GTPL Hathway Ltd

NSE:GTPL

Earnings Call Transcript 2023-Q2

[Operator]

Good day, ladies and gentlemen, and welcome to the Q2 FY '23 Results Conference Call of GTPL Hathway Limited, hosted by Emkay Global Financial Services. We have with us today Mr. Anirudhsinh Jadeja, Promoter and Managing Director; Mr. Piyush Pankaj, Business Head, CATV and Chief Strategy Officer; and Mr. Anil Bothra, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, sir.

[Pulkit Chawla, analyst]

Thank you, Michel. Good evening, everyone. I would like to welcome the management of GTPL Hathway and like to thank them for this opportunity. Without further delay, I shall now hand over the call to the management for their opening remarks. Over to you, gentlemen.

[Aniruddhasinhji Jadeja, executive]

Thank you, Pulkit. Good evening, everyone. I am pleased to welcome you all to our quarter 2 and half year ended FY '23 Earnings Conference Call. The company GTPL Hathway, is driven by the very purpose of being present at your service through its digital cable TV distribution and high speed broadband products offering. Halfway into 16th year of our operation, I'm happy to share that we continue to be #1 service provider in digital cable TV service in India and for broadband service in Gujarat. The company has registered a strong performance in H1 FY 2023 by growing 10% revenue. Efforts are being made towards aggregating smaller MSO and additionally expanding the broadband penetration. The broadband segment presented a great opportunity to grow due to constant increase in demand for wireline broadband and increasing data consumption trend patterns. While focusing on growth, we also continue with a net debt free company.

I now hand over to Mr. Piyush Pankaj, who will take you through business and financial update for the quarter.

[Piyush Pankaj, executive]

Thank you, Mr. Jadeja. Good evening, everyone. I hope all of you are safe and healthy. I'm pleased to announce the business and financial performance of GTPL Hathway for quarter 2 and H1 FY '23. Our CATV subscriber base as on 30th September 2022 stands at 8.6 million. Paying subscribers for CATV stands at 8 million. On a Y-o-Y basis, the increase in active and paying CATV subscribers is 550,000 and 650,000 respectively. We remain the largest MSO in India riding on our quality services and consumer-centric products and services. We expect to grow our digital cable TV business by aggregating smaller MSOs and additionally, expanding the broadband penetration to digital cable TV base.

In the broadband business, we added 135,000 new subscribers on a Y-o-Y basis and 25,000 new subscribers on a Q-o-Q basis. Home pass subscribers stood at 5 million as on 30th September 2022, of which 75% are available for FTTH [indiscernible]. The broadband ARPU for quarter 2 FY '23 stood at INR 450. The average data consumption per customer per month stood at 300 GB, registering a 33% increase Y-o-Y. This segment continues to grow as data consumption is increasing due to push for digital growth, digital education, push for hybrid work culture, increased use of social media, et cetera.

I'm proud to announce that we have been recognized as the Economic Times most iconic brands of 2022 by the Economic Times. The award is third in our list of accomplishments this calendar year. After the company was listed among India's growth championship 2022 published by Economic Times and Statista and among the high-growth companies Asia Pacific 2022 published by Financial Times. These awards are a testimony to our relentless customer-centric effort.

Moving on to the financial performance. On a consolidated level, excluding EPC contract, in quarter 2 FY '23, revenue grew by 10% Y-o-Y to INR 6,620 million. The CATV subscription revenue stood at INR 2,751 million. The broadband segment delivered robust growth of 19% Y-o-Y and revenue stands at INR 1,198 million, led by healthy subscriber additions. Consolidated EBITDA for the quarter stood at INR 1,383 million with a margin of 20.9%. Our continuous efforts to deliver in our balance sheet and maintaining our net debt-free status is seen in our finance cost, which has reduced by 30% Y-o-Y and 5% Q-o-Q. Our borrowings reduced by INR 335 million due to repayment of loan this quarter. PAT for the quarter stood at INR 459 million, up 6% Y-o-Y.

We can now begin with the question-and-answer session. Thanks.

[Operator]

[Operator Instructions] The first question is from the line of Pratiksha from Aequitas Investment.

[Pratiksha Daftari, analyst]

Good evening. Thank you for the opportunity. My first question was on the cable TV side. We've been seeing some softening of ARPUs since a couple of quarters now. So I just wanted to -- your view on the outlook on ARPU.

[Piyush Pankaj, executive]

Hi, Pratiksha. Yes, ARPU, you can say that it is at the same level as it was in earlier. We are not able to please the ARPU and we are looking forward that we are going to increase the ARPU as we are entering into new markets and still we are maintaining our ARPU at the same level because at present, we are entering into the market where the average ARPU is less than our average ARPU in those markets, but we are increasing our ARPU in our current market, so that we can maintain our same ARPU. But once we are going to stabilize in the new market, we are going to take up the ARPU. So I would say, on a Y-o-Y basis, you will see that growth in the ARPU by March '23 or by June or September '24. By that time, we are going to be stabilized in the new markets.

