Balaji Telefilms Limited (BALAJITELE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Balaji Telefilms Q3 FY '20 Results Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Periwal from Axis Capital. Thank you, and over to you, sir.

Yes. Good evening, friends, and welcome to Balaji Telefilms Q3 FY '20 Earnings Call. As usual, the call will be initiated with a brief management discussion on the quarterly and the 9 monthly performance, followed by an interactive Q&A session. From the management team, we have with us Mr. Nachiket Pantvaidya, CEO ALTBalaji; Mr. Sanjay Dwivedi, Group CFO. Over to you, Nachi, for your initial comments.

Yes. Very good afternoon. Thank you for joining us on our quarter 3 FY 2020 earnings call. I hope you all had a chance to review our earnings release published yesterday evening. The quarter and the first 9 months of this year has been very good for us, as our investments in creating content across TV, movies and digital have now started to pay off. I'm pleased to report that quarter 3 FY '20 has been a record year of profitability for us and is the highest quarterly profit in over 12 years. I will now quickly walk through major updates across our business, starting with the update on the TV production business, where we continue to drive the ratings for the broadcasters we work with. For the quarter, we had a 15% market share in prime time ratings, which is still more than our production houses rank 2 and rank 3 combined. This allowed us to finish the calendar year as the #1 creator of content on Indian television. We had 9 shows on air during the quarter and produced over 219 hours of content. Our shows are doing very well, and we launched 2 new shows in the quarter. The iconic Naagin came back for Season 4, a testament to our understanding of mass Indian content. We also launched Yeh Hai Chahatein, a spin-off show based on the hugely popular Yeh Hai Mohabbatein. Yeh Hai Mohabbatein came to an end after entertaining Indian audiences for over 6 years. Our TV business remains on a solid footing, and we'll continue to focus on driving hours of production and realizations. This quarter, we also successfully scaled up our digital content production arm and created a number of hit shows for our ALTBalaji platform. We have the required teams and infrastructure in place to continue to produce and create hit content for television and digital. Overall, the TV business remains on a solid foundation and will contribute significantly to the earnings for the year. Coming to our movie business. We had an exceptionally good performance, primarily driven by the super hit movie Dream Girl, which was accounted for in the quarter. Balaji Motion Pictures continues to focus on pre-sales and co-production of its future slate. And our capital commitments to the movie business remains limited. We have 4 movies in the pipeline, and our intention is to focus on pre-sales and co-production where feasible. For example, Ek Villain 2 is being co-produced with T-Series, as our production partner. Other movies in the pipeline include Dolly Kitty Aur Woh Chamakte Sitare, starring Konkona Sen Sharma and Bhumi Pednekar, which had a very successful premiere at the Busan Film Festival last year; Pagglait, starring Sanya Malhotra, and KTina, starring Disha Patani, both of which are original stories that should connect well with Indian audience. Finally, on ALTBalaji, we continue to establish ourselves as a preferred choice for urban mass Hindi content. Our collaboration with Zee5 has gone live since September, and both partners are pleased with the success so far. We continue to create shows that work well with digital audiences in India and Indians abroad. Our current active subscriber base stands close to 1.6 million, and we continue to see good traction on the direct subscription front. We are ranked consistently in the top 5 grossing apps. Currently, we are ranked #4 across iOS and Android despite one of the lowest subscription prices in the country and investing about 1/10 of what our competitors invest in marketing. Our deal with Zee5 will help us get committed revenues towards content creation, while allowing us to grow our direct subscriber base. The partnership allows us to conserve our cash burn by a way of co-production and move towards becoming profitable and a valuable OTT. And we have now significantly reduced our EBITDA burn for the quarter, from an average run rate of INR 30 crores a quarter -- the loss of INR 30 crores a quarter, we are now down to under INR 15 crores and expect this to narrow down quickly. I will now hand this over to Mr. Sanjay Dwivedi, our group CFO, to give you a quick update on the financials.

