New Delhi Television Ltd Management Discussions.
During the calendar year 2018, Indias nominal GDP grew by 10.2% and, its Media and Entertainment ("M&E") sector grew by 13.4%. Advertising, which had slowed down in 2017 due to demonetization and implementation of GST, also grew by 12.7%1.
The Indian television industry is trying to reconcile with the consequences of a new TRAI (industry regulator) order which came into effect from February 1,2019. TRAI says the order enables viewers to pay only for channels they want to watch, rather than being stuck with high fees for a large bundle of channels. Distributors also have to ensure each channel is available a la carte at a publicly declared MRP. However, there have been huge problems with how viewers are migrating from their existing arrangements or subscriptions to the new model. There are also reports of it becoming more expensive to watch channels as compared to in the older landscape.
Channels are now finding it tough to navigate where and how distributors promote and offer them to subscribers. Media houses that own a large number of channels, which can be offered together as a bouquet or bundle, gain much more leverage with distributors.
Apart from this, there are now open debates about the ratings system being adulterated with corrupt practices. Some networks have objected to others inflating their viewership by "buying landing pages" for example - becoming the default channel that a viewer lands at when she switches on her television set. Malpractices also include the rigging of "people meters" which grossly skews viewership.
Television, News & Advertising2
Overall television sector grew by 12% in 2018 to reach INR 740 billion. Growth was led by a 14% increase in advertising revenues and an 11% increase in subscription revenues. The segment is expected to grow to INR 955 billion by 2021 at an average rate of 9% over the next three years.
Advertising comprised 41% of television segment revenues in 2018 and this is expected to reach 42% by 2021. The number of total channels increased to 885 in 2018 from 877 in 2017, of which 43% were news channels.
In 2017, the top 10 genres of TV Channels contributed 46% of advertising volumes, which reduced marginally in 2018. Hindi movies were the top channel genre with 9% share of ad volumes during 2018. News, which commands a 7% share of viewership, garners a disproportionately high share of advertising volumes.
The top 10 channel genres that contributed 46% share of advertising volumes on TV are as follows:
The Growth of M&E Sector3
The Indian M&E sector reached INR 1.67 trillion (US$ 23.9 billion), a growth of 13.4% over 2017. With its current trajectory, it is expected to grow to INR 2.35 trillion by 2021 (US$ 33.6 billion). While television will retain its pole position as the largest segment, digital will overtake filmed entertainment in 2019 and print by 2021.
|Out Of Home media (OOH)||34||37||41||49||9.2%|
All figures are gross of taxes (INR in billion) for calendar years : EY analysis Broadcasters witnessed growth in subscription revenue4
Broadcaster share of subscription revenues increased to INR 110 billion. This is around 25% of the total ground collections. However, once the subscribers migration from old tariff regime to the new tariff regime is implemented across India, the broadcasters share is expected to go up significantly, especially from cable subscribers.
Advertising outpaced subscription growth5
Advertising revenue grew by 12.7% in 2018, while subscription revenue grew by 11.2%. Advertising revenues comprised 51.2% of the total M&E Sector in 2018 and are expected to grow to 52.4% of the total M&E Sector by 2021. Growth was led by digital advertising (which grew by 34% over 2017) and television advertising (which grew by 14% over 2017) on the back of sporting events, more impact properties which get a bigger audience, several state elections, and growth in regional advertising.
Digital media grew 42% in 20186
In 2018, digital media grew by 42%, with advertising growing by 34% and subscription growing by 262%. The digital advertising value above does not include spends of many small and medium enterprises, which industry discussions size at INR 72 billion but we are unable to verify. Subscription, which was 3.3% of the segment in 2017, increased to 8.4% in 2018.
NDTV Convergence Limited ("Convergence")
The Groups digital arm recorded its highest- ever revenue in 2018-19 with 25% EBITDA margin.
During the year, Convergence inked an unprecedented ad sales deal in the APAC region for more than 300 crores over five years with the worlds largest content discovery platform, Taboola.
