T.V. Today Network Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

For traditional sectors like Broadcast TV and Films, 2018 has been a decent year wherein the industry has maintained a healthy pace of growth and met expectations. This has been achieved on the back of growing subscription base and ticket prices, respectively. This trend has been cemented by the upward trajectory created by the new age digital media where further upswing is on the cards. Thus, M&E continues to match up to the predictions and become more vibrant. The Indian M&E sector reached INR 1,67,000 Crores (US$23.9 billion), a growth of 13.4% over 2017. With its current trajectory, it is expected to grow to INR 2,35,000 Crores by 2021 (US$33.6 billion).

The M&E product will always remain relevant for a young country like India, thirsting for infotainment. The growth of digital infrastructure is enabling Indians to fulfill their need for personal content consumption and the M&E sector has responded by producing content like never before - across languages and genre.

In addition, global OTT (Over The Top) platforms and Indian platforms available globally, have made it possible for people across the world to experience Indian content, something which was out of the reach of most Indian content creators till just a few years ago. The opportunity provided here is enormous, both to create content for the world and support global content creators with our talent, production, animation and VFX capabilities.

While the Indian economy grew its nominal GDP by 10.2%, the Indian M&E sector grew 13.4%. Advertising, which had dropped below the nominal growth rate in 2017 due to demonetization and implementation of GST, recovered and grew 12.7%. The M&E sector is seeing the fruits of continued economic growth and Indias rising per-capita nominal GDP, which is estimated to have grown by 10.6% in 2018, a five year high growth rate.

Broadcasters share of subscription revenue increased from INR 9900 Crores to INR 11000 crores in 2018. This is around 25% of the total ground collections.

INR in crores
Segment CY2017 CY2018 CY2019E CY2021E CAGR 2018-21
Television 66,000 74,000 81,500 95,500 8.8%
Print 30,300 30,600 31,700 33,800 3.4%
Filmed entertainment 15,600 17,500 19,400 23,600 10.6%
Digital media 11,900 16,900 22,300 35,400 28.0%
Animation and VFX 6,700 7,900 9,300 12,800 17.4%
Live events 6,500 7,500 8,600 11,200 14.0%
Online gaming 3,000 4,900 6,800 12,000 35.4%
Out of Home media 3,400 3,700 4,100 4,900 9.2%
Radio 2,900 3,100 3,400 3,900 8.0%
Music 1,300 1,400 1,600 1,900 10.8%
Total 1,47,600 1,67,400 1,88,700 2,34,900 12.0%

All figures are gross of taxes

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

However, once the subscribers migration from old tariff regime to the new tariff order regime settles down across India, some broadcasters share has the potential to go up significantly, especially from cable subscribers.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

Free Dish generated an estimated INR 2000 Cr of advertising revenues.

Top 10 channel genres contributed 46% share of advertising volumes on TV. News, which commands a 7% share of viewership garners a disproportionately high share of advertising volumes.

SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE

TELEVISION

(A) PERFORMANCE & INDUSTRY OUTLOOK

Television grew 12% in 2018 to reach INR 74,000 Crores.Growthwasledbya14%increaseinadvertising revenues and 11% increase in subscription revenues. The segment is expected to grow by an average 9% over the next three years, taking this segment to INR 95,500 Crores by 2021. Advertising comprised 41% of segment revenues in 2018 and this is expected to reach 42% by 2021.

Number of channels increased to 885 in 2018, of which 43% were news channels.

As per TAM AdEX, there were 10,962 advertisers and 16,857 brands on TV, of which 5,382 advertisers were not on print or radio. While ad insertions increased 15% in 2018, ad revenue grew 14%. Regional advertising outpaced national adverting growth on the back of national brands spending more to grow non- metro markets where GST had created a level playing field between national and regional brands. (DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

(B) DISTRIBUTION & IMPACT ON

BROADCASTERS

Television owning households increased from 18.3 Crores to 19.7 Crores, which is a 7.5% increase over the previous Broadcast India Survey. During the same period, total Indian households increased from 28.6 Crores to 29.8 Crores, which is a 4.2% increase and TV penetration increased to 66% in 2018 from 64% in 2016.

Digitization led to increased collections from end customers in DAS-III and DAS-IV markets, with many cities crossing the INR 200 per month number. DTH ARPUs have been affected by a change in the subscriber mix with incremental subscribers coming at a lower price point and the movement of subscribers to lower value regional packs.

HD channels grew from 78 in 2017 to 92 in 2018 (18% growth). HD viewership has grown at the rate of 57% in 2018 to reach 874,000 impressions.

NEWS GENRE

News viewership remained at around 7% despite 43% of TV channels in India being classified as news channels.

DIGITAL MEDIA

Digital media continued to grow at a fast pace, across both advertising and subscription.

2017

2018

2019E

2021E

Advertising 11490 15440 20040 30090
Subscription 390 1420 2290 5290
Total 11890 16860 22330 35380

INR in crores gross of taxes

In 2018, digital media grew 42%, with advertising growing by 34% and subscription growing 262%. Subscription, which was 3.3% of the segment in 2017, increased to 8.4% in 2018.

