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

Welcome to this investor conference call, dear investors. Just a small correction before we start. Mr. Subramanian is not here, unfortunately today. He -- but -- and also Sanjay Ballabh -- name is actually Sanjay Ballabh not Sanjay Ballarh, just a small clarification. Subbu is expected to come in shortly. So as soon as he comes in, I will introduce him back to you. Coming on to the company's performance. Before we take questions, I just want to give you a small rundown about the quarter that went by. We have positively called it a strong recovery quarter. And it is borne out by the numbers that we have already put in the presentation, but I would like to draw your attention by calling out some of these numbers. The total revenues of the company in the second quarter of this financial year was INR 68.8 crores compared to INR 47 crores last year, which represents a growth of 46.3%. So that's a top number that you must remember. If you were to look at it sequentially, the revenues were INR 68.8 crores versus INR 38.8 crores in the first quarter of this year which is 77.3% growth. Normally, we do not talk of sequential growth in our media business because different quarters have different seasonalities built in. The only reason I'm referring to sequential growth is because we are emerging out of the second wave of COVID. And hence, I'm sure you are curious to know how the business has picked up. So it's a strong recovery in revenues. In terms of EBITDA, the good news is that in the second quarter this year itself, we have turned positive with underlying EBITDA of INR 1.7 crores versus a loss of INR 14.9 crores last year in the second quarter. And on a sequential basis, the INR 1.7 crores of EBITDA in this quarter is comparable with a loss of INR 26.2 crores in quarter 1. As you know, as revenues grow in our company because of high operating leverage, it had an immediate impact on EBITDA and PAT numbers, and you've seen that happen in this quarter. Talking about PAT numbers, we reported a PAT of -- a loss of INR 7.9 crores in quarter 2 of this year, comparable with the INR 23.7 crores loss in the second quarter of last year and a INR 27.7 crores loss in the first quarter of this financial year. So overall, you will notice that because revenues have grown strongly at 46% compared to last year, the EBITDA has turned positive and the PAT losses have reduced very significantly. In fact, the quarter recovery was uneven because the lockdowns, which were imposed as a result of the second wave of COVID, were not fully lifted until even July and therefore, in many parts of the country and most notably, in Mumbai, as you would all know, in July, there were severe restrictions on timings of shops. Multiplexes were shut. Many things were not working at full capacity. And we saw that happen actually. But our business really picked up more from the middle of July and into August and September. In fact, in August and September, our EBITDA numbers are actually ahead of our own internal plan numbers. We normally don't share plan numbers, but I'm just giving that, again, to let you know that the recovery has been gradual and consistent as the restrictions have lifted. Now very important to also remember that in the media business, whenever a recovery happens, and I mentioned this last year also at this time, that the recovery from a complete lockdown always first happens in the ad volumes and then it is followed by a price recovery. This quarter has been no different. The volume have grown dramatically in this quarter compared to the same quarter last year. Volumes are up by 61% compared to the same quarter last year across our network, and the pricing is further down by 5% compared to the same quarter of last year. So clearly, it is a quarter which has grown on the back of a volume recovery. Despite the volume recovery, the capacity utilization across my network was just 52% during the quarter. This capacity utilization was weak even in the top 8 markets where the capacity utilization was nearly 79%. Now remember, the top 8 markets contribute 65% of the company's revenue. So if the top 8 markets are operating at 79%, it tells you that there's a lot of headroom left to grow still. And therefore, I would say that the recovery, while strong, is still only a work in progress. I wouldn't say that the company is out of the woods yet, but I think we are pretty much on the path to a full recovery. And the final evidence of that is that the volumes in the business have actually grown even on a golly basis, which means even compared to the pre-pandemic levels, the ad volumes are up by 24%. Now this is a remarkable number. And the reason for this number that I'm quoting over here is that it shows how popular the medium is with advertisers. Advertisers are putting more and more money, more and more ad volumes into the radio business. And clearly, that indicates the strong support that the medium enjoys with its advertising fraternity . Moving on, the revenues amongst the radio business of the core FCT business grew by 50% in this quarter. Core solutions business, and in that, for a moment only leaving out other operating income and the income that we earned from our advertising sales arrangement with TV Today stations last year. And leaving those 2 out, the core solutions business grew by 51%. So that shows how much strength both the businesses have demonstrated in the quarter. If I were to include other operating income as well as the TV Today numbers, then the solutions business has grown at 36% clearly because other operating income has come in lower. And TV Today stations, the revenue contribution has gone off because we terminated the advertising sales agreement in August end of last year. Now you will be keen to know which categories are doing well. The categories which have done well are durable had a GOLY or growth over last year of 300%. Real estate has done 135%, jump in -- in revenue contribution. Health and pharma is up 80%, media and entertainment itself, the industry is up 77%. Remember a lot of this business comes from OTTs because movies have been typically off because theaters have been shut in Mumbai until very recently. So it's mostly OTTs and the movies released on OTT platforms. Auto is up 71% despite all the industry problems. FMCG is up 60%, BFI is up 50% and so on and so forth. Important thing to note again is that these are strong volume growth numbers across a spectrum of category. So it is not as if the recovery is patchy and only in a few areas. Of course, the exact percentage numbers are not the most important right now because it also depends upon what the base was last year. And therefore, to some extent, I would say that don't go by the individual growth numbers per se. However, please note that the growth has been highly secured across different categories of advertisers. One very strong point I wanted to make is that the company has continued to maintain very tight control on its cost of operations. And I'm leaving out what the direct variable costs because they depend purely on revenues generated against those particular activities. I'm leaving those out because that's variable. I'm also leaving license fee out because license fee is again partially variable at least, but the cost -- and it's outside of our control really. The costs that we can control, which includes everything else, people cost, electricity, rent, administration, travel, all those costs which make up basically the other operating costs, as we call it, is up by only 20% compared to last year. Remember, revenues are up 46% but we have kept the cost slightly controlled at 20%. Even the 20% has some one-off numbers built into it. And most notably, in the HR head, last year, we had a reversal of some MIP provisions of the year FY '21 -- of year FY '20, I'm sorry, which therefore kept the base of last year low. And then there were some one-off items which we do not expect to repeat in the remaining part of the year. So if I were to look at my projected cost numbers for FY '22, which is including the next 2 quarters, for the full year of FY '22, my projected numbers are representing a potential saving of INR 80 crore compared to the pre-pandemic year of FY '20. So to repeat, because of tight cost control, we have benefited in the quarter because the costs have grown by only 20%. But more importantly, because of the tight cost control compared to the pre-pandemic number, the costs will be down by merely INR 80 crores. So this is something that we are gunning for, and we will ensure that, that happens. Because remember, we are still not out of the woods. One doesn't know if the third wave will come or not, and one has to be prepared for any eventuality that may come up in the future. We don't know if a virus mutates and all the vaccination success that we've had maybe partially rendered ineffective and therefore, the company has to keep that provision in mind. Now let me come to the most exciting part of the narrative. And the narrative is that as we've been telling you over the last 2 quarters, Mirchi is fast transforming and becoming a digital-first company. Now to this end, as you remember, we dropped the word radio even from our logo Radio Mirchi about 3 quarters back. Now in this transition towards Mirchi digital-first or what we are internally calling platform company. So this company, ENIL, which you know as Radio Mirchi is going to transform and become a digital-first company and its digital offerings are likely to be like a Mirchi platform, which means that not only will we put content on the platform, but we will also -- we are also creating a road map where we can have a lot of user-generated content, which comes onto the platform, a platform where advertisers and content creators will be hosted together and all the benefits that accrue to a platform operation is something that we plan to capture in ENIL. And all of this is going to unfold in the next 2 to 3 years' time. But in the meantime, let me just tell you about some specific time lines. Our platform launch, which includes app and web both should launch by the end of this financial year, if not earlier. The international portion of the app will launch before the end of the year. So hopefully, by January of 2022, we should be able to launch it. We have a team of 90 people in-house in the company working on our digital platform, which includes tech people, content people, product people, data people. So today, if you come to my company, we look like a tech company. We are selling inventory of interesting digital players. For instance, we are selling Google inventory. We are selling Gaana inventory. Very recently, we have sold a YouTube inventory of a big South Indian music star when they launched a video over there. We sold the inventory for that. So we have developed expertise in selling online inventory. We are -- on our YouTube platform, now 13 million subscribers. We've got a massive following on social media. We have a massive content production underway on podcast, which we will be launching on our platform before the end of the financial year, like I mentioned to you. We have a slate of celebrity-based video shows coming out, which again will be hosted on the platform or on YouTube depending on when they are launched. And we have a whole slate of new business ideas, which includes EdTech, which includes B2C e-commerce, which includes live streaming and which includes a lot of portfolio investments in companies that we are interested in and which operate close to our business of operations. This is where we plan to deploy the INR 205 crores of corporate that we have. But since many of the people ask typically about our cash distribution policy and outlook, let me first tell you that as soon as the situation improves and we are seeing the COVID kind of retract, hopefully, from the country, our cash generation should begin again. And as soon as that happens, the Board will sit down and take a decision on how to use the cash that the company will have on its hands. This is the narrative I wanted to leave you with. I'm opening the floor up. And incidentally, Mr. Subramanian has walked in, so he's available as well; and Sanjay Ballabh is here as well. So please, Janet, open the floor up, please.

