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 Entertainment Network (India) Limited Q2 and H1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Runjhun Jain from Ernst & Young, IR practice. Thank you, and over to you, Ms. Runjhun.
Thank you, Rico. Good evening, everyone. Welcome to the Q2 FY '24 Earnings Call of Entertainment Network (India) Limited. To take you 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 this call, a disclaimer, please do note that anything said on this call during the course introduction and in the document, which reflects the outlook towards the future or which should be considered as certain forward-looking statements 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, ladies and gentlemen. First of all, thank you for a late evening call and being here. On behalf of Entertainment Network (India) Limited, I extend a warm welcome to all of you for joining our quarter 2 and H1 FY '24 earnings call.
I trust you have had the opportunity to review our financial results. Please allow me to provide a concise overview. In quarter 2, our top line experienced a marginal decline of 3% year-on-year. But I would say the dip in revenue can be attributed to the non-FCT segment partly due to the shift in the festive season and the absence of a significant exclusive event that occurred last year. Nonetheless, the gratifying aspect is a significant improvement in our overall profitability, thanks to our diligent cost rationalization efforts over the last 6 months.
I'm pleased to share that we continue to observe an upswing in radio volumes and strengthen our dominant position in the radio industry. In Q2 FY '24, our volume market share is now at 26.6%, marking an improvement on a year-on-year basis of 120 basis points. Regarding profitability, our prudent and consistent cost rationalization endeavors resulted in cost savings of approximately 4% to 5% during the quarter. In consideration in the quarter 1, it's also.
Furthermore, we have deliberately focused on high-margin opportunities while selectively stepping away from low-margin deals in the market. While this strategy may temporarily impact our top line, but we believe it's a crucial step for sustaining our profitable market leadership in. As a result, our EBITDA margins, excluding digital, improved to 26.6% in the quarter. from 24.9% in the last year quarter 2. And if I look at on a sequential basis, the last -- on the sequential, we got 21.7%. So you can see it's almost about 120% on -- or year-on-year, and on a sequential basis, almost about 500 points -- basis points.
To help EBITDA margins for non-FCT business improved from 39.8% (sic) [ 39.3% ] in quarter FY '23 to a whopping 47.7% in quarter 2 FY '24. Our commitment to expanding our digital business remains unwavering with digital now contributing almost 10.1% of our FCD revenues in quarter 2 FY '24. This is up from 9.7% last year. Digital revenues for the quarter totaled to INR 7.1 crores.
You may have noticed our recent disclosure regarding the Board's approval to execute the business transfer agreement with Gamma Gaana Limited relating to the business of licensing music audio content and hosting and streaming services under the name Gaana. This aligns with our digital transformation strategy, and we will share further details once the deal is executed in the future call. Our dedication to sustainable and profitable growth extends to our international initiatives as well. I am delighted to report that we secured a revised license fee in Bahrain, enhancing the profitability and sustainability of our operations there.
PAT for company excluding digital was reported at INR 6.9 crores in quarter 2 FY '24 versus a loss of INR 8 crores in quarter 2 FY '23. After a span of 3 financial years in quarter 2, we have registered a positive PAT of INR 3.7 crores at a consolidated level. Our balance sheet remains robust with cash results totaling to INR 251 crores as on September 30, 2023.
Looking ahead, our primary objective remains the maximization of shareholder value, and we'll continue to take necessary steps to sustain our profitability in. We anticipate that the upcoming festival season will provide a significant boost to the overall media industry and to our business as well.
With that, I would like to invite any questions you may have. Thank you very much.
[Operator Instructions] Our first question is from the line of Deepan Sankara from Trustline PMS.
So firstly, from my side, sir, can you please break down this solution revenues in terms of digital platforms, outdoor and MMS revenue for us?
Yes, Deepan, just a moment. So if you look at solution business, about INR 16 crores is multimedia solutions, activation income is about INR 4.6 crores, digital income is about INR 60 lakhs and other digital platform is INR 3.5 crores, totaling to about INR 27 crores.
Okay. So the maximum impact for the quarter has come from these outdoor revenues dropping for us?
The activation business, what we call the event business and concert -- event and concert. Otherwise, all other businesses have done well. To give you a perspective, last year, the festival was in September and October, the Diwali was in October. So the festival started earlier. This time Diwali being in the November the festival shift has also led to a reduction in event and properties. And also, there was a significant big event last year, which was a 75th year of independence, and we had an exclusive campaign with regards to that. So that led to a drop in the event business for us this year.
Okay. Okay. Okay. And also about this Gaana recent announcement, so what is the rationale behind this? What kind of synergies we have with that business? And in terms of -- we could see that there is a huge loss-making entity. So how this will help us? So that we need more clarity on this.
Sure. Deepan, though I'll be able to answer all this once we sign the BTA. We are still not done. We just got a principal approval. Having said that, what we see losses of Gaana are more than 2 or 3 years back. The strategy, what we want to adapt is very different. I can only give confidence that we are not in a cash burn business. Having said that, I would request if you could wait for some time until we do the BTA and in the future calls will come with the [indiscernible] strategy and present to you all.
[Operator Instructions] Our next question is from the line of Subrata Sarkar from Mount Intra Finance.
Sir, just a couple of questions. One is on the -- like there is a -- recently, there is a -- government has revised advertising rate for like FM Radio. So what is your take on that?
And second, can you share like one data like during peak COVID level, like what percentage of advertising revenue used to come from central government and government as a whole? And currently, what is that percentage? Any ballpark number may also help us. And giving this upcoming election, what kind of traction we are expecting there?
So thank you. So yes, the government, which is called the DVC rates have been revised after a long time. So thanks to the ministry for listening to the radio stations. The rate has been in the range of -- the increase has been in the range of 50% to 60% across various stations.
To answer your pre-COVID level, government used to spend a lot and the contribution at the industry level used to be in the range of 13% to 14%, which came down post COVID in the range of about 6%, but we believe with elections around the corner for the center elections and the state elections, the spend should go up. And we would be optimistic that it could go up to about 9% to 10% at the industry level.
Okay, sir. Sir, second question, sir, is there any new update or anything like including FM channel in the new mobile, is there any regulation, any update on that side, sir?
So recently, 1.5 months back TRAI has come with strong recommendations, 4 specific recommendations and they have given to MIB. I know -- I can specify -- state the recommendations. I will not be able to comment on when will they come, because that's the privative of the Ministry and the cabinet. The 4 recommendations where one was the decoupling of license fee into a revenue share rather than from the OTF, that was the one. The second was FM tuners as compulsory on the smart phones. The third was they wanted to provide a COVID package by extension of licenses to about a couple of years. So this was the major recommendation and the fourth one was allowing new channels -- news broadcast on FM radio channels -- on the private FM radio channels.
So these were the 4 recommendations by TRAI. We welcome them, and we hope to hear from the government on this recommendation soon.
Okay. And sir, generally, what percentage of quarterly revenue comes due to festive like additional add? Like as this month has been shifted. So what kind of the revenue slippage we can expect that has happened in September quarter and used to accrete in December quarter?
Yes. So the way we look at it is, generally, a media industry is about 45:55 ratio H1 and H2. When a shift happens a few percentage points move to H2. But if you look at it quarter-on-quarter, it could be at least 10%.
Our next question is from the line of B. Suresh from [indiscernible] Financial Services.
Sir what is the present companies -- what is the position of net debt? And future expansions or any takeovers of any other companies? Any planning now?
Suresh, our -- we are a zero-debt company. We don't have any debt on the books right now [indiscernible] different plans. As and when something happens, we'll be very happy to share with the investors. As of now, we have just spoken about Gaana. Other than that, there's nothing on the table right now.
Again, zero debt, sir?
Yes, zero debt.
What is the cash position, sir?
We have INR 251 crores cash as on 30th September 2023.
[Operator Instructions] Next question is from the line of Chetan Thacker from ASK Investment Managers.
I just wanted to get a sense from your ad rates. How do you see that going ahead more from near term and also from the next year perspective?
And the second question was more on the digital revenue side. We've seen this number being stuck in the range of INR 6 crore, INR 7-odd crores quarterly. So how should we look at that number from a more 2-, 3-year perspective?
Thanks, Chetan. The first question on -- I'll answer the second one. Yes, the digital revenues for the last few quarters, as we said, we were building our app, and we are more focused on developing the content and getting organic growth in the subscriber base. So that has been our strategy. We never wanted to just go blindly burning marketing dollars and getting subscribers and then starting advertising. So for us, if the critical was to look at more from a stable organic growth in subscriber base. So that's been the strategy for the last 1 year when we started our own platform on digital.
But if you look at from quarter-on-quarter, the revenue growth has been quite nice. If you look at last year on digital platform, we did only INR 80 lakhs. This year, it has been about INR 3.24 crores. But yes, overall numbers have been INR 7 crores, INR 7.5 crores. So it's sustainable and stable revenues. Our digital foray on Gaana will also further augment the revenue based on this. And as I said, once we sign the BTA, it will be much more detailed strategy on the digital. And I believe our focus -- or being a very digital focus and digital first company in the next 2 years remain, moving just from a fully playing radio company to a multi-platform, multi-entertainment company. So that remains and in 2 years, you will see a substantial increase in the revenue also.
