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

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Entertainment Network (India) Limited. Joining us on the call today are Mr. Prashant Panday, Managing Director and CEO; Mr. N. Subramanian, Executive Director and Group CFO; and Mr. Sufal Agarwal, Financial Controller from Entertainment Network (India) Limited. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Prashant Panaday. Thank you, and over to you, sir.

Thank you, Aisha, and welcome to this investor call, dear Investors. As always, I will be taking the first few minutes in giving you a picture of how the quarter has been, trying to go beyond the numbers, but also covering some of the numbers. To begin immediately, you might have seen the financial presentation, of course, the revenues have grown in this quarter to approximately INR 85 crores, INR 84.5 crores to be precise. This represents an 80% sequential jump. Of course, it is still massively negative 42% compared to the same quarter last year. But what is good to note is that the revenue performance of the company has been improving with every passing quarter, and it is important for us to look at the performance of the company on a quarterly basis because we are emerging out of a pandemic year. And it is important to see how fast we are exiting the pandemic and getting back into a world where we saw growth in the past. So the news over here in my mind is very encouraging. And let me give you some evidence of that. I will now give you some numbers of the first quarter of this year, followed by the second quarter and then the third quarter to show you how there is an improvement in the business continuously. First, talking about revenues, our revenues have grown from INR 36 crores to approximately INR 47 crores to approximately INR 85 crores. If I were to look at the revenue drop compared to last year, in the first quarter, the revenue drop was 72%, in the second quarter it was 59%, and as I mentioned sometime back, in this quarter, in the third quarter, the drop compared to last year is 42%. Now if I were to look at the volume scenario because remember that when a recovery happens in media, it is first led by the volume -- ad volumes. So one keeps a track of ad volumes to know if the recovery is underway or not. Now the volume de-growth in the first quarter was 74%. The volume de-growth in the second quarter was 23%, and the really good news of this quarter is that there has been a volume growth of 12% or 11.5% this quarter compared to the same period last quarter. Now remember, both of these were festive quarters this year as well as last year. And despite that, there is a 12% growth in volume. So when the volume recovers, you feel confident that the pricing will recover and then the revenues of the company will also recover. But moving on, if I were to look at the EBITDA -- reported EBITDA number of the company, it was minus INR 26 crores in the first quarter, it was minus INR 6 crores in the second quarter. And this quarter is plus INR 21 crores approximately. And if I were to come to the profit before tax, and I'm not including the exceptional item, which I will talk about later, the profit before tax in the first quarter was minus INR 36 crores, which improved to minus INR 32 crores. And this quarter, we are close to a PBT breakeven at minus INR 4 crores, or minus INR 3.5 crores to be precise. And if you look at the PAT number, which now includes the exceptional item, again, I will repeat, I will talk about the exceptional item a little later. The first quarter PAT was minus INR 37 crores, second quarter was minus INR 24 crores and this quarter, we reported approximately INR 16.5 crores or INR 17 crores in PAT. So it tells you that the trajectory of the company's revenues, its profit margin, its PAT margins is all upwards. And therefore, we are confident that in the fourth quarter and then most certainly in the coming years, the company will be back on its rapid growth trajectory. But let me give you some more flavor on the revenue performance of the company. First and foremost, surprisingly, or actually not so surprisingly, the solutions business has actually grown slower or has de-grown faster than the radio business. The solution business overall has degrown by 55%, while the radio business has degrown by 36%. And there is one simple explanation for this and that is that the quarter 3 is a very heavy quarter for our solutions business and a very large part of our solutions business includes on-ground activations and on-ground events. That has been reduced to nearly 0, and therefore, the impact on the solutions business is much higher. I will talk about this, again, in a different perspective, slightly down the line. But suffice to say that as and when the on-ground events start, and they're already starting to start, we will see the bounce back in these revenues. To that extent, it is a temporary phenomenon that we are experiencing in the third quarter. Let me give you yet another flavor on the revenue performance. The revenue performance matches very closely how the country's markets are responding to COVID. And as I mentioned in the previous quarter, the top 8 markets are still the most affected by the pandemic effect. And that shows up in our revenue performance. So our revenue drop in the top 8 markets is between 45% and 50%, depending on whether you take only radio or the entire revenue. And the degrowth in the growth 27 market, the original 27 markets, is just 22% in revenue terms. And similarly, the volume degrowth in the top 8 markets is still negative 18%. Remember, I mentioned to you that overall across the network, volumes have actually risen by 12%, but in the top 8 markets, volumes are still down by 18%. So it tells you very clearly that the top 8 markets continue to remain in a severe grip of COVID. If you notice the performance of at least one other radio company, which has declared its results, you will realize that it has declared a revenue degrowth of only 22% de-growth. And the reason is very