Hindustan Media Ventures Limited (533217) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. This is Aaditya Mulani from the HT Media Group. I would like to welcome you all to our quarter 1 financial year 2023/'24 earnings webinar. [Operator Instructions] I now hand over to Ms. Anna Abraham, Head of Investor Relations. Thank you, and over to you, Anna.

Thank you, Aaditya. A very good afternoon to everyone. On behalf of HT Media Group, I welcome you all to the earnings webinar to discuss the financial results of the first quarter for Hindustan Media Ventures Limited, which is what we had yesterday, and HT Media Limited, which was released earlier today. On the call with me today are Mr. Piyush Gupta, Group CFO; Mr. Pervez Bajan, Group Controller; and members of our Investor Relations team. We will be now starting our presentation. Hope it's visible to all of you. This presentation and the financial statements are available on Stock Exchange websites and the Investor Relations section of our company website. On your screen now is Slide #2, which captures the disclaimer regarding forward-looking statements. As a practice, we do not provide specific revenue or earnings guidance. Kindly keep this in mind. Moving on. The next slide gives our Chairperson's comment on the performance of the company for the quarter, and I quote. "Overall, our performance in Q1 23'24 has seen an improvement. While revenue is muted, profitability has expanded on the back of continuous streamlining of costs and the easing of commodity prices. Circulation and advertising grew on a Y-o-Y basis in print, while in radio, non-FCT and value-added solutions drove the growth. Rising media spends by companies, growing consumer demand, more government spends, and a relative easing in inflationary pressure all auger well in the near-term for Print, Radio and Digital sectors of the M&A industry, which should benefit your company. We are focused on working towards achieving profitable growth in our core businesses while expanding into new areas, such as OTT. We remain committed to our journalism, while continuing to provide credible and insightful news and analysis to our audiences" Moving on to the agenda for today on Slide #4. We will begin the performance update commenced on our consolidated financials for the first quarter. This will be followed by detailed remarks on Print, Radio and Digital businesses. We will open for Q&A after the presentation concludes. With that, I hand it over to Piyush.

Thanks, Aaditya. Thanks, Anna. If you may just track the presentation. Our consolidated financial results, total revenue came at INR 445 crores, a growth of 3%. EBITDA at INR 27 crores is a growth of 250-plus percent. Margins, therefore, improved from a negative 4% to a positive 6%. Our PBT came in at a negative 21%, which is, however, an improvement of 68%. And PBT margins at a negative 5% from a negative 15% same period last year. Cash still remains a healthy INR 900 crores. Sequentially, our revenues declined by 10% and our PBT improved by 39% from a negative 34% to a negative 21%. Moving on. On the Print business performance, our Ad revenues came at INR 244 crores, which is a growth of 2%. Circulation revenue came at 4% growth at INR 60 crores. Operating revenue was INR 324 crores, which is a decline of 7%. Operating EBITDA was flat versus the same period last year at INR 2 crores with the margin at 1%. Primary reasons are given at the bottom of the chart. Ad revenue growth for the quarter is basis Y-o-Y basis supported by better Ad volumes. So the volumes have come to a prepandemic level. Circulation revenue rose on a Y-o-Y and a quarter-on-quarter basis owing to healthy realizations per copy. Overall operating revenues saw a decline on account of a one-off other operating income in the base year. And operating EBITDA was marginally positive. Having a quick look at our English business. Our Ad revenues on a Y-o-Y basis grew 2% from INR 127 crore to INR 130 crore. On a quarterly basis, they came down 16% to INR 130 crores. Circulation revenue on a Y-o-Y basis was 53% because of active realization per copy actions. And Y-o-Y -- on a Q-on-Q basis, they were flat to a marginal decline of 2%. And circulation revenue improved Y-o-Y due to improvement in our realizations per copy and Ad revenue grew Y-o-Y basis, as categories such as, education, retail, real estate And grew while FMCG auto remained subdued. A quick look at our Hindi business. Our ad revenues were up 2% at INR 115 crores. And on a quarterly basis, they were flat at about INR 115 crores versus INR 116 crores last quarter. Circulation revenue on a Y-o-Y basis were down 6%. On a quarterly basis, they were up 2%. And key highlights for the quarter, Ad revenue grew Y-o-Y primarily supported by higher Ad volumes. On a Y-o-Y basis, categories such as retail, education, auto, health care grew, while real estate and BFSI was subdued. Circulation revenue saw growth both on Q-on-Q basis, backed by higher copies. Radio. Our operating revenue grew by 4% and came in at INR 35 crores, and our operating EBITDA was virtually flat at about INR 2 crores. Margins remained flat at 6%. On a quarterly basis, sequential basis, it's a 5% decline on operating revenue and our operating EBITDA, it's a 182% growth. And key revenue growth on Y-o-Y basis is led by non-FCT segments, which is basically on air and on-ground events and various other integrations with our on-air activities. Operating activity has improved for same quarter last year. The Digital segment, our operating revenues came in at INR 36 crores, which is a decline of 9% and operating EBITDA at a negative INR 17 crores, which is a decline of 100%. Operating EBITDA margin came at a negative 48% as against a negative 22% same period last year. On key highlights, quarter-on-quarter revenue growth with improvement across all digital segments in Digital and increase in EBITDA losses owing to investment in new businesses. With that, we come to the end of the presentation. We now -- I hand it over back to Anna.

[Operator Instructions] The first question is from the line of Kaustav. Please introduce yourself and ask your question.

Can you hear me?

Yes, we can now. Please go ahead.

I'm from BMSPL. It's a family office. So I had a few questions regarding the Hindustan Media Ventures business. So your cost of goods sold has moved up from about 32% in FY '21 to 44% in FY '23. Now the global pulp prices are coming down. So I wanted to really understand, could you explain to us how sustainable is this trend is from how you are seeing it on global pulp prices coming down? And also, how much inventory -- what is the inventory days for you? How much inventory do you hold of high-cost paper already? And -- so basically, what I wanted to understand was how do you see gross margins going into FY '24? And then the second part of the question is, we're going into election here. So since we are going -- since FY '24 is we're getting closer to elections, how do you see in this Print business revenue growth in terms of circulation and advertisement revenue?

Well Kaustav, on the first part, we definitely see the gross margins expanding from here on. The pulp prices and indeed the newsprint prices have been now coming down for like 3, 4 months. And we don't go very long in a commodity cycle, which is coming down. We don't stop very long inventory. But our inventory prices will, in production, start coming down now. So you will see the margin expanding from here on. And we are not sitting on a very long inventory pile as well. So that's point number one. On the election year, of course, there will be election revenues, which will come. And I think right from the festive, which will start, let's say, in late September, October, right after election, I believe the revenue outlook should be reasonably buoyant.

Fair enough, I understand all these points you mentioned, but the main -- and I know you don't give guidance, but could you give some sort of indication as to how can we get back to these high single-digit EBITDA margins, not including other income?

Only 2 things, Kaustav. So let me -- okay, so let's brainstorm this. You're absolutely right. I think it's a great question. So one is obviously the commodity prices. Now newsprint, depending on the price of the newsprint, it constitutes anywhere between 30% to 40% of the bill of materials, depending on what the commodity prices are. As it is coming down, obviously, it will expand the margin. The only other thing is, which I've been highlighting on the calls earlier is the pricing. Now as you are aware that the volumes have come back, if you look at the industry volumes in Hindi, in languages, in English, most of the volumes are now back to pre-pandemic levels. However, the pricing is still a challenge. I mean, depending on market to market, in some markets, pricing is as low as 65%, 70%, whereas in other markets, it's 80%, 85%. We've started a very aggressive pricing program. But as you can understand, pricing is a competitive activity in the marketplace, but we are very hopeful from now to the balance of this calendar year itself, we should reach substantial pricing at the moment pricing comes and pricing falls directly to the bottom line. So without other income, there are only two levers. One is the raw material prices, which you have a better sense than I do, and the pricing, which I'm telling you that we've instituted a program which should help immensely. But it will not be a flip of a switch. I mean, we have started this program two months back. We are trying to push that number as much as possible, but it's a competitive market. The only good news is the volumes are back, it gives us confidence to undertake this journey. Last year a same time, we didn't have the confidence to hit the pricing pedal because the volumes weren't back then.

Okay. Great. And just last question, if you would allow me. One of the biggest concerns when we talk about this company is that you've got a lot of cash lying on your books and you don't use it. So is there any update on utilizing the cash on the books?

Kaustav, I have no fresh information to give on that side. The only point I can say and people can see hindsight is 2020. We've seen the start of the pandemic to the end of the pandemic. I think that cash held us in very good stead because the revenues collapsed the way they collapsed and it took more than 18 months for them to anemically start building back. But at this point in time, I don't have any fresh information to give on cash.

The next question is from Mehul Parikh. Please introduce yourself and ask your question.

Hello. Good afternoon. I'm an individual shareholder. My name is Mehul. So I had basically 2 questions. One is that in OTTplay, our online OTT aggregator app, there are other players like Tata and all DTH players and broadband players who already have a customer base. So what makes us so confident that we have a right to win? When I mean right to win is being the top 2 players in the country. What gives us that confidence and -- but the plan that we will be there? Second question is that we have basically 4 or 5 live digital projects, one of them is Slurrp. So when do we expect this kind of this business to become cash positive?

Okay. So let me first address the OTT players. So you are right, there are players in the market. But what OTTplay is trying to do is aggregate the OTT so that people seamlessly can move to a certain genre and seamlessly with a single sign-on at a discounted price, watch the content that they want to watch, irrespective of the platform that content is posted on. So the DTH players or the other broadband players, some of them, DTH players are definitely having their own proprietary app on which they are working. But what we are trying to do is aggregate the market. Now of course, there are a few aggregators as well. And this is like aggregation has happened in various places, we are trying to aggregate the OTT because that's a big theme, which is going in that content is now really, really growing at a speed of 18% to 19% annually and scheduled to grow like that for at least the next 5 years. Now what will come out of it, we are approaching that from a multiple price points. So there are markets like Delhi, Bombay and Bangalore whereby a lot of people have subscribed to multiple OTTs and paying that subscription. So if you do the sum of parts, the kind of OTT platform that you're getting, the single login and the single subscription is at steep discount to what you would otherwise have to pay to get access to all the content. So it's an aggregation play, right? And it can be directly compared to what Tata or various other people but there are other players. So yes, we wanted to say something. Go for it.

I Understand that model of the business. What I'm asking you is that like, for example, Tata Binge is offering 27 channels, similar packages aggregating the OTTs together. So a lot of people are moving. I keep getting Airtel messages regarding a kind of aggregate or discounted pricing. So basically, all of this have legitimate customer base, which is already a part of their viewership. So what makes us stand out that we will corner a market share there?

Well, I've never said that we're going to corner the market share. I'm saying market is good enough for more than one player, right? So...

Yes. Yes. But can we be in the top 2 and what makes us there?

Yes. So please segregate the market in NCCS A, B & C, NCCS B&C market, there are a lot of people who are still through the cable, the cord-cutting still not happened there because either the broadband is not there and 5G is not reached there, et cetera, and they want to watch it on TV and maybe they don't want to take a Tata where they want to -- if the cable is not there. So we are trying to access a certain segment of the market whereby we can -- with the proposition that we have, tap the NCCS B and NCCS C market -- that I'm not even saying for a moment that we'll be going head-to-head against Airtel or a Jio who are bundling 15 to 20 app. I think that's not possible because they are basically bundling with their broadband stuff. So there is a separate section of market that we're trying to address. And I don't believe that the market will be saturated and won by a single player. So I think we have a right to win, but in a certain segment of market that we've kind of based our research carved out for ourselves.

So have we got -- have we collected some good numbers over the last 3, 4 months?

Well, last 3, 4 months have been slightly slow because some of our critical key partnerships that we are doing -- they are going some a little slow, but we've been also surprised on the positive side with the potential of doing multiple other value-added services with those Tier 2, Tier 3 town operators, whereby we can do certain more value-added services and take this slightly higher on the value chain. But I would say it's encouraging but not superbly encouraging at this point in time.

Okay. The second point was about Slurrp, those standards which are there, when do we expect them to become cash positive for us?

Slurrp is not taking a lot of money at this point in time. We don't even have investing too much money at this point in time. We -- you know that particular segment, that particular theme, I think, is a very relevant theme. Hence, we are still in a pilot stage. I don't think we have any ambition to scale up Slurrp at this point in time. We will see how it goes later on, but Slurrp is not burning a lot of money.

The next question is from Yash R. Please introduce yourself and ask your question.

Piyush, so my first question is with regards to the other income, which I can see has increased by quite a bit versus previous year, what is the reason behind the same?

This is -- yes, this is Anna. This is largely linked to treasury. Last year, same time, there were multiple rate actions, et cetera, which had happened, which therefore, there was a fairly high MTM mark-to-market losses that we had taken. In this quarter, on the contrary, now we are expecting the rate actions to kind of near a pause, and therefore, there is MTM mark-to-market gains that has happened. That's really accounting for the fluctuation.

Okay. And my second question is with regards to the employee benefits expense. Now I can see although there is a slight reduction, but what is the reason we had same versus previous year is what I'm talking about again?

There is actually, versus previous year, quite a substantial reduction, and that is on -- we do have certain provisions which have been trued up basis final payouts of variable, et cetera. So because of that, there are savings in the employee cost line.

Sorry. I didn't get the last part. This Is on account of?

So yes, it's Piyush. We've trued up the provisions, the unwarranted provisions have been written back.

Which were then Q1 last year?

So the variable payout which happens bases the performance, these provisions are trued up every quarter.

The next question is from Mehul Pathak. Please introduce yourself and ask your question.

Can you hear me?

Yes.