Ladies and gentlemen, good evening and welcome to Entertainment Network India Limited Q3 FY 2024 earnings conference call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Runjhun Jain from EY, Investor Relations. Thank you, and over to you, ma'am.
Thank you, Manisha. I'm Runjhun from EY, Investor Relations. Good evening, everyone. Welcome to the Q3 FY 2024 earnings call of Entertainment Network India Limited. To take you through the results and answer your questions today, we have management team from the company here represented by Mr. Yatish Mehrishi, Chief Executive Officer, and Mr. Sanjay Ballabh, Chief Financial Officer. The financial results and the presentation have already been uploaded on the company's website and on the exchanges. Should you need any further information, you can reach out to us at EY IR team, and we would be happy to send it over to you. Before we proceed with this call, a disclaimer.
Please do note that anything said on this call during the call's introduction and in the documents, which reflects the outlook towards the future, or which should be considered as a certain forward-looking statement, must be viewed in condition with the risks that the company faces and may not be updated from time to time. With this said, I will now hand over this call to Mr. Yatish. Over to you, sir.
Thank you, Runjhun. Good evening, everyone. On behalf of Entertainment Network India Limited, I extend a warm welcome to all of you for joining our quarter three and nine months FY 2024 earnings call. I hope you had a chance to review our financial results, but let me provide a concise overview. I'm delighted to report a strong quarter with our top line witnessing a substantial 21% year-on-year growth. This robust performance is attributed to a stellar performance in both our segments, FCT and non-FCT. Our FCT segment has exceeded industry benchmark, underscoring our leadership position both in volume and value. In quarter three FY 2024, our revenue market share rose to 27.7%, marking a significant improvement of 110 basis points year-on-year.
The impressive top-line growth further translated to a substantial enhancement in ENIL's EBITDA margins, reaching 33% with an outstanding 36.4% year-on-year growth, delivering an EBITDA of INR 44.3 crores over last year of INR 22.4 crores. Excluding digital, the non-FCT segment recorded an impressive 35% year-on-year growth with a robust EBITDA margin of 34%. Our digital revenue stand at INR 11.4 crores, constituting 13% of our radio revenues. We have additionally invested INR 6.4 crores in the digital segment in this quarter. As you are aware, we completed the acquisition of the music streaming service, Gaana on 1st December 2023. We are currently in the process of revamping and rebranding it to align with our digital transformation strategy. However, it will be premature to provide specific details, but we will be very happy to share more information in the upcoming future quarters.
Our commitment to sustainable and profitable growth extends to our international business as well. Post-restructuring, our international business has stabilized and is now growing profitably. I am thrilled to share the PAT for the company, excluding digital was reported at INR 21.6 crores in quarter three FY 2024 compared to INR 10.4 crores in quarter three FY23, marking the second consecutive quarter with a positive PAT. For December YTD nine-month PAT, excluding digital stands at INR 32.9 crores versus a loss of INR 2.5 crores last year.
Even including digital, PAT for the nine months this year stands at INR 18 crores positive versus a loss of INR 18.1 crores last year in the nine months. Our balance sheet remains robust with cash equivalents totaling to INR 262 crores as of 31st December 2023. Looking ahead, our primary objective remains the maximization of shareholder value on the back of sustainable growth and profitability.
With that, I would like to invite any questions you may have. Thank you very much. Over to you, Manisha.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Deepan Shankar from TrustLine. Please go ahead.
Good evening, everyone, and thanks a lot for the opportunity and congrats for the great set of numbers.
Thank you, Deepan.
Firstly, can you provide the breakdown of this non-FCT revenues in terms of platform ramping and activation and MMS?
You want the digital, correct?
Yes.
Digital is, as I said, it is 13% of our radio revenues. You would remember last year it was last quarter it was about 8%, 9%. This year, we have delivered almost about INR 12 crores of overall digital revenue, with digital platform contributing INR 6.79 crores and digital component in other segments is about INR 4.91 crores.
The platforms, last time when we discussed it was around INR 1 crore, which has grown to INR 6.79 or the classification has changed though?
It just includes Gaana also for one month. Gaana we acquired on 1st December, so this includes the revenue from Gaana also.
What about the MMS?
MMS revenues is INR 17.5 crores against last year of INR 14.75 crores.
Okay. How do you see these government ads? During the last quarter and even Q4, we have seen quite a sharp increase in radios nowadays. Are we seeing a sharp growth from government ads and also in general ad cycle, are we seeing the turn towards radio now?
Yes. Government ads in quarter three, we see an increase in contribution against last year of about 10%, has now become about 13% contribution for government. Also you have realized last quarter we had said government pricing has also changed. The EVP pricing has changed, so that has also benefited us. But we are seeing robust government spends coming from both state and central government. Only thing in quarter four, government spends will continue deeper till the time the elections get announced. Once the elections code of conduct comes in, the election spends will have to be stopped because of the code of conduct. The government spends will have to stop because of the code of conduct, and then we will see some election spends coming in. You will see government spends stalling for a timing till the elections happen.
Okay. General ad cycle, positive turning towards radio segment?
Yeah. For us, the way we look at it is the number of clients are high, the volumes are also very high. What we would ideally want is a little less volume and a better price. But as we see right now, it will take some more quarters to look at a better pricing. But having said that, the business volumes are very high. It is higher than pre-COVID levels. The business has moved towards more retail, which is the way true to the medium. Radio is a hyperlocal medium, and now we are seeing a lot of retail clients coming on board against corporate clients earlier. So the contribution of retail has now gone to about 65% compared to what it used to be, 50%. So the mix of clients is changing, we are getting more local business.
Okay. Thank you, and all the best, and back to you.
Thank you, Deepan.
Thank you very much. The next question is from the line of Urmi Khania from RoboCapital. Please go ahead.
Good evening, sir. Am I audible?
Yes, Urmi.
Yeah. I have a few questions. My first question, is there any idea on the past recommendations such as ones released in FY 2017 or FY 2019? Have they been approved yet, and if yes, when have they been approved? Second is, what is the probability of the acceptance of the most recent recommendation?
Which recommendations you are talking about, Urmi?
Delinking of remaining channels of Phase III from technology ones.
Urmi, I am not aware of such recommendations. There were four recommendations which TRAI had sent recently to the government, which did not include this, but there were four recommendations. One was news, one was radio to be as mandatory in the smartphones. Then there was a decoupling of the license fee to revenues and not to the NOTEF. These were the four recommendations which had gone to government. We still await to hear from the government. I believe with the elections coming soon, it may not happen immediate, it might happen, of course, the elections.
Okay. Thank you.
Thank you.
Thank you very much. A reminder to all the participants, you may press star and one to ask a question. Thank you very much. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi, good evening, everyone, and congratulations for a very good set of numbers. Sir, my first question is, generally in the past commentary also, we have always mentioned that in the radio industry, typically, the volume comes first and the realizations follow. What is the utilization level across our Phase II and Phase III stations, and how do you look at the rate increase coming in?
Thank you, Dhwanil. Yes, you're right. Right now, post-COVID, we have seen a huge volume growth. All growth have come via volume and not through price. Price has taken beating across not just radio, but all traditional mediums. It's not only to the radio, but all traditional medium have seen a price decline across the last three, four years. Radio has taken long to get the price back, and I believe the price may not come back to the same level soon. We will see some growth happening in the next festive season. I don't see in the next two quarters the price change much. It will still be a volume-led growth. We still have a lot of headroom and lot of capacity available to manage larger volumes.
We believe the first change in pricing will look coming in the next festival, which could be the quarter two, quarter three, which is August, when the festive season starts. That is when we'll see some reversal on the price happening. Till that time, it will still be volume-led growth. We are still in a healthy space. Our overall capacity is still only 80%, and this is at 30 minutes an hour when I calculate. If I look at batch one, batch two stations, tier one, tier two, they are at 60% only. The metros or the top 35 are about 100%. But when I say 100%, it is only 30 minutes of inventory in an hour. So we still have a lot of headroom to drive volume-led growth. But as I said in my opening remarks also, we would have ideally loved little less volume and better price.
But we'll have to live with it for the next six, eight months till the price starts changing, Dhwanil.
Okay. Got it. Second question, sir. We continue to hear from various sectors that consumption side, there is slowdown, and that is impacting everybody. I mean, generally, again, when the times are tough, because we give the highest impact on the money spent, advertising moves to radio. Are we benefiting from that? What are we doing to ensure that when actually times are good, we are able to sustain those volumes?
Dhwanil, I agree. Radio, as I said, has moved towards being more a hyperlocal medium than what it was pre-COVID. Now we are attracting more advertisers at a local level. I still believe in the Indian consumption story, and at a local level, it is still very robust when you look at shop fronts and all. There is some stress in rural sectors, what we keep reading about it when you look at FMCG category. But FMCG category, when I look at levers and all, have not been advertising on radio for last few years. What we see as big categories are real estate, big time auto, government, education. They are really, really spending big. If you look at real estate, segment is doing really well.
We believe when you read commentary of any real estate listed players, everybody is very confident about the real estate industry in the next three, four years. I look at the categories which are good for radio are still very robust. The other good point for us is we are never dependent on one just category. Unlike TV, if you follow, TV is too dependent on FMCG, which contributes 60%, 65% or 60% at least. In our case, none of the categories are bigger than 15% at a national level. For us, it helps us manage it. Even if one or two categories don't do well, we are still better off.
Having said that, the consumption story, I still believe in India is still very robust, and we believe with the elections coming in, the spends will continue and radio to do its medium of hyperlocal will be able to do better.
Okay. That's very helpful. Thank you and all the best.
Thank you, Dhwanil.
Thank you very much. A reminder to all the participants, you may press star and one to ask a question. Thank you. The next question is from the line of Anant Shirgaonkar from Newport Capital LLP. Please go ahead.
Hi, can you hear me?
Yes.
Yes, Anant.
Yeah. Congratulations. Wonderful set of results. We are shareholders, and we are delighted to see these results.
Thank you.
I would just like to understand a few things more about how the scenario is changing in the advertising industry when it comes to radio. Just to give you a background, last few years, we've been bombarded by this narrative that digital is the only medium which matters, TV doesn't matter, and even radio doesn't matter. But your results obviously show that your utilization levels are moving up. Not only yours, competition is also moving up. Can you explain to us what is happening from the advertiser's point of view? If the narrative is so tilted towards digital, how are these utilization levels moving up? Why are advertisers coming back to radio, et cetera?
Yeah. It's a very interesting stage. Digital, what's happening is most of the digital revenues goes to Google and Meta, which everybody knows. If they look at almost 80% of the digital advertising revenue goes to these two platforms. Having said that, if you look at the Indian media scene or any media scene, the behavior is, yes, it is moving towards streaming platforms. You and me will say, who watches TV, but we watch only connected TVs, correct? We watch only Netflix and Amazon Prime and stuff. Or maybe when you look at radio, it becomes Spotify or Gaana or it is Saavn. Having said that, you're still consuming TV also on the connected TV. It's like the medium is still TV, but you might be watching on a different platform. So it's very interesting time.
It's like consumers are trying to move towards subscribed things, but they're not paying for subscription. The advertiser is not able to communicate on a digital medium, on a Netflix because there's no opportunity to advertise. So they are looking at other mediums. You can only advertise to an extent on digital medium when you look at local. And where radio benefits is because there are local players, there are SME guys who don't advertise so much on digital. They look at a traditional medium. To give you a very anecdotal, it may not be a very researched and scientific answer, but Indians feel like when you go to a grocery, you want to feel the wheat and buy or feel the cloth and buy. Similarly, when you advertise, you want to hear, or you want your friend to hear or see the ad on print.
In digital, it is very difficult to figure out where did my ad play. So that feel when a person spends on his own. I'm saying, this is not a very scientific, but when you speak to people, when you speak to clients, why do they advertise, why they're looking at this, these are the type of things we see. Even if when you look at music artists, they will say that on Spotify, they're the biggest stream, but who's listening, they're not very sure. But on radio, they cap themselves. So it becomes very, the mediums help understand the importance of it and how it's delivering. Yes, there are challenges. I'm not trying to say digital is not a challenge. It is a challenge. It's not about digital. Technology is taking over a lot of things.
It's not that we are shucking away, and that's the reason we have looked at Gaana also. The way we look at it is, yes, the traditional medium are here to stay. It may not be growth at what it used to be 10 years back. It will be a mixed growth, and we're looking at rradio plain vanilla growth , plus do lot of events, multimedia solutions, what we do, and also look at the subscription game on Gaana. That is the way we look at, and it's interesting time to be in right now, where both client and advertiser are still figuring out which is the best medium to deliver their objectives. I may not be able to answer everything, but it's a very interesting and challenging times to be in media industry right now, Anant.
Right. One of the things I had read was that digital, obviously, many people say about how digital growth is playing out, but when it comes to some of the other mediums like radio, from the advertiser's point of view, because they are priced cheaper and the reach is big enough, the bang for the buck could be higher when it comes to radio. Is that a sound logic?
Yeah. When I look at radio is always good as a passive medium, so it will always work well as a frequency medium, and we want to promote, or a tactical campaign. It may not be the best medium when you want to do a brand launch. Because it's a passive medium, it runs in a background. You're driving a car, it's on the back, you're working in office or at home, you're playing the radio. So it works as a frequency medium. So it works really well with any medium. If you do a print ad, then radio is a good frequency builder and a reminder.
Similarly, when you do a large digital campaign, radio will always help because you're on a commute, you are listening to radio, or when you are at home working in a kitchen, the house that is working will always be a reminder medium. And yes, at the right price, only for that specific city, it is the most, I would not say cheaper, but the most efficient medium to work because it doesn't have any spill-over. Digital benefit is there is no spill-over because you can target really well. In traditional medium, if you do a print in, say, Bombay, and you want to only target Thane audience, you are actually spending more than what you want to be. Compared to that, radio is much cheaper than print, and that's the reason it's more effective.
If you do not want to target many cities and want to target very specific city, radio works really well. That is the reason I believe radio in a local level, for regional clients, it works really well.
Right. Got it. That is useful. One of the just smaller questions. On the utilization levels, you said you are at 80%, your competition, the smaller ones could be at 60%. At what level of utilization do you think for the industry as a whole, do you think the price hikes will start coming in?
See, we are still the lowest. If you look at competition, they will be much higher on this because we are premium to all the competition. Our pricing will still be holding at least 25% at least, if not more. We will be at least 20% price hike from the next best. If I look at all the players, they will be very, very high pricing. Our volumes are still lower than competition. As I said, for us, the headrooms are available because we have always maintained a very low volume thing. It is ironical, and it is a double-edged sword. If I keep increasing volumes, then the listenership will drop because as a consumer, you and me, you come to radio to listen to music.
If I play more ads, you will not like the medium, and then you will force people to move to streaming services like a Gaana or a Saavn or a Spotify. You need to be careful. I believe competition will max out in the next two, three quarters, and that is the reason generally price hikes happen in media industry in festive, and that is what my assumption and my hypothesis is that next festive, we will see some price hike happening as industry will max out on the volume, or my competition will max out. I have volume available, so I can garner more share. I am a leader with a very large network. For us, we are very nicely placed compared to competition. If you look at certain competition, some competition have not done well in this quarter. Some have done reasonably well.
We will see some competition might be maxing out in the next couple of quarters.
Got it. Last question. On Gaana acquisition, can you just explain the business case to the extent that you want to reveal? What exactly are you trying to play through this acquisition? Is it just the subscriber growth and subscription growth? Because that could be really long-term. People do not really want to pay, as you yourself mentioned. What exactly is the play in Gaana?
Yeah. You are right. There is ability to pay, the willingness to pay is not there. It is not that people are not able to pay the money. We are asking, it is right now INR 299 for a year, which is less than a cup of coffee charge at Starbucks, correct? It is more about a willingness to pay rather than the ability to pay. What we looking at Gaana as a strategy is, yes, radio is there as a medium. We are looking at Gaana as a pure subscription model. We are not here to do free music. Music costs a lot, so I do not think people should come back and pay for the music. They pay for movies. They pay for everything. They have been given a habit of everything available free. But if you look at the price, it is not very high.
Anant, there are 200 million free music subscribers in the country as of today, or maybe a year back. It could have grown a little more. But if you look at overall subscription industry, it is 8 million. The way I look at this, it is an opportunity and not look at thinking people do not pay. People will, over a period of time, pay. Because it is not huge money. You have to show value to them. You have to show why they should be paying more. Can I give the best playlist? The way we working for this is, Mirchi has been the best curators of music for last two decades. Till streaming came in, Mirchi was where people were discovering music. We were the best music FM company. Correct?
Can I use technology like AI or recommendation engines plus human intervention and give the best playlist to people, give the best experience on music? Can I help them discover music better? There is tsunami of content, correct? If you look at today also, Netflix, you do not know what to consume. Similarly, when you go to Spotify, you need help. What should I listen to? How do you discover music? If I can give that with our media strength, being present in 63 cities and with 73 frequencies and in all parts of the country, we understand the nuance of every market. India is a complex country. Kanpur is very different from Lucknow, and Lucknow is very different from Patna. Within 100 km, behavior change, consumer preferences changes. We understand being present in this industry for last two decades, understand the music well.
We believe we are in well placed to understand this, and we are very clear we do not want to go free. We do not want to burn money. We want to make it happen with a subscription story only at the right price and give value to the consumer. We believe with the radio and Gaana together, it helps. I can make radio available on Gaana. One other factor, Anant, if you look at is, radio today, which one of the recommendations gone from TRAI also, is all smartphones do not have a radio. An Apple phone does not have a radio. If I want an Apple consumer to consume radio on the move, I can have a Gaana app on the Apple phone and have my radio part of it. So I get my longevity of radio also, and also play in the subscription market.
If you look at today's subscription market also, it is playing out well. Spotify, if you are a consumer, if you are a free consumer, you would have seen lot of restrictions coming on Spotify. All services are looking at moving to a subscription. YouTube has got the same problem. When you say radio plays lot of ads, today, you cannot consume one video or song without one ad coming in. So people will get habit moved to.
Till they were getting free music with very less ads, they were not ready to pay. The amount required is not very high, so we believe it will change. There is huge opportunity, as I said, 8 million versus 200 million is a huge opportunity to drive. That is what we are banking on. We believe, yes, it is going to take little bit. We have to be patient. It will take some time.
We are still working on the tech because nothing has happened on Gaana for last one year. We have worked on it for last couple of months. We know what are the challenges. We are working on it, and hopefully, in the coming quarter, we will be able to share some more details on it. Right now, it is too premature to share some numbers on it. But we believe we have a good opportunity to drive this business together.
Wonderful. That is very useful. Thank you very much for patiently answering all the questions. All the best.
Thanks, Anant.
Thank you very much. A reminder to all the participants, you may press star and one to ask a question. Thank you. The next question is from the line of Subrata from Mount Infra Finance. Please go ahead.
Hello.
Yes, Subrata.
Hi, sir. Just first one, just one bookkeeping question. In your this year result, depreciation is little bit lower. Is there any reason for that? Whereas, amortization is little bit higher. Is there any reason for that, sir?
Can you just repeat it, sir? Depreciation is lower than?
Amortization charges little bit higher vis-à-vis last year. At least it has come down vis-à-vis last year. Is there any reason for that? Total depreciation and amortization also. It was INR 22 crore, and now it is around INR 19.89 crore.
Give me one second, Sanjay will just answer. Just give one second.
Yeah. Just give me a minute. Subrata, there are two reasons, basically. There is no major CapEx which we have committed during the current financial year and current quarter. Also, majority of my stations, if you look into the station mix, are beyond the 50% mark of the license period. As you know that in radio industry, what we do, we do invest upfront, and then we start doing the amortization of the initial CapEx, which we have done. Now, most of our migrated stations and that is why these stations, that is past seven and a half years mark, and therefore, now, starting now till it becomes zero, the depreciation will actually start falling quarter on quarter and year on year.
Okay. I got it, sir. I am following your company for some time, so there is a great recovery to the radio on it. Now, sir, would you throw some light on the digital engine side? Still we are thinking what is our plan in terms of monetization, what will be our effort on that side? And may not be today, but in future at what level we will try to monetize it, or what is our strategy on that front? That is my only question for this.
Subrata, the thing is, see, till last quarter, our digital revenues as percentage of radio revenues were about 10%. We have moved to over 13%. Our aim is, in two years, if digital revenues can become 25%-30% of our radio revenues, that will be the first milestone we want to do it, as we move towards a more multi-platform entertainment company rather than just a radio company. We have moved from radio to multimedia solutions, to activations. Then we started digital advertisement. Now we started doing Gaana also. The way we want to look at it, over a period of three to five years, we want to have radio revenues about 50% and non-radio revenues about 50%. But the first milestone could be digital as percentage of radio revenue could be about 25%-30%.
Okay. And sir, can you give at least some update on our activity side, like outdoor activity and solution business, some update on that side of things?
Subrata, we have given the details of those activities. If you are looking into exactly which activities, and what event , et cetera, we have done. We have uploaded the details of those along with photos in our investor deck.
Yes, sir.
You—
Yes, I have seen that. My only point is more on in terms of numbers, because last time, let's say a few quarters back, our digital side and particularly events and all those things were not picking up. Is there?
Yes, Subrata. We have seen a 35% growth this quarter. But having said that, this year there has been a festive shift. But even if I look at quarter two plus quarter three, we are still growing a healthy 16%-18% growth in the event side of business. Event side business, different type of event business you are looking at, some markets are doing well, some markets are still under pressure. As you know, some of the categories, if you look at the macroeconomy also, some of the categories are not doing well. But for example, our Navratri event has done really well. Our festive properties in Calcutta have done really well. Second half is generally pretty heavy on events. We see some Diwali coming up. We see a healthy growth in the event side of business. This quarter has been really, really well compared to last year.
We have firm belief that event business is here to stay for us. Important is that we are delivering a healthy margin also. It is not just about driving more revenue, but it's critical is to deliver a very healthy margin. If you look at our EBITDA margin also on event business, is almost about 34%. We are confident about it. But yes, there are certain markets, certain categories which are still not conducive to events. We need to pick and choose the right events going forward.
Okay. But sir, situation has improved vis-à-vis last year, at least.
Yes. On event side, it has improved. People are looking at more experiential. People are going to concerts. That's more ticketing revenue. If you look at concerts or look at festivals, if you're in Bombay, you would have seen Lollapalooza or any concert, you'll see more crowd going, so the ticket revenue going up, but the sponsorship is still not there. Corporates are looking at more return for that buck they spend, so they're not looking one-day event. You have to be careful with the type of event you choose and the type of market you choose. People are going there in festivals, so ticketing revenue are coming in, but as you would know, ticketing revenue are not the most predictable revenue. You never know till the last moment. It has to be a healthy mix of sponsorship and ticketing revenue.
Having said that, yes, it has been a pick after COVID. This has been a much better year after COVID in terms of events across the board, not just for us, but across the board. Yes, it's a healthy sign.
Thanks, sir. Thanks a lot.
Thank you.
Thank you.
Thank you very much. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. As there are no further questions from the participants, I now hand the conference over to the management for closing comment.
Thank you very much for joining this call. We remain confident about the future results, and we remain committed into delivering, maximizing shareholder value with sustainable, profitable results. Thank you very much once again for joining this call. Thanks.
On behalf of Entertainment Network India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.