simply this because that is a network which is largely into small markets. And like I mentioned to you, even our degrowth in the small markets is only 22%. So our performances have to be seen in the right context. Now here is an interesting report that we thought we will share with you. And it is basically the Google Mobility Report. You might have seen and heard about it and seen quoted in various newspapers and websites right through the pandemic. And here is something that should give you a reason as to why the top 8 markets are still underperforming. So if you look at the mobility into retail and recreational areas, in -- across the major markets -- across the country, this number is still approximately about minus 30%, which means that compared to 1 year back, there still are 30% fewer footfalls happening in retail and recreational centers. Now remember, the radio business depends very extensively on retail shop fronts and real estate projects and jewelry stores and educational institutions. So a whole lot of business depends on retail shops and retail establishments. Even the auto sector divides its revenues between brand campaigns and campaigns which promote either trials or footfall generation for the dealership. So the radio business has been affected badly in the top 8 markets because the mobility has still not come to the full level. People who live in Mumbai will understand that the locals have not yet begun in right earnest. And therefore, if you go to the shop -- if you went to the shops in December or January, as soon as the festival season ended, if you went to Monday to Friday, you'd find that the shops were fairly deserted and more people took the effort on a weekend to come and do the shopping. So because shops are affected, those advertisers are reluctant to spend money at this point in time. But as soon as the mobility factor improves, there is absolutely no reason why these people will not come back with, what I would like to call, revenge advertising because remember, there is a huge amount of inventory that they're carrying. There is a huge amount of demand that is there in the public, and the 2 have to match. And I think we in radio can provide the bridge between the 2 metrics. Here is another interesting thing about our performance that while the pricing has fallen, it has recovered from the -- on a sequential basis. It has covered by 7% approximately on a sequential basis. Now it is very, very important that the pricing should recover. Those of you who were tracking our stock after the Lehman crisis will remember that I've been mentioning right since then that pricing recovery is a challenge in the media business. And therefore, the 7% price recovery in the Diwali quarter is a good sign. It will be difficult to sustain this revenue -- this pricing growth. But by the next festive season, which is in the coming August, which is another 4 or 5 months away from now, I think in about 5 months' time, our pricing should recover to within 10% or thereabouts of last year's level. So it's a good sign that the pricing has recovered. But still compared to all our competitors, our pricing has fallen by the least. Our pricing drop was approximately 28% in this quarter compared to last year's. Our competitors, as calculated from data available to us, is -- have lost pricing between 32% and 42%. So that's a bit on the relative competitor thing. But let me talk to you about our strategy and our products that I was mentioning. Now remember solutions overall fell by a larger number than the radio business fell. But let me just remove the effect of the on-ground component and show you what happens. If I remove the on-ground component. And if I also remove TV Today, remember, last year, we were also selling TV Today. And this year, from September, we have not been selling TV Today. So if I were to remove the effects of both of these, and look at just one of my solutions product, which is media solution, my -- or if I look at the solutions -- overall solutions number without these 2 items, then actually, my revenues are 21% up compared to last year. So my revenues this year would be INR 21-odd crore compared to INR 17-odd crore last year. So that shows to you that how important the on-ground events are to our solutions business. But there is a benefit that came to us because the on-ground component went away. And that is that our overall margins improved dramatically. Because remember, the on-ground events come at a lower margin and have always been a bit of a challenge for us. We've seen that this year, our solutions margins have gone up to 48% compared to last year's level of 35%. Now I would like to say over here that these margins will necessarily dip next year as on-ground events start again. But this time, when we start the on-ground event, when we develop our solutions for our clients, we are going to be very careful that we do not package on-ground activation or events in a very large proportion. This time, we are going to package more of our digital products into the solutions that we make for our clients. And therefore, I expect that the margin will not fall back to 35%, but hopefully, will settle at somewhere around 40% or thereabouts. If I were to break up the solutions margin between my different solution products, I would put it like this. So in the media solutions vertical, our margins are now 56% compared to 38% last year. So in my IP solutions business, which is basically all your activations and concerts and all of those kind of things, we did do concerts and activations online. My margin was 39% this year compared to 35% last year. And if I look at my digital solutions business, then the margin this year was 31% compared to 25%. So there has been an all-round improvement in margins in the solutions business, and that's something that is really important because as the market recovers, the demand for solutions is going to remain. And let me just give you one last data point to show how good the strategy has proved to be for us in the pandemic period. In the third