[Operator Instructions] The first question is from the line of Nagraj Chandrasekar from Laburnum Capital.

Prashant, congrats on a good quarter. Now that you guys have sort of rectified sort of what you plan to do with the platform and the launch date, could you give us a sense of the CapEx/cash spend on this going forward? And number two, how exactly it differs from the Gaana app which is, again, a part of our parent company's stable?

Thank you, Nagraj. Fundamentally, Mirchi is a very different business than Gaana. Gaana is a business which is limited mostly to music streaming, and they have a world of their own to compete. Mirchi as a brand -- is a brand synonymous with entertainment. And like I mentioned, we do entertainment in video format. We do entertainment in the audio format. And you may also know that we've got many IPs on ground. We have got television properties that we've created and so on and so forth. So Mirchi is a much larger canvas of opportunity and play compared to what Gaana is. And we avail of the platform that Gaana is without actually duplicating the work that Gaana does. In a similar way, our content today, and I'm happy to announce that we've got content, our podcast from Mirchi has been now offered to Spotify. They're available on Spotify. And therefore, like I mentioned, as far as we're concerned, we look at all music OTT players as partners and we will work with all of them in the future. Coming to the CapEx question that you asked, the plans are underway. The Board hasn't yet finalized, the management hasn't yet presented the final strategy and the budget to the Board. The Board is yet to sit on it. I think that should happen by January of the coming years. But the digital businesses typically tend to be more operational cost heavy rather than CapEx heavy. And to that extent, we are in a better place because remember, our digital revenues are actually quite strong in this company. I mentioned to you that it was 12% of our revenues in the last quarter. This quarter, it has come in at 9%. But we expect the year to end at 15% digital revenue. So we have a strong digital revenues line as well. And therefore, we will keep a tight control on operating costs as well going forward. But again, I'll be able to share details with you only later.

Understood. And just very ballpark, I understand that it's very preliminary right now. From what I understand, Gaana does a revenue of around INR 120 crores and has operating expenses of around INR 500 crores, which is from magnitude, much larger than our existing business. Would it be at all comparable to that level of spend? Or will it be a lot lesser and a lot more linked to revenue generation?

Well, Nagraj, as we have mentioned -- I just mentioned that we hope to end this year's digital revenues at about 15% of our total revenues. We have also mentioned in the past that, in another 3 years, which is by the end of FY '24, we expect to see our digital revenues grow to about 25% of our company's revenues and another 25% coming from solutions. Now imagine if the company's revenues will grow and go past the pre-pandemic level and if they go past INR 600 crores, INR 700 crores, then 25% of that, I think, should be similar numbers as to what we're talking about with respect to Gaana. But again, like I told you, our frame of reference is not Gaana. And Subbu? Yes.