Thank you. I hope you all have seen the results presentation available on the website. Financially, we had one of our best quarters in recent time. The key figures are as follows. Revenues for the quarter were at INR 198.4 crores and up 78% over the same period in FY '19. This was driven by 2 main factors: an increase in digital content production for ALTBalaji and Zee5; and the full impact of the movie Dream Girl in the quarter. Significant expansion in EBITDA was reflective of strong operational cost control, especially around the new shows launched in quarter. EBITDA for 9 months was at INR 95.9 crores versus INR 16.1 crores, a growth of nearly 5x. Finally, stand-alone Q3 PAT at INR 29.4 crores and 9 months PAT at INR 47.4 crores, growth of 145% and 165%, respectively, all reflective of a strong operational performance across our TV and movie business. Coming to ALTBalaji. As mentioned previously, we continue to drive strong revenue growth, which was at INR 23.1 crores for the quarter versus INR 41.8 crores for the full year FY '19. We continue to keep a tight control on cost. EBITDA loss in Q3 on ALTBalaji has fallen sharply and was at INR 16 crores versus INR 68 crores in the first half of the year. This strong performance is also reflected in our consolidated numbers. The company continues to remain cash-free with mutual fund investment as at December 31, 2019, was at INR 175 crores and a further cash and cash equivalents of INR 14.5 crores. The Board has also declared an interim dividend of 20% or INR 0.40 per share. Overall, we believe our investment into creating the content and platform are now reaping the rewards, and we believe we can continue this momentum into the coming quarters. I thank you all for joining us today. And now would request the moderator to open the Q&A session.

[Operator Instructions] We have the first question from the line of Aasim Bharde from IDFC Securities.

This is Rohit Dokania here from IDFC. Congratulations on a good quarter. Sir, I have 2, 3 questions. One is, you do talk about the pivot to paywall. So just wanted some more details on that, especially you are saying, you're kind of no more free to customers and are along with a single partner only. So what does this exactly mean?

It means 2 things that before September 1, 2019, we were freely available, as in available free on telcos to our customers at an ARPU, which was bordering between INR 15 and INR 20, because there was -- usage was monthly based. So the ARPU of those telco customers are very low, but we had a large base of telco customers that came, not directly to us but came on the telco base. Now that has stopped and everything is available only when the consumer pays for it, whether it is on Zee5 or on ALT. In addition, what has happened is that we produced 42 shows before September 2019, which are now available exclusively only on ALT. They're not available on Zee5. So Zee5 right now has about 12, 13 shows that we produced in the last few months. And the rest of the shows are available only exclusively on ALT. This has enabled us to, one, raise our ARPU; secondly, have direct subscriptions going up. As a result, year-on-year, we are doubling our subscription revenue overall also and also through direct subscribers. So that is really the benefit of going behind the paywall. We feel that as our library increases, we need to ensure that people form the habit of paying for our content and our content is not offered free. We had to do the telco deals and give it of free in the first, probably 30 months of our existence because our library was small, but now we have taken a call, now that the library is growing, that we are going to go only behind paywall.

So sir, understood, sir. Does that mean that sort of you're not present on any of these sort of telco aggregator apps at all?

Correct.

And did it have any impact in terms of knee jerk sort of reaction to our revenues? Or there was no such impact because these sort of...

No. In fact, as a matter of fact, in this quarter, the revenues have gone up, as you would have seen. So just to give you an overall picture, our numbers are looking more and more cheerful in terms of the top line and direct, simply because we have got 42 shows exclusively. And we were also able to kind of manage our P&L and revenues because of our deal with Zee, where there is content sharing and reimbursement for content sharing.

Sir, actually, that was the second question. So you did allude to some of it in your opening remarks. If you can just provide some more details, so how is the sort of content cost sharing, how does that happen? And in terms of -- is there any sort of ARPU sharing as well that goes on because I believe your content is also available on Zee5 as well? So obviously, it would be difficult to give the details, but at least some qualitative comment would be helpful.

It's a 60-40 content share. 60% of our content share is picked up by -- of our content cost is picked up by Zee. And I think on an annual basis, that will amount to at least about INR 80 crore to INR 90 crore. The rest of the money that we spend on the app has to be made by us directly through our exclusive live and the shows that we exploit. And as a result of that, we hope to breakeven between 36 to 48 months of our launch. That is any time after the AMJ quarter, we'll start breaking even. Right now, this quarter's loss stands at about INR 16 crores. We will make that single digits in Jan, Feb, March. And April, May, June onwards, we'll practically breakeven the ALT business.

[Operator Instructions] We have the next question from the line of Dharmik Prajapati from Prospero Tree.

First of all, congratulation on such a great result, as we are seeing growth after such a long period of time. I have 2 questions -- 3 questions on -- first is on the comments business, like comments and programming business has grown by INR 50 crores, which I can see from quarter-to-quarter. But the EBITDA level, we can see only INR 2 crore of growth quarter-on-quarter. So how is that? Can you throw some light around that?

You're talking of the television business because I think the numbers are not what you are saying. The growth has to be -- will be more. So Sanjay, would you like to elaborate here?

Yes, tell me. What is that you're talking about?

Which number?