quarter, despite the pandemic, the number of clients who have taken a solutions deal from us has gone up to 149 compared to 109 last year. This is a huge 35%, 37% increase in the client base for the solutions business. And I see no reason why every quarter, this number of 149 cannot equal 500 in the near term and 1,000 in the medium term. So I see the solutions business rising really quickly, and we have cracked the margins issue, and I think we are on a very, very sound track to growth on the back of these products. But one other thing I must tell you is that one component of the solution business is our digital product. Now remember I mentioned digital solutions a moment back. Our digital products have started doing exceedingly well, and there is an enormous demand in the market. Remember, digital is a product category that is growing rapidly all over and has been growing for many years and will continue to grow for many years. Our digital products are now accounting for almost 11.5% of our total revenues in this quarter. Now imagine this company's digital profile changing in the years to come and digital products becoming 25% or 30% of our revenues and at an attractive margin of 30% to 35%, I think you get a picture about how the growth trajectory of the company is going to be in the years to come. I just have 2 more points to make before I open the floor up. One is that the cost savings that we started at the beginning of the pandemic period have continued right throughout and the savings in cost in this quarter has been 29% on all costs, not including the DVCs on the event because obviously, when the events stop the DVC stops. So that is a larger number. But even if I leave those out, the operating cost, the genuine operating costs are down 29% compared to last year. And remember, this is despite 2 big heads, which is license fees that we pay to the government is down only 7.5% because the government has not obliged, the government has not cut license fees. They have held their ground and therefore, the license fees are down only in a small way, even though revenues have crashed in a big way. The second cost is the studio transmission cost, which includes the cost of rentals of Prasar Bharati towers and [indiscernible] towers and studio premises at the Prasar Bharati facility, they are down just 3%. Again, government has given no concession at all. So despite these 2 big costs degrowing or reducing by only a small amount, the company has achieved a 29% drop in operating costs. And we believe that going forward, we will retain a large part of this cost reduction, and we will be careful not to add it back when the revenues start to grow starting early next year. Finally, the IPAV order is something that is of interest to the radio business in a very big way. Remember, the earlier order came in 2010 and was valid for 10 years. The order was basically that for sound recording we paid 2% of our revenues. And while that helped us in the crucial period of growing up, and of late, it was becoming a really expensive deal for us because the revenues have grown. But more importantly, a couple of big labels were not covered by the 2% order. So those 2 labels, we had to do private deals, and the cost was so high that the overall sound recording royalty cost in the company was very high. Now what has happened as a result of the IPAV order is that the cost has been fixed on a needle hour basis. It helps us tremendously because it reduces -- it brings all labels on par. This order applies to all labels with no exception. Even those labels who were not giving us the rights to play music are now covered by the order. So we have statutory license, and we can invoke the statutory license and start playing the music. So huge financial advantage. The second advantage is that the IPAV has also set rates for the performance royalty. Now the performance royalty is under challenge in the -- has been under challenge in the Delhi High Court since 2006. Interestingly, even the order for that came out recently, and the order for that says that radio broadcasters are not liable to pay performance royalty. Of course, this order has been challenged by IPRS before the Division Bench, and out of financial conservatism, ENI continues to provide for performance royalties for the past and going forward. However, we have reassessed the performance royalty cost of the past, and we have brought it in line with the order that the IPAV has now passed for performance royalty. And this is the exceptional item that you saw, which has benefited the profit after tax of the company. That amount is approximately INR 27 crores. And that's the write-back of all the extra provisioning that we had done in the past towards performance royalty. There still remains a large chunk of money in the books which is provisioned against performance royalty for the past. And out of fiscal prudence, we have not written everything back, but a substantial amount of that has got released, and you see the benefit of that over here. Now why should you consider this particular exceptional item in evaluating the company? Because this comes out of provisions that we had made in the past and not all companies were making this provision in the past. One of our key competitors who is a listed company never provided for performance royalties in their books, while we kept providing for performance royalties in our books. So we get the benefit of this amount now, but they nor many other radio stations will get that benefit. So it's an item that you have to consider, and it has benefit going forward as well. The total savings in royalties that we expect on a 12-month basis is approximately INR 11 crores per year. That's a huge substantial advantage to the company. I've covered most of the points, and there's just a small point about our expansion in the Middle East. Suffice to say that in another couple of months' time, we will be relaunching in Dubai, and we will be launching for the first time in Qatar and Bahrain. With that, I will open up the floor for questions.