Convergence launched NDTV Hop in partnership with Airtel in October 2018. NDTV Hop is the worlds first 24x7 live channel made for mobile phones and streams content exclusively in vertical mode with over 8 hours of live programming every day.
As part of its vernacular strategy, ndtv.com is now available in Bangla and Tamil languages, in addition to English and Hindi.
During the year, Convergence has won two South Asia Digital Media Awards Gold for its election graphics in the Best Data Visualisation category and Silver in the Lifestyle category.
Convergence was also chosen by Google as a part of the Google News Initiative and is working with the global giant to introduce new innovative interactive experiences in India for online video. It is also working with Google on a green field project around dissemination of audio news across devices.
Red Pixels Ventures Limited (Gadgets360.com) continues to be profitable at EBITDA level in 2018-19. New categories have been added to the Hotdeals website - landline phones, inverters, sewing machines, UPS, fans, stabilizers and emergency lights.
Pricee, a search engine which compares prices of products, has now over 220 million products spanning over 800+ categories touching 5 million searches.
Fifth Gear Ventures Limited (CarandBike.com) is the third-largest auto portal in the country with a focus to build the next-generation AI platform to help users research, transact and manage their vehicles.
The platform is built on over a decade of path-breaking auto programming along with the most credible awards for the last 13 years and thus, in a short span of time, has clearly established itself as the no. 3 auto portal in the country and the fastest growing by far.
In a space dominated by players who have been ploughing through massive marketing budgets to maintain their digital presence and traffic, it has been very encouraging to reach this position without much marketing spend but by relying on credible content, superior user experience and tools and services which make life easier for an individual. It is the constant endeavor of the team to build a best-in-class experience marrying content, communities and commerce.
India is poised to become the third-largest used car market and last year was the first year that more used cars were sold than new. However there exists a big asymmetry in information between buyers and sellers and this is the problem that Carandbike.com is hoping to solve with key technology and AI driven tools, like used car valuation engine, a total cost of ownership calculator and an NDTV rating system, based on comprehensive inspection and a robust algorithm derived by industry experts.
OnArt Quest Limited (Mojarto.com) launched operations on June 17, 2016. It is an online e-commerce destination to buy art, artefacts and designs. Mojarto is an aggregator that brings artists, galleries, artisans and designers from across the sub-continent onto a single powerful platform, which breaks existing barriers of accessibility, transparency, awareness and trust in this category. The website currently has more than 35000+ artworks, prints and designs, and has aggregated more than 4500+ artists; 85+ galleries and 80+ branded stores.
Mojarto has taken Indian art to almost every country in the world with its revolutionary international service.
Mojarto takes pride in leading a participative art movement by connecting people with arts through technology and content. They have been helping artists and organizations to tell their stories by creating content for them.
Mojarto has also been instrumental in bringing art closer to people with its public spaces program. They have recently concluded revamping the Ghats in Haridwar with their Haridwar Mural Project.
Proving its premium status, NDTV was awarded Asias Most Trusted Company 2017 (India Region). The award was given by The International Brand Consulting Corporation, USA.
NDTVs Hindi news channel, NDTV India, was named "Best News Channel of the Year (Jury Choice)" by the prestigious industry association ENBA
Both channels (NDTV 24x7 and NDTV India) now effortlessly use mobile phones MOJO or mobile phone journalism - for the bulk of reportage. This advanced technology has been emulated by leading channels around the world, some of whom have sent delegates to NDTV to observe its cutting edge processes.
When Kerala was ravaged by floods, NDTV was the first news channel to respond with extensive reports; it also quickly organized a day-long telethon to raise funds for rehabilitation.
YUVA, our annual event that brings together the countrys youth with top leaders, saw Aamir Khan, Akhilesh Yadav, Abhishek Bachchan, Tejashwi Yadav and Badshah being interviewed by NDTV anchors with an audience packed with bright young students. They spoke about the environment, politics, and sports.