The number of wireless subscribers grew from 116.7 Crores in December 2017 to 117.1 Crores in November 2018. This growth primarily came from rural subscribers who grew from 49.9 Crores to 52.6 Crores in the same period.

DIGITAL INFRASTRUCTURE

Subscriber growth continues. Interestingly, mobile subscriber growth was led by rural markets.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

ONLINE NEWS

Online news subscribers grew between December 2017 and 2018, to reach 24.5 crores, across mobile and desktop users of news sites, portals and aggregators. This is approximately 43% of internet users at the end of 2018. The time spent per user per day on news is around eight minutes. Highest growth of around 40% was seen in non-English consumers.

RADIO INDUSTRY

Radio grew 7.5% in 2018 to reach INR 3,130 Crores, taking its share in total advertising to 4.2%. Growth was driven by a 3% ad volume growth, inventory growth from newly operationalized Phase-III stations and non-FCT revenues from digital, content production, events, etc. In 2018, 47 new radio stations were operationalized across 35 cities, taking the total of 386 radio stations in India.

The skew of advertising continued towards the metros, with the top seven cities contributing around 53% of ad volumes. These cities also benefited from the operationalization of second frequencies. Services, retail, food and beverage, auto and BFSI were the top five categories advertising on radio, with services comprising 30% of the total volumes.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

NEW TARIFF ORDER

The Telecom Regulatory Authority of India (TRAI), after getting approval from the Supreme Court of India, implemented a new regulatory framework for the television broadcast industry of India - the New Tariff Order (NTO).

The NTO, popularly known as the MRP regime, mandates that customers select the channels and bouquets they want to subscribe to and for broadcasters to announce the MRP of the same. The new regulatory framework was implemented on February 1, 2019 and the extended deadline to complete the migration from the old framework to the new one is March 31, 2019.

In the tariff order, TRAI attempted to ensure transparency, non-discrimination, consumer protection and create an enabling environment for orderly growth of the sector.

The new tariff order is expected to empower the consumers to decide and choose which channels they want to watch and hence, pay for. Till now, bundling channels together was giving the right to the broadcasters to push the channels under the consumers priority list.

The new tariff order states that the broadcasters are free to price their channels as long as the channels are offered in the A-la-carte manner. Once a channel is pushed in a bouquet, the maximum retail price (MRP) is to be capped at 19 per channel per subscriber per month.

Broadcasters to decide the MRP and declare it for their pay channels, will in a way, self-regulate the pricing and provide flexibility to maximise their subscription revenues.

OPPORTUNITIES AND THREATS

OPPORTUNITIES

The Media and Entertainment Industry in India consists of different segments such as television, prints and films. This sector is witnessing impressive growth. T.V. Today Network that operates various portfolios, leverages immense opportunities available in this industry through the diversified portfolio.

THREATS

Various threats faced by Media and Entertainment Industry and in particular by the Company include piracy, violation of intellectual property rights, lack of quality content, etc. The Company is continuously monitoring the various threats which can hamper the growth of the Company and is taking appropriate and effective steps in this regard.

OUTLOOK & PERFORMANCE

TELEVISON

Our Company has been continuously focusing upon continuing its growth trajectory with the channels from the network including Aaj Tak, India Today TV, Tez and Dilli Aaj Tak. The segment is growing consistently in market share, coverage and the credibility with audiences and advertisers both.

Its endeavor is to maintain the leadership position of News Channel Aaj Tak as the No. 1, which it has been able to sustain for last 19 years in a row since the very inception. It has also contributed to the growth in advertising revenues. Aaj Tak has established its supremacy as the Nations No. 1 News channel across viewership measurement currencies of BARC, TGI and IRS.

Aaj Tak has maintained its Leadership among Hindi News Channels in the new Audience Measurement System BARC with a Market Share of 17.3% (15+ NCCS All, HSM, April 1st 2018 – March 31st 2019, Relative Share basis Imp 000 out of 13 Hindi News Channels). Aaj Tak has also crossed average weekly 110 million viewers touching a maximum of 164 millions in 2018-19 (15+NCCS All, HSM, Wk 1418-1319, Coverage).

The Networks English news channel, India Today TV has shown stellar growth and is Clear No 3 English News channel in 2019 (wk 0119-wk 1319). The 24hr English News channel has consistently grown to become the No. 3 English News Channel with a Market Share of 10.7% (Source: BARC, 22+ M NCCS AB Megacities, April 1st 2018 – March 31st 2019, Relative Share is based out of 9 English News Channels).

The Hindi News channel "Tez" from the Network has already left behind established news channel NDTV India, Zee Hindustan and DD News with 4.4% share in 2018-2019 (April 1st 2018 – March 31st 2019) in HSM Metros. (15+NCCS All, Delhi Mumbai & Kolkata, April 1st 2018 – March 31st 2019, Relative Share basis Imp 000 out of 13 Hindi News Channels).