[Operator Instructions] The first question is from the line of Jinesh Joshi from Prabhudas Lilladher Pvt Ltd.

I just have one question. Sir, this INR 27 crores of exceptional gain on royalty write-back, is this a provision that was created earlier and now has been written back due to a favorable order? Or does it also have a cash flow impact into it? And secondly -- sir, just one follow-up. And secondly, you also mentioned in the opening remarks that the entire write-back has not happened and something more can be expected. So if you can just state what can be the quantum here?

Yes. Subbu will answer that.

Yes. So Jinesh, let me explain what it is, right? We -- as Prashant explained in the introductory remarks, we've been providing for performance royalty for the last several years, right? And we've been providing at a particular rate. Last month or sometime in December, we had the IPAV order and the IPAV order also has the rates for performance royalty, which we have disclosed. So what we have done this time is that we have remeasured the liability at the new rates. And when you remeasure, obviously, the new rates being lower than what we have provided earlier, you have a write-back on account of that. There is a second aspect to it is whether the amount that we are still carrying, remember, we have not -- Prashant said in the call earlier, we have not written back the entire amount, right? We still carry some provisions in the books. Our belief is that even that sum is not payable because we have a favorable order from the Delhi High Court. Since the IPRS body has appealed against the order, we have continued to maintain that provision, and we will also be continuing to provide performance royalty at the new rates determined by the IPAV going forward. So there is a provision on account of that. This is only a P&L impact, and it's not a cash flow impact because we did not pay them, right? So there is no cash flow impact, but there is certainly a P&L impact. Does that answer your question?

Yes, sir, but I just wanted that figure, the quantum of write-backs which can be expected going ahead because entire amount has not been written back. So if you can share the quantum?

So that will depend upon what the final order is, right? So if your question is how much provision I'm carrying in my books, it is in excess of INR 13-odd crores. And there is also an additional item in respect of some money that we had paid to them in the past, which is about another INR 11-odd crores. So it could be -- it is between INR 13 to INR 25. INR 12 crores will have a cash impact and INR 13 crores will have only a P&L impact. So the total P&L impact could be INR 25 crores, and the cash impact could be INR 12 crores, if everything goes in our favor, yes, yes.

Sure, sir. Sure. And sir, in the opening remarks, you also mentioned that the on-ground events can have a slightly lower margin, and within the solutions business, we are focusing more on digital. So first, can you just explain what is -- what can be the potential difference in margin between the 2? And within the solution business, where can we expect the digital component to be, say, 2 years down the line?

So Jinesh, like I had said in the opening remarks, the margins on on-ground events are lesser. Typically, the events margin would be in the region of 20% to 25%, but on digital, it can be from anywhere from 25% to 50%, depending on what kind of a digital product you're packaging in. So in about 2 years' time, I would imagine that the total value of the digital component should rise from the 11.5% that I mentioned in this quarter to -- I would expect it to be in the region of 20% to 25%.

The next question is from the line of Swechha Jain Jain from ANS Wealth.

I just have one question. Earlier, somewhere we had mentioned that we were planning to buy 3 radio stations from TV Today. So just want to know what is the status of that, sir?

Subbu, you want to answer that?

Yes. So Shweta, we had -- Swechha, sorry. We had sort of communicated last time around that the government is not granting the approval, so we are not going ahead with the transaction. We had a marketing arrangement with them, which has also been terminated. And now TVTN continues to sort of market those stations as well.

Okay, okay, okay. So we -- basically, we're not going to go ahead with it, right?

That's right. Yes. Yes.

[Operator Instructions] The next question is from the line of Rohit D from [indiscernible] Capital.

Thank you for the detailed initial commentary. It was really helpful. My first question is on the solutions business. So just curious to know sir, of the 109-odd -- 149-odd clients that you mentioned that we have right now, or I mean let's put it this way, what part of the solutions business is sort of repeat in the sense you have customers or certain solutions being repeated periodically?

