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 FY '25 Earnings Conference Call. Please note that this conference call is being recorded. [Operator Instructions] I now hand the conference over to Ms. Runjhun Jain from EY Investor Relations. Thank you, and over to you, ma'am.
Thank you, Siddharth. Good afternoon, everyone. Welcome to the Q2 and H1 FY '25 Earnings Call of Entertainment Networks (India) Limited. To take you through the results and answer your questions today, we have the management team from the company represented by Mr. Yatish Mehrishi, Chief Executive Officer; and Mr. Sanjay Ballabh, Chief Financial Officer.
The financial results and the presentation have been uploaded on the company's website and on the exchanges. Should you need any further information, you can talk to us at EY IR. Before we begin, I would like to remind you that today's discussion might include forward-looking statements based on the current expectations and assumptions. These statements are subject to risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to update these statements after today's call.
With that said, I will hand over to Mr. Yatish.
Thank you, Runjhun. Good afternoon, everyone. I would like to extend a warm welcome to all of you joining us for the Entertainment Network (India) Limited Q2 FY '25 Earnings Call. I hope you have had a chance to go through our financial results, and I would like to take a few moments to walk you through the highlights of our performance in this quarter.
In quarter 2, we recorded a domestic revenue of INR 110 crores, marking a healthy 9.4% year-on-year growth. This momentum was primarily driven by our digital and non-FCT segments, which posted impressive year-on-year growth of nearly 300% and 3.1%, respectively. I will dive deeper into our digital business shortly.
Our EBITDA for the quarter, excluding digital, came in at INR 22.5 crores with a margin of 23.2%. Profit before tax rose to INR 11.2 crores, up from INR 8.5 crores in quarter 2 FY '24.
Starting with our business segment. The radio industry faced a mild slowdown this quarter due to volume challenges that impacted our FCT revenues. Nevertheless, we retained our leadership position in FCT with revenue holding steady at INR 73 crores compared to INR 73.3 crores in Q2 of last year. Importantly, pricing remained stable this quarter, and we anticipate a recovery in volumes in the upcoming quarters. Our non-FCT segment showed a 3.1% year-on-year growth, generating revenue of INR 24.2 crores.
Despite limited industry events, we achieved this growth through our own successful IP events such as Spell Bee and Mirchi Freshers, which received a strong response. Our focus continues to be on high-margin events rather than high volume of events.
On the digital side, we discussed in our last earnings call, Gaana's annual subscription price was revised from INR 299 to INR 599, effective 1st July 2024. Despite this increase, Gaana has maintained a solid traction, contributing a robust digital revenue of INR 15.4 crores this quarter. This represents 21.4% of our radio revenues, a notable increase from 10.8% in quarter 2 of last year.
Digital spending reduced to INR 12.8 crores in quarter 2 from INR 15 crores in quarter 1 of this year, and we expect further efficiencies in the quarters ahead. Our international markets continue to be EBITDA positive, contributing INR 1.4 crores this quarter. As of 30th September 2024, our balance sheet remains strong with a cash reserve of INR 391 crores. To sum up, our focus remains, as always, on driving sustainable growth and enhancing shareholder value.
Thank you for your attention. And with that, I would be happy to take any questions you may have.
[Operator Instructions] Question is from the line of Deepan Sankara Narayanan from Trustline Holdings Private Limited.
So firstly, what is the kind of volume decline we have seen in radio business? And what is the key reason for that decline? And have we lost any market share in terms of volumes in...
Thanks, on the volume share, we have not reduced any market share. The drop has been largely the industry-wide slowdown. If you look at all industries, be it FMCG, be it auto, there has been a considerable slowdown in quarter 2, which led to limited business coming in. But having said that, we have held our market share very, very strongly. So we continue to lead our market share at 24% upwards.
Okay. Okay. And can you provide some breakdown on the solution part of the business, which has now degrown 9% year-on-year, so which part of that segment has not grown well?
So our IP business, which is the event activation business has grown really, really well, even though we had some erratic flood and the Calcutta situation, but the IP business, which is the event activation business has done really well. The multimedia solution, which is your advertisement led, that business has shrunk a bit.