Nagraj, the cost, we understand, but what Prashant actually wanted to say was that there are several layers to our digital play, right? We will have our app, we will have our mobile website. Our site and our mobile web would be to sort of drive, reach and distribution. And our app will be to primarily drive engagement. So what we are focusing and there's also an international ad that Prashant mentioned, both in the television interview and also earlier in the call. So what we can -- so there are multiple layers to that digital play that we have. That's why we are not able to share the overall cost. But the first layer would be broadly about around INR 20-odd crores of investment is what we see in the first layer. And with that layer, we would be able to release our international app and also our domestic app. And as and when we finalize our plans for the rest, which will also host third-party content, right, that's what the overall Mirchi platform's play is all about, which will have third-party content, which will have videos and a lot more. That, we are still working on it. We are awaiting our Board clearance. Once we get a clarity on that, we will share those numbers to you. But in the first phase, it's about INR 20-odd crores.

Understood. That's very helpful. Just one small other question from me. It seems like you've done very well on FCT volumes, and you mentioned pricing was slightly down Y-o-Y. Our peer -- listed peer who reported last week seems to have taken another route of taking pricing up and seeing volumes grow a lot slower than the industry. Could you give us a sense of why you've taken this slightly different approach? Is it because we want to fill up the additional inventory we have in the newer stations? And is that why our overall pricing is down and the pricing in the metro station is actually up? Or what exactly have we sort of done here?

No, Nagraj, let me clarify. I think the data that you're talking about is factually incorrect. The data that we use comes from ASX, which is an industry body which monitors volumes in many markets, 18 markets across the country, which are the biggest 18 cities. We get revenue data with a lag effect from government sources, which are publicly available as well. So our number calculations are very accurate in terms of the pricing that we get as well as our competitors get. So we have grown volume share versus our competitors. And we have also increased our pricing premium versus our competitors, including the listed ones that you're talking about. So factually, I'm sorry, I cannot agree with the numbers that you mentioned.

[Operator Instructions] The next question is from the line of Rohith Potti from Marshmallow Capital.

It is great to see such a strong recovery in revenues and thank you for spending some time on the new strategy of the platform business. I mean I was curious if you could expand more on what you think our right to win is, because you mentioned e-commerce, you mentioned audio, you mentioned video also. And I mean, if I think of each of these segments, I mean, globally and within India, there are so many competitors focusing on just 1 segment, right? So in e-commerce, there are so many players. In audio, there is Spotify and so many other players, including your Gaana itself. And in third party, also we have so many players who are all vying for the same set of clients who are spending, let's say, hundreds to thousands of crores. So I don't understand -- I mean what we think our right to win in this is and what we expect to achieve this, what are the expectations of the management from this over the 3-year period?

Okay. Rohith, very good question. And quite obviously, before we plan to launch this business, we have the answers worked up in our company. We are not going head-to-head with again, any of those video players who are spending INR 100 crores or INR 1,000 crores, we are not interested in that. We have scanned the market. We know who the players are in various markets. We are not attacking anybody. This is a growth market. There's a huge opportunity of growth left for the whole sector. And therefore, there are lots and lots of niches. And I would say, the bigger the niches, there are lots and lots of spaces available for brands to come and occupy. Now the thread that will run through all of the businesses that we'll operate, and I mentioned it in the last quarter but I'll repeat it now, is that this is all going to be relevant to Mirchi as a brand. It will be stuff that Netflix will not want to do. It will be stuff that our Gaana will not want to do. It will be stuff that an e-commerce company most certainly will not want to do. Our e-commerce will not be like the e-commerce that you're imagining. Our stuff will all be related to music, to entertainment, to the youth, to the vibrant buzzing community of -- our entertainment creators is going to be surrounded and around all of these areas. And in that space that we have identified, there is a big gap available in the market. There is a big gap available in the market. I'll give you just one example to tell you this. So we've been doing the Kareena Kapoor show for 3 years now, right? We have done 3 seasons. And we're about to launch a fourth season. And you should see the kind of demand that exists for a show of this type. Now there are hundreds of video producers, as you said. But I don't think that they can replicate what we're trying -- what we do with the Kareena Kapoor show, simply because our approach is not to make video and to launch video, but is designed towards creating a solution for a set of clients or advertisers. So there are advertising monies that we're bringing in. There are multiple media vehicles that we will bring into play. Our 63-city network of radios is a typical part of this program that we do. This kind of thing creates a big guardrail around us, a wall around us, which nobody can then penetrate and enter. So we are not here aiming to compete with the names that you're talking about. So our strategy is fluid right now, but it's well thought out. And it's clearly driven by the knowledge of the kind of question that you already asked. Subbu?

As to what Prashant said, Rohith, what we are doing is that when we talk about the e-commerce, we're not talking about it in a generic sense. We have over 13 million subscribers on our YouTube network, subscribers, okay, right? Once we have our own app, what we can potentially do is we can do more transactions. Today, we are 90%, 95%, 98% of all our revenues are right revenues. We're looking to be -- to have some portion of the transaction play. That's what Prashant meant earlier by e-commerce. So I believe, 15%, 20% of that, if we are able to convert into some sort of a transaction play. Because we already are there in some sense to our influencer network, a lot of our RJs are influencers. Even not -- sorry, Prashant.

Just to give an example of what Subbu just said, Rohith, remember 2 years back, we did the Bryan Adams and the Martin Garrix concert, right? And of course, we learned our lessons over there. But just a data point, we sold tickets and F&B worth almost INR 30 crores in those 2 events. But those are rooted to external vendors, external platforms. And we had -- we have 0 database on what happened with those 2 events. But in future, that's the kind of commerce we will do on our platform. And we will know our customers, we will gather data about our customers, and then we will be able to cater to the needs of these customers through more commerce. So our commerce, like I mentioned to you, will be more music, entertainment related. It's not the kind of e-commerce that you're talking about.