So, Rohit, we have a very high repeat rate in our solutions business. We have been having clients for several years who have been doing solutions with us. And almost all of them come back on a repeat basis. I would say that depending on the needs that they have, they come back and tap us for solutions. So yes, the repeat rates are pretty high. Having said that, the base in the past was low. Like I mentioned, last year was only 109 deals in the third quarter, if you go 1 more year behind that, it may have been only 40 or 50 deals. So the base was lower. And therefore, there are a lot more new clients who are coming into the pipeline at this point in time.

Okay. That is helpful. So I just wanted a little more clarity. I want to understand the solutions business more. I mean, it's very interesting the numbers that you're throwing up on an annual basis. But let's just say that in the traditional media, one major issue has been measurement, measurement of the impact of whatever the advertiser has spent on the media for, be it radio, be it TV, et cetera. So you don't know who has been reached and whether the spend has actually worked. So is this particular pain point being addressed? I mean, in digital, I understand it's much better, and you can actually show the impact, but in the remaining part of the solutions business, is there any way that you are conveying the measurement to the advertiser much better than, let's say, in the radio business?

Yes. So that's a good question, and let me attempt to answer that, Rohit. So the first thing is, remember that it is not that the traditional media are difficult to measure. There's a lot of measurement available. But when you say that it's difficult to measure the results of advertising on traditional media, even that is actually not true. And the reason is simply this because traditional media is typically used for brand building or for announcing new products or for announcing new services or for announcing new features, et cetera. Now let me just give you an example. Suppose Vistara starts a new flight from Mumbai to Shillong, right? Now they advertise on television, on radio, on outdoor on print. You read about it or you watch it. And then you're not traveling to Shilong, so you don't act on it, right? But let's say, 6 months later, when you get a chance to travel to Shillong and your travel operator or your online app says, hey, there's a Vistara available from Mumbai to Shillong, you'll say, yes, I like it because they -- I like Vistara, and I remember that they have communicated. So you're actually acting 6 months later. So the difference between traditional media and online media is that online media is used for immediate impact, immediate response, it is not used for brand building. But traditional media is typically used for longer-term benefits, for brand building, for new product launches and not that much for immediate results. Now our solution product actually combines traditional media with modern media, right? So in every multimedia deal that we do, we would have about 1/3 or maybe 25% or 40% of traditional radio because that umbrella that radio provides is very, very critical for the whole idea to work. The remaining 60% to 70% of the deal value is broken up into various components, one component would be on-ground. And I mentioned that that's usually a big component, right? Now why is on-ground important? Because on-ground actually allows clients a touch point between their brand and their customers. They can do sampling, they can do trial generation, they can do test drives, they can do various other -- they can do feedback, they can do contest. So touch points are very, very critical for any marketer. And one part of my solution business provides that. The third part of my solutions business is the digital component, which typically would provide immediate solutions. So if there is, let's say, a real estate person is being given a solution and they want footfalls to happen or inquiries to happen, then my digital solution will typically go in that direction. And by the way, in my digital solution, I may use Facebook and Google as well. Because remember, I am a solution provider. I use my assets, but I also use other external digital assets. So by a combination of traditional on-ground and modern media, I'm able to provide a holistic solution to clients. That is what is so beautiful about the solutions business. And that is what is not available in this country, by the way, nor is it actually available anywhere in the world because most media operators continue to operate only in their domain. And most advertising agencies continue to develop ideas, but they do not -- they don't have the capability, nor do they own the assets to actually execute those ideas. So we fill in the space in between that exists.

That was a really helpful answer, sir. I mean, you're basically are trying to say that the value chain is basically siloed and you're trying to break down the silos within ENIL and provide a combined integrated solution to the customer.

Correct.

So then the follow-up in this sense is how scalable -- I mean on paper, theoretically, it does look very scalable. But if I understand correctly, number one, this is primarily a city-centric or a region-centric solution that you're providing because, as you mentioned, around 40%, 50% is radio in the integrated solution that you provide to a customer. And then you have on-ground activations and certain -- quite a few regional channels that you have on YouTube, et cetera, which you use. So how do you -- I mean, what would be the limiting factor to your scalability? And how scalable do you think this is over, let's say, 5 to 7 years?

