Balaji Telefilms Limited (BALAJITELE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Balaji Telefilms Limited Q1 FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Kevin. Good evening, everybody, and welcome to the Balaji Telefilms Q1 FY '21 Results Conference Call. We have with us from the management, Mr. Nachiket Pantvaidya, Group COO and CEO, ALT Digital Media Entertainment; and Mr. Sanjay Dwivedi, Group Chief Financial Officer. Thank you, and over to you, sir.

Thank you. Good evening, and welcome to the conference call of Balaji Telefilms Limited. We will be covering this evening the results for the quarter ended 30th June 2020. We hope that you are staying safe and keeping healthy in these uncertain times. Starting with an update on the TV production business. All production activity unfortunately stopped on March 18th as per local regulations and health and safety measures and was resumed on 26th June 2020, and therefore, almost the entire quarter was not available for production. Sales to broadcasters only commenced in quarter 2 of FY '21, resulting in near 0 revenue from TV business. Subsequently, the production and operations are getting back to pre-COVID levels and six shows are currently under production. We expect changes in the lineup in quarter 2 FY '21 as COVID-19 continues to affect production schedules. We are confident that the revenue and production would be closer to normal in quarter 2 FY '21 given our current assessment of the lockdown and no imposition of more stringent lockdown measures. Coming to our movie business, theatrical releases remain uncertain, given that there is no clear indication from authorities for opening of single screen theaters and multiplexes. Our movie business had a relatively good quarter versus quarter 1 FY '20 as we completed the sale of digital rights of Dolly Kitty Aur Woh Chamakte Sitare to Netflix. One of our other movies, Pagglait, will also premiere on Netflix shortly, and we are exploring more such direct to digital sales opportunities for our upcoming movie portfolio. Work is on for select future projects and on confirmed projects like Ek Villain 2, which is the second version of the Villain series, starring John Abraham, and KTina, starring Disha Patani. Our movie business will continue to focus on pre-sales and co-production of its future slate and our capital commitment to the movie business still remains limited. We are very excited about the way ALTBalaji, our digital OTT platform, is shaping up. Our direct subscription revenue has grown 90% year-on-year to INR 12.9 crore versus INR 6.7 crore in quarter 1 FY '20. We have been successful in positioning ALTBalaji as an OTT providing Hindi mass content for India and the Hindi speaking diaspora. As India is a price-sensitive market, we think consumers from the Tier 2 and Tier 3 cities will need a very affordable price proposition, and therefore, our focus is on converting these first-time samplers into avid subscribers of premium content on the platform. ALTBalaji, with its less than INR 1 a day pricing has been successful in meeting this challenge, and it is one of the lowest priced video streaming players in the market. This has allowed us to quickly penetrate and grow our reach. On the creative front, ALTBalaji creates shows which appeal across segments. However, with narratives that are unique or untold and are a mix of thriller, drama, romance, horror, comedy, among others, each show presented on the platform or in the pipeline has been created, keeping in mind the audience's interest across demographic and sociographic segments. With deep consumer insights and data-driven approach, ALTBalaji is ruling massification, which is being followed by other international peers. Viewers spent an average of 60 minutes and 90 minutes per week in metros and non-metro markets, respectively, the highest in its category in 2019. This trend continues in quarter 1 FY '21. There has been some reduction in viewership in recent weeks as limited fresh content is available, given almost a complete shutdown of production activity, and we hope to restore the pace of new content addition in the coming months. To further broaden our offering basket, ALTBalaji is set to invest in Tring, which is a leading fan connect platform offering premium experience at affordable rates. India has always been a star-stuck country. Capitalizing on this strength offers a range of services like video shoutout, DM on Instagram, et cetera. Tring offers significant synergies with ALTBalaji digital initiatives, both across talent management and consumer connect. Our Board has approved an investment of INR 15 crores for a 17.5% stake in the form of equity or equity-linked securities, such as compulsory convertible preference shares. To some of the quarter performance. TV and OTT business was affected due to complete shutdown of production activity in the quarter. We are confident that these segments would bounce back in the current quarter as the content production is back to pre-COVID levels. Movies performance was boosted due to sales deals with digital platforms. We are further exploring similar opportunities, while remaining conservative on investments. I will now hand over to 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 a quarter that was significantly impacted by the pandemic as our operations remained more or less closed for the duration of the quarter. The key figures, which I would like to highlight are as follows: on a consolidated basis, revenues were down to the INR 35.1 crores versus INR 90.5 crores in Q1 FY '20. The major drag on revenue came from TV business, which saw no production hours. Movies had a higher revenues given we had a deal for digital release of one movie. ALTBalaji continues to grow at a much faster pace with average daily subscriber addition in quarter 1 FY '20 at 10,900 and revenues at INR 15 crores versus INR 12 crores in Q1 FY '20. On EBITDA front, we were able to cushion the impact of drastic revenue fall by devising the tighter cost control measures and reduction in staff and other overheads from INR 31.7 crores in Q1 FY '20 to INR 18.7 crores. We have proactively taken measures well before the quarter and hope to be able to bounce back to profitability as soon as our revenues picks up. Coming on to our balance sheet. We are a 0-debt company with bank FDs and mutual fund investments at INR 174 crores and other short-term working capital in movies of INR 67 crores. Total cash balance at INR 241 crores, which gives us significant cushion in this volatile times. We have been maintaining a very strong focus on balance sheet strength through the pandemic, and this flexibility allows us to come back to operations much faster once the regulations around content productions are further opened up. As you might recall, we have the infrastructure and capabilities to produce over 250 hours a quarter and expect to slowly reach that level. Overall, despite drastic fall in revenues due to the impact of pandemic, we have been able to contain our losses and stay focused on business growth. Going forward, with normalizing of the overall business environment and industry adapting to the post-COVID new normal, we are poised to grow dramatically and breakeven on ALTBalaji in this financial year. I thank you all for joining us today, and now I would request the moderator to open the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Sidhant Mattha from B&K Securities.

Yes. I just wanted to know about the sale of movies. So it's around INR 17.5 crores for the quarter. So it includes both the movies or it just includes Dolly Kitty?

It only includes Dolly Kitty.

One movie.

But in your press release, you have written that it -- in the press release, it is written that you have completed the sale of...

We have concluded two movie deal with Netflix, out of which one movie deal has been recognized in this quarter.

Okay, okay, okay. And secondly, what's the subscriber number for ALTBalaji currently?

Well, if you take a total cumulative number, it's pretty high. But this quarter, we have added -- in the quarter that we are talking about right now, it's closer to 1.5 million.

And total, any ballpark number?

So total is a little confusing because we were on telcos at one point in time. So that was in the 20s of million, but if you're tracking our history and you have not come on the call for the first time, you will realize that the number is pretty large. But you can say that our active subscribers, we've got about 1.5 million.

[Operator Instructions] The next question is from the line of Raj Desai from Prospero Tree.

Sir, my first question is that in Q1 FY '21, ALT has reported total revenue of INR 14.9 crores, out of which the direct subscription revenue was INR 12.9 crores. So the balancing INR 2 crore figure is from Zee5. Am I right?

Yes. Zee plus Jio. We have a small deal with Jio.

Zee, yes. Largely Zee.

Okay. So why is the revenue from Zee5 so low even though they have launched 44 episodes of four different shows in Q1?

Who has launched?

Who has launched?

Yes, Zee, Zee.

So all this got launched in this quarter, no?

Okay. There were two movies which were sold to Netflix. Is it at a fixed price or revenue sharing?

It's at a fixed price, and there was -- only one of those has been recognized as revenue in this quarter, which is Dolly Kitty Aur Woh Chamakte Sitare.

Okay. And during the sale of this Netflix -- we have sold these movies, have we sold all the rights, theatrical rights, satellite rights, music rights or only digital rights?

This is basically all the digital rights for a limited time period. We don't have the rights to release this theatrically in that limited time period.

Okay. And last question, sir. What was the direct subscription revenue of ALT for FY '20?

INR 12.9 crores, right?

For FY '20?

FY '20, it was close to INR 40 crores, INR 38 crores or INR 39 crores.

Yes.

[Operator Instructions] The next question is from the line of Shweta Sharma from AB Capital Advisors.

I had a couple of questions. The first one being in line with Tring. So the presentation mentioned that you have this new investment. And I just wanted to understand like what is the synergy that we are looking for into this? And also going in future, are we looking to do some more investments like this or this is just one-time?

The synergies for this are the fact that both of us are in the area of getting on screen talent and more importantly, both Tring as well as Balaji want to target Tier 2 and Tier 3 cities of India. So I think that is the synergy. It's kind of a talent representation business. And we work with talent and so does Tring. We feel they are a set of very energetic young entrepreneurs, and it's an early stage investment. As to whether we will make up such investments in future, we are not able to, of course, comment at this stage. As and when they happen, we will definitely declare them out.

Okay. And in the line of this shows, the TV shows, so it was reported that Kasautii would be going offline. And are there any new shows in the pipeline there or will there will show that would be replacing from Balaji to Kasautii or how is that going to be?

There will be, but that is not pertaining to the quarter that got over.

Okay. So sometime maybe going in future?

Yes. So I mean, we are talking of the quarter, April, May, June, right now, right?

Right. And also...

[Audio Gap] of course, there will be some old shows that go in. I don't know what your question is. But...

I also would like to know about the pipeline of the shows like are we looking at any new shows?

Of course, we are looking. We are always looking at many new shows. But we will announce them at an appropriate time. You must understand that the new shows that come on from Balaji's table are basically a venture between the channels. You're talking of TV shows, right?

Yes.

Yes, yes.

Yes. TV shows are a venture between the channel and us. And therefore, these will be announced at the time when we begin to market them.