That was very helpful. Sir, just a follow-up. So what are the metrics or what are the signposts or guardrails, whatever we have -- like as investors, what do you want us to look out for in terms of its strategy succeeding or failing? Are there methods which will come out with once you launch the app and once you come out with the proper strategy document that you share with us? Or is there something that you can share today?

Yes. So like in all digital businesses, there are in-between milestones, which get measured and tracked. And those are, as you know, usage metrics like MAUs and DAUs. Those are reach and impression metrics. Those are engagement metrics. Then there are transaction metrics. So these are all intermediary metrics which get measured even before the revenue trajectory starts and the profit -- profit has drawn out. Subbu would like to add to that.

So Rohith, if you look at the presentation, I think we circulated a little late today, so apologies about it. But if you look at the deck, you will see our digital revenues at about close to 10%, right? But it's sort of, you look at that number, it's all advertising. I think 1 year down the line, you will see a lot more transactions in that digital number. And when we sort of explain to you our strategy, obviously, by next quarter, we should be able to do that, right?

Yes, by...

Our strategy by next quarter, you -- we will give you a sense of what's the transaction number that we are looking at.

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

So basically just 2 questions. First of all, a good set of numbers. So I just wanted to know about the digital solutions. Can you give me the EBITDA margin for the quarter?

I can give you the margins of our solutions business overall, and then I will give you the margin of our digital business.

Margin for the solution business is there in the presentation, I needed the breakup because last quarter, you gave the breakup of the digital and the core solutions.

Yes, the margins of the digital business are 37.1% in this quarter, comparable -- yes, 37.1% in this quarter. That's right.

Yes, that's fair. And so basically, just wanted to know, so can you just add what digital businesses includes what things? So basically, you have YouTube, and then you have all these IPs would go on YouTube. And other things because you do some multimedia projects and some marketing activities for different form. Sir, digital initiatives that does come under the digital or it comes under the core solutions?

Yes, I'll tell you. So the digital businesses house many products, right? But first and foremost, let's understand one thing that -- okay, for the digital all the different kind of products that exist in digital. So there is content that we make and we place on public platforms, like the Kareena Kapoor show, et cetera. There are video shows that we make and we put on YouTube and we earn revenues from that. Then there are solutions that we design for advertisers. Let's say there's a client in Tamil Nadu who has a specific requirement and my team goes and meets them, and we develop a package, a solution which involves multiple package. Increasingly now, what we're doing is we're putting many digital elements into the package. So we may put a video in. We may put our influencers in. We may put external influencers in. And we may put digital marketing components in. So all of these things then embellish the package and work towards delivering better results to the clients. So those underlying digital components is something that we are earning from. So that's part of it. Then there are digital solutions that we make for our clients, like on the audio side, there are many, many clients. Just to give an example, a pharma company, which wanted to train its medical reps. And for the medical reps community, we made audio products, audio capsules, which the company then used to train its people. But we made those audio capsules in a way which was providing product knowledge, but also providing a certain degree of entertainment. So that there would be stickiness with the product. So those are audio products that we do. Another example I'll give you is that for many films that we do marketing for, where we produce creative content using the stars of the film, and we place it on our Filmy Mirchi YouTube channel. And Filmy Mirchi YouTube, by the way, is the biggest independent Bollywood-focused YouTube channel, with, I think, some 6.5 million subscribers and it gets some hundreds of millions of views every year. So we put our content. So again, the idea is to put -- develop a creative idea and then to put the product on either our own platforms or external platforms. So these are all examples, and then there are several others. But there -- just one last thing before I ask you again, Sidhant, is that just remember the -- so far, all the stuff that we have done has been with external platforms, whether it's YouTube or Gaana or it is plain old telephone system or whatever. But once we launch our platform, then we will actually start owning this customer, the database and all the action that happens on the platform. That's the difference that's going to emerge from the end of this financial year.

Okay. Okay. So basically my point is basically you're Gaana Mirchi Music Award, that's a television IP. With that, when this comes in YouTube, so the revenues you earn from that advertisement does come under the core solutions business revenues or that comes under the digital revenues? So whole YouTube revenues are in digital revenues.

Okay. So listen, you know that we don't own the music rights for YouTube, right? So all the content from the music awards that we place on YouTube, on our YouTube channels, we don't get any revenues from that because those flow to the owners of the music, right? We merely placed the content. But yes, if -- but let's say, I give you an example, I think we got a couple of crore rupees from YouTube as advertising that YouTube generates, that Google -- that's called affiliate advertising that they generate on our YouTube channel. That is digital revenue. And that's a couple of crores rupees. As you know, YouTube shared very little with the content makers and that's been our complaint point. And that's one of the reasons why we're creating our own platform. I mean, if you got the same number of views at our own platform, we would have been earning, I don't know, probably 50x more revenue than what we get from YouTube right now. So yes, but to answer your question, there are revenues which come from external platforms, which we do consider in our digital revenue.

Okay. And my last question is, basically, so your digital revenues -- in the solutions business, the digital revenues are doing really well. You're talking about revenue and recovery in radio also.

Yes.

So major point -- so international contracts, you are not doing but you used to do different on-ground activations and all. So post this vaccination like speeding up and all, have you seen any on-ground activations or some events which you have started to do in the third quarter? Or have you booked -- have there been some booking which has been done? Or can you give some early trends for the core solutions business revenue?