The Delhi focused channel - "Dilli Aaj Tak" is also delivering good ratings with a market share in Delhi of 3.3% (BARC, TG: 15+, Market: Delhi, Period: 1st April 2018 to 31st Mar19, Share% basis Imp000 based on 14 Hindi news).

Rating currency of BARC Rating System has ranked Aaj Tak, India Today Television, Tez and Dilli Aaj Tak among the leading current affairs channels in India in their respective segments.

All channels have contributed to the revenue growth of the Company in the financial year ended 2018-19 and all the brands are expected to further propel the growth of the Company in the coming years. The Company is constantly investing in content as well as marketing & distribution on the basis of detailed research in order to achieve better ratings.

DIGITAL

Digital segment will overtake film in 2019 and print by 2021. It is estimated that the segment will grow at a CAGR of 28% to INR 35,400 Crores by 2021. Advertising will grow at a 25% CAGR, while subscription will grow at 55% CAGR, on the back of 3 to 3.5 Crores paying video subscribers and 60-70 Lakhs paying audio subscribers.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

RADIO

Growth in 2019 will be fuelled by ad spends in the general elections of 2019, non – FCT revenues and firming of ad rates in regional markets. Radio companies will focus on building communities to understand consumers better and enable brands to connect directly with their audiences.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

RISK AND CONCERNS

(A) TELEVISION

If large broadcasters continue to keep their content off FreeDish, television advertising revenues would be impacted and FreeDishs future will be determined by the number of new channels which come on the platform. We can expect more regional, news and niche channels – particularly those impacted negatively by the TRAI order – to try building audiences through FreeDish subject to auction base prices being feasible.

(B) FM RADIO

MEASUREMENT OF LISTENERSHIP REMAINED AN ISSUE

Listenership measurement remains a challenge-except for the four metros where Radio Audience Measurement (RAM) data is available, listenership measurement is the biggest pressing challenge in other cities. At present, the segment is using social media platforms and their own surveys to overcome the absence of a credible measurement system. In order to overcome issues in measuring listenership, MRUC in association with AROI is inviting proposals to form an independent body that will measure listenership in the top few markets. Initially the plan is to cover 21 markets and the methodology for research will be similar to what IRS uses now.

Many new smartphones do not come equipped with FM receivers, which could impact radio listenership. Private FM was finally permitted to air news, but only in the form or replays of news broadcasts created by Prasar Bharti, without any modifications. No such restrictions exist on other media like television, digital or print in India.

(DATA SOURCE: EY - FICCI India Media and Entertainment Industry Report 2019)

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has adequate internal control systems commensurate with the size and nature of its business. Your Companys internal audit process is being handled by one of the best audit firms, M/s Grant Thornton.

Your Companys internal control is designed to:

• Saf eguard the Companys assets and to identify liabilities.

• Ensure the transactions are properly recorded and authorized.

• Ensure maintenance of proper records and processes that facilitates relevant and reliable information.

• Ensure compliance with applicable laws and regulations.

Further, Grant Thornton conducts extensive audits round the year covering each and every aspect of the business activity so as to ensure accuracy, reliability and consistency of records, systems and procedures. The recommendations and observations of the internal auditors are being reviewed regularly by the Audit Committee.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company continued to show good financial performance in the fiscal year 2018-19. Total Revenue of the Company registered a growth of 4.6%, up from Rs 714.59 crores in FY 17-18 to Rs 747.55 crores in FY 18-19. The major factors contributing to the growth were advertisement revenue and digital operations. The PBT at 202.39 crores in FY 18-19 was up by 7.7% over the figure of 187.92 crores in FY 17-18.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS (INCLUDING NUMBER OF PEOPLE EMPLOYED)

Your Companys employee strength as on March 31, 2019 was 1767 (Full Time- 1654, Consultant - 113). With human resources providing strategic advantage in the media sector, the Company has taken steps to improve processes for better talent acquisition, performance evaluation, merit recognition, and higher productivity. The Company has also undertaken initiatives to build stronger employee engagement and talent retention. Core policies to enhance efficiencies have been implemented.

KEY FINANCIAL RATIOS

As per SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios.

The Company has identified the following ratios as key financial ratios:

(Standalone)

(Consolidated)

Ratios

FY 2018-19

FY 2017-18

FY 2018-19

FY 2017-18

(i) Debtors 110 112 114 115
turnover (days)
(ii) Current Ratio 4.19 2.96 3.93 2.85
(times)
(iii) Oper ating26.66% 25.91% 25.85% 24.64%
Profit Margin (%)
(iv) Net Profit 17.13% 16.90% 16.64% 15.62%
Margin (%)
(v) Basic EPS 21.77 20.70 22.03 19.94
Rs ( )

Ratios where there has been a significant change from FY 2017-18 to FY 2018-19:

Current ratio is calculated as current assets divided by current liabilities as at the balance sheet date. The Current ratio of the Company improved by 42% in FY 2018-19 compared to FY 2017-18. This is largely due to increase in the investment in fixed deposits made by the Company during FY 2018-19.

   

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