the event side, also the business has been a bit subdued over the last 2 quarters because of the overall economic segment. But I think the second half, we should be looking at a pre-COVID number if you want to look at -- if you want to say that.
Just a second, I'm not saying the full year basis. But on the second half, we would be bullish to look at the event business doing well. And also when you look at the commentary of all industries, everybody looking at spending monies in the second half, we believe the traditional media outflow should have a decent growth in the second half of the year.
All right. The other question, sir, was on the license fee for the radio business, which is again a fixed expense that you incur. Now if the yields and if the mobilization of new revenue over there is behind, is there any way to address that? We actually heard in other calls that there is a representation being done to ministry to look at this. So I just want to get your views on how this is likely to progress.
Yes, Ankit, you're right. There has been a representation of that to support the industry. We have been asking the government to support the industry on this front in terms of the license fee, which is a function of the license or the revenue. So there has been a strong representation. And we would want to believe that government will look into it, considering that new auctions have also been announced.
I don't know it will be soon or -- but at least, they have announced it. Part of that, they might look into it, which could be a good jump for the entire industry. And we would really, really welcome that. But it remains with the government. We have been doing our job of doing the representation very, very strongly on that.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you very much. Thank you for joining the earnings call and your continued support over the years to the company. We look forward for this continued support in the coming years also. So thank you very much. I'll hand over to Runjhun. Thank you.
Thank you, sir, for this opportunity. And we look forward to host you again. And any other questions that you have, you can reach out to us. We are happy to help you. Thank you.
Thank you. On behalf of Entertainment Network (India) Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.