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Zee Entertainment Enterprises Ltd
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Ladies and gentlemen, good day, and welcome to Zee Entertainment Enterprises Limited Q3 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bijal Shah. Thank you, and over to you, sir.
Thank you, Zed. Hello, everyone, and welcome to Zee Entertainment earnings call to discuss company's performance in Q3 FY '20. First of all, we would like to apologize for shifting the call -- time of the call, which happened due to reasons beyond our control. Joining us today on this call is Mr. Punit Goenka, Managing Director and CEO of ZEEL; and Mr. Rohit Gupta, Chief Finance Officer, along with senior management of the company. We'll start with a brief statement from Mr. Goenka, and subsequently, we will open the call for questions. Before I pass it on to Mr. Goenka, I would like to remind everyone that anything we say during this call that refers to our outlook for the future is a forward-looking statement and must be taken in the context of risks that we face. Thank you, and over to you, Mr. Goenka.
Thank you, Bijal. I would like to welcome everybody to this call and appreciate you joining us for the discussion on the results of the third quarter of fiscal 2020. Before we take up the quarterly update, I would like to sincerely thank everyone for the reposing faith in Zee Entertainment over the past 12 months, a period where promoter level issues dominated the headlines instead of the operating performance of the company. It was heartening to see that despite so much noise, most of our valued shareholders stood by us, and many of them saw the inherent value of the company and increased their shareholding. Your faith has further strengthened my resolve to continue working towards making Zee Entertainment as India's leading global entertainment content company. I would also like to take this opportunity to address some of the concerns that The Street has expressed over the last few months regarding management continuity and Board structure. Even with a significantly lower stake that the promoter family now owns, I will continue to work for the company as long as the shareholders desire. The Board has appointed a reputed HR consultant to review and recommend my compensation structure and other terms of engagement in line with global best practices. As far as my team is concerned, we have not seen any churn in the senior management over the past year. And I would like to assure everyone that I don't foresee any significant management change in the near future as well. Now let me explain how the Board structure will evolve. Going forward, I will remain the sole representative of the promoter family on the Board of the company. Mr. Chandra will not be putting up his name for reelection in the next fiscal and will assume the position of Chairman Emeritus. To further strengthen the Board, new independent board members with expertise in the field of either media or technology will be inducted. This exercise is expected to be completed by the month of February. All these appointments will have to be ratified by the shareholders and will come up for the consideration at the forthcoming AGM. Moving on to some of the questions you might have regarding the balance sheet. Over the last couple of years, we have received feedback on company's treasury policy. Management has incorporated these changes in the treasury policy, and the same has been approved by the Board. In a nutshell, it mandates that going forward, entire surplus cash shall be invested in highly -- high quality, highly liquid instruments. During the year, the audit committee had initiated an internal audit of advances. The internal audit report has confirmed compliance and -- with all ZEE processes. These transactions are further -- being further verified by another external auditor, and the report will be presented to the Board in the month of February. Lastly, on receivables from Dish TV and Siti Cable, we have performed a detailed analysis of recoverability. Based on the assessment, the company has determined that the entire balance is good and collectible. As per the plan agreed with Siti Cable and Dish TV, the arrears will be cleared over 12 and 24 months, respectively. Consequent to the delay in payments, the company has taken an expected credit loss charge of INR 376 million during the quarter. The company will closely monitor the collection pattern from the said customers. Now moving on to cash generation for the next year. Over the last couple of years, the company has been in an investment phase, acquiring content, primarily movies, for expanding TV business and scaling up ZEE5 content library. While for ZEE5, movies are already one of the biggest propositions for the consumers, we have just launched 3 movie channels in the regional markets to monetize the content that we have acquired. Fiscal 2020 will be the last year of disproportionate increase in inventory. And I expect from next fiscal onwards, the number of inventory days will start reducing. In fiscal '21, '22 -- sorry, '20, '21, we expect that over 50% of PAT should be converted to cash, significantly improving the cash conversion ratio. Let's move to the operating performance. Third quarter is normally a strong growth period for us. However, the tough macroeconomic environment led to decline in ad revenues. Most of our