Well, there is some action which is starting to happen, but it is very piecemeal. Now remember, the first big action that has happened is the [indiscernible] which were organized the [indiscernible], which I think is a trendsetter of sorts because they'll be literally -- despite all that they may control, there'll be lakhs and lakhs and lakhs of people. I think there are states like Gujarat where they announced a limited version of Karva activity on ground. And though Mirchi could not organize its own Karva because of restrictions, because they had restrictions of I think 400 people per location, what Mirchi did is that we did a tie-up with several, several Karvas, package it together, offered it to advertising and did a smaller scale activation featuring on-ground Karva. So we made an entry over there. There are some runs which are starting to happen. There is a lot of ambiguity still and people are awaiting clear government directions on this side. So I think we'll need to wait another quarter before on-ground actually begins in a bigger way. However, limited on-ground, where there is a small number of people who come together has already started to happen. Now whether it's wedding, whether it is small B2B -- like I see a lot of posters in Mumbai, which talk about a wedding exhibition in Marriott or some B2B thing in Worli. So there's a lot of action that is starting to happen with limited gatherings. And remember for many of our television properties, properties that we carry on to television, like Mirchi Music Awards, the Mirchi Cover Star and all that, the on-ground requirement is very small. So I don't think that, that will be a bother for us in the period of time when it comes up. But the large activity that we used to do, which was the Mumbai Marathon, the Delhi Marathon, our involvement in all of those cases, all of that, I think, will still continue to remain subdued even in the third and fourth quarter, I would imagine.

Okay. So just in addition to this, so basically the 25% revenue, your 3-year thing is that 25% of the revenues is going to come from the digital, 50% -- and 25% of the other core solution business revenue.

Correct.

So what will be the growth factors for that? So you have this television IPs and some others, so will this on-ground activation remains and some concerts will lead to the growth to the 25%? Or there is some other thing which is being -- which will drive the growth?

So Sidhant, what we have been trying to do since the pandemic began is to substitute the on-ground with equivalent virtual solutions. So for instance, we never used to do R&R events, rewards and recognition event, HR events. Now we have developed a module, and we're taking it to multiple companies where we're doing online R&R events for our clients, right? Similarly, there were concerts that were never done online now, there are concerts that we are doing online as well. So there is a lot of substitution of on-ground with online, which has already happened. But remember, on-ground is a very critical component for a marketing manager in the company because it allows them touch point and it allows them touch and feel, crowd interaction and all of those some things. So as soon as the pandemic recedes, let's say, 12 months later or thereabout, so 6 months later, on-ground will definitely make a comeback. There's no doubt about that. And those will also be part of the 25% of the solutions business that I mentioned to you. So yes, there will still be a part of it, but they'll be of a smaller quantity compared to what we were envisaging pre-pandemic.

The next question is from the line of Deepan Sankara from TrustLine PMS.

So firstly, I wanted to understand in the radio business, what is the kind of recovery rate levels in terms of yield as compared to our pre-COVID levels? And when are we expecting the yields reaching pre-COVID levels?

So the specific numbers, I will allow -- let Sanjay to give, but conceptually, I will tell you that we expect the revenue recovery to -- sorry, the pricing recovery to definitely take 2 or 3 years. It won't be immediately. The reason is that first, volumes will run full. Remember, the number that I give you on capacity utilization, right, around 13 minutes per hour basis, but you know that the industry operates even at double and triple of that number at times. So there is a fair amount of volume that the industry will first deploy and then the pricing will start to rise. So I think that the price recovery will take, I would say, 2 or 3 years to happen. Specifically, Sanjay, do you want to give some data points?

Yes. Sure. So if we compare the numbers for the overall rate perspective, then definitely, we are still down compared to the pre-pandemic level. And that number would be -- I mean, we are overall down by almost 37%. And we are not -- we are yet to reach that level of pre-pandemic. And if we compare ourselves with the last year number, same period, then we are down by 5%, 5.3% to be specific.

Okay. Okay. And specifically on digital front. So if we compare Q-on-Q, we have seen growth but as contribution has come down. So overall growth in digital business has been lower than total business. So any specific reason?

Yes. Deepan, the reason is that it is related to a single activity, which was an opportunistic play that we did last year second quarter. That activity did not repeat. So there will be quarterly ups and downs. But like I mentioned, we do expect to end this year at some 12% or 15% in digital revenues.

Deepan, you had asked a question about radio recovery. If you look at the published results of print companies and also privately available data on English print, you would notice that we are at about 75% to 80% of pre-COVID revenue. So to segregate the numbers, the volume numbers are about 105% of pre-COVID, and the yield is at about 75% -- 70%, 75% depending upon the category. Now in radio's case, particularly for Mirchi, even at these levels of 77% to 80% of pre-COVID revenue, we would be comfortably be very profitable, right, because of the fact that we have readjusted our cost base quite significantly. And so even if we don't get -- obviously, all of us would want a full price recovery. But even if we don't get a full price recovery, we are quite okay with our new cost base.

Yes. So that's coming back, the profitability levels will be much higher than even pre-COVID levels, right?

That's right. Yes.

The next question is from the line of Utkarsh Maheshwari from Reliance General Insurance.

Congratulations, Prashant, I think it's a very good result after a long time. I mean recovery is being visible.

Yes.

Could you just throw some more -- I mean, just out of curiosity, I would like to understand, when you're seeing this platform business in the form of app. So we really like on our phone, we have just 1 app and we can access everything just like that or something like on that sort of thinking, with an app you can hear the radio?

So let me answer this. So if you remember what Subbu said earlier, is that the app is a device, which is used more to build engagement, more loyal customers that come on to your app, download your app and use your app regularly. But a larger reach is available via the web. And as you know, most people will consume content when links are shared between each other, either on podcasts or various other methods of communication. And then the content consumption happens in a bigger way. But the app is a more tighter community of more loyal users. So the app is a critical element of our play. And the app will contain several things. It will definitely contain audio stories or different types of podcasts, et cetera. It will contain textual information like a publishing company would do but on the music and entertainment domain, and will also contain a fair amount of video that the company will produce. And again, to clarify, we are not in the same area of operation as the video OTT players. We have no overlap with them at all. We will be creating mostly shorter-format video content, et cetera, that we will put on the platform. Now you asked a question about whether we can stream radio on our platform or not. Well, it is work in progress. Currently, we are not in a position to play because of restrictions or rather very difficult demand from the music industry on royalties. But there are a couple of solutions that are being worked out. I think in a limited way, we will test the waters when we launch the app by April -- by March or April of this coming year. So yes, we will have a few limited radio stations with music playing on our app as well. But as I told you, it will be a step-by-step progression in that direction. However, like I mentioned earlier, we will launch the app in the U.S. in January or February of the coming years. The U.S. has very settled royalty regimes with respect to streaming services. And therefore, in that market, we will certainly be offering the radio product. In fact, we already have an app which is an older-generation app in the U.S., where we are streaming our FM radio and AM radio stations online as well. So we will begin with that for sure. But whether we are able to take a big play of it or not in India will depend upon how things develop from that point on.

