GTPL Hathway Limited (GTPL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of GTPL Hathway hosted by Emkay Global Financial Services Limited. We have with us today Mr. Aniruddhasinhji Jadeja, Promoter and Managing Director; Mr. Rajan Gupta, Chairman and Non-Executive Director; Mr. Piyush Pankaj, Business Head, CATV and Chief Strategy Officer; and Mr. Anil Bothra, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Naval Seth of Emkay Global. Thank you, and over to you, sir.

Thank you. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for their opening remarks. Over to you, sir.

Thank you, Naval. Good evening, everyone. A warm welcome to all of you to the conference call of GTPL Hathway Limited to discuss financial and operational performance of quarter 1 2022. GTPL Hathway continued to deliver on key KPIs during quarter 1 2022. The highlights of the quarter was robust subscriber addition and subscription revenue for Broadband business, strong profitability and debt repayment. GTPL has further reduced its debt by INR 168 million in quarter 1 2022. GTPL will continue to march forward on its stated strategic road map by coming up with interesting and new products and services, enhancing customer experience, strengthening its digital infrastructure and capability, and escalating its footprint in the existing and new market. With that, I hand over to Mr. Piyush Pankaj, who can take you through the business and financial aspect of the company.

Thank you, Mr. Jadeja. Good evening, everyone. I hope all of you are safe and healthy. GTPL Hathway is one of the few consistently profit-making cable TV and broadband company in India. Our business model is quite robust and can explore multiple growth opportunity that this sector has the potential to offer. In the last 5 years, our CATV subscriber base has grown sharply by 2x to 7.3 million. Additionally, our broadband subscriber base has mirrored a significant growth of 3.6x to reach 0.7 million. We have been consistently generating healthy free cash flow and have managed to reduce our gross debt by INR 420 crore in the last 5 years, and have returned the money to shareholders in the form of regular dividends. I'm happy to share with you that GTPL Limited has been recognized as one of India's top 500 companies by Dun & Bradstreet ranked 401 on turnover in the listing published for 2021. Additionally, during quarter 1 FY '22, we have launched GTPL Interactive Virtual Assistant, GIVA, a Whatsapp-based chatbot for 24x7 customer support for CATV and Broadband businesses. Let me now share the performance highlights for the quarter. As on June 30, 2021, our active TV subscribers stood at 8 million. GTPL's digital CATV services now reaches 1,000 plus towns spread across 15 states in India. The company is expanding aggressively in Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu and the North States. GTPL CATV platform services own and operate 48 channels across over 6 genres. The CATV industry offers an underlying growth opportunity for an organized and seasoned player like GTPL Hathway. Our CATV business expansion will gain momentum with organic and inorganic growth in the coming quarters. The Indian wireline broadband sector is a sunrise industry with huge untapped growth potential. It accounts for mega 6% penetration of the total households in India, as against 80% in Japan, 70% in eurozone and 50% -- 55% in China. This represents a huge opportunity for growth for us. In the broadband segment, we added 2,30,000 new home pass in quarter 1 FY '22 and taking the total home pass as on June 30, 2021 to 4.10 million. During the quarter, GTPL added 55,000 net broadband subscribers, taking the total net broadband subscribers as on June 30, 2022 to 6,90,000. The broadband ARPU for quarter 1 FY '22 grew by 4% Y-o-Y to INR 440 per month. GTPL looks forward to expanding its Broadband business by leveraging its existing base of 10-plus million CATV subscribers and attracting new broadband subscribers through business partners. Let me now move to our financial performance. On our consolidated business, excluding EPC contract, during quarter 1 FY '22, GTPL's consolidated revenue grew by 22% Y-o-Y to INR 5,843 million. The CATV subscription revenue stood at INR 2,641 million. The broadband revenue for the quarter grew by 74% Y-o-Y to INR 918 million, led by healthy subscribers additions. EBITDA for the quarter increased by 8% Y-o-Y to INR 1,362 million with a margin of 23.3%. On our consolidated business, including EPC contract, during quarter 1 FY '22, GTPL's consolidated revenue grew by 22% to INR 6,106 million. EBITDA for the quarter increased by 7% Y-o-Y to INR 1,380 million with a margin of 22.6%. PAT for the quarter surged by 16% Y-o-Y at INR 475 million. The finance cost during the quarter was lower by 78% Y-o-Y and 62% Q-o-Q. Our EPC contracts during quarter 1 FY '22 reported the revenue, EBITDA and profit before tax of INR 263 million, INR 18 million and INR 18 million, respectively. On our stand-alone business, excluding EPC contract, during quarter 1 FY '22, the company's revenue grew by 14% Y-o-Y to INR 3,740 million. The company reported EBITDA of INR 778 million with an EBITDA margin of 20.8%. On our stand-alone business, including EPC contracts, during quarter 1 FY '22, the company's revenue surged by 14% Y-o-Y to INR 4,003 million. EBITDA stood at INR 796 million with an EBITDA margin of 19.9%. PAT during the quarter stood at INR 305 million. This is all from my side. Thank you, everyone, for your attention. We can now begin with the questions and answer sessions.

