Ladies and gentlemen, good day and welcome to Entertainment Network (India) Limited's Q2 and H1 FY 2024 earnings conference call. As a reminder, all participant 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 a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Runjhun Jain from Ernst & Young, IR Practice. Thank you, and over to you, Ms. Runjhun.
Thank you, Zico. Good evening, everyone. Welcome to the Q2 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 the call and disclaimer, please do note that anything said on this call during the course of introduction and in the document, which reflects the outlook towards the future, or which should be considered as a certain forward-looking statement, must be viewed in conjunction with the risks that the company faces and may not be updated from time to time. With that said, I will now hand over the call to Mr. Yatish. Over to you, sir.
Thank you, Runjhun. Good evening, ladies and gentlemen. First of all, thank you for a late evening call and being here. On behalf of Entertainment Network (India) Limited, I extend a warm welcome to all of you for joining our quarter two and H1 FY 2024 earnings call. I trust you have had the opportunity to review our financial results. Please allow me to provide a concise overview. In quarter two, our top line experienced a marginal decline of 3% year-on-year. I would say the different revenue can be attributed to the non-FCT segment, partly due to the shift in the festive season and the absence of a significant exclusive event that occurred last year. Nonetheless, the gratifying aspect is the significant improvement in our overall profitability, thanks to our diligent cost rationalization efforts over the last six months.
I'm pleased to share that we continue to observe an upswing in radio volumes and strengthen our dominant position in the radio industry. In Q2 FY 2024, our volume market share is now at 26.6%, marking an improvement on a year-on-year basis of 120 basis points. Regarding profitability, our prudent and consistent cost rationalization endeavors resulted in cost savings of approximately 4%-5% during the quarter. In continuation in the quarter one, it's also. Furthermore, we are diligently focused on high-margin opportunities while selectively stepping away from low-margin deals in the market. While this strategy may temporarily impact our top line, we believe it's a crucial step for sustaining our profitable market leadership aim. As a result, our EBITDA margins, excluding digital, improved to 26.6% in the quarter from 24.9% in the last year, quarter two. If I look at on a sequential basis, it was 21.7%.
If you can see, it's almost about 120% on year-on-year and on sequential basis, almost about 500 basis points. EBITDA margins for non-FCT business improved from 39.8% in quarter FY 2023 to a whopping 47.7% in quarter two FY 2024. Our commitment to expanding our digital business remains unwavering, with digital now contributing almost 10.1% of our FCT revenues in quarter two FY 2024. This is up from 9.7% last year. Digital revenues for the quarter totaled INR 7.1 crores. You may have noticed our recent disclosure regarding the board's approval to execute the Business Transfer Agreement with Gamma Gaana Limited relating to the business of licensing music, audio content and hosting and streaming services under the name Gaana. This aligns with our digital transformation strategy, and we will share further details once the deal is executed in the future call.
Our dedication to sustainable and profitable growth extends to our international initiatives as well. I am delighted to report that we secured a revised license fee in Bahrain, enhancing the profitability and sustainability of our operations there. PAT for company excluding digital was reported at INR 6.9 crores in quarter two FY 2024 versus a loss of INR 8 crores in quarter two FY 2023. After a span of three financial years, in quarter two, we have registered a positive PAT of INR 3.7 crores at a consolidated level. Our balance sheet remains robust with cash reserves totaling INR 251 crores as on September 30th, 2023. Looking ahead, our primary objective remains the maximization of shareholder value, and we'll continue to take necessary steps to sustain our profitability aim. We anticipate that the upcoming festival season will provide a significant boost to the overall media industry and to our business as well.
With that, I would like to invite any questions you may have. Thank you very much.
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. Our first question is from the line of Deepan Shankar from TrustLine PMS. Please go ahead.
Good evening, everyone, and thanks a lot for the opportunity. Firstly, from my side, Yatish, please break down these solution revenues in terms of digital platforms, outdoor, and MMW revenues for us?
Yes, Deepan, just a moment. If you look at solution business, about INR 16 crores is multimedia solutions. Activation income is about INR 4.6 crores. Digital income is about INR 60 lakhs, and other digital platform is INR 3.5 crores, totaling to about INR 27 crores.
Okay. So the maximum impact for the quarter has come from these outdoor revenues dropping for us?
The activation business, what we call the event business and concerts. Otherwise, all other business have done well. To give you a perspective, last year the festival was in September and October, with Diwali only in October, so the festival started earlier. This time, Diwali being in November, the festival shift has also led to a reduction in event and properties. Also, there was a significant big event last year, which was the 75th year of independence, and we had an exclusive campaign with regards to that. So that led to a drop in the event business for us this year.
Okay. Also, about this Gaana recent announcement. So what is the key rationale behind this? What kind of synergies we have with that business? In terms of, we could see that there is a huge loss-making entity, so how this will help us? So that we needed more clarity on this.