The channel continued with its hugely popular Jai Jawan series with Sonakshi Sinha and Ranveer Singh visiting soldiers to entertain them and thank them for their contribution to the country.
On October 2, 2018 NDTV, in partnership with Reckitt Benckiser, organized a massive 12-hour telethon, Dettol NDTV Banega Swachh India, to promote Swachh Bharat. Co-anchored by Amitabh Bachchan and
Dr Prannoy Roy, the program saw Chief Ministers, film personalities, musicians and artists come together to promote initiatives to make India cleaner and more hygienic. This is the highlight of ongoing "Banega Swachh India", a huge initiative sponsored by Reckitt Benckiser, now in its fifth year.
The Ramnath Goenka Awards for Excellence in Reporting were won by Sushil Bahuguna in the Environment Category; Zafar Iqbal for his Reporting from Jammu and Kashmir and Sushil Mohapatra in the Business and Economic Category. REDINK Awards were presented to Sushil Bahuguna for Excellence in Environment Reporting and Sushil Mohapatra for Excellence in Business and Economic Reporting.
At the exchange4media News Broadcasting Awards (ENBA), Saurabh Shukla received the Young Professional of the Year Award 2018.
NDTV 24x7s Uma Sudhir won the Population First Laadli Award for her reports on girl child trafficking, her fifth Laadli Award; and was also awarded the Chameli Devi Jain Award for Excellence in Reporting.
New Tariff Regime vs. Old Tariff Regime
Prior to February 01, 2019 (old regime), every household was forced to opt for channel packs being offered by the operator irrespective of the fact whether she watched all those channels or not. A la carte option was not viable as there was no concept of Maximum Retail Price (MRP) for each channel.
Post the implementation of the New Tariff regime in February 2019, based on an order by industry regulator TRAI, a household can either opt for Ala carte channels or curated packages offered by the operator by paying a rental of Rs.130 per month and the MRP of the A la carte channels or a package. This monthly rental of Rs. 130 entitles a viewer to 100 channels. If the household only opts for 100 FTA channels, then that household has to pay nothing extra but Rs.130 + GST. If that household opts for pay channels then it would be Rs. 130 + MRP of pay channels + GST. Thus, a household can make a choice of channels, which was not an option earlier.
For distribution, NDTV brought down its carriage cost by 37% in 2018-19. NDTV further increased its reach in the international market by launching on Hotstar International. NDTV 24X7 is the only Indian English news channel available in the US on Comcast Cable, the worlds largest cable network.
NDTV 24x7 has maintained its no. 1 position among Indian News channels available in the UK Human Resources NDTV is proud to be considered the organization with the finest talent in the industry. NDTV follows a strict policy to ensure womens safety at the workplace. Also, NDTV, in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has three Internal Committees (IC) to address any complaints related to sexual harassment.
NDTV has constantly focused on continuous learning and development initiatives. NDTV also facilitates cross-functional transfers to provide exposure across functions for optimum utilization of talent.
As on March 31,2019, there were 543 employees on the rolls of NDTV and 345 employees on the rolls of other NDTV Group entities.
Evaluation and Mitigation of Enterprise wide Risk
The tangible slow-down of the economy has resulted in large and important advertising categories drying up. The auto sector, for example, has seen the worst sales in 8 years, and real estate and FMCG are going through similar downturns.
Despite these external factors, NDTV continues to innovate and grow its special projects business with big wins, including the "Roshan Dilli Campaign" in partnership with Uber and the Delhi Government. The campaign, based on viewer inputs, sought to make Delhis roads safer at night by implanting new street lights.
NDTV completed the fifth year of its highly impactful "Swachh Bharat" Campaign in partnership with Reckitt Benckiser.
NDTVs structural reorganization continues to focus on consolidating on its core priorities of news journalism.
As digital revenue grows, NDTV is placed to leverage its huge leadership spot in the online space to expand and grow its business.
Its digital business is also being used to drive its television advertising deals with combined offerings for advertisers.