So primarily, I mean, in the near term, it is not very clear that we will -- I mean, the India business, the radio part, we are available online, free or not, that we'll be testing and getting into that stream, right? Because I think because it's not a paid service out here, that's the basic reason for that.

Well, it's not a paid service, and two, there are music royalty issues. Of course, Subbu is pointing out to me that I should mention it's true that in the U.S. and any developed market, the CPM rates for advertising that happens on audio products is pretty high at $6, which is you can imagine, INR 400-odd CPM, which is a great premium offering. So that is something that ideally we would like to mention and we would like to launch in India as well. And in any meaningful relationship that exists between partners, we would be happy to share a lot of the revenues that we generate with the labels. So like I told you, there are negotiations which will go on. There are other procedures by which we are trying to acquire the rights to play the music. Currently, we'll have to test the waters as we go ahead.

I think this last question is for Subbu. I mean you did mention about some INR 80-odd crores of cost reduction. So will it be fair to say that by this end of quarter, we shouldn't have a decent profitability also coming? Because I mean it's been a couple of years since the time we have seen the blacks . I mean at 79% utilization, probably we will scale it up as such season picks up. So putting things in context that way?

Utkarsh, we have not fully recovered. But despite that, because of our lower cost base, we are already at about INR 10 crores of EBITDA during the quarter. As and when we see the revenue ramp up, because as Prashant mentioned, the current quarter, July was not a good quarter -- a good month at all. The numbers that you see are essentially negative for July and strong positives in August and September. So as the recovery progresses far, you will also see that increase in numbers in our P&L. And our solutions business is now coming at a much higher margin. You have the comparative data now for 8 quarters, right? We have been giving that data in our deck. So you'll find that is also trending up.

So I mean, the road to profitability should happen, but maybe like -- I mean, again, we have to see how fast the ramp-up happens. I mean, as you mentioned in the opening remarks that all the sectors have been firing well. I think there was no comment on the government side. I mean is that also firing a similar way? Or is it on a lower side?

I think government volumes -- revenues have grown by 40% compared to last year. But remember, the base was already low in the...

Last year, it was like completely, I mean, blank.

So even the central government has grown only by 26-odd percent, but state governments have grown far faster. The state governments are playing a bigger role of late. But if the central government starts to fire, then that will be a big boost.

Okay. Fair point. I think the price you have already said, it will take 2 to 3 years. But have we seen any kind of steps from the industry to increase the yields and all as now things are improving? Or I mean it still people are only pushing hard for the balls?

No, because as I think there's been a change in mindset in the industry. I don't think that the industry is overly focused on pricing as the variable now. I think the industry is looking at a combination of pricing and volumes and looking at revenue is basically in short, right? And today, the products that -- on the radio side that are offered in the market vary quite a lot. So there are products that started high paying capacity categories. And there, we get a higher price realization. And then there are categories of clients, which we call it hit-and-run clients. They're basically come in for a short period of time, burn a lot of inventory and then they vanish for the rest of the year. So typically, they come with lower pricing. But today, the industry has found a good operating model where it is able to accommodate both higher pricing and lower pricing clients. And the focus is not so much on pricing as it is on overall revenue generation and market share.

So basically, the focus will move towards the wallet share from the clients so that you can use in for different markets.

And also remember that for companies like Mirchi, the solutions business is very big. So when I combine my radio business with -- when I combine my radio inventory, along with digital and along with some on-ground and along with some Gaana inventory and Google inventory, then pricing becomes a concept which is a little kind of irrelevant. It's not really an apples-and-apples comparison with the past.

Your next question is from the line of Pavneet Singh Keer from Skyline Equity.

Yes. Prashant, I would like to congratulate you, not for the numbers exactly, but for your oratory skills. I had been a part of your conference call for the past almost more than 5 years now. So I'd like to congratulate you that whatever the scenario, be it a doomsday scenario, painted out in COVID, you had always made us feel that everything is okay, and "All is well", a line from the 3 Idiots movie. Now going back to the point, so now coming back to the point is that we have a beautiful vision of being a very good entertainment platform in times to come. But on the execution side, I feel that we are like, in some stage, we don't know whether we'll be able to convince the advertisers what kind of currency we have. But we start to project that these kind of people are listening to the radio for entertainment, these kind of people are listening to radio for -- while they're in their journey. And these kind of people are so sticky that unless they get their set of programs every day, they are not like going to sleep. So on that front, how are we like able to convince the advertisers -- for the past 5 years, I'm just listening that some of the other -- the advertisers will be like happy to join the radio stream as their primary stream to broadcast their business. I'm sorry if I have like offended you on any front.

No, no. Pavneet, that was very brave thing of you to say that. I know that you're basically saying I speak too much. I understand it, but I let it pass, okay. But coming to your question, see, first and foremost, we have never, in 20 years, said that radio is the primary medium. In fact, radio is usually not a primary medium. Radio is always a supportive medium. It supports either print or it supports television or it supports on-ground activations traditionally. Nowadays, radio supports a lot of digital work as well. So radio doesn't have any qualms about it. We are not a primary medium, but we are a very critical support medium. Without us, the main medium doesn't work as efficiently. The second thing we said is about radio, whether people will consume it, come back to it, whether it's for driving audiences, maybe there is some numbers that come up. Radio is exceedingly sticky in its listenership, exceedingly sticky. In fact, I don't -- in the television business, you find various channels going up, going down in the pecking order. I was just noticing the other day that a channel which used to be a top #1 channel a few years back has gone down now to the third position. And it's TRPs and TVRs have fallen a lot. But in radio, there is extreme stickiness, extreme stickiness.