Sure, Deepan. Though I will be able to answer all this once we sign the BTA. We have still not done. We just got a principle approval. Having said that, what you see, losses of Gaana are more than two or three years back. The strategy, what we want to adopt is very different. I can only give confidence that we are not in a cash burn business. Having said that, I would request if you could wait for some time till we do the BTA, and in the future calls we'll come with a cogent strategy and present to you all.
Okay. Sure. I'll come back during the communication.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Subrata Sarkar from Mount Intra Finance. Please go ahead.
Hello.
Yes.
Hello.
Yes.
Good evening, sir.
Yeah.
Sir, just couple of question. One is on the, recently, the government has revised the advertising rate for FM radio. What is your take on that? Second, can you share one data, like during pre-COVID level, what percentage of advertising revenue used to come from central government and government as a whole, and currently, what is that percentage? Any ballpark number may also help us, sir. Giving this upcoming election, what kind of traction we are expecting there?
Thank you. Yes, the government, which is called the DAVP rates, have been revised after a long time. Thanks to the Ministry for listening to the radio stations. The increase has been in the range of 50%-60% across various stations. To answer your pre-COVID level, government used to spend a lot, and the contribution at the industry level used to be in the range of 13%-14%, which came down post-COVID in the range of about 6%. But we believe with elections around the corner, the central elections and the state elections, the spend should go up, and we would be optimistic that it could go up to around 9%-10% at the industry level.
Okay, sir. Second question, sir. Is there any new update or anything like including FM channel in the new mobile? Is there any regulation, any update on that side, sir?
Recently, a month and a half back, TRAI had come with strong recommendations, four specific recommendations, and they have given to MIB. I can state the recommendations. I will not be able to comment on when will they come because that's the prerogative of the Ministry and the Cabinet. The four recommendations were, one was the decoupling of license fee to a revenue share rather than from the OTEF. That was the one. The second was FM tuners as compulsory on the smartphones. The third was they wanted to provide a COVID package by extension of licenses to about couple of years. These were the major recommendation. And the fourth one was allowing news broadcast on FM radio channels, on the private FM radio channels. These were the four recommendations by TRAI. We welcome them, and we hope to hear from the government on this recommendation soon.
Okay. And sir, generally, what percentage of quarterly revenue comes due to festive like additional ad, like as this month has been shifted. So what kind of revenue slippage we can expect that has happened in September quarter and used to accrue in December quarter?
Yeah. The way we look at it, generally, a media industry is about 45, 55 ratio H1 and H2. When a shift happens, few percentage points move to H2. But if you look at a quarter on quarter, it could be at least 10%.
Okay. Thank you, sir. That's all from my side.
Thank you. Hello, Zico. Can you ask for the next question, please? Hello? We lost it.
Yes. Are you able to hear me?
Yes, I can.
Our next question is from the line of B. Suresh from Burrams Financial Services. Please go ahead.
Sir, can you just shout?
Thank you. Thank you for giving the opportunity. Sir, what is the present company's position of debt and future expansions or any takeoffs of any other company? Any planning of course?
Suresh, we are a zero debt company. We don't have any debt on the books right now.
Right. Present zero debt company.
Different plans, as and when something happens, we will be very happy to share with the investors. As of now, we have just spoken about Gaana. Other than that, there is nothing on the table right now.
Present zero debt, sir?
Yeah, zero debt.
What is the cash position, sir?
We have INR 251 crores cash as on 30th September 2023.
Okay, sir. Thank you for giving the opportunity.
Thank you.
Thanks.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Chetan Thacker from ASK Investment Managers. Please go ahead.
Good evening, sir.
Evening.
Sir, just wanted to get a sense from you on ad rates. How do you see that going ahead, more from near term and also from the next year perspective? The second question was more on the digital revenue side. We've seen this number being stuck in the range of INR 6 crore, INR 7 odd crore quarterly. How should we look at that number from a more two, three-year perspective?
Thanks, Chetan. The first question on. I'll answer the second one. Yes, the digital revenues for the last few quarters, as we said, we were building our app and we are more focused on developing the content and getting organic growth in the subscriber base. That has been our strategy. We never wanted to just go blindly burning marketing dollar and getting subscribers and then starting advertising. For us, it was critical was to look at more from a stable organic growth in subscriber base. That's been the strategy for last one year, when we started our own platform on digital. But if you look at from quarter- on- quarter, the revenue growth has been quite nice. If you look at last year on digital platform, we did only INR 80 lakhs. This year it has been about INR 3.24 crores.
But yes, overall numbers have been INR 7.5 crores. So it's sustainable and stable revenues. Our digital foray on Gaana will also further augment the revenue base on this. As I said, once we sign the BTA, it will be much more detailed strategy on the digital. I believe our focus on being a very digital-focused and digital-first company in the next two years remain. Moving just from a only plain radio company to a multi-platform, multi-entertainment company. So that remains, and in two years you will see a substantial increase in the revenue also.
