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GTPL Hathway Ltd
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Ladies and gentlemen, welcome to the GTPL Hathway Q4 and FY '23 Earnings Conference Call 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 would now like to hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Don. Good evening, everyone, and welcome to the GTPL Hathway earnings call. I would like to welcome the management and thank them for this opportunity.
Without any further delay, I shall now hand over the call to the management for their opening remarks. Over to you, gentlemen.
Thank you, Pulkit. Good evening, everyone. A warm welcome to everybody to the conference call of GTPL Hathway to discuss quarter 4 and annual FY '23 financial performance.
I'm glad to report yet another year of consistent growth in our broadband and digital cable TV business. GTPL to continue largest MSO in the country as well as in Gujarat and largest broadband player in Gujarat. The company has further strengthened its presence across all other markets, especially in southern state.
I'm pleased to inform you that the Board has recommended a dividend of INR 4 per equity share for FY 2023. Both our digital cable TV and broadband business continued to show healthy growth across India in terms of subscriber and ARPU.
I will now hand over to the call Mr. Piyush Pankaj, who will take you through the business and financial performance of the company.
Thank you, Mr. Jadeja. Good evening, everyone. I am pleased to announce the business and financial performance of GTPL Hathway.
Our digital cable TV subscriber base, as on March 31, 2023, stands at 8.95 million. Paying subscribers stand at 8.20 million. On a Y-o-Y basis, the increase in active and paying subscriber is 550,000 and 400,000, respectively. In the broadband business, we have added 104,000 new subscribers, an increase of 11% on a Y-o-Y basis. Home-pass subscribers stood at 5.30 million as on March 31, 2023, of which 75% are available for FTTX conversion.
The broadband ARPU for FY '23 stood at INR 460, an increase of INR 10 on a Y-o-Y basis. The average data consumption per customer per month stood at 321 GB, a 25% increase Y-o-Y. On a consolidated level, excluding EPC contract, in FY '23, revenue grew by 12% Y-o-Y to INR 27,140 million. The digital cable TV subscription revenue stood at INR 11,005 million, up by 2% Y-o-Y.
We saw a consistent growth in our broadband segment. Broadband revenue increased by 18% Y-o-Y and revenue stood at INR 4,826 million. This was driven by a healthy subscriber addition. Consolidated EBITDA for FY '23 stood at INR 5,163 million with a margin of 19%. PAT for FY '23 stood at INR 1,145 million. We are a net debt-free company, and our finance cost has reduced by 31% on Y-o-Y basis for FY '23.
For quarter 4 FY '23, on a consolidated level, excluding EPC contracts, revenue grew by 13% Y-o-Y to INR 7,017 million. The digital cable TV subscription revenue stood at INR 2,753 million, up by 2% Y-o-Y. We saw a consistent growth in our broadband segment in quarter 4 FY '23. Broadband revenue increased by 14% Y-o-Y and revenue stood at INR 1,246 million. PAT for the quarter stood at negative INR 124 million.
There was a drop in the PAT on account of the following reasons: An exceptional item of INR 189 million provided in quarter 4 FY '23 with respect to the provision of certain identified old receivables on account of assessment of counterparty credit risk. Second, increase in depreciation, amortization of FY '23 by INR 220 million on account of reassessment of the useful life of select asset class and obsolescence of certain asset class due to technology upgradation.
The standalone revenue, excluding EPC for FY '23, stood at INR 17,328 million, an increase of 14% Y-o-Y. The EBITDA stood at INR 2,842 million with an EBITDA margin of 16.4%. PAT for FY '23 stood at INR 725 million.
This is all from my side. Thank you, everyone. We can now begin with the question-and-answer session.
[Operator Instructions] The first question is from the line of Yash Sarda from Sushil Finance.
My first question is, how is the response on the GTPL Genie which was launched in December. And if you could give a number as to how many customers from are broadband, everything goes on customers have opted for the plan? Secondly -- second question is, what is the anticipated increase in data consumption in the quarter which is coming or what you're seeing due to the IPL, which is being streamed online? And last question is how many customer -- what is the conversion, which we are seeing happening from the cable TV subscribers to broadband due to OTT happening and online streaming of IPL? That's it.
So we have launched Genie+ in end of December. The main responses have started coming from January month. And till date, we have seen that around 12,000 subscriber base has come into -- has taken the services in last 3 months. And out of that 12,000, we can say that around INR 8,000 is from the broadband side and around 4,000 is of the cable subscribers.
The second question on the IPL, we have not seen any effect because of having free in Jio cinema, that it has affected our subscription reduction or our subscriber reduction due to the IPL. So the effect is almost nil on that side, I will say.
And third question was on -- third question was on Genie, that how many subscribers have shifted from our broadband to cable or cable to broadband. The cross-selling is happening and because Genie have launched as a standalone product. So that is not giving us Genie+ as a standalone product where our broadband subscriber or our cable subscriber can take it as a standalone product, and it's a B2C product. So because of Genie, we are not seeing that the conversions and all. Yes, we are hopeful that as we are going to launch the combined bundled services, which we are going to do in quarter 1, entertainment plus broadband together, and entertainment includes OTT plus cable. That's we are going to look after. That will give us a good [indiscernible] in the market.
I just had one follow-up question. On [indiscernible] you mentioned that there has been a blackout in the month of February for, I think, 6 whole days. Could you just elaborate on that? In the Start Sports, what I understand is it's not a part of the package which you currently offer, it is on a la carte, if I'm not wrong. So how is it -- how that is working out? These 2 questions, follow-up.
So basically, the -- it was not a blackout. It's what all [Foreign Language] team broadcasters, effective date 18 of February to 23 to February [Foreign Language] broadcast server [Foreign Language] especially because of the NTO [Foreign Language]. And the issue is resolved and everything is now normalized.
And just confirming, Star Sports is being offered as an a la carte or already bundled with…
It's a part of the bundle, which we are not [indiscernible].
The next question is from the line of [ Aniket from BM SPL ].
My question was a bit longer term regarding the broadband business ARPU. So with the effect of all the OTT providers coming in such as Reliance and having their own units, what do you feel is going to happen to your ARPUs for the coming 2, 3 years? I just wanted to get a broad picture.
ARPU. See, if you see from last 2 years, our ARPU, which was at around INR 400, we have gone up to INR 460 in the last 2 years' time. We are looking forward that we'll continue that journey, that INR 10, INR 15, INR 20 increase per annum. And that is because we are converting everyone into the FTTX technology and pushing our subscriber to take the higher package, packages of 100 Mbps, 150 Mbps, 200 Mbps. And that's the strategy on which we are working. Yes, if you ask me, I'm not increasing the rate of my packages, but I'm moving my lower packages customer to higher packages customer. And that's why the benefit is coming in our ARPU. And we look forward that we are going to continue that. That's the strategy. And we are looking forward that we'll continue to increase the ARPU as we are increasing from last 2 years.
[Operator Instructions] We have the next question from the line of Karan Mehta from [ Nirzar Securities. ]
So I just have a couple of questions. So firstly, we have seen an increase in pay channel costs on an annual basis. So I just wanted to understand, is this of recurring nature? And if so, what would be the increase in -- percentage increase in pay channel cost per year for next 2 to 3 years? And also, what's the outlook on both of our businesses.
Hello, Karan. Karan, we always advise the analysts to look pay channel along with the marketing and placement revenues. If we do the net pay channel cost on that basis; expenses, pay channel expenses minus renewals, it's hardly you will see that there is a 2% increase in the pay channel, hardly INR 9 crores to INR 10 crores, which is there. So my -- if you see over the year -- for the whole year, we are -- the subscription is contributing around INR 25 crores to INR 27 crores. And out of that, pay channel is just increasing INR 9 crores to INR 10 crores. So that's the trend we are looking forward that the pay channel will be on 2%, 3% increase, not more than that on the net basis over the years.
And sir, also, what's the incremental cost and depreciation cost per subscriber for both of our businesses? And what's the replacement cycle for our fixed assets in both of our businesses?
So fixed asset, if we talk about, we are depreciating our STBs in 8 years' time. And the routers as at around at 10 years' time, 8 to 10 years in the routers for the different make. So that's -- that's adding on the depreciation side. So when you talk about the replacements there are, yes, it takes 8 to 10 years for the replacing any assets because they're our robust assets, which are continuing. Still the boxes, which we have deployed in 2011, 2012, is still continuing in our system and same with if you talk about what routers we have put in 2016, 2017, which is still going robustly enough.
Sir. And the first question, the incremental cost and depreciation cost for both of our businesses, incremental cost per subscriber for both of our businesses.
So per subscriber incremental costs, if you talk about, if I am adding one subscriber base and I'm getting around INR 125 from that, on that, if you talk about that, just the incremental operating cost, which is net of my direct cost, which is pay-channel and all, which is coming to around INR 30, not more than that.
The cost is just INR 30 per subscriber. So that is for CATV?
That is for the CATV.
And broadband?
Broadband also, it is around -- broadband is lesser because the main cost there is going on into 2 direct costs, which is the bandwidth cost and my customer acquisition cost, which is the higher, which is more. So there it is coming to around INR 25 crores to INR 30 extra operating costs, admin and operating costs.
And what is the depreciation cost per subscriber?
Depreciation per subscriber, you can talk about around INR 90 in the cable side. And in the broadband side, it is coming to around INR 60 to INR 70 in the broadband side.
Sir, if I can squeeze in one more question. So what is the acquisition cost per -- sir, we had a discussion over the implementation of NTO 3.0. We expect that this may result in shutting down of some smaller LTOs and MSOs, which will, in turn, give us an opportunity to acquire these. So I just wanted to understand what the acquisition cost per subscriber for these MSOs and LTOs?
The acquisition cost, I will just say that it depends on a lot of things that in which markets we are operating, what are the different aspects of those network technology-wise, where it is in the rural area or outskirts of city, whether it is in the main city, all those factors come.
Basically it's which territories also like up in the HSM market has a different acquisition price, south market is a different price, whether it is an area is Phase 1, whether it is area is Phase 2, whether it is area is Phase 3 or Phase 4. It depends on the territory wise, there is a price difference is there.
But if you can just -- if you can give a broad range for our major market.
Majorly, if you see overall our major market, like almost 60% to 65% is our HSM market [indiscernible] market. And close to around 30% is like south market. So acquisition price depends on the network and all those things, whether it is in the north, if a network is in there in Delhi and our network is in the Kanpur or if it is network is in Gorakhpur, if it is a network in the Muzaffarpur, the rates are, acquisitions are going to be different. So it's very difficult to give you one figure on that way because it depends on different factors. And that's the way, Karan, we can go offline on this, that how we come into the acquisitions and all of those things and how we determine the prices on acquisitions.
The next question is from the line of [ Pawan Nahar ] an Individual Investor.
So I wanted to understand, we've done a CapEx of around INR 470 crores in FY '23. What is the plan for '24? Any particular number?
Yes. So CapEx, we did INR 468.5 crores in FY '23. Out of that, broadband CapEx is around INR 225 crores. The rest is the CATV CapEx. As we are saying throughout in the call that we are keeping around INR 450 crores to INR 500 crores. And we are looking forward in the next 3 years, we are going to do INR 1,400 crores of investment. So we are still sticking to that, that depending upon the opportunity, we will [indiscernible] around INR 450 crores to INR 500 crores of CapEx, which is going to be 50% in each of the business.
So every year, INR 450 crores to INR 500 crores beginning FY '23.
That's right. So next 3 years, INR 1,400 crore to INR 150 crore.
So that is number one. Number 2, now what I'm struggling to understand is your absolute EBITDA. I don't want to focus on depreciation because let's eliminate the -- let's -- I mean, we could look at that as well. So EBITDA is like what it was in FY '20. So it's a short -- we've done such a big investment, right? Our gross or whatever, I mean, whichever way you look, in the last 2 years we have spent about INR 800 crores, FY '22 and FY '23. And our absolute EBITDA, right, is down by almost 10%, 15%.
9% around, yes.
Yes. So I'm unable to understand that till FY '22, every dollar that you were investing was yielding good return. Suddenly in the last 12 months, particularly, there's just a collapse. I don't want to get into the detail of the CATV and cable. All I want is update the dollar [Foreign Language].
Many [Foreign Language] activation revenue we have lost around INR 30 crores. The activation revenue is [Foreign Language] deferred. That is a noncash item. Cash basis [Foreign Language]. So because of that INR 130 crores, we have gone out there. Second, this fourth quarter, yes, we have lost around INR 10 crores to INR 12 crores because of the blackout, which we expect. [Foreign Language] we were expecting [Foreign Language] which you will see that jump in the quarter 1. [Foreign Language]. Second, third [Foreign Language] which was contributing in EBITDA and revenue both sides.
This was FY '21, right? FY '22 [Foreign Language].
FY '22 [Foreign Language] around INR 3 crores to INR 4 crores [Foreign Language].
[Foreign Language].
[Foreign Language].
So I just want to [Foreign Language] say at this point, INR 530 has become INR 465 or INR 470, right? And [Foreign Language] in fact a little more. [Foreign Language] generally, what is the kind of EBITDA or ROC up internal [Foreign Language].
Basically, investment proportionately quarter-in-quarter [Foreign Language] last FY '20 to '23 1 or [Foreign Language] major quarter CapEx 70% quarter 3 or quarter 4 [Foreign Language].
[Foreign Language].
[Foreign Language] it's close to around 30. Standalone [Foreign Language] it's close to around INR 30 crore, consolidated [Foreign Language] it's close to around INR 22 crores, INR 23 crores. [Foreign Language] that contributes around more than INR 50 crores.
So can I ask you in very simple terms, like I don't -- I wouldn't have all the details [Foreign Language] FY '23, what should we expect in FY '24?
See, we are looking forward that [Foreign Language] growth pace till FY '22, if you see, we are doing the revenue growth of somewhere around 17%, 18% on that basis overall. And EBITDA growth was somewhere around 13% to 14% every year, plus 5 years [Foreign Language]. That's we're to continue in FY '24.
So more like 13%, 14% EBITDA growth.
That's right.
And 13%, 14% EBITDA growth, okay. Okay. Just the moment. And then I wanted to ask you, is there like -- so when you say you're going to spend INR 450 crores, INR 500 crores, it is like acquiring other small cable TV operators? Or how -- where is this money going to go outside of broadband CapEx?
You're talking on the broadband or CATV?
Outside of broadband, CATV.
You're talking about CATV. See, CATV, you have to understand the market right now. You have to do 2 type of CapEx investment. One is to maintain your subscriber base. And second is to gain new subscriber base. Maintain is because the churn rate, which was the churn rate, which is going on in the industry, which is around 15% to 16%. So if you talk about right now, I'm at 9 million, 15% to 16% of 9 million, which is like 1.4 million to 1.5 million subscriber base, which I have to gain just to maintain my subscriber base and my revenue. And then I have to invest much more to have our net subscriber base positive so that I can gain more revenues and more EBITDA. So that's the cycle on which every consumer, you can say direct consumer activity is happening where the subscribers are. We talk about telecom, we talk about DTH. Wherever it is there, there is a churn there. And to maintain that churn, you have to make some CapEx additions, plus we have to do more CapEx to bring more revenues and EBITDA. So that cycle will continue over here also.
Understood. So basically, what you are -- when we say churn 15%, and we get the subscriber a set-top box and we incur other costs for its activation. So if every year there is a churn of 15%, that means that, I mean, it is a huge cost, which is not recovered. And then we will keep having this price increase, depreciation or write-offs.
No, we are recovering the boxes. We are redeploying some of the boxes. But yes, you are right. You can't recover the 100%. It depends that whatever we are recovering, whether it is useful or not. We are doing the repairing also, putting the boxes, refurbished box into the market also. But yes, that is not coming 100%. You recover around 50% or 55% boxes. And then you do that whatever repair or some refurbish you can do and put it into the market. That goes back to 30% only.
It depends on the [indiscernible] basically retrieval cost. We are collecting INR 500 activation and box cost is INR 800. So if it's [indiscernible] because of INR 300, it will go for recovering and [Foreign Language] so we'll decide whether if we want to recover or not.
So those factors were there because when you are doing the recovery, you have to do with some recovery costs, whether going for that or whether you should go for the new boxes straightway, which is going to fetch you INR 400, INR 500 from the market. And whether you want to do, recover those boxes, which is the remote areas and all -- all those factors work on that. But yes -- refurbished box is lesser in the market, and we're happy to do CapEx of those.
And the second thing, Karan, because some places, there's a strategic decision because in earlier the NTO and [ DAS ] 1 and 2 implemented in 2012 and 2014. And because of that, that time the technology was MPEG-2. So it's a policy decision company has already taken, will not further put MPEG-2 box. So that box is a completely absolute market [Foreign Language] because we are completely -- our -- right now, the 95% business we migrated in MPEG-4 Box.
And this year there is no dividend. And we cannot -- do we have buyback?
No, no, we have declared INR 4 as dividend. I think Mr. Jadeja has made in his opening remarks.
It was interim or final?
It's a final one, INR 4.
I'm sorry, I missed that.
Subject to shareholder approvals and all, but yes, our Board has recommended for INR 4, INR 40,000 crore.
And one more thing I wanted to ask you, Mr. Jadeja, is basically we are at 75% already the promoter between the 2. And the stock valuation seems pretty interesting, close to book value [Foreign Language] despite your ROE being 16%. And maybe rightly so, maybe there are concerns. Like is there any way we can do something about a proportionate buyback or something like that? I mean actually, sorry, it won't help. Basically I'm wondering what could the management do about the stock price, the numbers I have supporting valuations are.
These are promoter call, strategic call because as a company, we can't comment on these things. We -- this has to be taken at the strategic level with the promoters and then to the board that what we should [indiscernible]. So I can't comment on this subject here.
[Operator Instructions] The next question is from the line of [ Saket Kapoor from Kapoor Company ].
Sir, you mentioned about CapEx of INR 450 crores for the -- for FY '23, sir?
INR 468.5 crores, INR 468 crores.
So sir, out of this, entirely is this operational CapEx only? Or how should one look at this spending? What goes into technological upgradation and what goes into capacity augmentation? If we look at CapEx, the augment has to be into capacity augmentation that will lead to further revenue going ahead? And how much is going towards the operational CapEx, which is needed to maintain, to run the entire system? So if you could give that split up?
Yes. So if I come to first on the broadband side, we did INR 225 crores of CapEx on that, if I talk about, we did around INR 550,000 of home-passes on that, which is the CapEx we have put around INR 22 crores, just making it to the home-pass. Plus there is around INR 30 crore, which we did in the technology side, technology enhancements in the backend and all. The rest has gone for the customer acquisition cost in the broadband side.
Same in the cable, well, I will say that as [indiscernible] is by saying that we are going from MPEG-2 to MPEG-4. Those side, the technology enhancement side, we have did around INR 25 crores of CapEx on that side, plus on the enhancement for our head end and technology side, we did around INR 20 crores of CapEx on that side. The rest has gone into the business side.
Sir, when we look at the CapEx part of companies there, wherever companies spend [Foreign Language] additional revenue generate [Foreign Language] going ahead, that is the order of what CapEx is defined. So in our case, if some CapEx goes towards the modernization towards retaining of the client. So when we are spending that money, what is the ballpark we work around [Foreign Language]. If you could give us the color on the same, how -- what are going to be the customer count going at for the money that we have spent and thereby [Foreign Language].
See, cable segment, [Foreign Language] to maintain our subscriber base and all because we are recovering some boxes, we are putting it into the market also. So that is around -- out of the total, that is around INR 50 crores to INR 60 crores, which is going into maintaining that subscriber base and all. The rest is going in increasing our subscriber base and plus the technology enhancements. And as we go into the new market, we have to do some of the CapEx, net of CapEx and all. So that's the way we are doing it in the cable side.
In the broadband side, as you will see that the -- to maintain or you can say because the churn there is around 20% to 22% in the broadband side. So there, you have to do somewhere around INR 70 crores to INR 80 crores in maintaining the business and rest in enhancing the business and thus making the home-passes plus doing the technological upgradation and all, which is going to give us, generate more and more subscriber base and revenue for us.
Sir, when we look at the profile for both cable TV and broadband going ahead. It is going to be -- my basic understanding is that broadband is going to be clean winner going ahead and everything would be clubbed under that, whether it is television, networking, internet would be the key. So going ahead, how do you -- what are you visualizing in terms of this cable TV business contribution, I think over the last 3 years, we have seen the revenue shifting towards broadband. So how likely is going to be the mix going ahead and the customer preference with the laying of optic fiber cables and the internet penetration going ahead, how good the number would be there in terms of the split between the cable and the broadband mix? And I think so broadband would be contributing to the bottom line also in a significantly higher EBITDA number than what cable TV is?
See, last 6 years, you will see what the CapEx we did, last 6 years I'm talking about. You will find that we did around 60% to 63% around in the broadband side. Only 37% has gone into the cable side. The cable side, your CapEx has started increasing from last year, when the churn has also increased, and we have to increase our -- or maintaining our subscriber base around INR 50 crores to INR 60 crores more we have to spend on the cable side. So that is the case. Otherwise, yes, whatever the benefits or you can say, the CapEx which we have put in the broadband side, and we made around jump up around 3.8x in the subscriber base in the broadband.
The pace is much, much higher than what we did at 2x in the cable side. So yes, broadband has gone up, and that is one of the reasons that we wanted not only dependent on the cable, which you are seeing that in the segment result and all that broadband has also started contributing a significant part and the business is not totally dependent on one business. And that's the purpose that both the business do good and start contributing towards the whole consolidated results. And that's happening, and that's a good sign for us.
Continuing business, if we talk about, we are in the, as a management and as an industry and all, we are seeing that cable is not going anywhere. If it's going to be there, it's going to generate whatever cash we are generating and going to grow from here only as you see that still the non-TV households, which is going to be there. The consolidation of whole cable industry is still open, has 80 million subscriber base and only all the organized there is just around 40 million right now, subscriber base in their hold.
So 45 million subscriber base is lying there, which is there. But yes, you can say that you have to combine the business broadband plus entertainment plus OTT plus more services together as we considered ourselves as a fight, which we have the access to the home through that pipe. We have to increase our services in such a way that in consolidated way, whatever need is there in the households, we can provide that. But yes, we are looking forward that both businesses are going to do good in the future. Yes, we have to combine those businesses together, combine those offerings, make it more lucrative for the customer, increase our services. Right now it is cable OTT plus broadband increase more of our services, which we can provide to the households and start providing all type of needs to satisfy all type of needs of the customers.
So sir, only a small point, in your opening remark also, you mentioned about a percentage of conversion to FTTX. So when that conversion is totally skewed towards the broadband part of the story only, the fiber-to-home part is you are looking to be a broadband conversion only from cable to a broadband expert? Is that understanding correct?
No, no, no, not cable to broadband. Earlier the technology was lane [Foreign Language] almost today 90% business is almost migrated to in a GPON technology. So on home-pass basis, if I talk about, around 75% of our home-pass is already in the FTTX and 25% is in the lane, which we are converting. And every year, we are converting those. So we are looking forward that we will become 100% FTTX in coming years. So it is from [ MEN ] technology, which was LAN technology to FTTH direct-to-home technology.
Sir, in your presentation, Slide #4, you mentioned about O&M contract of 17,000 kilometers of optical fiber for BharatNet. Could you guys and explain, sir, what is -- what are you conveying in that?
Yes, that is for showing our capabilities. This network -- this project has already got over last financial year, which I talked about, the EPC project. which we got for around INR 1,072 crores for the laying the 17,000-kilometer fiber for the GFGNL, the broadband ready fiber. So that's the project which we did, and we completed that. Yes, we have the capability of doing this type of big projects, and we are looking forward as government is coming up with new tenders and all for every state. We are looking forward that we will participate in more type of those projects.
So from this O&M contract, when will the revenue start chipping in, sir? What is the period from which and what would be the annual revenue we will be gathering? Or if you could explain the nature of the contracts, sir?
See, the contract is which we won at that point of time is INR 1,072 crore of [ APC ] project plus INR 57 core for 4 years, INR 57 crores of O&M, operation and maintenance of these networks. The operation and maintenance of network has started in FY '23, and those revenues are showing in other operating income.
So actually technically it's a 4 plus 3.
So 4, extendable to 7 years, 4 years extendable to 7 years. And revenue has started in this financial year.
So we will be booking revenue of INR 57 crores. That will not be incurring any cost on the same? This will directly go to the [indiscernible].
We are incurring the cost and making the margin of around 25%, 20% -- 23% to 25% of that.
Sir, barring this restatement on account of depreciation and also in terms of, if I say the below-the-line item of exceptional items. When can we restore back to this 23%, 24% EBITDA margin, sir? And then also, sir, if you could give us some more color on this exceptional line item, sir, of the [indiscernible]? What was the period for which this money was lined and the aging part and what -- and of the total receivable today, have you done the stress test for the same? I think the trade receivable on a consolidated basis is around INR 292 crores currently. So are we done with everything?
Yes. So first, yes, we are done with everything, the first thing. Second, as you talk about the provision for doubtful debt, that is amounting to INR 180 million, which is from certain identified receivables. As you know that Deloitte is our auditor, and being the first year, they have advised on conservative accounting and they have identified some of the parties where with the management discussions and all, the recoverability of outstanding is a bit doubtful. So there they have advised for taking provisions in books. If the company is able to collect the outstanding amounts, it will reflect in our revenues in the coming years. But yes, as Deloitte is now our auditor from this year, they have gone for extra conservative on that way. They have discussed all outstandings with the management. And whenever they find that there is a bit of [Technical Difficulty] they advise us to take the provisions in the books. And outstandings were around 1 year old or 1 years, 3 months, something old. But they have advised us to take this on the books. If you're able to recover it, it will come back into the revenues.
And out of this INR 15 crore, sir, number of parties affected? How many people it was due, sir?
5, 6 parties are there.
6 parties are there. And we are doing business with them currently.
Yes, we are doing the business with currently. And we are hopeful that we are going to recover those things. But…
So out of this INR 292 crores receivable, we are still owing money -- they are still owing money to us, INR 292 crores [Foreign Language].
Not right -- not right now. After doing the provisions, they are at 0. But if we are going to be able to recover those, then that will come as a revenue to us.
So is it any disputed amount, sir? Is there any dispute on that figure? Or how -- or what is the nature of this receivable then?
Not disputed, but yes, outstandings are there from those parties. They are always asking us for the time, being the amount a bit large for them. And till date we are giving them time to pay us on those. Right now, as you know, the commitment in tariff order has come and we are implementing that. Somewhere that has also given the idea to our auditor that as it is [Technical Difficulty] it will become more difficult for them to pay us. So they have asked us to take the, on conservative accounting and the provisions and they're saying that if you are able to collect, then it will come back as a return.
And then coming back to the our -- my one question is left answered. It's a good answer, then we can return to the -- our historical margin, that above 20% margin. When can we expect that?
You have to understand that the margins which we are looking at right now, you have to look at net pay channel, the trend on that. If you see on the net pay channel, which is your pay channel expenses minus marketing and placement revenues, if you look into that, we are at almost at the same margin. Here what is happening that my placement and marketing is increasing and my pay channel cost is also increasing in the same ratio. So placement and marketing revenue is not contributing towards the EBITDA. And there our EBITDA margin is going down on the margin side. So when you look at the net pay channel cost, then we will see that our margin is almost maintained.
[Operator Instructions] The next question is from the line of Rikesh Parikh from Rockstud Capital LLP.
Sir, just wanted to understand on the -- our cable TV business, we have been #1 in Gujarat and #2 in West Benhal and right now we are expanding in 6 more cities. So I hope to understand what is our medium-term plan over there over the next 2 to 3 years, where we are expanding? And what is the size we are seeing it? And are the margins same or we are spending more to acquire the customer in those areas?
As I always say that our endeavor is or our target is that in the next 3 years, we are going to add 1 million subscriber base every year on that basis, in the cable side. That remains to us. Yes, we are going into the new market, but we are keeping our economy in such a way that it is not going to affect our EBITDA. So the margins and all are at the same level. And we are seeing that it should not affect EBITDA in the going forward. Yes, when you go into a totally brazed market, at that point of time, you have to do some of the admin expenses and all. But as you get established, within a quarter's time, you will start making the margins at the same level which we are making at the cable side.
And looking at the broadband side, I can see the incremental profitability is much higher and we are able to get roughly INR 10 ARPU increase Y-o-Y basis ourselves. So can we -- is it safe to assume that the incremental contribution on the EBITDA side that will keep on increasing going forward?
Yes, yes. That's the strategy on which we are working. That company is going to have 50% EBITDA from cable side and 50% EBITDA from the broadband side. Again, we are working towards that. And the pace of growth is going to be more in the broadband side.
Last thing, sir, I missed out in the beginning. Just a focus on this GTPL Genie means what is our game plan and how will it show us apart as such on this platform?
See, Genie, we have launched as a B2C product right now of the self-product, which is doing good right now. Somewhere the game plan is to give a bundled product to the consumer, where you can have cable plus OTT, we can have broadband plus OTT, we can have all 3 together plus more services and all. So that's the plan on which we are working towards, which I say -- just say that how you can bundle and how you can provide all types of services plus more new services, adding more services on those to the consumer. So that's the plan on which we are going ahead. Yes, the margins are healthy on the OTT side also. And we are looking forward that as we go forward, there also, those markets are also able to contribute in our business.
And last question, I just missed out, this NTO3, how do you see it impact us? And this on the cable side because incrementally we are losing out to the internet side. So your thought on that? And will it help us increase our margin also, means revenue per subscriber?
See, LTO 3, I will say, it is good for everyone, every stakeholder, and we are looking forward more transparency in the market on that basis. And yes, it is going to be healthy for us, for the DPOs. We are looking forward that as the NPO1 as we got the benefits, we are going to get the benefits in NPO2 also.
The next question is from the line of [ Ketan Athavale from RoboCapital. ]
Sir, I just wanted to know, on this depreciation, which has increased. So will it persist? And what will be the run rate going ahead?
So basically, depreciations, additional [Foreign Language] earlier we were in a lane technology, and we migrated completely our network in a GPON. So we -- going forward, we'll not deploy that, again, lane technology. So [Foreign Language] because we don't want to redeploy in the market because we are completely migrating to the GPON format. So [Foreign Language] as per the depreciation policy [Foreign Language] completely broadband existing infrastructures to [Foreign Language] almost today, we reached almost 90% migration is completed. So [Foreign Language].
And you said EBITDA growth for FY '24 13% to 14%. So how is it, revenue growth looking for 2 years and EBITDA growth in -- EBITDA outlook in '25?
So if you see our old CAGR, we were doing around 18% to 19% of revenue growth and 13% to 14% of EBITDA growth. We are looking forward that we will -- from FY '24, we are going to maintain those CAGR.
Okay. And just one last question. In both of our business individually, what will be the ROE, steady state ROE?
ROE is, as you can calculate it from the balance sheet, we are going to give the annual balance at this time because investment in cable and you can say broadband is different. So straight way giving the ROE is -- is it possible to give the away right now?
Just in steady state over long-term, what it can be according to you?
Return on equity, if we talk about, I'll come back to you on that because what is the return of going on right now and how it is going to shape on those.
The next question is from the line of Gunit Singh from CCIPL.
So especially, at these valuations, the company looks like a very promising prospect just like another, as you mentioned that -- mentioned about during the buyback. But we -- and I heard about the discussions that we had regarding the CapEx, about INR 450 crore annually. But one thing that I wasn't able to understand was that the returns are we expecting on this CapEx. So for example, if we are spending INR 400 crores or INR 450 crores annually, like you mentioned about INR 50 crores to INR 80 crores or INR 150 crores, including both broadband and cable, are going for maintenance and technology enhancements and the rest is going for acquiring new customers basically. So I mean, if we are spending INR 450 crores annually.
Just a simple question, if we're spending INR 1 crores annually -- INR 1 crore, how much asset turn do we expect on it? So for example, we are spending INR 450 crores annually, can we say that we can expect, say, about 1.5x like INR 600 crores additional revenue? Or what kind of additional revenue do we expect? Because INR 400 crores this year and about INR 1,600 crores you mentioned for the coming 3 years. So the figure goes down to about INR 2,000 crores. So can we reasonably say that after 3 years, we can expect an additional revenue of, say, INR 3,000 crores or INR 4,000 crores. I mean this is a simple question from my end, and that's the only thing that…
See, when we are doing the CapEx, the assets. The asset is there for the long term, which is like 8 years to 10 years. And you have to see the return on those 8 to 10 years. So first year, if we talk about -- right now, our ROA is going at around 16%. We are looking forward that return on assets at 16% to 17% has to be maintained in the organization because when you look at the return on assets, you look at it, the longer time because assets is for the -- over the years. So you can't say that INR 4,500 crores, if I did, then my incremental revenue has to be INR 500 crores or INR 600 crores. It has to be such in a reasonable rate that, yes, you get your ROA, return on those assets, which we are employing and the full assets on the whole side at 16% to 17%, which is maintained right now. And we are looking forward that with the time it is maintained or increased from it.
So yes, so we are basically planning to maintain a revenue growth of 18% to 19%, like you mentioned, for the coming 4 to 5 years, we can say?
That's right.
The next question is from the line of Yash Sarda from Sushil Finance.
Sir, I can see in the internet service business, the average earnings per user has been decreasing since the past 2 quarters, though our number of active paying users are increasing. So could you give us a guidance as to going forward in the next 1, 2 years, any number of the -- numbers which will be stabilizing or do we see a growth happening? That's it.
Yash, can you -- your voice was cracking in the first sentence. Can you repeat that, the first sentence?
My question is particularly on the broadband business. So number of active paying users are increasing -- have been increasing since the past 2 quarters. But the earnings per user, which is coming down has been on a down trend, in Q3 it decreased by 5%, and let's say, there was a loss. So what would be the earnings per user where we will be having a steady sales growth for the next 1, 1.5 years? And how many customers do we plan on adding for the next 2 years?
Yes. So as I said that we are looking forward that next 3 years from 920,000, 900,000, we are looking forward that we are going to increase somewhere around 40% to 50% of our subscriber base in the next 3 years. That is the target, which we have taken. The second thing is that you're talking about margin per user. Margin per user, if you see, we have -- overall where we have maintained that hardly INR 5 here and there. And we are looking forward that those margin is, which is around 40% of power ARPU, is going to maintain in the coming years also. As we are working towards the enhancement of our technology and all in such a way that on the same small incremental costs we have going to be able to serve more and more customers, which we are going to cross 1 million very soon. And the margin of 40% has -- should be maintained on those.
And just a follow-up question. When the average data consumption increases. So how much is the unit economics, which we are benefiting? Because I think there has been a significant increase in the data consumption in the past 1 year and which is going to increase coming forward as well.
Yes. That's one of the direct costs, which I will say. That as I say that we are doing the technology enhancements in such a way that we are able to manage those data through different technology; peering, caching and all, in such a way that our margin remains the same. So that's the technology enhancements, network management, you can say how you rearrange your network in such a way by investing in small amounts so that you save on those increasing of the bandwidth. So -- because that is one of the technology enhancements, which we have to do because as you see data from last 2 years, it has increased tremendously. But still, we are maintaining our margin, and that is not pouring into our cost. And that's what we are doing, and we are confident that we are continuing to do so.
The next question is from the line of [ Rama Manohar ], an individual investor.
Sir, I had a question that you said that EBITDA will increase by 13%. So is it on what we have achieved from INR 500 crores or is it EBITDA FY '21 numbers -- FY '22 numbers, like what is INR 567 crores? So [indiscernible] net profit margins, see, the profit after 3 years after spending somewhere around INR 1,000 crores CapEx, profit remains same, whereas revenue increases, maybe profit is INR 70 crores or INR 80 crores, we have moved to like…
Manohar, I will just say that as we say that we are going to be close to INR 600 crores of EBITDA, that's what we're trying to achieve in FY '24, which we missed in FY '23.
Okay. INR 600 crores will be likely that you are targeting. What about the net profit margins, like depreciation I'm not sure because whether you are increasing the depreciation or it would be like INR 300 crores or INR 320 crores or INR 400 crores.
Come again, you are talking about which margin?
No, you said INR 600 crores, I'm talking about net profit margins. And every quarter, depreciation now has reached INR 100 crores. Is it INR 100 crores? Or is it going to be just INR 80 crores again?
No, no, it is going to be INR 80 crores because this quarter, you are seeing more because of the provision which we have made of INR 32 crores for the obsolescence of routers and other equipment, LAN routers and other equipments, which we have taken as conservative accounting.
And one more thing that last call you said that rate of return -- rate of investment, you will get back in 18 months. And now it is already where we spent around during the last 3 years, INR [ 802,000 ] crores is the CapEx is done. Of course, some is maintenance CapEx. Still after spending so much amount, our EBITDA remains same. So I think we are missing something.
And if I go and bring new customers in the cable TV, the return comes between, you can say, 15 to 18 months straightaway. Yes, as I say that we are investing around INR 50 crores to INR 60 crores in the CapEx to maintain our subscriber base. Those INR 50 crores to INR 60 crores is not giving me any return right now from last 2 years, okay? Rest of the assets are giving return at the higher rate, and that's why I am able to maintain my ROA at 16%. So rest of the assets, which I am deploying is giving us around 22%, 23% return. This INR 50 crores, INR 60 crores is not giving me any return. In average, I'm coming to around 16% of ROE. So that's the equation, let us say.
Sir, not able to increase ARPU, cable ARPU, are you going to increase [indiscernible] April 1, you said that, I read this from newspapers or even in the con call you said that you will take a call on ARPU increase.
Yes, already we are implementing the [ MTU3 ]. We have started the whole thing from 15th of April and already the revised rates and packages have gone into the market. You can find it out in the market. So that's the strategy we are implementing in Q3.
Yes, that is my concern because the new telecom players, mobile player, every family, I think their ARPU went up by INR 100 at least, if you say 2 or 3 phones are there. Whereas [indiscernible] GTPL is struggling to increase even INR 10 or INR 20 ARPU. I think that is one anomaly. And then how -- because that is I think the business because we have a [indiscernible] and OTT, whatever it is. And then Tata -- Tata Sky, it is Sky Play, they are entering the broadband and security business because ICL cable business, the cable TV business may go out of the market in 3, 4 years or 5 years.
So I'll come on that. First, on the increase. Yes, increase, you can say, revised prices and packages are already in the market from 15th of April, from the morning. And we are looking forward that as [indiscernible] helps us, helped us in the whole thing, and Q3 will also going to help us. First thing. Second, your assessment on cable TV that it will be obsolete in 3 to 4 years, we don't agree. Cable TV is going to be there and going to grow the growth, that's the belief of the management. Yes, the bundling of the product, which I have already talked about, that you have to bundle, we are also in the broadband, we are also doing the OTT.
We are doing the entertainment in the cable. We have to bundle that. We have to -- I've also talked about, we have to introduce more services, which is the requirement of the customer, which we're already a lot of things are we are rolling also, and you will come to know this year.
So it's going to be not only 3 bundled services, more bundled services, which to satisfy every need of the customer, as we say that we look ourselves as a pipe, which has the access to the households. And that's the strategy on which we are working, and we look forward to launch all of those things in this FY '24.
Last one or 2 ancillary questions, like increasing the ARPU will result in increase in margin [indiscernible].
Yes, it is. If the ARPU is getting increased, the margin will increase.
But not sure to what extent our profit margins will increase, right?
Again, the next quarter will come. We will talk more about this in the next quarter. We will start seeing some of the results on the next quarter.
One last question. You said that, I want my company to focus more on broadband. Okay. Now you are saying that broadband, I think our 9 lakh customers, you are aiming for a 40% to 50% growth. I think that [indiscernible] 3 years, right?
Yes.
Don't you think it is a small increase because that is happening players. And then we are -- this year, I think we did very bad. I think only -- of course, cable TV is, company did good. Whereas coming to broadband, it is just 25,000 every quarter. And last 2 quarters, you said, there is a customer, B2B customer 70,000 something. And that also did not happen this quarter. So what is that clearly aiming for next only a broadband result, I think there is a more scope for increasing business? You can come back from cable TV to broadband. Can you clarify?
Broadband side, if you see, everywhere -- you talked about the competitions and everyone. The growth which we are doing is at the same level of growth which other companies are doing right now. We are better than the, some of the other companies. So that growth is going to maintain and that's going to enhance as we go forward. The B2B side of the business, yes, you are right that we had -- because of some technology here and there and mismatch and others, we are not able to do significant things in quarter 4, which we were expecting. And that is one of the reasons that you have seen our EBITDA a bit down because that contribution has not come in FY '23. But we are hopeful that FY '24, we are going to get the B2B subscriber. The -- whatever projections I have given you on next 3 years is just for the B2C. I have not integrated the B2B predictions on that.
The next question is from the line of [ Saket Kapoor from Kapoor Company. ]
Yes, sir. A very small point, sir. You mentioned we will be going back to the EBITDA number closer to INR 600 crore for FY '24. This was correct, sir?
Yes, around.
So we were in the vicinity of INR 555 crores, INR 560 crores for FY '22. And if we keep that as a base, this being an anomaly year because of the noncash item, we will be -- we will have a growth of 10%.
Yes, you're right on that way because the main reason is on that INR 550 crores, around -- as we are talking about FY '22, around INR 70 crores of revenue, INR 70 crores to INR 75 crores revenue as of activation revenue, which was like a deferred noncash EBITDA. That's why I said that activation revenue is a noncash, it is not affecting our cash generation capability and all. But it was contributing in the EBITDA, which has gone away. So if you take away that, it is like from 480, I'm talking about 600. So it's more of like in the 2 years' time, around 22% to 23%, 24% gap, which is more of what we are talking about our CAGR.
Could you please explain this activation revenue part of the deferred part? I didn't get it correctly. What is the nature of the same? And why would it appeared earlier and will not be a repeat item?
Yes. Activation revenue is more of which at the time of DAS, when we are deploying our STBs first time in the market, we collected it from the customers. It's like INR 700, INR 800, INR 1,000 on the boxes, which has got deferred for 5 years. So if you see the whole sales score, which has happened from 2017, 2018 until 2019 mid you can say. Those revenues of deferred revenues were appearing in our books. So in DAS, you have to do the deferred for 5 years of those revisions. So those revenues, which we have generated the cash on those years is part of the P&L, which is going away now.
So earlier [Foreign Language] DAS implemented in India 2012 Phase 1, Phase 2 is 2013. And Phase 4, it is up to 2017. So [Foreign Language] is more than almost 150 million set-top box implemented, whereas, let's say, take an example like GTPL itself is almost 10 million customers [Foreign Language] INR 500 activation revenue [Foreign Language] almost INR 500 crores activation [Foreign Language].
Phase 3 was 2017, but it was extended till 2019 somewhere, 2019, 2018 end.
[Foreign Language] this is what -- this has got…
That was the part that is going to be a very small amount, a very, very small amount of that, which is remaining now.
[Foreign Language] 97,000 kilometers of optic fiber and [Foreign Language] this will be earning annuity on the same or if this is what the infrastructure we have laid out and we have booked the revenue and the profit of that same? Are these [ IPV1 ] type effect?
You are talking about GFGNL. That EPC project.
No, no, sir. I'm talking about our Slide #4, wherein we have mentioned about our network in infra of 97,000 kilometer of optic fiber and we have done work for BharatNet project for joining, connecting 3,700 Gram Panchayat and then the O&M part. So are these clubbed under the IPV1 assets? Are these infrastructure assets?
This is my own. This is my own, 97,000 kilometers, which is I own it in different, different parts of the country, where I put in my own optical fiber.
This is not [indiscernible] owned by government. That is owned by government.
The way in which I have created the assets in last 15, 16 years.
Correct. Sir, so are these the IPV1 asset, the infrastructure assets, wherein you will earn an annuity on the same just like [indiscernible]? The licensed infrastructure provider category?
No, no. It is not like that. I can lease these to different parties.
But this is more on my B2B customers than for B2C customers. That's right.
And in your presentation, sir, one point was mentioned about this broad speaking video streaming solution. I'm missing where, on which slide it was mentioned. So if you could give us some more color, what are you conveying by this? And what is the differentiation? And how will this contribute to the revenue part?
So this is basically -- it's a broad speak, it's a technology solution, whereas it's a [ CBN ] technology solution, where I can -- you can deliver your content very easily, easy way and in a very smooth way. So next time, if you want this in detail technology side, I'll ask my tech answer to you, he'll give you enough brief guidance.
And last point on the -- out of the employee cost, sir, what is the payment to the KMP? How much have been -- is there a fixed cost or also a performance bonus that is being paid under the employee benefit expenses?
On the KMP side, yes, the around 15% of salary is on the bonus side, on the performance base, 85% is the fixed.
Okay. So out of this INR 145 crores, what is the contribution to the KMP on an annual basis?
I think sort of online.
We can take it offline because…
[Foreign Language].
We can take it offline.
I will get in touch. And lastly, a small point on with smart TVs now being the order of the day and they are getting bundled up with our mobile phone and the internet, getting more Wi-Fi to it. So how do you see that advent on more technological advancement in terms of smart TVs taking foray? How are you seeing this cable business will survive and will get [Foreign Language] cable business is going to be -- will have growth going ahead. But now with the smart TVs coming into it, [Foreign Language]?
So basically, [Foreign Language] whether it's smart TV with Android or is it IoL. [Foreign Language] GTPL is also doing, understanding with a lot of television vendors will come to do in quarter 1 or quarter 2 [Foreign Language] we'll let you know in coming either quarter 2 or quarter 3.
So that is one part. The second part is as more and more smart TV will come, we are happy because people are more moving towards the HD side. So the quality of HD or 4K, which -- all of those things is going to give us a boost on our side because HD quality, if you have -- if you don't have very high broadband connections and all, it is always be trouble. In our case, HD quality is very easily delivered on the smart TV and all, and that is going to give us more chance to do the marketing to those guys.
Sir, just to summarize, it is a good -- it is going to be a good customer experience going ahead. You are putting up technological upgradation, client acquisition. But [Foreign Language] in terms of valuation. So valuation [Foreign Language] the tax incidence on dividend is also very high. That is both for the promoter as well as for the non-promoter entity. So how is the valuation going to improve? And how are investors in the long run going to benefit from the type of CapEx and the money [Foreign Language]. Definitely it will create the infrastructure, you are going to provide customers the right experience at the right price. But how do you take a look after your investors, sir? [Foreign Language] now Reliance being in the pole with Jio. What's the message for us as minority shareholders?
See, as a management of GTPL Hathway, if you see, whatever we have promised in the IPO time and throughout the years, we are fulfilling those in the business aspects, and we continue to do so. If you talk about the shareholding side, that how it is going to get impacted and how the valuation because if we believe as a management, the valuation should go up because we are doing good in the business. Our, you can say, returns are increasing, everything is increasing. So we should have a good value on the whole, which we believe as a management. And -- but yes, restructuring or you can say how the shareholders has to look into that. I will say we will take the advice of our investors only individually that what we should do, which we should recommend to our Board on which we should recommend to our shareholders that what we should do so that the valuation should go up.
So I will say that we will take the feedback from the investors individually and present it to our board and the shareholders on that way.
Yes, sir. And you should also engage funds that can get you because if you look at the all-time high, it was around INR 300 or INR 296 that was the stock price in back in October '21. And we are now down, I think, if there is no corporate action taken, we are down to INR 100 today. So on top of spending money, having no debt, there has to be the reason why market is not valuing the company. That needs to be [indiscernible].
As a management, we are also concerned on that. But the prices are at the lower side as it has come in to down. But yes, we have to look that -- see, as a management, we can do our business on the business side, we can improve our thing for subscription creation and speculations and what we can do in the market and all, we will like to have our investor to tell us or advise us so that we can present it to our management.
Yes, right. I want happen more on it, but you are the largest shareholder. So you -- whatever value creation will happen will be top-down only. So that is the 3/4 on the promoter and the remaining 1/4 for minority shareholders. So whatever steps you will take, it is not only going to go for your minority share, it will come down top down from the promoter to be non-promoters. Kindly look into the aspect and the reason therein or also the purpose of them remaining listed when value cannot be created for your industry. That's all from my side.
Sure, we look forward to -- we look forward to that. And we will talk individually as -- so that as the company will do better and better the share price will go better also.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.
I would like to thank the participants for taking out time to join our earning conference call. We look forward to having continuous engagement with all the market participants. For any queries, please feel free to connect with Orient Capital, which is our IR advisers. Thanks, and have a good evening.
On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines.