Entertainment Network (India) Limited (ENIL.NS) Earnings Call Transcript & Summary

Okay. All right.

Yes, thanks.

All right. Sure. And for the -- I mean, for the traditional business, what kind of a recovery are we seeing in this quarter 2 or things are remaining as it is? Or do you have any optimism? Or are we hopeful of some better numbers coming ahead?

See, the way I look at there is -- last year, if you look at second half media industry has had a lot of headwinds since last year's H2. So there will be a base effect coming in monsoons, though look erratic, but there has still been better monsoons than last year. Festive, only deterrent in festive it's a little earlier. So it will be difficult to compare over last year and this year because this year, large festive happens in the quarter 2 against last year of quarter 3. But I think in quarter 3 and quarter 4, we believe there will be a base effect, which will lead to growth.

Okay. Okay. And then finally, what about the cash balance of INR 350 crores, how do we plan to use it? Because it's -- I mean, it's been a long time we have been like patiently sitting, our shareholders, not being able to create value. I understand the headwind in the industry. But I mean, somewhere we will have to -- I mean, how do we use the cash balance? And how do we think about creating value for shareholders?

So one thing is, Shikhar, we have been very consistent on dividend even in during COVID times also we have been increasing and though marginal increase, but over the last 2 years, you would have seen we have been very consistent on dividend and have increased that. Also, we keep evaluating different new businesses also as you look at with AI impacting not just media industry but all industries. So we keep looking at new opportunities to see if we can look at new avenues, while as we stabilize Gaana business and then also start looking at the newer media businesses also.

Okay. Okay. Got it. Got it. But nothing material on cards as of now, I mean, for acquisitions, sir?

Even if it was if I would put it on this -- I can't put it out here.

Right. Right.

I put it on the SEBI. I'll do a proper disclosure, if there was something right now -- we keep evaluating, we keep discussing, but there's nothing material right now.

Got it. Got it. All right. All right.

Thank you, Shikhar.

[Operator Instructions] The next question is from the line of Vipul P. Shah from INPact Wealth Advisors.

Yatish-ji, can you hear me?

Yes.

I wanted to check last when we discussed in the last quarter, the digital revenues, especially the Gaana revenues were roughly around INR 18 crores, which means that on a Q-on-Q basis, there is no growth. Is that right way to look at it?

No, I don't think, just give you one second.

Yes.

Because you would have seen overall digital also. One second, Vipul.

Yes, sure.

Vipul, last quarter, it was about INR 14.6 crores. Now it is INR 17.95 crores. The -- what you're looking at is the overall digital revenues and not Gaana revenues, what INR 18 crores you're trying to say.

Yes, my mistake. And how do you see based on whatever -- between last quarter and current quarter, the kind of visibility you're seeing, you still feel fairly confident that -- and you just mentioned also that by this time next quarter -- next year, you would be able to break even on Gaana, that visibility looks for sure?

Yes. So far on course, Vipul, I can't enter details, but as per our workings and as per our -- the way we're looking at our efficiencies and business, we believe we should be able to do that.

Okay, fair enough. Okay, fine. That's from my side.

Thank you, Vipul.

The next question is from the line of Rahul Goenka from Noesis Ventures PL.

Yes. I just wanted to ask you that does Gaana have any cost competitive advantages compared to its rivals because of its radio presence? And basically, Gaana -- Radio Mirchi has been operating a lot in the regional spaces where the other rivals have not been able to have such a strong hold. So does that pose as an advantage to Gaana in the future?

So Rahul, it's a good question, and that's always been a premise for us when we took our Gaana business also. And you rightly pointed out, Mirchi has been the one where discovery of music happened over the last 2 decades. People -- before even digital came in, people would discover music on radio and Mirchi being the largest and the leader in that place has always been where people discovered music and we curate the best music for people, the playlist and all. And with our presence in 63 markets, yes, it's a massive competitive advantage, not just from a marketing and media muscle that we can promote Gaana in all these markets. But because we understand the nuances of each market and each language, and you would know that India changes every 40, 50 kilometers, both on food, music taste, we understand and that's the reason we are able to customize and target individuals at those levels. So those learnings surely help us deliver this business better than our competition. And as of date, if you look at it, most of the music streaming services, the head of music are all been Mirchi guys. So for us, we understand the space really well. And with Gaana, our event business and the radio business, we are really, really well placed in the audio segment -- audio entertainment segment for the country.

What about your rivals? Has Wynk closed down as yet? And I believe YouTube Music and all their spend -- they've got massive budgets and people are what you call kind of elevating to them because they have the, what you call, videos to go along with it. So does Gaana also provide that or they just provide the music?

So Rahul, the way we look at it is our business is in on Gaana, we are a paid service, while YouTube and Spotify -- and first of all, Wynk has closed down. Wynk has closed down, Hungama has closed down, Resso has closed down. So there are very less players now. At one point of time, there were 9 music streaming services. Most of the -- and it's been now very clearly seen that if you run only a free service, it's not a viable business. Paid subscription is the way to go, globally also if you look at Spotify numbers, it's always been paid subscription, which drives profitability and numbers. So from that perspective, we believe a paid subscription is a business to go for. Earlier also, if you look at when we were kids or when we were college guys, we used to buy music. It's just that when free streaming happened, people stopped buying. So as music gets not available free, people will go back. You would remember that a Kabhi Khushi Kabhie Gham CD you would have bought at about INR 300, INR 400 also. And in today's time, you're able to provide INR 600 or INR 700 a yearly subscription with million songs across the universe at a touch of a button. So there's massive convenience, entire catalog is available. The best playlisting is available. So there's a lot of value which is being given to people. From a competition point of view, the way we look at it, there's massive headroom available for subscription. India, there are almost about 200 million free music subscribers. But only about 10 to 15 -- 10 million to 12 million are paying subscribers. If you look at the EY last report, which came in during the FICCI-FRAMES in March, only about 10 million to 12 million pays. So there's massive headroom. You can always be pinching that why only 10 million to 12 million pay. There's a behavior change required. I think though -- and I'm very optimistic that's the way to go. And so that's the headroom available. There is behavior where people are streaming music online. So which is a good thing because people are streaming. Over a period, people will tend to pay, and it's still a lot of headroom available. Everybody can grow. It's not about just us, YouTube, Spotify can grow because there's so much available -- audience available for you to attract your own subscribers. And as you mentioned, we are -- we understand the Tier 2, Tier 3 markets or the regional market well. Just to give you a number, 65% of our users come from Tier 2, Tier 3 markets.

Okay. So, yes -- but do you all pose a threat like YouTube Music if somebody wants to watch something free, so they can get some live streaming or some songs free of charge, whereas you all guys are charging INR 500, INR 600. So does that pose as a competition or not really?

So that will always...

[indiscernible] own segment.

So that way -- see, from that point of view, even Radio Mirchi is a competition because there also music is freely available, but ads play. Similarly, on YouTube also, music is available, ads play. Now if a consumer wants to have a music which is without any ads and wants to have so much of music available, then it is -- then it doesn't matter to us. I'm just saying being YouTube or being Spotify or being radio also because everything is available free in this. And that's where the change is happening. But if you look at why people move to streaming is largely because ads has always been a deterrent. With YouTube also it's more ads coming in and they're also pushing their premium product, we believe the market will also move towards subscription. If you look at Spotify or YouTube, both are pushing subscription and asking people to pay rather than giving free because on a free product, you will have restrictions on playlisting, backgrounding is not available. So there are a lot of restrictions on the free product also. The experience is not so great. So I'm not saying all 200 million will start paying in the next 6 months or 1 year. But even if the numbers just jump up to a double in next 2, 3 years, every business will become very, very profitable and a good business to be in and headroom is available.

What I was -- also on ChatGPT, what I found that YouTube Music has invested close to INR 21,000 crores in the last 2, 3 years. So is that figure you think a correct figure or you would not like to comment?

It would be global. And plus YouTube is a platform where labels also put and they -- label puts their content. And when ads play, they have to give money back to labels or any content. It's a global number. And that business, I would not be able to -- I would not be in the position also to comment on it. But it's -- whatever we read and whatever our sources say, it's a global spend for radio, not just India. And it's not about just music, it's about all content.

Okay, okay. Okay, thanks for your information and clarification.

Thank you, Rahul.

Yes, bye.

Bye.

[Operator Instructions] The next question is from the line of Anant Shirgaonkar from Newport Capital.

Can you hear me?

Yes, Anant. How are you?

I'm very good, Yatish. How are things?

Good, good, Anant. Thank you.

Good. Yatish, can you just give some color on the events business, how the quarter went? And how is the year looking going ahead? And what is the sustainable growth rate you expect for the events business?

So event business, just the event business because we do solutions. But if you look at just pure event business, what we call the IP events, for us, this quarter grew almost about 58%. And I would have loved more growth had the war -- geopolitical situation not happened where we had to cancel a lot of events. If that had not happened, the growth would have been a little higher. Having said that, quarter 2 also and in the coming quarters also, we believe our event business will see massive growth. And in this case, we are not talking about percentage growth. It could be -- actually it's almost doubling revenues also. That's the tailwinds we see in the experiential business. So hoping for a very -- and very optimistic on the growth in the event business.

Right. And how do you see this playing out over the next few years? Do you think this is more sustainable? Because already, I heard like you're doing 50-plus marathons and you're doing a lot of concerts and festive events and stuff. So how much can this grow or you can keep going hinterlands, Tier 2, Tier 3 and the demand for events just keeps on growing year after year? How do you see this playing out?

So yes, we've -- I think event business on its own can match up the ad business because there's so much tailwinds available that people are -- we are looking at there's a behavior change in consumer where people are spending money on experiential. They want to go out. There is massive investment coming from District and BookMyShow also when you look at how do you make people move out and there is incentive available. Plus if you look at the music scene, food, everything is looking very, very different post COVID. So that's a massive change that has happened, and we believe that is here to continue. The new generation believes in you live only once and they want to spend money on experience and not on holding assets. They want to experience life. So if you look at be it a Wimbledon type of event also, you would have seen so much -- so many influencers and everybody talking about it. It's no longer just a sports event. It's become more a fashion event also. So that's the amalgamation of events, entertainment, sports, music coming together and people wanting to go out and experience is leading to the tailwinds to drive this business. And because we have been in this business for last more than a decade and with our presence in 63 markets, we believe we are well positioned to leverage this. It comes with a little less margin coming to the radio business. And when you see a lot of tailwinds in any industry, a lot of players get into it. So in a shorter period, there could be some pressure on margins also because a lot of people would want to just take some business from you by quoting a lower margin. But that happens because then the quality -- you can lose a business once, but not every time. And that's what you have seen in the last 10 years. With our equity in the market, with our presence, our client relationship, I think we are well placed to drive growth and profitability.

Right. And I would believe ROCE would be very high for this because investments will be very low. Is that a fair comment?

Yes, it's a people-driven thing and because a lot of cost becomes variable, but it's a people-intensive business. So as much as I would like to do 63 markets, it will require teams in these markets, and these are specialist people. This is not like I can tomorrow send my radio sales guy to execute the event. The execution of the event is very different. But from a CapEx point of view, there is no investment.

Right. And as far as what I've seen from this quarterly result, so you've got events business, which you said has grown at 58% and you've got Gaana business, which has again shown a healthy growth. And if you add the revenues for both events and Gaana, then as per what I have done, they exceed the radio revenues. Is that a fair comment?

Not really as of now. That's what our aim is. I think by year-end, we should be looking at a 50-50, if not less for radio. But as of today, it's almost about 58% radio, and which is as per our plan because generally, events is a very H2-heavy calendar. H1 is not as heavy as H2 because events start post the rains, a lot of on-ground events start post rains. And that's the reason H1 is a little muted when you look at event business. But Gaana is more linear, while events will be very H2 heavy.

Correct. So just extending your comment here, if you say that by year-end, Gaana plus events exceed radio and given that Gaana and events both are showing so much of a healthy growth, then going forward next 2, 3, 4 years, radio should become a smaller and smaller part of ENIL, whereas the high-growth businesses would start dominating the top line...?

Yes, that's the aim. I think that's what you're calling -- my KPIs very clearly, that's what we're looking at transforming this company from just being a radio company to a multimedia company, what's true to the name of entertainment network and not just the FM Radio.

Fantastic, fantastic. All the best to you guys.

Thank you. Thank you.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you, Nidhi. Thank you, ladies and gentlemen. It's a pleasure to have you all. We remain committed to drive profitable growth and returns for our shareholders. Thank you once again for joining this call. Thank you very much. Have a good day.

Thank you very much. On behalf of Entertainment Network (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.