Okay, sure. On the ad rate bit, sir, how do you see that panning out?
On the ad rate, yes, it's a very difficult time for traditional media companies, and I would take this opportunity not to talk just about radio, but if you look at print, television, everybody rates have been very suppressed looking at the market conditions in quarter two, and it is a function of supply and demand plus competitive pressures also. Unlike an entertainment GEC channel on TV, radio doesn't have as a volume cap, and you see competition going up on volume side. So as long as there is a cap coming on volume, people will still volume, and there is still a headroom available. So it's a function of both. As much as we would want to look at yields going higher, it gets suppressed because of the economic conditions and also competitive pressure. Having said that, generally rates go up in the H2.
My submission would be that for the next couple of quarters, we will feel the growth will come through volumes and not through price. We expect after two or three quarters, the price will start looking up because as we see competition volume going completely capping out, they will not be in a position, and that's when you can look at it. So far, the strategy for growth has been largely volume-led in difficult economic conditions. Having said that, we believe H2 should look much better.
Understood, sir. And sir, any update on the ad product that you were supposed to launch? Any update on that front?
The M-Ping we launched this year. This quarter, we have done about INR 3 crore revenue on M-Ping itself, which was the audio ad platform you are saying?
Yes, sir.
Yeah. We did INR 3 crore revenue.
INR 3 million?
INR 3.2 crore of revenue we have done on M-Ping this quarter, which was not there last year, so it is a straight benefit. It has been a great journey in the last two, three quarters. Our ambitions are much higher. And apologies for INR 3.2 crores, it is INR 2.2 crores.
Sir. I was getting confused.
It is INR 2.2 crores this quarter. Ambition is much higher. We have seen a lot of traction in the market, and we believe we can leverage this product with our huge client base of almost about 10,000 clients a year and a strong sales team. These numbers could go up in the coming quarters also.
Where do you record this revenue? Does it go into the digital bit, or does it sit into the non-FCT solution bit?
It goes into the digital, because this is pure digital audio inventory.
Understood. Sure, sir. Thank you so much for that. Wishing everyone a very happy Diwali. Thank you so much.
Thank you. Wish you the same. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Ketan Athavale from RoboCapital. Please go ahead.
Hello, sir. Thank you for the opportunity. Most of my questions have been answered. I just wanted to know if we are bidding to acquire BIG FM, and if yes, then at what revenue or EBITDA multiple are we bidding?
To answer, Ketan, I can only submit that we have put in a bid. We are waiting for the discussion to come on board. I would not be in a position right now to answer this query till we supposedly win it, and then we can put it on record. Right now, yes, we have shown interest, and that's the only thing I could address you right now.
Okay, got it. Thank you so much, and happy Diwali.
Thank you. Happy Diwali to you, too.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Chetan Thacker from ASK Investment Managers. Please go ahead.
Sir, just a follow-up on the solutions business. Typically, what kind of bump up do we see in festive on the solution bit?
Yeah. Event business is largely H2-led, simply because the quarter two is marred by rains, monsoon across the country.
Yes.
If the overall media revenues are generally 45/55, event would be 30/70.
Understood. We should expect a fair degree of that revenue flow to start coming into the H2 numbers as we move ahead.
Yes. We are also very optimistic on that.
Sure. And sir, any timeline by which you expect to hear back from the Ministry, or it will come up when it comes up?
It's a good question. We would like to hear tomorrow, but it's a process. To be fair to them, it's a process. The Ministry looks into it, and then it has to go through the Cabinet. Our sources say it could be a few months from now, and it should happen because beyond that, we will get into election time. Let's hope it comes as soon as possible.
Sure. Sir, in case the extension happens on the license period, will we again recalibrate the write-offs that we had taken earlier last year when we had essentially written off based on our new expectation and estimates on how much revenue the last licenses could flow in?
Thanks. The only thing is, it is too hypothetical right now. We have not gauged it.
Understood
Because it's still a recommendation, and you don't know if the recommendation will stand the time and Cabinet approves it. So we have not thought about it in the extension time.
Understood. Sure, sir. Thank you so much for this. Very helpful. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, that was the last question for our question and answer session. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you. I extend my heartfelt gratitude to each and every one of you for the continuous support you have provided to the company throughout the years. I would reiterate that the last quarter results have been very encouraging for us, and we remain focused on profitability and maximizing the shareholder's wealth. Above all, the cornerstone of our journey remains profitable growth and the compass guiding our every move. Lastly, I would like to wish you and your family a very happy Diwali and a prosperous new year. Thank you very much.
Thank you. On behalf of Entertainment Network (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.