Okay. Very good question again, Rohit. And again, let me clarify a point. Of course, we do our solutions -- we execute our solutions business at a city-centric level. That's the core strength of my company because I can provide a solution in Bangalore, which is unique and distinct from the solution that I give to the same client in Guwahati because the client has different marketing challenges in the 2 cities. So that's my strength. However, if there is a client who wants to run a pan-India challenge, we are more than equipped to do that. So that's one clarification. But in terms of scalability, there are 2 things which matter over here: one is designing the solution; and two is executing the solution. Now designing the solution is a tricky thing because once you design 100 solutions, maybe you are able to sell 20, and there are 80 which are not sold. Now what we have is a very good mechanism to archive these 80 and make them available nationally to all our sales teams so that when they are pitching to similar clients or similar categories or clients with similar marketing challenges, they first tap into the archive that already exists and try and use those solutions. So the design part of it becomes fast and I can give a solution to a client literally within 24 or 48 hours. The second part of it is the execution challenge. And the more on-ground that we package into the solution, the less scalable it becomes because on-ground takes time, it takes planning, and execution is really difficult in on-ground. And also very often, the product that we deliver on-ground tends to be very difficult because it's not an easy product to execute. So many times, clients get upset and all of those things happen, which is why I said that going forward, we will keep the on-ground component limited, but we will keep the radio and the digital components and any other media that we use -- we often use television and print also, we will keep those components high. Those are easy to execute. So the challenge to scaling up gets reduced very much when you reduce the on-ground and the challenge to designing reduces very much when you have a very active archiving system. I hope that answers the question, Rohit.

That was very helpful. Sir, that was really helpful. And so does this mean that, let's say, you would be open to, let's say, outsourcing the activation component -- the on-ground component after having designed the solution at your end? Is that some...

Again, let me clarify. We usually do not execute ourselves at all. I mean, I would have maybe 10 people in my company who do execution. So there may be 500 people on outside agencies or event companies or media agencies who work in executing a solution. So I don't to -- I don't have any headcount, I don't have any execution [ panel ]. I just have let's say, 2 people who are executing 5 clients, and they are working with 5 different execution agencies and doing the job, which is, by the way, why my on-ground margins are lesser because whatever margins get generated on the on-ground part of the business get shared between me, the idea generator, and whoever is executing the idea. So that's the thing. So we are not executing ourselves at all. Rohit, you can come back later if you need, but I think we should allow others to ask a question.

[Operator Instructions] The next question is from the line of [ Deepak Shankar ] from TrustLine PMS.

Congratulations for good improvement in results. First of all, wanted to understand this digital revenues contribution that you mentioned during the call at 11.5%. The same thing during FY '20, what was the number?

Okay. So [ Deepak ], I will let Subbu give you an answer. We were not tracking this number in this method till last year, but he may have some other benchmarks. But I just want to tell all of you, dear investors, that we actually encourage you to ask the question because we are aware that the business model that we have is not something that you can readily find elsewhere, and therefore, we would encourage you to ask as many questions and if required, we'll keep the questions window open longer today. Subbu, do you want to take that question?

So essentially, in the previous years, what we used to do was that we were only reporting our stand-alone digital revenues. And we were not reporting digital components included in our other revenue streams, like media solutions and also IP solutions. So what you have in the current year is the 10% number is for all the 3 of them. For the previous year, do we have the data with us readily now? No? Okay. We don't have the data with us readily now. What I would suggest is that over the course of next week, you can get in touch with Mr. Sufal Agrawal, and he will be happy to share that data with you.

Okay, okay. So just to clarify, so these digital components will include digital solutions, which are into YouTube our original content and our client-based video so those kind of solutions, which is made only into digital formats?

That's right. [ Deepak ], so basically, we have a lot of our own social media assets. As you know, we have the largest social media presence amongst any radio operator. We have the largest number of influencers at a local level compared to any other media outlet. We do a lot of videos ourselves. And not only that. We use -- we develop digital solutions which even use the plain old telephone system. We do podcasts, we do original video. So we do a lot of digital products. Like what Subbu said, some of this is packaged into media solutions. Some of this is packaged into IP solutions. Some of this is run as stand-alone digital solutions. So added all together, we get about 11.5%, or approximately INR 9.7 crore of revenues in this quarter. [ Deepak ], feel free to ask any more questions that you may have till you're very clear about this because we are very passionate about talking about our model.