Yes. So the television network [indiscernible] revenue of INR 84 crores [indiscernible] which is grown by INR 49 crores. The profit -- EBITDA has just grown by INR 26 crore to INR 28 crore, which is INR 2 crores lag.

PBT, PBT.

So last year, we had one-off revenue -- profit from private equity sale, which was around INR 5.5 crores. So that had contributed as well as in the last year's numbers. So you have to remove that number when you want to compare PBT to PBT.

So actually, if you look at profit before tax, it's INR 13.87 crores, if you take that number out...

As compared to INR 21 crores this year.

As compared to INR 21 crores, yes. Roughly INR 21 crores now.

Okay, okay, okay. And going back to movie business, so which I can see that pipeline is of 4 movies. Dolly Kitty was supposed to release in Q4.

Correct.

Which has now shifted to Q1 like in FY '21 [indiscernible]

Correct.

So what are the actual pipeline for Q1 FY '21 like Q1 or for FY '21, if you can just throw some light around...

The thing that we mentioned -- sorry are you -- what is your question? Are you continuing -- I'm not able to understand. Just...

I just wanted to understand what is the pipeline -- assured pipeline for FY '21? Because what I assume is that there was a film that you are going to launch in this current year, financial year. Now with only 3 has been released and now so fourth movie has been shifted to next year. So what is the pipeline for FY '21?

Okay. So the pipeline -- and you can count to the 4. Number one is Dolly Kitty. Second is KTina, starring Disha Patani, then it is Pagglait, starring Sanya Malhotra; and we have Ek Villain 2, which we're coproducing with T-Series. The release date for Ek Villain 2 is not yet firm, but it could well be in March of 2021. It might just be the fourth release.

What is the completion stage like of this -- any 4 movies like is the 50% of the movie completed or...

I'm telling you. Dolly Kitty is completed fully.

You would have heard it that we have already premiered it at Busan Film Festival.

Busan Film Festival. Pagglait is about 30% complete. KTina is 50% complete.

Okay. And Ek Villain is yet to start?

Yes. Ek Villain is yet to start.

Okay. Okay. Fine. And sir, [indiscernible] I can see the results...

I'm sorry to interrupt. Mr. Prajapati, your audio is sounding a little muffled.

Yes, yes. We can't hear you, sorry.

Yes. Sorry. There might be some network issue. Can you hear me now?

Yes, yes, better.

Yes. So the one thing is on ALT business like the cost is very much controlled, like where I can see the revenue growth is only from like INR 3 crores or INR 2 crores -- I am sorry. Revenue growth is by INR 3 crores quarter-on-quarter, but our cost is very much controlled because our losses has been reduced by almost INR 16 crores compared to last quarter. So what I understand is that Zee contributing at the top line, not in the content cost, if I understand better. So...

No. I don't think you are taking the numbers right.

We'll just explain. Sanjay, if you can just clarify?

So last year -- you are talking about ALT, correct?

Yes. ALT had digital business, so last quarter...

Yes, yes, yes. So last year, for quarter 3, the number was INR 8 crores top line.

No, no, sir. I'm not talking Y-o-Y. I was talking quarter-on-quarter.

I'm talking quarter-on-quarter only.

INR 20 crores to INR 23 crores.

So you are talking about sequential quarter or quarter-on-quarter?

Q2 to Q3.

Q2, Q3.

Okay. Yes. So there is a surge of INR 3 crores on top line.

Yes. And that the cost are very much reduced by INR 16 crores, losses, there are, like, INR 29 crores to INR 12 crores. So I don't understand. Can you throw some light on that?

So 50% of the cost has been picked up by Zee.

Because if you would have recollect during the last conversation when we had with you guys, we have clearly told you September 1, we went live with Zee5, correct? The full impact was not seen in quarter 2.

Correct.

Whereas this quarter has full impact for the shows, which we have co-shared with Zee, where they have picked up cost by 50%.

Okay, co-shared with Zee. And what I understand like is, is Zee contributing anything to our top line results or is only the content cost sharing?

50% is -- cost is picked -- cost gets reduced, and 10% is what I accrue as a revenue.

Okay. So it's 60%, 50% and 10% ratio. And one thing on the movie side -- that's all.

We have the next question from the line of [ Karan Gala ] from [ Robocap ].

Yes. I just wanted to ask one thing. The base level point that you mentioned for April to June, was it at cash flow level or PAT level?

We had cash flow level. For the quarter, we are already breaking even.

So in ALT, you are already positive and cash flow positive by April and -- to June?

April, May, June, we'll be targeting P&L breakeven.

P&L positive.

Cash flow, we are already breaking even now itself.

The reason is we have some amort that we are carrying from the past...