And I guess, Prashant, my question is not about exactly about the stickiness of the product. My question is exactly about why is the advertiser ignoring it to such an extent that is not able to build in confidence with a specialist like Prashant on the table and trying to convince him for the past 5 years, [Foreign Language]. A pool of advertisers [Foreign Language] on the TV, on the OTT but they're probably not interested in radio at all. I mean, in the volume of Phase 1 Gaana, Phase 2 Gaana, the mature stations [indiscernible] it's a revenue burden. [Foreign Language].

[Foreign Language] Radio advertisers, they are also very sticky. They're also very, very sticky. Now your question is like, why is it last 5 years after, not revenue growth may recover. There are key factors are [Foreign Language] actually, [Foreign Language] the demonetization [Foreign Language] whether it is print, whether it is out-of-home, whether it is radio, many of these sectors have actually suffered a decline in the CAGR, revenue CAGRs and all. So there are factors like that, which have come into play. But the stickiness of advertisers, whether it is to -- in terms of listenership, the stickiness of advertisers, stickiness of listeners, both is very, very high for radio. And that is why you see that as the pandemic started to lift the volumes of climb back to beyond pre-pandemic levels. And secondly, I want to tell you that, going forward, probably please imagine radio -- please imagine Mirchi not as Radio Mirchi but as an entertainment brand called Mirchi, which has a strong presence, the #1 radio brand under its fold, but which also has a very fast-growing digital footprint across the network. And think of it as a radio company but really as a platform company on the digital side.

Okay. What sort of like cash generation should that post you over the next like 3 to 4 years period? How much should we be able to add to the KT of INR 208 crores, INR 210 crores, whatever we have.

Well, history shows you that in a normal year, in a normal pre-pandemic year, we were generating approximately INR 100 crore a year in cash. And like I mentioned at the beginning of this call, once the conditions improve, we should get back to that level of cash generation.

Prashant, I would like to conclude by saying one thing. I have a couple of ideas with me. And I have like a history of working in PR. So what I would do is I would mail you. And if I'm in Delhi, I'd like to meet you. If you, too, are in Delhi that time.

Yes, of course, that is the #1 market for us, certainly in Delhi. But let's not wait for that. So why don't you just send an e-mail. There's an e-mail I did mention, and then I'll get it. I think, Sanjay...

I think sitting across each other would make better sense because I'll have ample time to talk to you and like we can discuss that strategy going forward.

Most certainly, most certainly. We will definitely connect.

The question from the line of Jinesh Joshi from Prabhudas Lilladher.

Yes. Sir, I had a question on this platform business of ad . How do we plan to monetize the content? Will it be an AVOD model or an SVOD model or a mix of both? And typically, when it comes to video content, there are a lot of OTT players who are not making money. So what are your thoughts on that? I know that we are not planning to create a long-form content, and there will be shorter video formats. But additionally, the operating cost in the video content is very high. So how do we plan to be profitable in that? And secondly, how should we expect the breakeven? And what kind of investments will be needed in the back end? If you can just share some thoughts on that.

Jinesh, let me just take your first question first. So typically, as a group, Times of India group, as a company, we are all strong in advertising generation. We have a strong relationship with advertisers. Also, as you know, the subscription business in India is still small and assent, and hopefully we'll grow, but we don't know about that. And also remember that our content is more of the fast consumption kind of content. So I would imagine at this stage, that it will be more advertising-funded. Advertising will be the big source of our revenue generation. But again, like Subbu has said a couple of times in this call, if there are various other revenue models that emerge on a digital platform, one of them being transaction. Now you can call it e-commerce, you can call it B2C e-commerce. There are various different names given to it, but transactions is an important part of the revenue generation as well. There are many other revenue generation models. I don't want to get into it right now, but there are many other generation models. Now we talked about infrastructure and Subbu again mentioned that in Phase 1 of this project, we may invest up to INR 20 crores, mostly to build the app and build the infrastructure around the app.

Sir, you can clarify the Phase 1, it's only about international.

Yes. Phase 1 that we referred to is largely about the international part of the app, which we should launch by January, February of next year, and that will contain music and radio stations as well.

It's a breakeven time line? Any thoughts on that?

On the breakeven of the digital business?

Yes.

[indiscernible]

It's still not worked out. It's not being developed fully, to be discussed with the Board as well. We will share with you as soon as we are ready. It will take us maybe one more quarter or slightly longer than that, yes.

But sir, typically, how long does it take? I mean our time lines could be different, but in terms of business which we are planning to enter into. Typically, how long does it take to break even? We could be a few quarters away here and there, but generally, how long does it take?

See, it depends on what kind of ambitions you have. You know that there are players who don't make profit for 10 years. I think Spotify has just started making profits or something. And then there are players who tailor their strategy to a faster recovery because they plan to do activities around the core rather than kind of in a much bigger umbrella manner. To give you an example of what I mean to say, there are companies like Amazon and FlipKart, which will lead for a decades because their ambition is global and cover one and all in India and abroad. But there are many examples of department stores or high street stores, which also have digital shops available. But their ambition is to basically cater to their consumer franchise and offer them another channel of purchase. Now these players are profitable from the data launch actually, right? Because they have looked at digital as a distribution channel for their merchandise. Now even somewhere in between, we certainly don't have plans to bleed forever, but we will always invest in any new product that we launch. Even in our radio business, it takes -- we used to say that it takes 2 years to break even at an EBITDA level because we invest heavily in brand building and marketing and we did that in the first 10 years of our ride. I think in the platform business also, it will be somewhere in between, but not immediately, but definitely not very far away.

Jinesh, on the U.S. speed that we're looking at, while we'll give you more specific numbers in a quarter or 2, the early indicators that it should happen in 2 to 3 years' time.

We take the last question from the line of Nagraj Chandrasekar from Laburnum Capital.

I think Nagraj has asked a question. I think -- Janet, is there anybody else?

[indiscernible].

Can you hear me?

We can hear you, Nagraj. Go ahead.

Yes, So really 2 questions. One, I just want to take a step back and look at the big picture here, right? You have an excellent business that is very well run and throws off a certain amount of cash flow, which it will likely throw off for several years. And beyond the point, we don't know what technology does to radio, how you compete in a world where voice is carried via a different medium. If -- I think if I put on what you said on this con call and what you said on previous con calls, it's pretty fair to say that we shouldn't be expecting much cash flow back as shareholders. So is it fair to say that the mandate to you as the CEO from Bennett Coleman is look, you're generating this much cash, figure out a way to reinvent yourselves for the future, feel free to spend the cash you have and spend it intelligently? Or is there some sort of like a mandate that say, "Look, if we can't recycle cash into the business, maybe we should just give dividend out, so that we can spend it else, right?" So some sense of how you look at this at a high level because as a CEO, that's the main challenge you have. You have a certain amount of cash flow. You have been a necessity of reinvention because of technology, is it fair to assume that some of the other, you do the best job you can over the next 3, 5, 10 years to spend this in reinventing yourself? And as your shareholders who are basically coming along with you for the ride and hoping you can reinvent in a shareholder value accretive way. That was my first question. My second question is you talked a little bit about the solutions business. And on previous calls, you also said that, look, the fact that we have an entertainment DNA as opposed to the new DNA of other parts of Bennett Coleman means there may be certain types of campaigns that we may be better positioned to run than other parts of the group because news organizations have to stay neutral and can't do advocacy beyond the point, et cetera. I just wanted to understand, is it the case that every part of Bennett basically tries to sell their own ad inventory? And then on top of that also tries to undraw. So ENI may do this, Times now may do this, you may do this, Gaana may do this. And then on top of that, to the extent there is some multimedia campaign and many campaigns are now increasingly multimedia, you earn an extra fee for being the person that puts a composite solution together. In doing this, are you basically also competing with other parts of Bennett where you're right doing a strong 30% to 50% of the spend is radio, which means radio is the anchor medium and everything else you kind of curate and bundle in, whether Bennett inventory or other people's inventory. And then other parts of the group will try to do the same where their inventory ends up being the anchor inventory. So do we expect to see you competing both within the group and outside the group within the solutions business?

Okay, Nagraj, first, your first question. It's actually the Board which direct management in whichever way the company is in a position to grow fast. Growth is a mandate. And the good thing for us is that over the last 20 years, we have built a brand which allows us to grow into new areas rapidly. So yes, the Board will push us on growth and using the brand as we leverage. It is not growth for the sake of growth, growth into areas which are not strength areas for the company, but it is growth within the company's areas of strength using the brand as we "on which the growth areas are big". So that is the answer to your first question. And if both finds that there isn't growth opportunities left, and certainly, one of the things that we will look at is using the cash differently, shareholder value generation is always top most in the Board's mind and therefore, they discuss this every quarter. Your second question is also interestingly worded that do all group companies work together or do they compete with each other. Well, they do compete with each other whenever it comes to it. But remember, the different products of the company cater to different market opportunities. Like obviously, Mirchi and the whole television network hardly compete. Mirchi, like I mentioned to you doesn't compete with newspapers. Mirchi, I told you -- I told somebody a few minutes ago, is not the primary medium. Radio has to always support either print or television. So actually, radio works very well with the Times of India Group public -- print publications. The Radio Mirchi has benefited enormously from MX Player's presence. Mirchi has benefited enormously from the Bennett Group's brand capital businesses. So basically, it feeds off in its various businesses and actually adds to its strength. And so therefore -- but in the marketplace, there are -- there may be times when we compete as well. It's not that we don't compete ever. But we collaborate more often than we compete. I think Mirchi solutions business, when we add on other multimedia products, there are again no mandate that they have to be Bennett products. In fact, Bennett products are also limited in their offering. So we are a hyper local brand. And if we were to do, for instance, a solution for a client in Rajkot, maybe Bennett doesn't have a suitable property in Rajkot at all. And we may then pair up with a local newspaper there or we may pair up with a local outdoor supplier over there. So there is no mandate to do that. But I think as a group, we work very well. Synergistically, all companies review their scope to work together. Even on the content side, we have a very strong brand in Bombay Times. We have a very strong brand in Filmfare. And we leverage these relationships whenever it suits us to access celebrities either for our own IPs or even for our radio content. So we work holistically is what I would like to tell you.

No, I think the question was specific to the solutions business, which is, let's say, the Delhi government, I'm picking up a random example. Let's say the Delhi government puts out an RFP saying, "We want a campaign to tell people not to burst crackers on Diwali." Then Mirchi told them saying, "Look, guys, we will do a campaign for you with our solutions business. We put in some radio. We'll curate up Bennett, non-Bennett, bouquet of media properties and get the message out." Simultaneously, Times of India could go to them and say, "Look, we'll give you a solution where we'll throw in some Times of India, we curate a combination of Bennett, non-Bennett, other properties, come with us." Would you then see a Mirchi team, a Times of India team alongside other teams from other organizations all competing for that same solution business? I'm talking about the integrated solutions business, not a pure play ad business.

I get what you're saying, Nagraj. So typically, big clients of this nature, we would coordinate our steps so that we don't trample on each other. We would move synergistically. And there are clients who clearly give that indication that they would like to see us as a group rather than as independent companies fighting each other. So there are cases like this, and we coordinate with each of and we meet the clients jointly. That happens all the time. In fact, in many clients, Bennett is leading the way and they package radio in. And then there are clients where radio is leading the way where we have better relationships and we try and see if we can get some Bennett properties or some Internet properties. So it works in a coordinated manner. Thank you, Nagraj. And Janet, can we please call this meeting to a close?

Sure. Members of the management, can you please go ahead and give your closing remarks?

Thank you very much, dear investors, and there is an e-mail mentioned in the presentation. Please do reach us for any more clarifications or questions that you may have. Thank you very much.

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