Okay. And given that you've recently started the production and all, are there any specific measures that are being taken on sets for this?

Yes, of course, there is a whole set of rules and regulation to be able to shoot under COVID-19 conditions, and we are adhering to them.

The next question is from the line of Dipan Mehta from Elixir Equities.

My question was relating to the drop in ALTBalaji nondirect revenues from INR 5.6 crores to INR 2 crores. That is entirely because of Zee and Reliance Jio?

See, if we don't produce shows that were budgeted in the quarter, we don't get the money from -- for them from Zee. That's the basic principle. Because of COVID, we were -- we are at around 20% to 25% of the estimated production of shows in April, May, June. And therefore, that number has dropped. But if you look at our direct subscription, that has doubled from quarter 1 of the same financial year earlier.

So now as and when new shows come on stream at both the platforms, then you should be reverting back to the revenues of about INR 6 crores, INR 7-odd crores every quarter, which we are getting from the partnerships? Is that correct?

Correct.

Yes.

Okay. And second question is on -- first of all, I really appreciate this Slide #11, where complete breakup is there. In that BTL movies plus TV production saw a depreciation of INR 7 crores, that is the standard depreciation. There is nothing onetime in it, right? Because it appears to be [Technical Difficulty].

This is standard depreciation, but also you should understand, under the new Indian GAAP, lease rental for the shows which we produce goes under depreciation. So it carries a bit of lease rental for the sets.

[Operator Instructions] The next question is from the line of Dhaval Joshi from Sundaram Mutual Fund.

Sir, just wanted to check with you now your balance four movies which is under pipeline. And you have mentioned that it will go into -- now come on digital, basically. So is there any difference or impact, I would say, to -- on your margins per day between theatrical selling or on digital, basically?

I don't know what your question is because all the past six movies that we have sold have come on digital. Can you just sharp focus your question?

So basically -- so whichever movie comes through theaters basically, over there, collections and everything would be better and your margins that way -- or earnings would be better. But now we are selling into the -- on our OTT platform. So is there any impact or a difference in the earnings, do you expect on that?

See the movie that we have sold already, let me talk about it. We are already positive by a decent amount. So we expected in this financial year, when we ended financial year with the two or three movies that we even sell digitally, we will have a robust 10% to 15% margin of profitability assured to us. So that's the benefit of selling digitally, if that is your question.

Yes. yes. So that -- so it's -- okay, fine. It's a fixed margin -- cost-plus margin sort of deal you're doing in digital. Okay.

Correct. No, for the movies that we have sold currently. For the future movies, they're yet to get produced. Like Villain, which we have mentioned, has to yet start production and KTina has to complete production. So we -- let that get produced. We don't know how the conditions in the country will change till then.

Okay, okay. And what was the cost of these two, three movies which will go into -- which you already sold?

Cost, what do you mean by cost?

I mean, total cost of production, making a movie and plus margin?

I don't think we are in a position to fully reveal that right now. Because I think it's a complicated and long process.

Okay. Fine. And one more question, sir. Can you give me breakup, TV and movie for the quarter, revenue breakup?

It's there in the slide.

Yes, it's all there.

No, it is TV plus movie -- sir, it is TV plus movie, is there.

If you see the summary slide. What exactly you want in TV?

How much is the revenue in TV? The TV revenue is some INR 4 crores or something.

TV revenue is just INR 3 crores.

INR 3 crores or something.

[Technical Difficulty] to be sold for the quarter 2. Rest is all movie. TV hardly contributed to anything to these financials.

Okay. So page number -- Slide #11, which is a INR 20 crore, which shows your TV plus movies, so breakup, you're saying that INR 3 crore is TV and balance is movie. Is it correct?

Absolutely correct. Absolutely.

[Operator Instructions] The next question is from the line of [ Soma Shetty ], individual investor.

My question is about the ALTBalaji shows that we converted to the TV shows. When there was no production, we converted some 37 hours of the ALTBalaji shows to TV shows and gave them as a TV serials. Where is that revenue accounted? Because 37 hours is not less. It would have been somewhere more than INR 20 crores or so. So I don't see that in the TV business revenue.

37 hours for INR 20 crores?

Yes. How much is that? And where is it? Has it come, that revenue? Or where is it accounted?

I think you have missed the last quarter revenue call. The way accounting happens is once we have delivered the space to the platform and it's my commitment to them on the delivery is over, I recognize revenue, irrespective of when they are going to telecast. So this got accrued in quarter 4 itself, portion of it in TV and portion of it in ALT.

But this question was asked in...

Even in the last quarter number, we had accounted for these Zee series which got sold for TV as well as for web series.

Okay. If I remember correctly, this question was asked in previous call also. And then the answer we heard was it will be recognized in Q1? Is it not the case?

No, no, no.

Okay. Means that is already accounted for?

Yes, yes, yes.

Okay. Then in the TV business, we still see INR 4 crore of revenue. What is that about when there was no production?