Sir, also in terms of utilization of cash. So we have seen that we have around INR 191 crore cash. So regarding that, so when will be probably Board will be taking decision?

So the number is not INR 191 crore, it is INR 197 crore. As we said in the previous calls too, the Board will take a call at the time of approving the annual accounts. We -- Prashant and I have said this a number of times in conference calls, we do not have major investment plans. And the way we are doing our business, particularly the solutions business, it hardly consumes any cash, the working capital investment in our solutions business in the current quarter, if I recall right, was just INR 7.5 crores. And even when we scale up rapidly, I don't see this number going beyond INR 15 crore, INR 20 crore. The whole of last year, we did not see this number going beyond INR 15 crore, INR 20 crore. So there is no major cash consumption in the business, and the Board will take a call at the time of approving the annual accounts.

[Operator Instructions]. The next question is from the line of [ Manish Gandhi ] an individual investor.

Yes. My first question is: With the digital growing very fast, can you please throw some light on how do you see business evolve for, say, next 2, 3 years overall? And in terms of the number of people we are planning to have in digital and other things? And just add to that, in connection to digital, so are you exploring any small, say, INR 10 crore, INR 20 crore type of investment in digital media start-ups, which can help us scale even faster?

Thank you, [ Manish ], for the question. And as always, it's really good to talk to you. You've been a big supporter throughout. And I think it's an honor to answer this question. So digital business is fast-growing. We all know that. And it's something that we have always been wanting to take a big part in. So we've been seeing the growth happening, and we are going to scale it up in a very big way. So if you ask me how I see this business growing, what is INR 9.7 crores in this quarter and possibly, what may be INR 25 crores or INR 27 crores or INR 30 crores in this year, could easily become INR 100 crores in a couple of years and then go beyond that. So there is a big growth ahead for our digital products. Either in the form of digital solutions directly or as part of our media solutions or IP solution. That's one part of the answer. In terms of the people involved, we have said this that we have reduced the headcount in our regular radio business so that we can operate it in a much more streamlined manner. And some amount of that headcount reduction, we have transferred to our solution business. Of course, in the last year in FY '21, we have reduced a lot of headcount even in the solution business because the on-ground business went completely kaput. As we speak, we have 118 people in our solutions business today. About 1/2 of them are in the digital business. The remaining 1/2 are in various other parts of the businesses. But this number used to be about 190 or 200 people till last year. So as a first step, as a solutions and digital businesses scaleup, we will see the headcount return to 200. But beyond that, I don't think that we would like to add too much beyond that because the digital business can also work through outsourcing. A lot of the creative businesses can be contracted on service basis rather than hiring people. So there are different models which work on the digital side. So I think we will see reinstatement of our old headcount in maybe 2 years' time. I don't see that going much beyond that, [ Manish ]. In terms of investment and acquisitions, yes, we are on the lookout. We are in the process of identifying specific verticals of growth and specific technical and expertise gaps we have in our company and our team. And we will be looking at plugging those gaps. But specifically at this point in time, we don't have anything already on the anvil, but we are on the lookout.

That's good to hear, Prashant. I'll send some of ideas if I get just [indiscernible].

Yes, please do that. We will really appreciate it.

Yes. And my second question is: Please explain about Mirchi Brewery And its significance for the solution business.

Okay. See, the Mirchi Brewery is an internal team, which we have called brewery because it brews great solutions, right? It's like you brew great coffee, you brew great solutions. So we just decided to call it Mirchi Brewery. There are approximately about 55 -- 50, 55 people in the brewery team right now. But again, this is a team I see scaling up as we create more solutions. Now here is how the team works. As soon as my sales team meets a client, the first thing they ask the client or the agencies, tell us your marketing challenge, okay? And allow us to come back with a solution. Now the team comes back to the office. It meets with the brewery team, it meets with a couple of other sales members, they brainstorm. And the solution -- and the brewery team comes out with a multimedia solution. Depending on the requirement of the client, either the brewery team member can also visit the client or the sales team member presents the clients, solutions are tweaked, et cetera. And then it's given to the execution team to execute. That's how the brewery team actually is the backbone of our solutions business.

The next question is from the line of [ Siddharth Agarwal ] from Prudent Value Partners.