Consolidating on core business is yielding good results and continued focus on cost-cutting and operational efficiency will serve the group in navigating a new financial year where the economy has registered a considerable slowdown and advertising is slow.
Risks and Concerns
The news and other content broadcast by NDTV on its news channels is provided by editors, reporters who are trained to check all facts as well as verify the reports sent by freelance journalists/ stringers, etc. NDTV has established systems and protocols so as to ensure authenticity of reports. But, occasional human error or deceptive information provided at the source of the material, as also vindictive parties who are upset with reports about them, could lead to litigation for libel or defamation charges.
Internal Control Systems
NDTV maintains adequate internal control systems commensurate with the nature of its business, size and complexity of operations. These are regularly tested for their effectiveness by Statutory as well as Internal Auditors. Significant observations made by the internal audit team and the follow up actions thereon are reported to the Audit Committee of the Board of Directors of the Company The Audit Committee reviews the adequacy and effectiveness of NDTVs internal control environment and monitors the implementation of audit recommendations acted by the Management. In addition, third party specialists and an online Compliance Tool provided by Ernst and Young are engaged to assess and ensure regulatory compliances.
Statements in this report, particularly those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute forward looking statements within the meaning of applicable laws and regulations and actual results might differ materially from those either expressed or implied.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition Retained Earnings Account
During the year, company has turned profitable as against losses in the previous year. The company has earned total comprehensive income of Rs 116.31 million during the financial year 2018-19 as against total comprehensive loss of Rs 648.80 million during previous year, a turnaround of Rs 765.11 million.
Summary of the Statement of Retained Earnings for the year ended 31st March 2019 is given below:
|Rs. in million|
For the year ended March 31,
|Add: Total comprehensive income / (loss) for the year||116.31||(648.80)|
Retained earnings are the profits / (loss) that the Company has till date and it includes remeasurements of defined benefit obligations.
During the year, the Company reduced its net debt level by Rs. 116.40 million from Rs. 1,007.20 million to Rs. 890.80 million. The finance cost has increased by Rs. 16.28 million primarily on account of increase in interest rates in line with the market.
|Net Debt||Rs. in million|
As at March 31,
|Long Term Borrowings||18a||-||-|
|Short Term Borrowings||18b||952.13||1,206.41|
|Add: Current Maturities payable within 1 year||19b||-||7.12|
|Less: Cash and Bank Balances||12 & 13||61.33||206.33|
|Net Interest Cost||Rs. in million|
As at March 31,
|Less: Interest income on Bank Deposits||8.68||10.56|
|Net Interest Cost||158.34||140.18|
The additions to fixed assets in the current year consist of Plant & equipment, Computers and other Office equipment acquired for supporting operations.
Results of operations
Revenue from operations comprises advertising sales, subscription revenue, event sales and other business income.
Advertising revenue includes sale of free commercial time (FCT) for broadcasting of commercials, sponsorship with reference to association with a particular channel, band etc.
Subscription income comprises revenue from Cable and DTH service providers and from International distribution operations.
Event sales are derived from special programmes or events linked to awareness campaigns for social causes in partnership with the advertisers.
The contribution of the different components to total income for the year ended March 31,2019 and March 31,2018 was as follows:
|Income for the year ended March 31,||
Rs. in million
|Particulars||2019||Mix %||2018||Mix %||Growth
|Other Business Income||232.51||8%||317.78||10%||-27%|
|Operating Income (A)||2,515.35||92%||2,985.55||96%||-16%|
|Other Income (B)||226.88||8%||131.70||4%||72%|
|Total Income (A+B)||2,742.23||100%||3,117.25||100%||-12%|
Advertising sales saw a decrease of Rs. 232.04 million or 12% in 2019 in comparison to 2018 primarily due to downturn in TV advertisement revenues.
Other Income for the year ended March 31,2019 is Rs 226.88 million as compared to Rs 131.70 million for last year. The increase of Rs 95.18 million is primarily attributable to Liabilities / provision written back amounting to Rs. 50.14 million and Interest income on income tax refund amounting to Rs. 30.53 million.