[Operator Instructions] The first question is from the line of Pratiksha Daftari from Aequitas.

My first question is, if you could tell us for cable TV, what was the ARPU in this quarter? And if you could explain the subscriber decline that we had and how do we see things currently?

This quarter, the ARPU remains same. If you do the calculation, you will get it at INR 122, INR 122-point something. So the ARPU is flat this quarter. This quarter, we have witnessed as the year opens and the COVID has gone into its highest numbers in April and May, and it was a difficult time for everyone, for every business. We faced that in cable also. We tried to maintain our subscriber bases. The main hit has come from the corporate subscribers, which was -- we are seeing that in the last quarter of last year, the corporate subscribers started coming back to our fold. And in April and May, we have seen that they have gone away again. And in June, some of them have returned back. We are hopeful that as the situation will improve, we will get back our corporate subscriber base and again, we will bounce back. So that's why you have seen that there is 200,000 subscriber base down. Some effect has come because of cyclone, which is Tauktae cyclone, which has hit the Gujarat and Maharashtra. And there is a Yaas cyclone, which has hit in the West Bengal market. Still some of the subscriber base, which we have -- which is still to come from because of these cyclones. So we are expecting that in the quarter 2, as the situation will improve, we will get back these subscribers who are still not back after the cyclone and plus the corporate subscribers.

Okay. So did we have any -- on non-corporate side, retail side, did we have any gross additions for this quarter?

Yes. If I talk about, we lost around 350,000, 375,000 in the corporate side. The retail side has gone up by around 150,000 to 175,000, between that, and the net figure is 200,000.

Okay. Understood. Okay. And this time, we've seen a pay channel costs as a percentage to our cable TV revenues have gone up substantially. So is there any change in our commercial arrangement with the broadcaster or by...

Pratiksha, you have to see pay channel cost in conjunction with our placement and marketing revenues. If you see the increase in placement and marketing and increase in the pay channel cost is similar, there is no impact on the gross margin due to the pay channel.

Okay. Okay. Understood. On the broadband front, I -- we've seen some decent growth on home pass additions this time. So do we expect like the trajectory to continue?

Yes, we are trying to continue this trajectory. This quarter was difficult for us on the ground. But still, we managed to do that, 230,000 home passes. And we are going to continue that.

And on the subscriber addition front, do we see the growth rate increasing or we -- how do we look at subscriber addition in broadband for this year, the remaining...

As in the last call also, we have given that we were going to add between 50,000 to 60,000 every quarter. This quarter, we added 55,000. So we are hopeful that the projections on which we are working or we have given, we are going to continue on that basis.

Okay. Understood. And any update on the litigation front?

Which litigation you're talking about?

DoT.

Okay. No, there is no update on the AGR side. There was -- court was not into the order. So no hearing has happened on those. So no...

When is our hearing scheduled, sir, right now?

Rajan sir, do you have the update on this?

Piyush, no updates as of now. I think you can offline update then, as and when the developments happen.

Yes.

Okay. And sir, on the EPC, I think can we assume that now all the revenue recognition for the EPC contract, excluding obviously the O&M is revenue recognition and expenses is done with?

Almost 98% is done.

Okay. Okay. All right. Now sir, a couple of data points. If you could share the receivable position as on June and the CapEx plan for the remaining of the year.

Receivables position is INR 352 crores. If you see quarter 4, we were at around INR 383 crores. The receivable has come down by INR 30 crores. It is at INR 352 crores around this quarter. And on CapEx, this quarter we did INR 82 crores of CapEx, of which INR 49 crores of CapEx is in the broadband and INR 33 crores of CapEx is in the CATV.

Okay. Sir, how much of the receivables would be from broadcasters? How much would be for EPC?

Broadcaster is around INR 165 crores and EPC is around INR 120 crores.

And are we facing any issues in receivables from the -- for the EPC contract?

No, no we are not facing any issues. If you see last quarter, we have given that we have INR 226 crores of EPC project receivables. Now it has gone -- it has reduced to INR 120 crores.

Okay. And sir, CapEx guidance remains the same for the full year?

CapEx, the projections which we have given, that we are going to do between INR 350 crores to INR 400 crores that is going to be remain same right now.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Some of my questions have been answered. Just a couple of things. Firstly, if I see the cable TV segment-wise result on a consolidated basis, year-on-year, the revenue has gone up. Even quarter-on-quarter, it has gone up. But cable TV PBT has not gone up in that proportion. In fact, quarter-on-quarter, it has come down by almost 5%, 10%. So what led to that? Is there any one-off or any cost increase?

PBT, if you talk about at that time, you can see that depreciation is going up as we are doing more and more investment. And one of the reason is, whatever increase we are taking in our revenues and all, that is coming down with the depreciation. So one factor is the depreciation, as you see. PBT has increased by -- if I compare it with the last year, quarter 1 FY '21, if you talk about, that is from INR 575 crores that has gone to INR 75 crores. I'll just give you the figure of the PBT. On the consolidated basis, if you see, quarter 1 FY '21, ex EPC, the PBT was at INR 56 crores. And if you compare it with the quarter 1 FY '22 ex EPC, PBT at INR 732 crores.

Yes. But predominantly, this increase was due to the Broadband business. I'm talking just about the cable TV business. So if I see there was almost 15%, 17% jump in the cable TV revenue year-on-year. But PBT in cable TV business has gone up hardly anything, like a couple of crores. And in fact, quarter-on-quarter, it has come down, cable TV PBT.

You have to see in a different way because the subscription of CATV is flat from last year. It was at INR 183 crores last year. This quarter also, it was INR 183 crores. But still, your PBT has increased by around INR 6 crores from INR 35 crores to INR 42 crores in the -- from the quarter to Y-o-Y basis. So the contribution on the PBT is happening. But yes, the revenue side you talked about, it has gone from INR 327 crores to INR 370 crores. But cost side also has gone up from INR 248 crores to INR 396 crores. You have to see the business in the basis of clubbing placement and pay channel together and see the net margins increase on that. So pure on subscription, it is flat from last year. But on PBT, we are getting around INR 6 crores of the PBT. So PBT is increasing. Still the revenue is same.

Okay. In terms of cable TV subscribers, so this year, obviously, due to the pandemic in Q1, it has come down. But over, let's say, next couple of years or 3 years, what kind of gross -- what kind of net cable TV subscriber addition we can expect, annualized?

So we are planning -- our planning is obviously coming 3 years, almost close to around 3 million. Each year, we wanted to plan to around 1 million. But yes, because of this pandemic, it's a issue. But our projection is year-on-year, it's 1 million every year.

Okay. Okay. And last question from my side was there -- how much we did spend on this appointing Boman Irani and this new campaign launch? How much we would have extra spent during this quarter?

It's hardly -- it's 0.5% of the revenue, which has gone into that.

Okay. Okay. And any update on hybrid box launch?

Yes. Hybrid box, we are launching somewhere in August right now. hybrid boxes already with us. It has got delayed because of the pandemic and because the shipment has got delayed. We got the shipment in mid of July now, and we are planning to launch in August. Everything is complete and the testing is going on.

The next question is from the line of Saptarshee Chatterjee from Centrum PMS.

Congratulations on a good quarter amidst the pandemic second wave. Sir, my question is on the broadband side. Most of the questions have been answered. On the broadband side, the ARPU has been INR 440, slightly around INR 5 lower than last quarter. Whereas, like, the -- we have expected trend to be higher because of you were upgrading the plants. So if you can give some color on that front?

Rajan, sir?

No, broadband, I think as far as ARPUs are concerned, I mean they have been pretty stable. And I think more than ARPU, we have been anyway indicating that there is no plan to ARPU increase. So ARPUs will remain, broadly speaking, stable. And quarter-to-quarter, they'll keep on increasing INR 5 or decreasing INR 5 based on the pack mix change. But I think, the bigger picture, which we have to see on broadband is GTPL is in a very sweet spot, which we have been updating you for the last many quarters, okay? In a state where only BSNL is a major competition and nobody has this kind of network, the amount of investment we have done in network in terms of upgradation from MEN to GPON and the kind of service improvement which we could exhibit both in terms of speed quality and overall network quality, okay? We are kind of in a sweet spot. That's where you are seeing these kind of results in a quarter-on-quarter in terms of increase in revenue, subscriber numbers, EBITDAs and without any disruption because of any other competition, actually. A, because ARPUs are low; and B, EBITDA levels are very healthy. You would have seen the EBITDA levels. Upwards of 40% EBITDA with this kind of ARPU. So essentially, that means that GTPL can keep on spending more and more within Gujarat itself, okay? And it's a very large state at a very affordable price point of INR 400 to INR 500 and keep on growing for many, many quarters to come. So I think that's a better way to look at it. Quarter-on-quarter, yes, there will be INR 5 variation here and there in the ARPU. So there is no change in plans or there is no drop in pricing, which has happened.

Sure, sir. And in the cable TV, like we have said that you are expecting around 1 million subscriber increase every year. So that will basically -- are we talking about expanding in market share out of this 170 million paying subscribers, right? So from whom we are expecting to gain market shares and majorly in which states, if we can classify?

We are expanding very fast in Maharashtra, Andhra, Telangana, Tamil Nadu and Northeast, plus we will add more states going forward.

And this will come from majorly our which competitors maybe, in the like DTH or mostly our MSOs only?

It is going to be a mix of that. We have, as in earlier calls, we have said that we have started the programs and through marketing, through direct selling, everything, to tap the DTH market and bring back them to the table. That is already going on in the strategy. Plus, there is going to be the strategy of consolidating the market going forward with the cable TV.

Sure, sir. Very helpful. And is it possible to give any color on the hybrid plans? Like what kind of ARPUs, margins, anything on that front? Anything?

We are going to launch very soon. It is hardly now 15 to 20 days, 2 to 3 weeks. I think it will be colored everywhere. So I will say that wait for 2 to 3 weeks more.

The next question is from the line of Kush Gangar from Care PMS.

So most of my questions have been answered. Just last. So with the current AGR case going on, recent -- I think yesterday, there was some hearing regarding some mathematical errors. Does that impact us? If you can just highlight on that.

No, that is for telecom, not for this.

It will not impact us.

The next question is from the line of [ Nikhil Jain from Jayalakshmi International ].

Yes, sur. Just one question, actually. So fundamentally, our revenues from -- if you look at Y-o-Y sales, our revenues have increased by more than 20%. However, our PBT has increased by only 7%. So what would be the major reason for that? So that was one. And second, is there any kind of indication or guidance from the management for the rest of the year say what kind of EBITDA margins we can manage? So whatever we are having now, would that be sustained? Or there can be a potential to increase in the same given the benefit of operating leverage? These are my 2 questions.

Yes. You're right that our total income has increased by 22% Y-o-Y. But the expenditure has increased by 28% Y-o-Y also. And thus, EBITDA has just increased by 8% Y-o-Y. From INR 126 crores, it has gone up to INR 136 crores. And that's why you are seeing that in the PBT, it has increased by around 30%, from INR 56 crores to INR 73 crores Y-o-Y. So these are the figures. And it's a consistent one. As you see that EBITDA growth, which is happening Y-o-Y is between 8% to 10%. And as we are reducing our finance costs substantially, we are getting the gain in the PBT. So that is reflecting here. That PBT has gone up by 30% Y-o-Y on this.

Right, sir. But the point was that, see, the finance cost has a limit, right? So we are already down to a good -- so we have reduced the debt significantly. So we can obviously looking to reduce it further and it will go down further. But the point was that if the EBITDA growth is going to be 8% to 10% in the business, which can be potentially, let's say, having good operating leverage. So I just wanted to understand is there any specific reasons? So what are the other activities that we are doing, which are, let's say, taking or reducing our EBITDA growth as compared to the top line growth? So that's what because finance costs will have a -- yes, yes.

Yes. That's right. So I will not go to PBT here. I will say that we are in the expanding mode, as you know, in the Broadband business also and in the Cable business also. When you are expanding, then you will have to do some extra expenses, which you have to take out, establish the market, we have to enter into the new market, establish the whole thing. So your cost increases at that point of time for, you can say, till the substantial number you gain, so that will cost goes down on those markets. So that is where we have to go and we are going aggressive in our new markets and bringing down because there is a fixed cost. As the number of subscribers will grow, we will get the more contribution towards your EBITDA. So that's what's the way we have to go, and we are doing it that way. As far as concern about the EBITDA margin, we are at around 23% EBITDA margin, and this will be maintained.

The next question is from the line of [ Mehul Chawla from RV Equity ].

Hello. Can you hear me?

Yes, yes. Please. Can you hear us?

I can hear you. Yes. So the question was basically that given that we are generating very good cash flow and we are now net cash, are you looking actively at any acquisitions, especially on the cable side of the business since you said you are looking at consolidation in that market?

Yes, we are working on it organically or inorganically...

Sorry to interrupt, Mr. Chawla, may I request...

Increase our subways inorganically and organically, both. So yes, we are working on the acquisitions also.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Yes. Just one question. One of our -- the competitor, Next Digital, they have this HITS model adding to satellite model. And recently, they have got the approval from the ministry that they can give the services to others as well. And they were mentioning that it gives -- it reduces the connectivity cost of the MSO, where there is a density of the population is very low. So they are targeting in the interior. So how does this can impact our business?

[Foreign Language] impact...

We are also trying to expand through -- by acquiring the more and more MSOs.

So basically, we are not in HITS model, but yes, as you said, expansion [Foreign Language] going forward, the fiber and lease cost and bandwidth cost [Foreign Language] down the line lease cost [Foreign Language] we are not going ahead with this HITS. But yes, now everywhere, even though under this digital India Bharat Net projects and all everywhere, fiber availability is there, all lease circuit are there. So everywhere is now ruler part is also we recovered everywhere. Rajan, sir?

Yes, Anu bhai, I just want to add to it. So ladies and gentlemen, first, let's understand HITS is not a new technology. It is not as a first year HITS has come. HITS has been existing for many years. And in spite of that, digital is only MSO, which is double space, okay, as far as cable TV is concerned, okay? Secondly, as part of our business vision, obviously, we have this whole convergence kind of as a part of the plan, okay? And with the kind of fiber we have in Gujarat and in many other states, specifically in Gujarat, obviously, it makes sense to keep on expanding broadband home passes and make sure consumer get both the services, okay? And -- because obviously, future is convergence. So while we keep on evaluating every technology and there is no permanent no to any technology, okay? But as of now, we are fairly confident we'll keep on repeating the past market share gains. And no -- and focus will be more on convergence and keep on taking broadband to more and more kind of homes in Gujarat and other states as well.

And yes, HITS is a one-way technology.

[Operator Instructions] The next question is from the line of [ Tarun Kumar from OSPL ].

Yes. Can you hear me?

Yes, Tarun.

Yes, I actually wanted to ask about the satellite broadband that is coming in as a new technology. Recently, there has been some articles about the same, and maybe Airtel is trying to do something in this space. So just wanted to have your understanding about this technology and the potential that it has and maybe we can tap into it?

Rajan, sir?

So again, satellite broadband, whatever information we have currently available in public domain or otherwise, okay, it's for a very niche kind of area. It's for areas where the regular fiber broadband is not easily reachable, okay? And -- because the kind of economics today fiber broadband has, as I keep on repeating, GTPL is able to give in a sub INR 500 pricing per month okay, without any investment from consumer. Consumer has to literally invest INR 0, and consumers can pay INR 500 and get 100 mbps unlimited broadband, okay? As per our evaluation, no technology currently meets that kind of -- it's not possible through any of the technology. So satellite broadband is a niche, okay? The kind of pilots also which have happened across the world, they're happening more for niche areas, areas where fiber connectivity is not easily reachable, and giving consumers access to high-speed broadband in those areas. And we are quite certain that the kind of value for money, this whole fiber broadband or active technology offers, that's not replicable currently by any technology.

Okay. So basically, right now, you're saying that what we have, like the fiber broadband on a cost basis is continuing to be superior than even the satellite broadband that is -- and they might be able to launch at the price different, right?

Yes. And most -- it's not a very recurring charges per month. Second is the revised charges. If you study -- like I don't want to waste time of everybody on this call. That's a separate topic actually. We can spend a couple of hours understanding that. The kind of consumer premises and equipment satellite broadband needs, okay? So it's not equipment. That's like the HITS technology earlier they mentioned, okay? And here, we are giving every day thousands of connections without any installation charges or deposit, anything from consumer. Consumer can pay and get INR 500, 100 mbps. That's simply not possible. There you have to put a lot of equipment at the consumer place and there are a lot of onetime charges, et cetera. So basically, the technology is not meant for mass markets like India or whatever it will be. Yes, there will be a lot of use cases which will come. And -- but that will be for only niche areas. Our focus in GTPL is obviously in the mass market.

Correct. Correct. So whatever market we are targeting is going to be unlikely that satellite broadband competes at house, right?

Absolutely. Absolutely.

The next question is from the line of [ Nikhil Jain from Jayalakshmi International ].

Yes. A couple of questions. So one was, let's say, the organization is owned 37% by Hathway, which in turn is owned by Reliance, right? So is there any kind of let's say, arrangement that we have for let's say, any kind of potential mutual collaboration that is there between us and the Reliance? Or the operators completely different entities altogether and compete in the same markets? And is there any benefit that is coming in from the shareholding or if there is not? So that was question one.

Yes. So GTPL right now is going ahead on their own strategy and own brand. And we are privileged that Jio is our partner, Hathway is our partner throughout. And the benefits you can talk about, the best part is all the benefits GTPL is getting, whether it is vendor negotiations, whether it is points strategy, whether it is content side, whether it is knowledge sharing and all. But yes, GTPL is working as independent on their own brand and own strategy. And there is understanding on the ground that we are -- as a group company, we are going to complement each other in the market, and we maintain that.

Okay. So does that mean that let's say, is there some kind of an arrangement on the ground that, okay, we will not be competing? Or we'll be competing as aggressively as we compete, let's say, with Airtel or let's say Dish TV subscribers and other people?

No. We are competing in the market, but we are not disturbing each other. If we have to do some work in the ground, we will do in the joint strategy, against the third player, and we will help each other to grow. So that is the understanding, and that is the market understanding on which we are working.

Okay. So that was first question. The second, I just wanted to understand how -- what are the -- let's say, and if it can be sent off line also, that is fine. What are the broadband customers and cable TV customers that we have on a state-wise basis? Because I was just looking at it, and we have now presented both things cable TV and broadband in, let's say, around 8 states and then another 5 or 6 states, so where we are presenting through broadband or through cable TV. Which states we are covering let's say the most popular 13, 14 states of the country, right? So I just wanted to understand, has management thought that what is the strategy of expansion for the management? So do we want to go into more number of states? Or do we want to consolidate our presence? Do you want to have a strong #1, #2 in many other states? Or we want to open more states let's say so some strategy some thoughts there.

One of the strategy of choosing the -- going into the market, GTPL always believed that whether it is cable or whether it is broadband, it's a density market -- on the way of density market business. So whichever city or whichever area you go, you have to be the dense subscriber base on those areas. See, in the cable, you can go on the strategy basis of the whole state, you can go on the strategy basis on 5 cities or you can go on the strategy of having 10 districts. But whichever way you go, you have -- you should have the density, and you should be #1, #2 player in those areas, in those distracts, in those state on those levels. So state comes in the last. You have to understand that when you are entering into a new state, first, you have to go for 2, 3 districts and you will make yourself #1 on those districts first. And then you expand in other districts and slowly, you become #1, #2 in the home state because cable or broadband is a local business, you can say. It's not like global that wire. That's how you have created 1 infrastructure, and it is whole for the state. No, you have to incrementally create your infrastructures and go for the business. But yes, this is sure that wherever GTPL is going, we go in the way that we should be #1, #2 in the short period, and we'll start making money on those markets.

Right. No. So that's the right thing actually for that is what I also believe because somewhere when I look at the number of states and these are very popular and very big states, I get a feeling that, okay, are we spending ourselves too thin? But thank you for the clarification. So can I assume then that when we are going in Andhra or we are going in Telangana or in Maharashtra or any new state, We are focusing on a district by district and trying to make money and trying to consolidate ourselves in that before expanding to the entire state, right?

Yes, that's right. That's why I'm giving that every time the statement that we are expanding very aggressively in Maharashtra, Telangana, Andhra, Tamil Nadu, Northeast because we have still to cover a lot of districts on those states. So that's why we are expanding aggressively on those markets. If you talk about Gujarat, we are already in all the districts in Gujarat, already present, except 1 or 2, which we are going to expand. But if you talk about Maharashtra, Telangana, Andhra, Tamil Nadu, Northeast, still a lot of districts are there where we can expand. And that's why this statement is that we are aggressively expanding in these markets.

Right. So just one last and maybe just pardon me if it is not so correct. But the point is that should we not actually go 1 state by 1 state? Should we actually go consecutively or together in 5 states or 6 states, or maybe a little bit more actually, right?

It is a strategic question. I think we should take it 1 to 1. It depends that what company is taking this strategy and how -- so this is a strategic question, sorry.

[Operator Instructions] The next question is from the line of Riddhima Chandak from Roha Asset Managers.

Sir, my question is on the CATV side. So basically, in this quarter, what leads to the reduction in the CATV EBIT margins on a Q-o-Q and a Y-o-Y basis, both, even after increasing this revenue?

Yes. So if you talk about just CATV, we are down by around INR 1 crore at the EBITDA level from a Y-o-Y basis. And that is mainly because the subscription CATV is a bit down. And the second is your activation revenue. The deferred revenue of activation is reducing. And that's why if you see, there are INR 6 crore of impact on the activation revenue. But in EBITDA, the impact is just INR 1 crore.

Okay. Is there any pressure on the pricing also, nothing like that?

No. No pressure on the pricing. As I stated that we will -- the ARPU is maintained. And whenever we get -- the situation improves in the market, then we are going to increase the ARPU.

[Operator Instructions] The next question is from the line of Miten Lathia from Fractal Capital.

Miten here. Just wanted to understand in terms of the incremental home pass that we are doing now; where is the proportion of overlap on our cable business? So I think you've answered this last time, but are we deviating on that at all or no?

No, no, we are not deviating. Our stand is, as -- Miten, it is clear from the beginning that for doing the better ROI, we are riding on our Cable businesses for giving it to the broadband services. And we are expanding wherever our Broadband business -- our Cable business is there, that to be in the broadband also.

And you don't see that changing for the next 3 years, at least? I mean you will keep on doing an overlap with your Cable business?

Yes. We are going to do those overlap. We are going to come with the broadband through partners. That strategy is everywhere. Already pilot is over. And we are going to launch that. But we are going to do through partners on our network only, on our cable network only.

So effectively, no greenfield area for broadband is being targeted?

Greenfield area is together, we are targeting for the cable and broadband, just like new building is coming, new areas are getting developed...

But it's the same state or same districts or same town. Yes.

Okay. So you may be in the process also expanding your geographical territory of your Cable business. That's what you're trying to say?

That's right.

That's already we are doing. We are doing it in our current states also and our new states also.

Fair. And sort of -- if one were to understand the incremental profitability of broadband, by looking at the numbers, we can get a fair sense. But if we were to just simply look at incremental EBITDA margins for a new subscriber added on the existing home pass, that would be at what number, sir?

If you talk about EBITDA, because it's not CapEx, CapEx is different. On EBITDA, if you say, it's around 42%, which is we are getting straightly incremental in our revenue.

That would be on the whole base per se, right? But on an incremental basis, it will be higher than...

Yes. On incremental basis, if you talk about that I'm adding subscriber base, where already I have subscriber base, then talking about -- we have created the...

Piyushji, in existing markets, essentially gross margin. So gentlemen, if your question is in existing home passes, we're already, for example, 15% penetration is there. And if we add another 3% penetration, how much will be the addition to the margin? Because fixed cost has already gained those market. So it will be basically gross margin is what will go to the kind of profit line. Obviously, below EBITDA, whatever lines are there, depreciation, et cetera, that will come. So gross margin is what will get added to EBITDA. And gross margin is typically most of the markets is more than 70%. I mean finally, above gross margin, you have passed of only bandwidth and money which we paid to channel partners in terms of participator commission or partner commission.

So 70% is the number. Got it. Understood.

[Operator Instructions] The next question is from the line of Dhruv Shah from Ambika Financial.

Sir, I just have one -- so I have a couple of questions linked to the one thing. How many of our 4.1 home passes would be coming from Gujarat?

Home pass is around 95% -- 90%, 92% is from the Gujarat.

Okay. Understood. The reason why I'm asking that question, sir, is because apart from Gujarat, your plans for broadband doesn't seem to be anywhere competing other likes, right? Because if you see your likes, your offering in Hyderabad, you are charging 100 mbps for almost close to INR 850, whereas Jio is charging only INR 699. So apart from Gujarat, why is our offering really not competitive?

So basically, majorly, our focus on B2C is only on Gujarat. Other states, our plan to go ahead with our business partners, like our joint venture partners or our partners and all. Hyderabad market, it's a B2B. Yes, it's B2C subscribers are less over there. So still, we are working with our business through partners, business partners. And surely, we will replicate what we are doing in Gujarat. So that will happen.

Even if you work with your business partners, but we don't have any say in the kind of offering we have because if you see in Nagpur, our maximum offering is 50 bps, and that too with a 15-month period and INR 480 per month Whereas...

So Piyush, I'll take this question. So gentlemen, some of our colleagues having installed itself spoke about focus, right? So if you see last 12 quarters, what we have been talking about here in this call, that we have limited capital. We'd like to use that capital in areas where we can get maxim ROI, okay? So around 12 quarters back, we identified Gujarat as the market where we have dominant leadership in cable, where we have excellent trade relationships, where we saw a sweet spot that apart from BSNL, no other large telco is able to do any substantial wireline and broadband business, okay? And we all agreed that right from doing IPO time, that this business makes only money if you are #1 or #2, and below a particular volume threshold in a particular market, okay, which is why we said Gujarat has a huge amount of home pass available, okay? And the way our unit economics work, even at an average ARPU of 450, we make greater than 40% EBITDA, okay, which is where -- and to offer 100 mbps, you will first upgrade the network from MEN to FTTX. And every quarter, like some of us spoke about additional depreciation, et cetera, because every quarter, we have been spending money on upgrading network as well as creating new network in Gujarat market. We haven't even exhausted that, okay? So you're right. One can go to Nagpur, one can go to Hyderabad. Hyderabad already has 3 players. It is a very developed market where no net adds at market level are getting added. Hyderabad already has more than 11 lakh, 12 lakh wireline, broadband consumers who are getting at a very affordable price, 100 mbps speeds, okay? Now identifying through our channel partners some gaps, for example, say outskirts Hyderabad or Warangal where quality broadband service is not available. And over a period, we can develop that franchise as Piyush is rightly mentioning. But frankly, our prime focus will be in markets where we can be #1 player, okay, and where we are the first entry. And that's where you can make even at a INR 450 price point greater than 40% EBITDA. So while some work here or there will keep on happening, but I think as a strategy itself, the focus is on Gujarat at least for the next few quarters, where there is still a lot of there. So we can go anywhere, but it's more like management deciding to kind of focus on areas where, first, we can be a market leader, we can be the one who creates the market and then we can kind of be a dominant leader there.

Right. So apart from Gujarat, sir, if you can just -- if I can just elaborate on that, which is the other state which you're looking to expand apart from Gujarat?

Right now, the major focus is in Gujarat. We are present in Patna, Varanasi, Jaipur, Nagpur, Pune and Hyderabad. But these are the small operations. We are going to concentrate on these markets and develop this market as the CapEx and all those things permits. But yes, these are the 6 focus market right now where we have entered, and we are going to go that with the time.

Okay. And sir, my next question is, Is there any inorganic opportunity in the broadband space? You have alluded to the fact that you were looking for inorganic opportunity in cable TV. But are there any opportunities on the broadband space also, which you will be looking at?

[Foreign Language] ISP. I think it's a 5,000, 10,000 [Foreign Language] Gujarat, [Foreign Language]

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

Thanks, everyone, for joining the earning call of FY '22 quarter 1 of GTPL Hathway Limited. Be safe and healthy. We will meet again on the next quarter earnings call. Thanks a lot.

Thank you. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.