First of all, congratulations for a decent set of results given the circumstances. Sir, my first question is now how do we see the trend in the volume -- ad volume's growth in our metro cities in this quarter? Or how has it trended over the last quarter, month on month? Are we seeing improvement? The reason I ask this is because, sir, as we follow the results of several companies, we see most of the companies -- listed companies are posting record volumes and even the GST collections are -- have recovered to pre-COVID levels, which kind of signal that the economy is sort of there at the pre-COVID level. So do we also see some signs of volume growth recovery in our metro top 8 cities also now? What is the trend that you are seeing, sir?

Well, let me answer this in 2 questions -- 2 parts. First is that the metros very rightly, you said, will see a major recovery in volumes because like I mentioned in this quarter, our volumes in the top 8 cities are 18% down compared to last year. So first, this 18% recovery will happen. Now let me also tell you that we always ran less volume than our competitors. And clearly, that extra headroom that is available to us to bridge the gap with our competitors is also available to us. So we see that there is enough room for expansion in the metro business and the metros are the biggest contributor of radio revenues, and therefore, I see that expanding. I think, like I mentioned earlier, that by August, September of the coming year, which is 6 months from now, when the second season -- when the season again begins, by that time, I think, hopefully, COVID would be behind us, and there would be a lot of revenge advertising that will happen. So I think that we will be running full up on inventory by in the coming season. When the volume recovers, after that, the pricing will recover. So pricing always trails volume recovery in the media business. And let me -- then now give you another interesting statistic, and Sufal can give you the exact real numbers. But in my batch 1 and batch 2 stations of Phase 3, there is huge amount of volume still left. We are operating at maybe 30% or 40% level. So therefore, there is huge room there left for volume expansion. And like I mentioned, the markets over there actually are not so badly affected. So after the next 5 years and the importance of radio over there is so high, I see radio growing very dramatically in all the markets of batch 1 and batch 2. Sufal, what are the exact numbers, please?

So batch 1, we are currently at 34% capacity utilization. In batch 2 at 29%. So there is still a lot of scope in the improvement in few, where, on overall basis, we are at 55%.

Okay. Siddharth, anything else?

Yes, sir. Sir, one more question, just a bookkeeping question. Sir, as of September end, our net cash position was roughly INR 240 crores. And this quarter, we had some decent sales as well. But our net cash has gone down to INR 197 crores. So does that mean that we weren't able to convert a lot of our sales into cash this quarter and because of the operating expenses, some of our cash has gone down. What has happened, Subbu sir?

So let me answer the question. As Prashant explained earlier in the call, the sequential growth rate has been very, very strong, right? When you have a strong growth rate, with a typically 90- to 100-day collection cycle, there is also a working capital buildup, right? So that is one part of the reason for the decline in the cash. The other is also something that Prashant explained earlier in the introductory remarks is that the government has not given any concessions. So we had actually pay up all the accumulated license fee. In fact, this is for the entire radio industry, all the accumulated license fee for the first half, all had to be paid in the third quarter. So consequently, the cash position has declined from INR 240 crores to INR 197 crores. So the split between -- on account of the accumulated payables being paid in the current quarter and the increase in receivables, which is on account of the buildup in sales is about INR 30 crores to -- INR 30 crores on account of receivables and other INR 24 crores on account of accumulated payables. And then that is sort of supported by an EBITDA collection of INR 13-odd crores, if you knock out the rental receivable. So that gives you broadly the INR 42 crore number that you are seeing in the cash position.

[Operator Instructions] The next question is from the line of Sanjesh Jain from ICICI Securities.

First, on the programming side in the radio, now that all the labels are covered in the new order, do we plan to change the programming content with a different label, which is now available completely at the same price as others? Do we plan to change any of our radio programming style there?

Sanjesh, it's really a very good question, and I'll tell you why. Because I mentioned to you that with a couple of labels earlier, we had a separate deal. They were not covered by the 2% order. And the deal structure was such that it encouraged us to play more of their music because the amount was fixed. So invariably, what happened is that we -- in order to save overall royalty costs, we would play more of their music, and therefore, we would play less of the music of the people who were represented by the 2% order. So that will change. And therefore, I do expect that there will be a certain rebalancing which will happen. However, don't forget that these 2 labels are also the ones who are most active in new music. And therefore, there is no reason really for their share to drop dramatically. Maybe if their share was 60%, it may drop to 50%, but I don't see it changing very much beyond that.