The Companys expenses comprise of Production, Personnel, Operating and Administration and Distribution and Marketing Expenses apart from Depreciation and Finance costs.
The following table depicts the different components of operating cost:
|Operating expenses for the year ended March 31,||
Rs. in million
|Particulars||2019||% of Revenue||2018||% of Revenue||Variance
|Operations & Administration Expenses||681.51||25%||921.59||30%||-26%|
|Marketing, Distribution & Promotion Expenses||496.89||18%||573.65||18%||-13%|
|Depreciation and amortisation||94.90||3%||131.17||4%||-28%|
|Total Operating Expense||2,402.06||88%||3,461.05||111%||-31%|
Production cost for the year ended March 31, 2019 decreased by Rs. 164.79 million in comparison to the year ended March 31, 2018 primarily on account of rationalization of consultancy fees, optimization of transmission bandwidth, savings in travelling and panelists fees etc. The breakup of the production expenses is provided in the table below:
|Production expenses for the year ended March 31,||
Rs. in million
|Particulars||2019||% of Revenue||2018||% of Revenue||Variance %|
|Consultancy and professional fees||153.16||6%||209.03||7%||-27%|
|Graphic, music and editing||15.50||1%||16.85||1%||-8%|
|Subscription, footage and news service||21.27||1%||35.90||1%||-41%|
|Transmission and uplinking||50.45||2%||83.10||3%||-39%|
|Stores and Spares||0.44||0%||0.91||0%||-52%|
|Other Production Expenses||50.39||2%||58.50||2%||-14%|
|Total Production Expenses||377.88||14%||542.67||17%||-30%|
Operating and Administrative Expenses
Operating and Administrative Expenses decreased by Rs. 240.08 million in comparison to 2018 in continuation with the Companys focus on cost rationalization. There have been substantial savings across all expense heads including rent, consultancy, travelling, taxi hire, vehicle running, insurance, bad debts etc.
The breakdown of the major components is as follows:
|Operating & Administration expenses for the year ended March 31,||
Rs. in million
|Particulars||2019||% of Revenue||2018||% of Revenue||Variance
|Rates and taxes||15.89||1%||61.70||2%||-74%|
|Local conveyance, travelling and taxi hire||56.16||2%||88.76||3%||-37%|
|Electricity and water||38.50||1%||47.63||2%||-19%|
|Vehicle running and maintenance||32.67||1%||50.05||2%||-35%|
|Repair and Maintenance||74.61||3%||77.78||2%||-4%|
|Legal, professional and consultancy||136.72||5%||168.78||5%||-19%|
|Loss allowance on trade receivable/ doubtful advances||49.59||2%||66.14||2%||-25%|
|Trade receivable written off||17.54||1%||44.79||1%||-61%|
|Total Operating Expenses||681.51||25%||921.59||30%||-26%|
Related party transactions
These have been discussed in detail in the notes to the financial statements. (Please refer note 34).
Key Financial Ratios
Financial Leverage and Coverage Ratios
|Debt Equity Ratio||0.40||0.54|
|Interest Coverage Ratio||2.04||-2.28|
The Debt Equity ratio is 0.40 in 2019 in comparison to 0.54 in 2018 signifying increase in internal accrual and lower debt during 2019. Interest Coverage ratio has improved to a healthy 2.04 in 2019 due to better financial performance in 2019.
The Current ratio has improved to 0.78 in 2019 from 0.72 in 2018.
Debtor Turnover Ratio Turnover Ratios
* Debtors include Receivable under barter transactions
The Debtor turnover ratio has decreased in 2019 in comparison to 2018.
|Return on Net Worth||4.9%||-28.9%|
The Profitability ratios have improved considerably following the turnaround in the Companys financial results during financial year 2019.
Statements in the Management Discussion and Analysis report relating to the outlook of the Companys business may differ from the actual results. Important factors that could make a difference to the Companys operations include market factors, government regulations, developments within the country and abroad and other such factors.