Largely, it's been -- the degrowth, if you see has been led by one client, which we had last year and it did come in this year. But having said that, the overall industry muted advertising growth has led to a degrowth of the multimedia solutions. Otherwise, our IP business has grown very strongly at 59%...
And so how has been the festive season so far for us in terms of radio business? Are we seeing really pickup in volumes happening as compared to last year?
So the season has been quite good. We expect with the wedding -- very strong 48 lakh wedding happening this year, we believe with the wedding and the year-end business should do well. That's what we're hearing from guidance. If you look at other industries also, if you look at 2-wheeler sales, Bajaj Auto, you have recorded good numbers in October. So we believe even FMCG should see uptick. We worried with the commentary on the urban side of the urban growth.
Having said that, I think the wedding season should keep us in state for a growth in the radio business. Though we need to be cautious about heavy government spend, which happened in the last quarter leading to the election, if that could be a deterrent on the growth, it could be if the government spend doesn't come in on the same levels.
That base was there in the previous Q3?
Q4. Largely Q4. I'm not doing a quarter-wise guidance. I'm just telling you about how we're looking at H2. The festive was quite decent. And we remain optimistic with the view wedding season coming in, and the year-end business, there's always an uptick but we are also cautious about the Q4 government spend, which happened quite heavy, which generally happens leading to the election.
Okay. Okay. A lot of radio industry players have highlighted that real estate business has degrown quite sharply. So are we seeing some improvement in that segment happening for radio business?
So for us, real estate has been not very, very bad. Some pockets have not done well. Some markets. So I would not say real estate generally has been very bad, but some markets like Jaipur, Indore has not performed as well as it always used to perform.
Okay. And can you please share some highlights on Gaana revenue performance? And also this -- what is the current paying subscriber base for it.
So, Deepan, I was not able to -- I'll be happy to share you the exact subscription numbers when we meet separately. But to give you a perspective, we have grown on subscription quarter-on-quarter. Our revenues are growing. We took a massive price jump from a INR 299 to INR 599 doubling of the price. But we have seen our upgrades and renewals happening at a constant rate, and we are very happy with the quarter 2 performance on Gaana. And we believe the next 3, 4 quarters, we will see much stronger growth also coming into that.
Okay. So earlier, we were around INR 9 crores to INR 10 crores quarterly run rate. So is it still at the similar level or it has increased from that?
This year, our digital revenues are INR 15 crores, INR 15.2 crores.
Inclusive of others as well, right, Gaana...
Inclusive of others.
[Operator Instructions] Our next question is from Aakash the line of who is an individual investor.
So I would like to ask, what is the volume growth on a Y-o-Y basis, sir?
So volume this quarter has declined, as I just was talking about with the way the overall economy and all the industries have performed, we have seen a little bit of traction -- downward traction on the volume growth. So it's about a mild 2.9% degrowth on the business on the volume side.
Okay, sir. And what is our inventory utilization for this quarter?
Sorry?
Our inventory utilization for this quarter?
We are at about 74% against last year of 77%.
74%, okay, sir. And sir, what is our effective rate growth if we compare to the pre-COVID level and on Y-o-Y basis, effective rate?
Prices remained stable. But if you look at from a COVID perspective, it is still lower than pre-COVID levels, which remains across the media industry, Aakash.
Okay, sir. And sir, if we talk about Gaana, can you tell something like what is -- is the margin steady if we compare to the last year.
So as we said, we took Gaana where the product was not very great after 2 years of the way Gaana was handled. So the first level for us, our job was to get the product right. And if you've been -- I'm assuming if you are a Gaana user, you would have seen the better UI, all content coming. We didn't have all the content also 1 year back.
Now we have all content if you compare against competition also indexed to it, we'll have all the content available on the Gaana platform. Even the user interface has improved drastically, the recommendation engine. So we have invested a lot in that.
Having said that, our expense quarter-on-quarter has reduced. Last year, we spent almost about INR 15 crores on Gaana, but this quarter, we have spent about INR 12.8 crores on our spending. So that's come down, and we are seeing sustained growth on the subscriber and our revenue numbers also in Gaana quarter-on-quarter.
[Operator Instructions] Our next question is from the line of Narendra from RoboCapital.
Given the subscriber traction that you are seeing, would it be possible to comment on a rough ballpark on where we could end the year as on Gaana in terms of revenue?