Okay. Sure. On the ad rate bit, sir, how do you see that panning out?
So on the ad rate, yes, it's a very difficult time for traditional media companies and I would take this obviously not to talk just about radio, but if you look at print, television, everybody rates have been very, very suppressed looking at the market conditions in quarter 2 and it is a function of supply and demand and plus competitive pressures also. Unlike our entertainment GEC channel on TV, the radio doesn't have a as a volume cap. And you see competition going up on volume side. So as long as there is a cap coming on volume, people will fill volume and there is still a headroom available. So it's a function of both as much as we would want to look at yields going higher, it gets suppressed because of the economic conditions and also competitive pressure.
Having said that, generally, rates go up in the H2. My submission would be that for the next couple of quarters, we will feel -- the growth will come through volumes and not through price. We expect in the -- after 2 or 3 quarters, the price will start looking up. Because as we see competition, volumes going completely capping out, they will not be in a position and that's when you can look at it. So far, the strategy for growth has been largely volume-led in a difficult economic conditions. Having said that, we believe H2 should look at much, much better.
Understood, sir. And sir, any update on the ad product that you were supposed to launch? Any update on that front?
M-Ping we launched this year -- this quarter, we have done about INR 3 crore revenue on M-Ping itself, which was the audio app that what you're saying?
Yes, yes, sir.
Yes. So we did, that's what the INR 3 crores of revenue -- INR 3.2 crores of revenue we have done on M-Ping this quarter, which was not there last year, so it's a straight benefit. It's been a great journey in the last 2, 3 quarters. Our ambitions are much higher. And app revenue is not INR 3.2 crores, it is INR 2.2 crores. So that was getting it's INR 2.2 crores this quarter. Ambition is much, much higher. We have seen a lot of traction in the market and we believe we can leverage this product with our huge client base of almost about 10,000 clients a year and a strong sales team. These numbers could go up in the coming quarters also.
And sir, where do you record this revenue? Does it go into the digital bit? Or does it sit into the non-FCT solution bit?
It goes into the digital, because this is pure digital audio entertainment.
[Operator Instructions] Our next question is from the line of Ketan Athavale from RoboCapital.
Most of my questions have been answered. I just wanted to know if we are bidding to acquire Big FM? And if yes, then at what revenue or EBITDA multiple are we bidding?
Yes. So to answer, Ketan, I can only submit that we have put our bid. We are waiting for the discussion to come on board. I would not be in a position right now to answer this query until we suppose we win it, and then we can put it on record. Right now, yes, we have full interest, and that's the only thing I could address you right now.
[Operator Instructions] Our next question is from the line of Chetan Thacker from ASK Investment Managers.
Sir, just a follow-up on the solutions business, typically, what kind of bump up do we see in festive on the solution bit?
Yes. So event business is largely H2 led, because -- simply because the quarter 2 is marked by rain monsoon across the country. But if the overall media revenues are generally 45-55, event would be 30-70.
Understood. So we should expect a fair degree of that revenue flow to start coming into the H2 numbers as we move ahead?
Yes. We're also very, very optimistic on that.
Sure. And sir, any time line by which you expect to hear back from the ministry or it will come up when it comes up?
It's a good question. We would like to hear tomorrow, but you know that they [indiscernible] process, to be fair to them, it's a process, the ministry looks into it and then it has to go through the cabinet. Our process state could be a few months from now, and it should happen, because beyond that we will get into election time. So let's hope it comes as soon as possible.
Sure. And sir, in case the extension happens on the license period, will we again recalibrate the write-offs that we had taken earlier, last year when we had essentially written off based on our new expectation and estimates on how much revenue the large licenses would flow in?
Chetan, the only thing I can say that it is too hypothetical right now, we have not gauged it, because it's still a recommendation. And you don't know if the recommendation will stand the time and cabinet approves it. So we have not thought about it in the extension times.
[Operator Instructions] Ladies and gentlemen, that was the last question for the question-and-answer session. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you. I extend my heartfelt gratitude to each and every one of you for this continued support you have provided to the company throughout the years. I would reiterate that the last quarter results have been very, very encouraging for us, and we remain focused on profitability and maximizing the shareholders wealth. Above all the cornerstone of our journey remains profitable growth and the compass guiding our every move.
Lastly, I would like to wish you and your family a very, very happy Diwali and a prosperous New Year. Thank you very much.
Thank you. On behalf of Entertainment Network (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.