[Pratiksha Daftari, analyst]

Okay. So stabilized -- so when we say stabilized, we're looking at around 120 levels, right?

[Piyush Pankaj, executive]

Yes. We are at 120 levels right now, 190, 120. That is because we are going into the markets where the ARPUs are less right now. We are going to increase those ARPUs in new markets also. In old markets, we are increasing our ARPU, and that's why we are able to maintain the ARPU right now. But once those new markets are going to get stabilized, it will take 6 to 12 months, we will start seeing that the ARPU is increasing.

[Pratiksha Daftari, analyst]

Okay. And if you could just elaborate a little about the growth plans in subscribers in this business because we've been in a very volatile trend here. And also if you can comment on the gross addition and net addition and return on quarterly trend.

[Piyush Pankaj, executive]

Yes. So as I have stated that on a Y-o-Y basis, we have increased our paying subscribers by 650,000. But still, the revenue for some of the subscribers is going to start from quarter 3 and quarter 4. So we'll start seeing it in the revenue side also, the growth. We are still maintaining that we will do 1 million per annum, which is the target on which we are working towards. Already on a Y-o-Y basis, 650,000 we will get, we have to do more around 0.5 million to 600,000 more than this year, and we have to continue that trend going forward also.

Yes, on the churn side, we will say that churn is from last year, it was a bit under control. Last year due to COVID and all, it has significantly high. But we have controlled it, it's -- we have tapered it down. But still pre-COVID era, the [ratios] is still higher than the pre-COVID era, I would say. So we are trying to [get] more of that so that we can show more on the net addition side. And we are confident that we will get those results.

[Pratiksha Daftari, analyst]

Okay. And on broadband front, so how do I look at quarterly additions every year. I think you've seen some -- the pace of growth has come down drastically in the last 2 quarters. So how do you want to describe the outlook here?

[Piyush Pankaj, executive]

See, earlier, we have given an outlook that between 40,000 to 50,000 per quarter we will do. First quarter we did around 35,000, this quarter it is 25,000 addition, mainly because of the monsoon. It was an extended monsoon for the areas of the Gujarat for us. Mainly, it happened for 1 month, 1.5 months, but it was like all 3 months heavy rains were there in Gujarat. And that has affected a bit of our net additions. We are hopeful that we are going to cover it in the next 6 months time, and we will come back to the same projections which we have given.

[Pratiksha Daftari, analyst]

So this is about roughly close to million subscribers by the end of the year?

[Piyush Pankaj, executive]

Yes. We are at 870,000 right now. We are looking forward that we are going to add around between 80,000 to 100,000 in this financial year. So close to 1 million.

[Pratiksha Daftari, analyst]

Okay. Okay. And how about home passes like what is the -- do we have any targets set out here? I think in the last 2 quarters, H1 [indiscernible] 40,000. So how do I look at growth plans here on a home pass basis?

[Piyush Pankaj, executive]

Home pass, yes. As I said, we have planned it to ramp it up, but because of the rain we are not able to ramp it up. If you see we did 150,000, 150,000 last 2 quarters. From 4.7, we have come to 5 million right now. We are looking forward that we will close near, somewhere around 5.5 or 5.6 million. So we are planning to do double that in the next 2 quarters.

[Pratiksha Daftari, analyst]

Okay. And if you could just comment about the acceptance of Genie box. How has that been going? And I understand that, that should have improved the margins that really is not showing in the numbers. So is there anything else out there that is taking time?

[Piyush Pankaj, executive]

Genie box, you can say, last 6 months, we have seated around 10,000 added. As I say that as many customers have already subscribed to some of the apps, and the rent should go for hybrid upon completion of their existing subscription. And second, on the market feedback, which is -- we have to come with the lower validity pack and introduce smaller bundles of OTT apps. We have not baked that because of the rains and all. [indiscernible] we should wait for that for this launch, and we are launching at the time of best after Diwali where we are going to get 2 type of products. One product is with the hybrid box. And one product is going to be for my existing customers who can opt OTT on [indiscernible] and with broadband and with cable TV, both bundled together. So all those launches are going to happen around Diwali, and we are hopeful that we are going to get tractions due to this and we will increase our horizon in terms of customers based[indiscernible].

[Pratiksha Daftari, analyst]

Okay. And lastly, how much CapEx has been incurred in each division in this quarter?

[Piyush Pankaj, executive]

Yes. For the 6 months, we have -- did the CapEx of around INR 210 crores where CATV, it has gone around INR 110 crores, and broadband has gone INR 100 crores.

[Pratiksha Daftari, analyst]

CATV INR 110 crores and broadband INR 100 crores?

[Piyush Pankaj, executive]

Yes.

[Pratiksha Daftari, analyst]

And what is the CapEx plan for the balance year?

[Piyush Pankaj, executive]

We are keeping the same CapEx plan of between INR 450 crores to INR 470 crores for this year, where 50% is going to be the CATV and 50% is going to be in the broadband.

[Operator]

[Operator Instructions] The next question is from the line of Raj Ojha, an individual investor.

[Raj Ojha]

A couple of questions. First question is related to subscriber base. So I just wanted to understand how do we plan to increase our broadband subscriber base and especially which areas we will be targeting for coming quarters or a year?

[Piyush Pankaj, executive]

Yes, Raj. Thanks. Raj, threefold strategy is there. One strategy is the B2C strategy, which we are doing right now. The 25,000 or 35,000 which we have seen in the last 6 months has been the B2C subscriber as well. And that hope to continue. The second strategy is in the remote Gujarat side where we have to expand. Right now, we are at 110 cities only in Gujarat present. And in cable side, we have presence of around 400 cities. So we have to expand on that, plus we are to leverage the GFGNL infrastructure, which we have [indiscernible] for the government and penetrate into the rural Gujarat side. The third strategy is the B2B segment, which we have started, already a lot of things are in pipeline there. You can say around 50,000 subscriber base in the pipeline and which we are seeing that will come back -- come to us in the quarter 3 and quarter 4. So with threefold strategies on which we are working to increase our subscriber base in the market.

[Raj Ojha]

Sir, also just wanted to understand the government has been pushing various digital initiatives and motivating to connect rural areas to broadband. So at a macro level, how this thing can help us to increase our -- ultimately how this can increase us benefit in a longer run?

[Piyush Pankaj, executive]

See, as the more digital adoption is happening in India and has the consistency side is to say that is only wireline broadband, which gives the consistency. And any homes -- now at least, they are not depending on totally on wireless. They wanted the wireline at home and that is going to help us in increase in our subject. The overall industry, if we talk about [indiscernible] households. And out of that, only 25 million households is a wireline broadband right now. So the opportunity is very big for all the players. And we are looking forward that as the government initiatives plus the infrastructure improvement happens in country, the adoption of wireline broadband is going to increase multiple. And that's going to help all the players and who were at the forefront of this, that's going to return more on that basis. So very surprise industry, I will say, and we are looking ahead to be part of that.

[Raj Ojha]

Okay. Okay. Sir, I have one last bookending question. Like we have been generating good cash flow, and we have -- like we have got out of the EPC business. Okay. So I just wanted to understand now what was the impact of this on our EBITDA margin going ahead?

[Piyush Pankaj, executive]

EBITDA margin is going to improve. And on the EPC, we were just making the EBITDA of around 8% to 9%. And now as EPC project is not there, then the regular businesses, which is at EBITDA margin of more than 20%. That is going to help us in the EBITDA margin.

[Operator]

[Operator Instructions] The next question is from the line of Karan Mehta from Nirzar Securities.

[Karan Mehta, analyst]

So I just have one question. What's the amount of recurring CapEx and the amount of new CapEx incurred for growth in CATV as well as broadband business for first half -- for the first half FY '23?

[Piyush Pankaj, executive]

The recurring CapEx is mainly to the CATV side, the main CapEx is STBs. If I say the replacement STBs, which we have to from the blue boxes, which is in the warranty period in all, which you can see as a recurring, it is moving around 200,000 or 250,000 in a year. The rest is for the new subscriber base, which we are incurring. So if we are purchasing around 1.5 million boxes, out of that, 1.3 million boxes or 1.25 million boxes is going for the new CapEx, new subscriber base. Hardly, you can say, 15% is growing on the recurring side. Same -- the same trend is on the broadband, where we have to do the replacement or replacement of your current [indiscernible] customers or in the [land] customers and we have to migrate and chip on [indiscernible].

[Aniruddhasinhji Jadeja, executive]

But this financial year, basically, the CATV side setup box might be a replacement bit higher because of the -- we are completely in this financial year, we are migrating -- renewing entire MPEG2 box to MPEG4 box. So we are replacing old MPEG2 box. And that gives a very good support and feature to upgrading our -- especially the channel lineup addition for new channel or saving for bandwidth overall to the service provider.

[Karan Mehta, analyst]

Okay. Okay. Sir, if you can just quantify this number of recurring CapEx?

[Piyush Pankaj, executive]

For this year, I would say the recurring CapEx will be around -- for the 200,000 boxes, which is around the total CapEx, it is going to be around 22%. But general, it is going to be somewhere between 12% to 15% on the CATV side. On the broadband side, it is 15%, 15% to 17%. It is maintained in that way.

[Karan Mehta, analyst]

Yes. If you can just quantify the -- I mean, the amount?

[Piyush Pankaj, executive]

Amount on 6 months, if I talk about, it is going to be somewhere around INR 25 crore out of INR 110 crores is the CATV side, which is recurring. And in the broadband, it is going to be somewhere around INR 15 crores out of INR 100 crores in the first 6 months.

[Operator]

The next question is from the line of Akshay Jain from Equity Research.

[Akshay Jain, analyst]

Hello?

[Operator]

Please proceed.

[Akshay Jain, analyst]

Sir, I just had a few questions. We have increased receivable and even payables are higher compared to H1 last year. I just wanted to know reasons for the same.

[Anil Bothra, executive]

So say, the total receivables are INR 3,565 million. If I compare these receivables with the September of FY '22, it is almost around INR 3,226 million, whereas if I compare this from the quarter 4 or 31st March 2022, it is INR 2,836 million. So increase is cyclical in nature, which is actually predominantly from the marketing and carriage receivable. And the same amount of tables are also going up. So it is a kind of -- the arrangement between the marketing and carriage parties and the pay channel party. So it is a contract kind of entry. And if you look at the trade tables on 30th September, it is INR 5,864 and the Q2 of last year, it was INR 5,550. So it is cyclical in nature. If we compare with the September number of last year, then it gives the correct picture. March, yes, the things will come back to the normal.

[Akshay Jain, analyst]

Okay. Sir, one more question. I'm seeing that the segmental PBT is improving with the contribution from the broadband segment. So going forward, what is your guidance for the current financial year and the next year on this?

[Piyush Pankaj, executive]

Broadband, as we mentioned in earlier call also that we are making around 40% EBITDA in the broadband business. So as the broadband business will go up, the contribution towards PBT and EBITDA is going to increase fiber broadband. In CATV side, we are making around 20% to 22% EBITDA margin, and that is going to continue. So as the broadband business will start contributing more and more in the revenue side, you will see that the EBITDA and PBT the contribution is going to come more from the broadband.

[Akshay Jain, analyst]

And sir, coming to the ARPU of your broadband business, it's been broadly in the range of 445 to 450. Do we see any improvement coming in to the ARPU for broadband segment in the coming quarters?

[Piyush Pankaj, executive]

We are not giving any that the ARPU is going to increase. We have the whole management and the whole industry is concentrating more towards the subscriber additions as the opportunity is little big. And we are going to continue that also. Yes, we are going to maintain our ARPU at this level, we are not looking forward that will make [indiscernible] than this. But yes, subscriber addition is the main focus right now. Once the business will get mature at that point of time, we will see that how to increase the ARPU.

[Operator]

[Operator Instructions] The next question is from the line of Dharma Venkatesham, an individual investor.

[Dharma Venkatesham]

My question on our cable business. Like you have mentioned that you are looking like in [indiscernible] acquisitions if anything comes up. So is there any specific reaching or consultative or it's still in the early stages?

[Piyush Pankaj, executive]

Can you repeat the question? The last question was not very clear.

[Dharma Venkatesham]

Okay, sir. Like in the cable business, you said like we are looking at inorganic opportunity. Is this still at very early stages? Or is there any particular reason that you want to expand through inorganic opportunity?

[Piyush Pankaj, executive]

No, no. We are looking forward to expand all over India as we are already in 19 states, and we are looking forward to enter into few more states. And so we are looking forward for acquisitions in all the states where we are present. Wherever the opportunity is coming, we are going ahead with that. And in quarter 3 and quarter 4, you will see that some big acquisitions will come into our fold.

[Dharma Venkatesham]

Okay, sir. And I was late to join the call so if this question was asked so pardon me. Is there any update on the court case that we were, have you or is it still at the same stage?

[Piyush Pankaj, executive]

No, it is -- it's still under the same situation. There is...

[Unknown Executive]

We're talking about AGR.

[Piyush Pankaj, executive]

So there is no movement on that. We are looking forward. I think one growth pace is happening in the first week of December by the Supreme Court. So we are hopeful that some movement will happen at that point of time.

[Dharma Venkatesham]

Okay, sir. So as far as I understand that we have a precedent in this case, which is actually in that we don't have to pay the fine though. That is how it is still there, right? Or is my understanding wrong, sir?

[Piyush Pankaj, executive]

No, no. Your understanding is right. You can see our notes, note #7 and #8 in our results, which as we have given and put it into the brochure, you can get a clear picture of those in note 7 and 8 of the results.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

[Piyush Pankaj, executive]

Thanks, everyone, for joining the earnings call. And we look forward to again interact with you on the next quarter results, the quarter 3 results. Please be safe and healthy. Thanks a lot.

[Operator]

Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.