So we believe the way we're trending right now on the numbers per se, it would be better if we can do a one-on-one discussion on it. But the way we're trending around, it should be around INR 60-odd crores type of revenue on a yearly basis.
Okay. So we are aiming to maintain the current kind of revenue.
On a full year, yes. We'll maintain that. See, the whole idea is as we increase price, all subscribers don't move to INR 599. Whenever they come for renewal, they will move to a higher price. So that jump also will happen over a period of time.
Okay. So has the price increase dented the subscriber growth? Have we seen any attrition or anything like that?
Not much. Actually, Narendra, in fact, if I look at the price jump what we have taken and the drop, I think the price jump has helped us a lot. So we have almost doubled the price, but our upgrades and renewals percentage is almost static, almost stable.
Okay. Okay. And do we expect to breakeven Gaana anytime soon? I think we are EBITDA positive this quarter. So what is the trajectory there?
So as we believe it will take us at least 6 quarters to breakeven on Gaana because we need to improve on the tech side, there's some investment going on and getting all the content. We have just increased price. As I said, the blended price is still lower. When everybody comes at INR 599, that is when the magic number happens. So as much as we're lacking it, we also would want to break even as fast as possible, but we believe around 5 to 6 quarters more will lead to breakeven.
Okay. So as per my understanding, when your whole -- the INR 399 -- INR 299 kind of cycle gets over and all the subscribers move to the INR 599 pricing, that at that number, right?
Yes, plus will grow the subscriber numbers also. So both put together. So it might -- so this I'm thing at a full year basis, maybe on a ARR basis, it could be a little earlier also.
Okay. Okay. Great. And what kind of subscriber growth are we seeing Q-o-Q, Y-o-Y? Any number that you could provide that would be helpful.
Maybe you could speak to Sanjay separately, he will share the numbers.
[Operator Instructions] Our next question is from the line of Harshad Gadekar from Elara Securities.
So just wanted to know how we should think about in terms of EBITDA margin going ahead? Are we seeing any stability? Of course, that would be a function of the top line as well. But in terms of production expenses and other, how we should think?
On the radio business, you're saying or overall, you're saying?
Overall.
Yes. So the way we look at the -- when radio business remains a muted growth, it puts pressure on the margin because radio business is much more profitable at overall level. So that margin has dented us some bit of margins. Otherwise, we believe our margins, but what we have done well is held on our cost numbers. So our cost in terms of people cost and other operating expenses have been in much control, and we have taken due care about it also.
So from that perspective, we believe we will remain in the same EBITDA margin numbers as last year, if not more right now. And it will depend on how radio growth pans out in the balance of the year.
Okay. And any color on how we are strategizing in terms of Gaana, given the competition in the market. So just wanted to know if you can share any strategy what exactly we are working, what steps we are taking?
Sure, Harshad. So see, the first 6 months for us were critical to get the product at benchmark levels with competition. And you know we have global competition of Spotify, YouTube and even Indian players like Saavn. But having said that, we have done really well in the last 6 months to improve our product interface, the experience and getting all content on board. So first 6 months went in that.
Having said -- the other point, which is more heartening is I don't think we could have come -- taken over Gaana better time than this. If you look at the industry perspective, the entire industry is moving towards subscription. If you would speak to any music label or any anybody else, it's looking at that everybody is looking at making this business purely subscription and not drive through advertisement.
Gaana went paid -- we had paid 2 years back. Wynk has closed down, which was sort of a free service. Resso, which was free service, went paid and then closed down. We are seeing a lot of restrictions on free model coming on Spotify, on Saavn. Even on YouTube, there are a lot of restrictions for a free product. So it helps the entire ecosystem is working towards driving subscription. And that's where the gains are happening for us who are a pure subscription model.
So you have seen gains happening in industry-wide. Industry-wide, the subscriber numbers have gained. We have also gained on subscribers. And I think it's the best time where everybody, both on the music industry side, artists and the streaming players believe the only way ahead is to be the streaming market, is to be on a subscription economy.
And if you look at Spotify global results also today, it shows very clearly there is a way to make money through subscription. They have also grown globally, and that's the way the business will go ahead.
So our strategy is going to be very clear. We will play on an India-wide strategy, cognizant of the fact that our radio strength lies in knowing the Indian market across the Indian market, all languages. We are present in 63 markets. understanding the nuances of music, choices, consumer behavior puts us in a good state.
We have priced ourselves very competitively against all other players, which also helps us. And we are seeing the price elasticity has not been so much in the case as we increased price from INR 299 to INR 599. And we still remain competitive on pricing with all other players.
So having said that, with our media might on being radio, our radio jobs being influencers, our relationship with the artist community puts us in a really good state in a business which is subscription led. And we believe this business has to be subscription-led only. And with all players also believing in it, it helps us a lot.
Got it. And is it possible to share any ballpark range in terms of market share of Gaana respect to overall music streaming industry?
So I would -- because we are paid and others are not paid, so it will not be a right number to look at it. Just to give you a ballpark on paid subscriber numbers, we will be around a market share of about 15% to 20% on the paid subscription basis, I'm saying.
[Operator Instructions] Our next question is from the line of Rahul Goenka, who is an individual investor.
Just wanted to recall that Airtel subscription-based service, Wynk, they said that they will close down. And I believe they have a turnover of approximately INR 100 crores to INR 200 crores with them. So with them closing down, do you think so there will be traction in terms of Gaana gaining a little bit more market share and their revenues increasing.
Yes, Rahul, thanks for the question. Yes, it helps. But to just give you some perspective, Wynk was more a free service, and it was more a bundle to their subscribers, and their revenue were largely led by advertisement rather than subscribers. But a free service getting closed down always helps a service which is going to be paid.
So definitely, Wynk closing down helps us a lot. But just to clarify that the entire revenue was not from subscription, it was also from advertising revenue. There was some bit of advertising revenue also into it.
[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, everyone, for joining this call. We remain committed to enhancing shareholder value and growth and driving growth.
We can take one question of Deepan, we can take that question.
Sure, sir. Our next question is from the line of Deepan Sankara Narayanan from Tine Holdings Private Limited.
Sir, any update on...
Deepan you're not audible. Can you please switch to handset mode.
Am I audible now?
Yes, yes.
So any update on government approval on this TRAI recommendation on radio industry. So how has it been progressing?
So Deepan, if you have recently seen the announcement by government on new auctions coming up in 234 cities, where they have considered one of the TRAI recommendation of decoupling the license fee from the onetime license fee to just on variable point of 4% of revenue. So they have considered in the new auction, they have considered, but they are yet to take for the existing radio stations.
So we are hopeful from that perspective that the TRAI recommendation should get or maybe may get in consideration in the coming quarters. And one of the state minister also spoke about the new segment coming up in one of the forums he was speaking. So we believe -- we remain optimistic on that, that the TRAI recommendations could come in, in the coming quarters, having in the new auction, they have looked at it. So we believe for the existing registration also, they might consider.
Okay. And what about this news as a service and also this mandatory inclusion of radio in smartphones?
So two things happening, Deepan, on the news, as I said, the state minister did speak about it in one of their forums recently that they might allow news per as per TRAI recommendation, but it was one of the forums, so I can't comment on that, but we are hopeful that it might get cleared.
On the smartphones, we're still working, and we are hopeful with the same minister handling both the telecommunication and MIT, we could have some headway on that. We have put our representation on it. TRAI has recommended it. So we believe that could happen.
Okay. And some of the players have taken yield increase during the Q2. So are we also seeing such possibilities in -- during festival season of yield increase for us?
Deepan, I would be very surprised if anybody has taken a price hike in quarter 2 we have remained stable and we are the most premium player. I would be really, really surprised if anybody has taken a price hike might be going down only on the price in the quarter 2.
In quarter 3, as I said, because of the festive shift between October and November, we might see a muted November because last year, Diwali was mid-November. So that could also put some pressure on it on the volumes. So it may not be as healthy as or a healthy increase. There could be a slight change on price or it might remain stable.
Sir, if you would like to give your closing comments?
Thank you, everyone, for joining the call. As we said, we remain committed to a strong profitable growth and enhancing shareholder value. Thank you once again. Have a good day. Thank you.
Thank you. On behalf of Entertainment Network (India) Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines.