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

Ladies and gentlemen, good day, and welcome to Entertainment Network (India) Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Runjhun Jain from EY IR. Thank you, and over to you, ma'am.

Thank you, Ankur. Good morning, everyone, and welcome to the Q4 and FY '25 Earnings Call of Entertainment Network (India) Limited. To take you through the results and answer your questions today, we have the management team from the company represented by Mr. Yatish Mehrishi, Chief Executive Officer; and Mr. Sanjay Ballabh, Chief Financial Officer. Please note that the financial results and the presentations have been uploaded on the company's website and on the exchanges. Should you need any further information, you can get in touch with us at EY IR. Before we begin, I would like to remind you that today's discussion might include forward-looking statements based on the current expectations and assumptions. These statements are subject to risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to update these statements after today's call whatsoever. With that said, I'll hand over to Mr. Yatish.

Thank you, Runjhun. Good morning, ladies and gentlemen. On behalf of Entertainment Network (India) Limited, I extend a warm welcome to our Q4 and FY '25 earnings call. We appreciate you joining us on a rainy Saturday. Thank you very much. We announced our results yesterday, and I hope you had a chance to review them. I'll now take this opportunity to walk you through the key highlights and provide context around our performance. On the financial overview, during the year, our domestic revenue reached INR 526 crores, reflecting a 9.4% year-on-year growth. This was primarily driven by strong performance in our digital and non-FCT segments. Excluding digital, our core business recorded a 2.6% year-on-year growth with a revenue of INR 465 crores. Let me take you through the segment performances. The radio industry faced significant headwinds during the quarter, and we are not immune to these challenges. Additionally, quarter 4 of the previous year benefited from the extraordinary government and political ad spends due to the general elections, resulting in a higher base. Despite this, we remain relatively better insulated than peers and continue to maintain a healthy 26% volume share in the radio segment. On the non-FCT segment, we maintained a very strong momentum, growing 20% year-on-year to INR 151 crores. This was driven by the sustained success of our solution-based initiatives and key on-ground events such as Green Marathon, Spell Bee and Boom Box. For FY '25, the EBITDA margins for the non-FCT business stood at a strong 33%. Let me cover -- take you through the digital business. Our Digital segment delivered a stellar growth with revenue reaching INR 61 crores, up a strong 122% year-on-year growth, largely driven by the strong performance of Gaana. We are encouraged by the positive customer response to the revamped Gaana 2.0 platform despite the revised upward pricing. Revenues have been improving quarter-on-quarter, and we anticipate the full impact to reflect in FY '26. In quarter 4 FY '25, digital revenues comprised 32% of our total radio revenues, up from 24% last year. For the full year, digital contribution reached 26% compared to 15% last year. This is in line with our strategic vision for evolving from a traditional radio company to a diversified multimedia entertainment enterprise. Very happy to share our digital cash burn is steadily declining, registering a 15% drop sequentially over the last quarter with a total investment of INR 47 crores in FY '25. Just to reiterate some key financial metrics. Q4 FY '25 EBITDA, excluding digital stands at INR 37.4 crores with the EBITDA margin at 27.5%. PAT for quarter 4 FY '25 is INR 21.4 crores, a 21% increase over quarter 4 last year. Full year EBITDA, excluding digital stands at INR 118.8 crores with EBITDA margin at 25.5%. And our PAT for the full year stands at INR 48.1 crores. Our international operations remained EBITDA positive, contributing INR 19.2 crores in the revenue for FY '25. The company continues to maintain a strong balance sheet with a cash balance of INR 368 crores as of March 31, 2025. Lastly, I'm very pleased to announce that the Board has recommended a dividend of INR 2 per share, up from INR 1.5 per share last year. With that, I will now hand over the call to the moderator. I look forward to your questions. Thank you.

[Operator Instructions] The first question is from the line of [ Khushi ], an individual investor.

My first question to you is what is the Gaana revenue for the quarter and for the full year?

Anything else [ Khushi ], or I will be just tell you the numbers.

Also the revenue growth Y-o-Y and quarterly?

On Gaana only?

Yes.

Okay. So our Gaana revenues increased from -- the total revenue for a full year was INR 46.2 crores against the last year revenue of INR 12.78 crores. Yes?

And what was the profitability of Gaana?

So Gaana, as you said, it's an investment phase. We are reducing costs, and we believe Gaana will become profitable in the next 5 to 6 quarters.

Could you please specify a number like...?

I'll be happy to share, you can -- happy to share the numbers in detail on a side call with our CFO, please.

Yes, sure. My other question to you is what is the market share?

On Gaana or on radio?

Overall.

So overall, as I said, on the volume share, we have almost a 26% volume share in the radio business. And from a value point, we are upward of 30%.

Also, please give a split on Gaana and radio?

The market share you said, [ Khushi ]?

Yes.

See, [ Khushi ], market share on digital -- on Gaana is very difficult to put up because every platform has a different way of doing business. For example, YouTube is largely available free and they have a very less paid service. Spotify also does free and a subscriber service. Gaana -- while Gaana, we don't offer free music. It's a paid service platform. So you have to pay for -- to listen to music. So if I was to look at a paid share, we are a very healthy share compared to Spotify. But since nobody shares the numbers, it's very difficult to ascertain. So we have our own internal metrics on Gaana, and we believe we have a very healthy share in the paid market music streaming service.

Okay. My other question is, what is the inventory utilization for the quarter and for the year?

So our inventory utilization has been around -- for the quarter has been about 81%.

Okay.

And at the year -- for the full year has been about 78%.

All right. My other question is, what is the volume growth for both the quarter and for the year? Hello?

One more minute, please. Just a minute.

Yes.

So as we said last year, there were elections and there was a lot of government spends. So there's been a drop in the volume growth by about 4%.

Drop by 4%, okay. My other question for you is what is our effective rate growth for the quarter and for the year? Also, how is this compared to pre-COVID levels?

So pre-COVID levels, as we have always spoken about, the price have not come back to pre-COVID levels. They stand at about 25% less than pre-COVID levels. It used to be 40% down. There has been some errors in the degrowth. It's now stable at 25% right now.

Could you please tell me again the revenue of Gaana, like I'm...?

About INR 18 crores on a digital.

That's for the quarter?

Yes.

And for the year?

We spoke about it there in the investor presentation, [ Khushi ], you will have all the details on that.

Okay.

Yes, thank you.

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

This is [ Prashant ]. My question is related to again with Gaana. Since this is a digital platform, how can we prepare for the peers like the Spotify? And is there any strategy or what's the plan for going forward to growth about Gaana? So please, can you elaborate more on the future plan or future growth about the Gaana and digital platform?

Yes. Thank you, [ Prashant ]. See, for Gaana for us, it's very clear. It's a Made India only product in the market right now on the music streaming service. If you look at largely the competition remains YouTube and Spotify. This year, I'm very happy to say we have grown our subscriber base by almost 28% when we took over. We took over the business in 1st December last year. And from 1st April to this year, there has been a healthy 28% growth in our subscriber base. You would know that we increased our price from INR 299 to INR 599 in the month of August. So we are seeing a very healthy growth. As I mentioned earlier, we are committed to profitability on the Gaana business. And we believe in the next 5 to 6 quarters, Gaana should become a profitable business for us with a healthy revenue and a bottom line. Thank you.

The next question is from the line of Ronak Shah from Equirus Securities Private Limited.

Sir, my first question is regarding except of the government, which are the other sectors which have given the -- supported the overall volumes?

So thanks, Ronak. Actually, government business has gone down over last quarter because last year was leading to the general elections, government spends a lot of money, and there was also political business coming in, which will also reflect in the quarter 1 in the coming quarter also. So in fact, government business has gone down and political business has gone down. If you look at the business which have done well, traditionally in the quarter 4, the BFI segment does spend a lot, and that's where the 16% growth has come on BFI sector and real estate sector has done well for us.

Okay, sir. Sir, my next question is regarding the new prices, which you have reflected from the July 1. So as in the last call, you have highlighted that around 27% of our subscribers are having the new rates. So what is the status right now? And are you witnessing any drop in the overall customer base because of the price hikes?

So Ronak, what we meant, 27% was the profitable base. It was not the INR 599. The profitable base was 27%, which now stands at March -- as of March 31st at about 35%. We'll see the first turn because we increased price on 1st August, we'll see the impact only in 1st August, but we have not seen our growth rate go down. So we are very confident that we'll be able to deliver that number considering the way our product is and very, very good recommendation engine, the UIs are good, the catalogs are good. Remember, we are the first guys who have been curating music for the country for the last 20 years, correct? So our music play editors have also done an excellent job on that. So we are very confident that our growth will sustain for the coming years also. And there is a lot of headroom available in the market for paid market share. As I've also mentioned earlier, there are 200 million free music subscribers and only as per EY report, only 25 million pay or maybe 15 -- sorry, 15, only 15 million pay for the music streaming service. So there's massive headroom available, massive growth opportunity available there. It's required to be patient and keep delivering value to the consumer. So as we keep delivering value to the consumer, we believe this growth will be sustainable and our ambition of -- and our objective of making Gaana profitable in the 5 to 6 quarters is on track. Our losses have also gone down quarter-on-quarter.

The next question is from the line of Kavish Parekh from B&K Securities.

Could you help me with the absolute number of paid subscribers in Gaana? And how has this number moved over the past few quarters?

So thank you, Kavish. As I said, our numbers have grown almost 28% from the beginning of the year, which is a very healthy growth. If you look at EY growth, I think we have outperformed the subscriber growth in the market. And we don't reveal the numbers over a period, if you require anything on our individual calls, we can have a larger discussion on it. But having said that, it's a very healthy paid market share, which we have right now.

And secondly, music labels have maintained the view that all audio OTTs will move behind the paywall, still Spotify and JioSaavn offer free services. You have, of course, been very clear about transitioning to the paid mode of consumption leading to profitable growth. What are your thoughts on these 2 platforms moving to paid? And if this -- if it were to happen, what gives the industry the confidence that subscribers will pay rather than moving their consumption to a free platform like YouTube?

See, it's a very good question. I think if that happens, I think we will see a hockey stick growth in the subscriber markets. I'll just take you back. I'm assuming you'll be about 35 years. So if you just go back to your younger days, people used to buy CDs, people used to buy cassettes. Even for pirated music, people would go to a next door shop and pay INR 100 to get their own playlist. So it's not that people have not paid for music earlier days. People have always paid. If you look at -- you bought a CD of Kabhi Khushi Kabhie Gham at about INR 300 or INR 500 also. And today, you're getting almost INR 700 or INR 600 for our cost, a full library, global library at a click of a button at a convenience, different playlist. So I don't think it's about value because it's been available for free, people have not been valuing it. As services stop, I think that will be a hockey stick growth for the industry. And that's where music labels also believe in. I think the future lies in subscription and not doesn't lie in the free medium. You have seen the ad headwinds, advertising headwinds across media have been there. So there is no way a medium can sustain only on advertising. I think the subscriber growth will play it. We saw in video OTT in the COVID times, the way the growth happened. And we believe the similar numbers will happen here also. Now coming to competition, Spotify has started putting a lot of restrictions on free product. Even if you look at YouTube also, when you watch anything on YouTube, there is so much of ads now coming on YouTube that they are also looking at putting -- paying more focus on subscription. In fact, YouTube Music, if you are not a paid subscriber, will not play music in the background. So that itself is a nudge to go subscribers. Even Saavn is looking at that. So I think it's a very healthy thing. There is -- as I said, if everybody goes paid, the headroom is -- because 200 million people does subscribe music free. So there is no way people may not subscribe this. And as I said, the last EY report says about only 15 million pay. So the amount of growth opportunity which is available for all the players is massive. So I'm very, very confident, very optimistic. It's a great business. It's a great time to be in. We have developed a great product. It's a Bharat -- it's the only Bharat product. Gaana means songs. It's very, very close to the Indian consumers. The search optimization is massive. So we are very confident that this product and platform for us will deliver a lot of great revenues and profitability for us in the coming years.

Just one last thing from my side. Could you share some engagement metrics or maybe the time spent on the platform on Gaana by a free user versus a paid user?

So we don't have a free user Kavish. So there is no comparison. And that's the reason those numbers will not make sense because if you compare with a Spotify, which is a freemium model, the numbers will always look different. So it will be difficult to share as the engagement -- what we track is how the engagement is growing as the subscriber numbers are growing, our engagement metrics is also growing. And it's been just 4 quarters, if you look at Kavish. We have not been handling Gaana for years. It's been just 4 quarter or a full 1 year, if you look at it, the way we're looking at the business. And we are very, very happy with the way engagement has gone up. Our -- and the way we count is the listening down both numbers are very, very healthy.

[Operator Instructions] The next question comes from the line of Harshad Gadekar from Elara Securities.

So would it be possible to share any color on the growth outlook for FCT and non-FCT segment? And what would be the key priorities for us in FY '26?

Thank you, Harshad. See, the way we look at this quarter 1, we thought it started well. But because of the border tensions, it took a beating on both on ad media and everything because it's not a great time for any company to look at it. Now since it's behind our back, the ceasefire has happened, it's good. The way we look at is the ad business, ad environment business will remain a little muted. There will be growth because of a base effect in the second half. It might be because it will still continue to be muted. Hoping with the more macroeconomic conditions, even the -- if you look at the U.S. tariff wars settling down, rains going to be great. We believe that will drive some growth on the pure advertising sales. Having said that, we are very bullish on our non-FCT solution business and the event business. Event business in quarter 4 has grown almost 80% for us. And we believe this year also, it will lead the growth. Even our solutions business has done reasonably well, and we believe the growth will come from the non-FCT segments. And we are double downing on that, and we are very confident that this year also the event concert business will do really well for us.

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

I just wanted to clarify one thing. You said Gaana revenue is INR 46.2 crores. This is for the quarter 4, right?

No, full year.

Full year. Okay. And for quarter 4, how much is it?

INR 17 crores. Only Gaana will be is about -- so one second.

I think digital is around INR 18 crores. So Gaana...?

Digital is INR 18 crores and Gaana will be about INR 14.6 crores.

INR 14.6 crores. And last year, same quarter, it was around INR 9.5 crores as I gather from my...

Yes, yes, yes.

Okay. And for the full year FY '24, how much was it?

Full year last year, as I said, it may not be comparable because we took Gaana only in 1st December. So the full year number for 4 months was about INR 12.78 crores. Against that, this year, it is INR 46.2 crores.

Okay. Okay. Got it. And my next question was the volume declined by 4%. This is for the quarter, right?

Yes. Both quarter and all -- quarter because if you look at last year, quarter 4, there was massive government and political spends which has led to the degrowth. So government business and whenever a new government comes, the government spends are always lower and it impacts -- if you look at past general elections trends also, the government business goes down. But last year was massive government and political spend that resulted into the volume degrowth.

Okay. And for the full year, how is the volume faring?

Same thing. It's almost the same. Actually, quarter 4 led to the larger number drop also.

[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you very much. It's a pleasure to have you all, and thank you very much for joining on a Saturday. As we have been always saying, we are committed to delivering profitable growth for our stakeholders, and we remain committed. We are very excited about our business on Gaana and overall event business. Thank you very much again. Thank you.

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.