advertisers are going through a slow growth period and that has led to cut in advertising expense. I believe that the worst phase is behind us, and we will start seeing an uptick in the growth from the next quarter. The proposed changes to the tariff order by TRAI are being challenged in the court, and we are awaiting the final verdict. However, I'm confident that our strong portfolio of channels across markets will enable us to navigate any regulatory change in the most efficient manner. Despite the slowdown, we continue to make investments in business, where we see potential for growth. Working with our strategy to entrench ourselves deeper in the regional markets, we have launched 3 regional channels that will make our content more accessible to audiences across the country. India's first Punjabi general entertainment channel will surely help further strengthen our viewership share and brand in the North Indian markets. With the addition of 2 new regional movie channels, we now have the biggest movie channel portfolio in the country. We are preparing for the launch of 2 more channels over the next few months. We also continue to invest in original content for ZEE5 to create a rich content library that will make it really compelling -- a compelling offering for our consumers. These investments will help us go ahead of industry once their transient slowdown phase has passed.During third quarter fiscal 2020, our television network had an all-India viewership share of 18.2%. While our regional portfolio increased viewership share, share in Hindi markets declined in both GEC and movie segments. ZEE TV maintained its weekly prime time leadership, but lost weekend prime time share and was the #3 channel in the pay Hindi GEC segment. Our Hindi movie cluster continues to be the #1 movie portfolio in the pay Hindi movie genre.Our regional portfolio had a mixed performance during the quarter. We maintained leadership position in Marathi, Bangla and Kannada markets, with Kannada further strengthening its leadership position. While Zee Tamil improved its viewership share, Zee Telugu witnessed a marginal decline. Zee Keralam continued to gain share in the Malayalam market, establishing itself as a strong contender for the #2 position. Zee Sarthak regained leadership in the Oriya market towards the end of the quarter. Now coming to ZEE5. In the month of December, it recorded a peak DAU of 11.4 million. ZEE5 released 26 original shows and movies during the quarter and continues to be the biggest producer of digital original content in India. We are well on track to achieve the target of products producing over 70 original content pieces this fiscal. ZEE5 launched a refreshed version of the progressive web app in December, which enables a fast, engaging and immersive user experience. We are also in the process of inking deals with smart TV for placement of hot key on the remotes, which will make the ZEE5 content accessible to the user at a click of a button. Coming to the financial performance. Our overall revenues declined by 5.5% year-on-year to INR 20.5 billion. EBITDA for the quarter stood at INR 5.6 billion, and EBITDA margins were at 27.6%. Our cash and treasury investments at the end of December stood at INR 17.7 billion. With this opening comment, we would like to address any questions you may have.
[Operator Instructions] The first question is from the line of Vivekanand Subbaraman from AMBIT Capital.
Punit, you mentioned that the receivables from Siti and Dish, you now have a plan to collect the money over 12 to 24 months. Given that the 2 entities have had challenges over the last 9 to 12 months in paying you money, what gives you the confidence that their financial position will improve and you will get the money back from them? Second question is on the group level debt -- the promoter group level debt. Now what is the update on the liquidation of nonmedia assets? And any update on the stake sale of Dish? And anything you can clarify on that?
Thank you, Vivek. So on the first part, what we've initiated was that, when we saw that they had -- Siti and Dish both have fulfilled their commitments to us as per the payment plan given by them for quarter 3, but they expressed potentially not being able to keep it up in quarter 4, especially Dish. Siti, I'm still confident, we'll be able to keep stick to the payment plan as they have submitted to us. We had appointed a third-party to go and do a deep dive into their financials. That third-party has come back and said that, given that the current debt levels of Dish at where they stand, and the way they have planned their cash flows, this is the best outcome that they can do. And therefore, we believe that this is all collectible. For the time value of money, we've already taken a provision in our books. And obviously, we will try and recover that from Dish TV as and when the time arises. So it has been certified by a third-party to us, and Board has taken more of the same, and therefore, has allowed us to go ahead on this basis. On the second question, Vivek, I'm sorry, as I had stated earlier as well, I'm no longer involved in the Essel Group corporate affairs. I'm solely running the Zee Entertainment company, but I will request the corporate team to give an update to Bijal, who can then share it with you offline.
Right. And 1 small bookkeeping question that I forgot to ask. What is the cash position right now in the company?
Rohit?
Yes. So our cash and cash equivalents as of 31st December are at 17 -- INR 678 million, and they have improved from [ 14 92 ] around 30th September.
The next question is from the line of Yogesh Kirve from Batlivala & Karani Securities.
My first question is -- so if you've seen the programming cost increased by about 15% in the first 9 months, now considering we've launched 3 channels and I think 2 more channels are slated, so any guidance on what -- how should we look at the programming costs over the next 4 quarters?
So programming costs on the back of the new channels and ZEE5 combined will be in the region of 10% to 12% for us. And going forward, it'll be pretty much in line with that.
So 10% to 12% is the growth you're referring to, right?
Yes. Bijal, do you want to add to that?
Yes. So see, one thing you need to understand. See, there are a lot of things which go into programming costs. So if we have any big movie in the base quarter and we don't have a movie in this quarter, then the programming cost will change dramatically in terms of growth. So underlying programming cost is growing and it is not a 6% growth. Last year, same quarter, we had some movies and that is the reason why the comparison might be distorted. Additionally, there is one more thing. See, last year, in 3Q, advertising market was extremely strong. So we had taken up lot of shows and done -- I mean events around that and also few events standing outside the normal shows. And that is the reason the cost of programming was high. Now if we look at this year, the advertising market was not strong and, technically, we have actually reduced those investments. So that also explains a part of slower growth in overall programming cost. That said, if we look at the base business, both domestic broadcast or as well as ZEE5 is concerned, I don't think that there has been any change or anything which has -- I mean in terms of growth -- programming cost growth trajectory that is [indiscernible]. It remains to be stable.
Right. So say, if we one-off all this sort of quarterly volatility, my question was related from a longer-term perspective over the next 1 or 2 years. So on back of the channel launches, are we going to see a sort of a higher increase than we are seeing currently?
Not really. See, this channel -- I mean the channels, which are -- 2 are movie channels and 1 more movie channel we would be launching in due course of time. And then there is Punjabi general entertainment channel. Now of these 3 movies channels, a good part of amount was already in our P&L. We did not have enough movies at that point of time. We were building library. And that is the reason why there was no movie channel. So this movie channel will not lead to very significant increase in costs. Punjabi will add to cost, but in overall scheme of thing, it's very small. And on the ZEE5 side, also I mean we are already reaching, in terms of number of shows, we have reached where we wanted to reach, around 70-plus shows in a year's time. So there also we don't see much of an increase. So overall, I don't see any step jump or other continuous increase in the programming cost.
And just another small question. So related to the provision we have taken related to delays in collections, so is it for the amounts which are overdue so far or we have also taken into account the delay for about 12, 24 months that we are anticipating?
No. So it takes into account the payment plan as agreed by the Board and how the collection will come in. So it's for the entire amount.
Just to clarify, this is not that Dish TV will not pay the entire amount. It is a provision for loss of time value of money due to delayed payment, they will recover entire money from Dish TV. However, since the payment is delayed, it will -- I mean the charge has been taken to recognize the time value of loss.
And I may just like to add. When we collect all the payments, this charge will actually be reversed in the profit and loss account.
The next question is from the line of Kunal Vora from BNP Paribas.
On advertisements, you mentioned that next quarter you expect to get back to growth. So just wanted to get some more insights? Like, what's the -- what's your view on the market right now? Which are the sectors spending, not spending? And what's giving you confidence? Are you seeing signs of improvements in January? That's one. I'll come to the second question, later, sorry, yes...
So what you say it is that -- I mean this is the worst quarter. There will be definitely an improvement from first quarter itself. Just want to put this quarter's declining perspective and that will give you an answer that why we are saying this is the worst quarter. So I mean there are 3 things, which are actually driving this sharp decline. One is that we took off 2 of the most important channels from DD Free Dish. So that itself is contributing almost like 450 basis point of decline and that gets into the base from 1Q of FY '21. So that degrowth which we have been facing [ us on FTA strategy ], will not be there. Secondly, if you look at last quarter's number, the base was extremely high. We grew around 23% in the last quarter on the back of 30% growth in the year before. So that was the reason that I had mentioned that we were facing very strong market in the last year same quarter. We had done a lot of events and we were tactically invested in a lot of properties. So that also resulted in significantly better revenue growth last quarter. So the base was extremely high and that has impacted to an extent. And overall, we are -- the last reason is, overall, we are seeing weak economic environment. So that's where most of our consumer companies have seen sharp slowdown. Now in the slowdown, generally, the consumer companies tend to hold back on new product launches or new innovations, which typically accounts for up to 50% of their spend. And cutback in this innovations had actually led to a significant drop in industry revenue itself and which has reflected in our numbers also. So going forward, we think that the base itself will be much better. And secondly, we -- I mean what is behind us, we are seeing some stabilization in ad revenues as -- in the last couple of months. And we think that we are quite hopeful of recovery to normal growth trajectory in the coming fiscal.
Sure, sure, sure. Okay, second question on international. Advertisement as well as subscription revenue has been coming off sharply. Is it largely because of rising usage of OTT? And is the decline broad-based or any specific markets in which you are seeing pressure? And how -- what's the status of ZEE5 rollout in international markets?
So it is quite broad-based. Because if you see, we've seen losses in the Middle East market, we have seen losses in the U.K. market. This is all -- so the Middle East market is largely due to the economic environment there, that there was also a platform that shut down in the India/Middle East market, which just completely wiped out the subscription revenue. So it is quite broad-based. It's not one specific market per se. But yes, answering your question, markets like U.K., et cetera, are, at some level, due to the OTT business. And we have taken a conscious call that, during the next fiscal, we will be shutting off our linear business in these markets and only be available through ZEE5. ZEE5 has seen good traction in certain markets, and definitely, in the Asian market and Europe market, but we believe that once the linear feeds are out of the picture, then we will see even furthermore traction for ZEE5 in these market groups.
Okay. So how would that impact international revenues next year as we shut down the linear television?
Maybe we're a hockey stick thing. There, you will see some more decline happening next fiscal in the subscription revenues. And then starting from the fiscal after that, you'll start to see growth come back.
And just lastly on margins. With the larger investment, new channel launches and if you start expanding inventory, how should we look at the margins going forward? The 30% margin be still remains?
So we are still in the process of finalizing our plans for the next 3 years. I'll be in a better position to guide you on margins to -- at the end of fourth quarter. But right now, for the fiscal, we are making all endeavors to reach the 30% mark. If you see our 9-month total, we are still at 31%, and therefore, there's no reason to doubt that why we can't achieve 30% this fiscal.
The next question is from the line of Rohit Dokania from IDFC Securities.
Punit, can you talk about subscription revenue? So how should one think of domestic subscription revenue in the next fiscal? So I obviously understand there will be amendments to the new -- to the tariff order. Therefore, one was to sort of set it -- set the amendment side, what kind of growth could one see in a status quo scenario?
In a status quo scenario, you would definitely see low double-digit growth coming from us. And even in the new scenario, we are very confident that we will definitely have growth. What that level of growth will be, difficult to say today. But definitely, once we see the outcome of the tariff order or NTO 2.0, we'll be able to guide you better. But in both scenarios, I still believe that the company will still grow its domestic subscription revenue.
Fair enough. Also just 1 bookkeeping question. Is it possible to share the absolute figure of inventory and receivables as of Q3 end?
Yes, of course.
Yes. So you go ahead with next point if you have.
No, this is the last question, Bijal.
Just give us a second.
So the inventory -- yes. So our inventory advances and I'm looking at both these numbers together, we are at roughly around INR 6,000 million (sic) [ INR 6,000 crores] and this is against about INR 5.8 billion (sic) [ INR 5,800 crores ] last quarter.
You mean INR 6,000 crores versus INR 5,800 crores last quarter.
Yes. Yes.
Okay. And similarly for the receivables?
The receivables are in line. They have actually come down marginally. So as against INR 2,418, we are at a receivable number of INR 2,332.
The next question is from the line of Ankur Periwal from Axis Capital.
Just one clarification on the [indiscernible] if I look at H1 content cost...
I'm sorry to interrupt, sir. Mr. Periwal, your voice is slightly breaking. So if you can maybe just be in the better coverage area.
Is it better now?
Yes, much better, please.
Yes, sorry. So in H1, our content cost was roughly 20% of growth year-on-year. While this quarter, the base being higher partially, the cost has come down to 6%. Now going ahead, what sort of run rate should one expect there, given that our investment in ZEE5 also will increase as well as the new channels, the overall spend will remain there? So will it be in tandem with the revenue growth? Or if you can put some light over there?
As I said earlier, this is the current year is the peak investments of ZEE5 and that's why you saw over the last -- the same 20% kind of growth. It will now normalize, and I think we should be in the ballpark of 12% to 13-odd percent growth in the coming fiscal.
Sure. And secondly, on the balance sheet front, now given the -- there was certain elevated inventory because of the new channel launch expected, which now is spanning out over the last few months and going ahead as well. The balance sheet will -- should be -- as in the working capital investment there, should be seeing a reduction probably in March. Will that be a right understanding? Because you mentioned earlier that FY '20 will still be a peak inventory. But in absolute terms versus H1, there should be a decline there?
Yes, you should see that more starkly in FY '21 because this is still the preoperative launch phase of these channels, and the hard launch is yet to happen.
Okay. Fair enough. Sir, lastly, just 1 clarification, although it got covered in the earlier question as well. On the subscription front, now with this NTO being there an overhang still, we are fairly confident that the subscription revenue will still be in a positive trajectory despite NTO being implemented, even if it is, let's say, in the current form?
Absolutely correct.
Next question is from the line of Aliasgar Shakir from Motilal Oswal Securities.
Yes, most of my questions have got answered. I just wanted to understand, maybe if I missed it, pardon me for repeating, just the ad outlook that we are seeing and what kind of growth scenario we can build in probably the coming quarters?
So fiscal '21, we are expecting it to be in the single-digit -- high single-digit kind of scenario.
In the advertising?
That's right.
Yes. So high single-digit is for entire -- I mean expectation of the agency is high single-digit for the entire television industry. But if you look at last year, we had 2 big sporting events, one was World Cup plus, that was IPL. Next year, it will be only one. So for entertainment, it could be low double digits.
Okay. And also we have been, banning the last few quarters, generally gaining market share, so always targeted growth above the industry. So what is the growth that we could target?
Our endeavor will always be to beat industry. So that -- we will stick to that.
And this launch of new channels will also help us in the coming year. And on top of that, Kerala, which we launched in the last fiscal, so that has been consistently gaining market share. So that will also start adding to overall growth. So again, I mean on the growth side, which was market share-led growth-driven story. If we are able to improve, we should be able to grow ahead of market. But we have a lot of levers to improve our market share in the coming year.
The next question is from the line of Charles Cartledge from Sloane Robinson.
Could you -- perhaps you said that in your introductory remarks, but my line is not that great, what's the situation of the -- on these funds on the balance sheet which are tying up cash at the side and various other funds? Are they -- have you redeemed the money like you said you would? Or is it still there?
We have already started the process of redemption, Charles. And last quarter, we received $2 million from them. We are expecting some more money in this quarter. And we are expediting the redemption to happen as soon as possible.
So when do you think it might be complete, please?
It will take about 12 months for us to get it done.
And why would it take that long?
See, basically, these investments were done in nonliquid, high-yielding assets, and therefore, liquidating them takes time. And we are working with the funds to make sure that these liquidations happen as soon as possible, even if it means we have to suffer some losses. But we are still working towards the redemption as soon as possible.
Next question is from the line of Jay Doshi from Kotak Securities.
I just -- this question is to the CFO. Sir, you mentioned INR 6,000 crore as inventory plus deposit advances. Because if I'm not mistaken, inventory as of September end was INR 4,300 crores and deposit to advances were about INR 840 crores. So that would be about INR 5,200 crores. So has it gone up from INR 5,200 crores to INR 6,000 crores? Am I missing something, which doesn't look like?
No, no, you are not missing. I mean we have given the entire advances number. Now if we are asking -- I mean if you are asking about those advances [ only it has for film acquisition ], it has gone down a bit. Those advances have gone down a bit, I think, by around INR 50 crore and inventory...
The inventory is about INR 200 crores.
Yes, inventory has gone up by around INR 200 crores. So overall, around INR 150 crores of increase in that part. Now the overall number which we talked about includes all the advances, which is towards advanced taxes, it will be towards deposits, which we would have given for renting property and various such advances would be there. There might be some advances which we are buying for content and all. So all the advances -- each of them -- that was that number INR 6,000 crores. Otherwise, the number has gone up by INR 150 crores. Advances relating to film acquisition and the inventory both together.
Yes. So I'd just like to clarify here. So this number that we spoke about is inventory and advances. We do have what we had called as interest-free security deposits, which are over and above that. That is about INR 775 crores, over and above that. And that number in September was [ INR 769 ] crores.
That's helpful. Second question is a related question on programming cost. Now you've guided for 10%, 12% increase next year. Now if I look at your inventory increase on a Y-o-Y basis over the past 12 months, it's gone up by INR 1,600 crores. So on a straight-line basis of 5-year period, roughly, it should result in inventory amortization increase of more than INR 300 crores per year, which itself translates into high single-digit increase in content cost. And on top of it, you are indicating higher investments in ZEE5. So I'm a little surprised that 10% -- 12%, 13% programming cost increase guidance that you've given for next year or going forward looks a little bit on a lower side to me. So what am I missing? And second is when I look at this quarter's number, if I were to factor in inventory amortization in sync with inventory increase, 6% growth in programming cost looks a bit too low. So if you could kind of call out what percentage of the inventory, INR 4,500 crore inventory as at September end, is not subject to amortization as yet because that content is not telecasted?
So yes, I mean first, see, if you are seeing an inventory increase through the year, only -- I mean you will not see full impact of that increase. Some impact of that increase is already flowing through our P&L this year. So you will not see that full impact which you are calculating at 20% in the coming year, is not correct. That's #1. #2, if you look at our balance sheet, even within this, there is around INR 5 billion worth of inventory, which is kind of coming up for amortization, will be at a later date, because these are all future rights with channels which are there. So that is the second part. Thirdly, we have said that we are reaching peak investment intensity in ZEE5. So even in this year itself. So it is not that we are saying that ZEE5 investment intensity will go up in the coming year. Looking at the domestic broadcast business, given the way the environment is and we are actually at optimal number of hours across all the channels. So we really don't need to add significantly to our spend in the coming year. That is one. And on top of that, there are a few other strategic things which we are doing in domestic broadcast business, which will also result in some reduction in costs, and we are having some cost optimization also. So putting all this together, a large part of this 13% growth we are talking about will be driven by movie amortization. But beyond movie amortization, the increase in cost will be -- will not be very significant.
Understood. So at current inventory, 500 -- INR 5 billion is what is for future rights and the remaining INR 40 million is what is pertaining to content that is being telecasted, so you're already amortizing it. Is that right to understand?
Yes, absolutely. And also note that whether the move is telecasted or not, the -- if rights become active, we start amortizing. So let's say that we would be launching a channel -- we have launched a channel in Bhojpuri this year. But if there was movies which were in Bhojpuri which we acquired and the right day started in -- on 1 April 2019, the amortization starts. So amortization does not wait for telecast. So that is, again -- I mean again, will probably answer your question to a large extent.
Understood. And final point, just a request, I'd put this request last time around as well. If you could give some standard sort of disclosures on ZEE5, which is MAU, DAU? Because when we look at your competitors' numbers on App Annie or SimilarWeb and when you compare those numbers with ZEE5, it becomes very difficult to reconcile with the disclosures that you've given on ZEE5. So for us to be able to assess the progress as well as positioning versus competition, it becomes difficult. So if you could share standard MAU, DAU numbers instead of peak DAU?
Absolutely, Jay. We will start doing that from next quarter. As I stated in my opening remarks that ZEE progressive web application has just launched last month, and our new app will be launching in the month of February. So starting from next quarter, we will start giving you the absolute standard metrics.
The next question is from the line of Alankar Garude from Macquarie.
Firstly, there has been a dip in our market share in Hindi GEC since the past 3, 4 quarters. Even in a key genre like Marathi, the market share of some of our competitors has been picking up meaningfully. So my question is, are there any content initiatives planned to improve our market share in Hindi as well as some of these important regional languages?
Yes. So obviously, we continuously want to look at our content portfolio of the channels and improve on that, so that the market share can be gained back. You will see a lot of content change happening on Zee TV, on Zee Marathi, on Zee Telugu. So all these channels where we lost market share, we will be replacing most of those shows, therefore, trying to regain back the leadership position. In fact, I'm told that Zee Telugu has already gained back or started the trajectory towards upward movement and should be on track within first quarter of next fiscal.
Right. Secondly, Punit, can you share what would be the size of the Board once the new members are brought in?
The Board size eventually will be only 8 to 9 members. And this should be all done by the -- as I stated in my opening remarks as well, from the beginning of the fiscal.
Right. And finally, Punit, 1 question for you. Do you think that this Board reconciliation episode, which happened in November, could have been handled better?
In hindsight, everything could have been handled better, including what happened on January 25 last year.
Next question is from the line of Priyank Singhal from HDFC Life.
So my first question is on subscription revenues, what percentage of subscription revenues would be coming from Dish and Siti Cable?
So Dish is roughly about 20% of our revenue. Siti Cable will be just about 5-odd percent, 7%, sorry.
So about 27% of total subscription revenues come from these 2 entities?
Correct.
Okay. For the quarter, we've reported 22% growth in subscription revenue. So what is driving this very significant growth? Has there been any recent -- because I think mandatory cash et cetera all that is behind us now, right? So is it completely largely volume-driven or there's an element of pricing, if you can break it between pricing and volume?
No, this is purely NTO 1.0 driven. There is nothing else in that. The volume part is yet to be factored in because we have not even started to work on that yet.
Yes. So Priyank, we have been increased subscription growth has been highest for NTO 1.0. The reason for that is, if we look at last 7, 8 years, the ZEE's market share has gone up from around 11% to almost 20% when NTO was launched. Now most of our competition has not seen any gain in market share. In fact, some of them have actually seen a loss in market share over a period of time. Now in earlier, in ZEE, it was a bit difficult to monetize this gain in viewership because generally, a bilateral deal is to happen and that was like, last year's price of something. And in the new NTO actually gave us a chance to reset our pricing. So I would say that a very, very large part of our subscription revenue growth has actually come from the places where we have built viewership data over last 3 to 4 years. So just to give you an example, Tamil Nadu was not a market where we were getting anything. It will almost like close to INR 0 of subscription revenue. If I we were able to see FY '18, FY '19 financials, but if we look at FY '20, that number has become very, very significant. Similarly, in Telugu market and Kannada market, we have seen some significant improvement in West Bengal. We have also seen significant improvement in Maharashtrian market on account of the fact that the Zee Marathi is kind of an indispensable channel for almost everyone and -- which was not getting due value under the earlier regime. So this entire growth in our viewership is an explanation to why we are growing much faster as compared to our competition.
And I should add here in Tamil Nadu, 2 months ago, most of the cable companies have switched off Zee Tamil, and we went on an aggressive marketing drive in Tamil Nadu, and almost 60% of subscribers have gone and picked our channel ala carte.
So then it is, in that case, if I understand correctly, volume-driven, right? Because we are able to get for a higher number of subscribers, we are now getting paid for compared to in the past? Is it?
No. We knew those subscriber base existed, but because we were unable to price the channel in for the consumers, they were being sold as a bundle. Therefore, there was no individual pricing. Therefore, it's still pricing-driven, not volume-driven.
And just linking this to the other question, which you were asking on the forum that what will happen in NTO 2.0. So the kind of viewership and the kind of pull our channels have exhibited during implementation of 1.0 gives a lot of confidence that we should be able to continue to grow our subscription revenue even in the new regime.
Sure. But given that Dish TV and Siti Cable are 27%, 30% of our subscription revenue, I'm assuming it is fair to assume that of the incremental revenue growth that we are seeing on the domestic subscription side, those 2 entities would have a similar share in the incremental subscription revenue as well. So what I'm trying to understand is that the receivable outstanding, therefore, keeps going up from those 2 entities. And if they have not been in a position to clear our historical outstanding, incrementally, all this additional burden coming on to them. What are your thoughts on that? And what would be the current at the end of the quarter receivable outstanding from those 2 entities? Is INR 750 crore the total amount, including whatever has grown during the quarter as well? How should we look at the overall receivables picture given this healthy growth in subscription revenues that is coming?
So I think let's break the 2 up. Let's not combine it and look at it. If we look at Siti Cable, they have been paying us from the last quarter all their monthly billing, plus additional amounts. Therefore, their actual billing has come -- actual outstanding has come down. I expect the same to happen in quarter 4 as well. Then in the case of Dish TV, they have brought down -- they're paying -- making regular payments to us for the current billing for the last quarter and they will continue to do that for this quarter as well. Their outstanding amounts or overdue advances start getting reduced starting from next fiscal onwards. And on your point about incremental numbers being added, if you look at cable NTO 2.1, the cable industry lost almost 15 million subscribers. So it's not as if the cable industry is growing significantly from that perspective. And even on Dish TV side, our numbers have been stable. There's been hardly any growth in the billing.
See, Priyank...
So the 22% growth in domestic that we have seen -- you were saying that that Dish and Siti may not have grown. So it is the ex of these 2, the remaining 70%, which has grown even at a higher rate, so that the overall has grown at 22%?
No, let me clarify. See, it's simple. One is that you have seen because of NTO 1.0, you are seeing growth across the board. Now I think you are conjecturing that a large part of this 22% growth is coming from Dish TV and Siti Cable, which is not the case. In fact, the growth at that -- those places are actually lower than the average growth which we have seen. We have seen very strong growth in southern market. In that market, Dish and Siti are not really that strong. So actually, if we look at it, if I were to look at distributor by distributor, the growth from other distributor is much stronger as compared to this. As far as Dish, Siti subscription revenue receivables are concerned, so going forward, I mean there will be -- they will be paying for what we bill for the year as well as they will be paying a part of arrears. That arrears flow of Siti Cable will be completely clear in 12 months' time and that arrears for Dish TV will be cleared over 24 months time. That is the plan right now.
But what should be the total number outstanding, Bijal, as on the quarter between...
INR 7.5 billion is the total number, which is given in the -- on those 2 accounts also.
So INR 750 crores is the total, not just the overdue amount? It is the total amount?
Yes, yes, that is the total amount.
Overdue amount is?
Overdue amount is around INR 3.5 billion. Overdue is INR 3.5 billion and number is -- total number is INR 7.5 billion. We don't expect it to increase in fourth quarter also. And then the arrears payment will also start.
The next question is from the line of Ruchit Mehta from SBI Mutual Fund.
My questions have been answered.
The next question is from the line of Dhaval Seth (sic) [ Naval Seth ] from Emkay Global.
Naval, this side. Sir, 2, 3 questions. First, on Dish and Siti, are these equal installments, monthly, quarterly? Or these are like -- will be staggered at the end of the period?
The payment plan has been received monthly basis and that's how the collections will happen.
So these are equal monthly installments?
No, they may not be equal monthly installments, but they are monthly installments and going up significantly later on.
Okay. Secondly, on the content advances, what we had paid during last year for interest-free 11 months, what is the status there? Have we received content rights? Or is there anything which money we will get back because we have not received content rights? Any status update over there?
Rohit?
So we have been receiving content over the quarters. And some of these advances will completely be nullified by end of Q4. And in terms of the deposit, some part of it has come in Q2 and Q3 and some part will come in Q4. They will be converted into advances in the quarter 4. And then we will see that they will be converted into inventory over the next year.
And any -- you are sensing anything which will not get converted into content and you'll receive back the money? Anything of that sort you're sensing over there?
So if there is no content received in the next fiscal against these advances or deposits, this money will be returned back.
Okay. And lastly, what was the OCF and FCF generation for the quarter?
So we had a positive cash flow this quarter. And as you can see that our cash and cash equivalents have grown, so the OCF for this quarter is INR 251 crores.
And FCF, sir?
So yes, I mean approximately the same number as FCF because it was not much CapEx during the quarter. So about INR 250 crores is the free cash flow.
Ladies and gentlemen, we will take the last question now, which is from the line of Deepak Gupta from Reliance Nippon Life.
I just want a clarification on the ITD of INR 150 crores which was written off last quarter and if there's any update on the same.
Not yet, Deepak. We are still working on it. I think the company has had many other priorities to be dealt with. We will come to that sooner.
Ladies and gentlemen, that was the last question for today. On behalf of Zee Entertainment Enterprises Limited, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.