HT Media Limited (HTMEDIA.NS) Earnings Call Transcript & Summary

Good morning, everyone. I'm Amit Madaan from Investor Relations team, HT Media Group. I would like to welcome you all to the Q3 FY '21 Earnings Webinar. [Operator Instructions] I now invite Ms. Anna Abraham, Head of Investor Relations, to take forward the webinar. Thank you, and over to you, Anna.

Thank you, Amit. Hello, and good morning, everyone. I trust each of you would have had a great start to the new year. A very happy new year to all of you. I welcome you to this earnings webinar of HT Media Group to discuss the financial results for the third quarter of fiscal year 2021. Joining me today on this call is our group CFO, Mr. Piyush Gupta; CFO of HMVL, Mr. Sandeep Gulati; Group Controller, Mr. Pervez Bajan; and the members of the Investor Relations team. Our remarks today will track with the presentation on this Zoom webinar. This presentation has also been made available on the stock exchanges and the Investor Relations section of our website. Moving to Slide 2 of the presentation. As you are aware, we don't provide specific revenue or earnings guidance. In this context, I would like to draw your attention to the disclaimer regarding forward-looking statements on your screens right now. Kindly keep this guidance in mind for any discussions that may happen during the course of this call. Moving on to Slide 3. Slide 3 gives the Chairperson's comments on the performance of the company, which mentions a recovery in demand and advertising environment on a sequential basis, which has resulted in an uptick in our advertising revenue. Going forward, as the economic activity picks up momentum, we expect our businesses to do better. Moving on to Slide 4. This gives the agenda for today, which will be covered by Mr. Piyush Gupta. After his remarks conclude, we will open for Q&A. [Operator Instructions] With that, over to you, Piyush.

Thank you, Anna. Good morning, everyone, and wishing everyone a very happy new year. We'll be covering the third quarter FY '21 call. So the agenda is on your charts. If you just move to the next chart. So on the consolidated financial summary, as you can see, we've cracked Q3 of '21 and the same period last year. There's a 38% growth as far as the total revenue is concerned. As a corollary, therefore, the recovery up till 62% has already happened. If you remember, the first -- the second quarter was much lower. EBITDA is at INR 59 crores. So I'm happy to report we've come back to black and INR 59 crores positive EBITDA, which is a decline of 47%. Margins are also returning back to the last year's level, currently tracking at 15%. PAT also is at INR 9 crores, which is a substantial decline from last year, but at least it's come back in black with a 2% PAT margin. Net cash has improved versus the last year, and we are sitting on INR 1,043 crores. There's some commentary on the right-hand side, which I'd quickly like to point to you. A decline of 38% over the last year. There's a 30% sequential growth versus the quarter prior, which is something that I just articulated. On the cost front, all our efforts that we've been at since the start of COVID have led to INR 185 crores of saving over last year. On the profitability, there is a sharp turnaround in profit whereby we've got a positive shift of INR 74 crores in EBITDA and INR 50 crores in PAT over the last quarter. EBITDA margins at 15%, and we continue to maintain a strong liquidity position. Moving on to our business unit performance. Our Print business also did exceptionally well in these circumstances. The revenues came in at INR 236 crores, with total operating revenues, including circulation revenues, at INR 289 crores and operating EBITDA at INR 18 crores with a 6% margin. Versus the prior quarter, as you can see, there's a sharp increase in the Print revenues by 46%. The prior quarter was INR 162 crores. And operating EBITDA, which was a negative INR 4 crores, is now a positive INR 18 crores. As we can see, there's a sharp increase in ad volumes. At the industry level, the volumes have recovered, albeit the pricing is still under pressure. There's a strong recovery in circulation copy and return of operating profits on account of growth in revenues supplemented by continued cost initiatives. So some amount of operating leverage, which in the first and the second quarter we saw the business had lost, has started now coming back to the business. If I just move forward. A deep dive into the English business. In the third quarter, we came in at a revenue of INR 119 crores, which is a 47% decline versus a year ago and versus the prior quarter. However, it's a 56% growth. So you can see, the English decline versus a year ago is more than the blended Print decline, which means the vernacular or the Hindi is doing much better than English. If you look at circulation revenue, which is the chart on the right top right-hand side, we have the circulation revenue at INR 4 crores, which is a sharp decline of 76% because a lot of copies, which moved away, were line copies, and there's a mix change also. However, versus the prior quarter, we can see there's a marginal improvement. We have gained market share despite all the challenges in this environment. This is a very important point. I mean given the English markets are under much more pain than the vernacular or the Hindi markets, the big cities of Delhi and Bombay, where we are present, we have managed to inch up our market shares, which is a very healthy news I'd like to share. Growth in almost all categories over the previous quarter due to festive spend, led by retail, FMCG, real estate, luxury and e-commerce. However, as I said earlier, yields continue to be under pressure, and slowly and steadily, we are trying to inch up the yields, as are the other competitors. Moving on. A quick deep dive into the Hindi business. As you can see, the Hindi volumes are much better. So there is a decline of 23% unlike 46%, which we saw in English. On a quarter-over-quarter basis, there's a sharp increase of 36%. On the circulation revenue, there's a decline of 20% on a Y-o-Y basis, and on a Q-o-Q basis, it's a 3% better versus the prior quarter. This -- most of the ad volume growth is led by festive spending, as also the election advertising, which came in this quarter; sequential ad revenue growth, higher volume share versus last year. And these are the categories, such as auto, FMCG, retail and health. They have shown a good traction. Yield, again, remains in pressure in the Hindi markets as well. Quickly moving on to Radio. Operating revenue came in at 27% as against INR 50 crore same period last year, which is a decline of 45%. However, versus the previous quarter, it's a very sharp improvement of 78%. We are hoping that quarter-on-quarter, the strong performance or the growth pickup will keep on continuing. Margins. Operating EBITDA came in at a negative INR 16 crores versus a INR 6 crore positive same period last year. There's a decline in Y-o-Y op revenue on operating EBITDA as the industry is struggling post COVID, and yields are under tremendous pressure in the Radio business also. Sequential operating revenue, there's a 78% growth, which I've already highlighted, which is across all our stations. And we've seen a sequential improvement in our inventory utilization as well. With that, I come to the end of the presentation. We now open it for Q&A. Thank you.

Thank you, Piyush. We'll now begin the Q&A session. [Operator Instructions] The first question is from Vinit Manek.

This is Vinit Manek from Karma Capital Advisors. I had 2 questions from my side. So on the Hindi side, as you indicated that we have performed really well this quarter compared to the previous quarter. So can we consider this as a one-off quarter where we had some festive spends and election spends coming in? And will this taper off down in the coming quarters or we see an improvement and coming back to that INR 140 crores, INR 150 crores of revenue run rate for the Hindi business in the coming quarters? And how far are we from that?

Vinit, look, the festive seasonality is clearly built into the quarter. So that's, of course, going to taper off in the subsequent quarter. But the journey toward INR 150 crores, INR 160 crores is still slightly far off. So we will see some sequential growth because volumes are coming back. But the big black swan at this time is the pricing. So I think price is a slow build, which will take some time. So I think it will taper off a little, but I would still presume that the volumes will slowly keep on inching forward. I would also request my colleague, Sandeep Gulati, to share his thoughts because he tracks Hindi very closely. Sandeep, over to you.

You're on mute, Sandeep.

Sandeep, you're on mute.

Sorry. Apologies, sir. So let me add to what Piyush just mentioned. So overall, yes, we may see some tapering, but good news is, from a year-on-year perspective, we are continuously seeing an improvement. So even if we compare quarter 3 versus quarter 3 of last year, we have seen that improvement, and that's why you saw the revenues inching up. Even in quarter 4, that sequential growth is even -- so we are seeing January already. So we are doing better than that. So marginal tipping but -- tapering or -- but overall, we are doing better from a year-on-year standpoint. So recovery will be even better than what it was in quarter 3 from a prior year perspective. Hope that answers.

So Sandeep, just to understand, so is the small businesses and the regional businesses, who usually feature themselves in the newspaper ads, so these guys, their confidence in terms of the advertisement is in terms of volume that is coming back. Only the challenge for us is the pricing part to come back.

Yes. So that's exactly -- you stated it rightly. So the volumes have actually shown already quite some healthy signs, and it's just building up. Now how we slowly build up the pricing back on, that's what is going to be a work ahead of us. And good news is that we are all continuously moving in the right direction. So it's going to pan out well. That's the way I see it.

Okay. Okay. And second question is to Piyush. So Piyush, we have seen in the English side, some of our peers, who have been completely or they are more getting into these digital platforms, and they have a paid subscription like ET or some other newspapers, who is completely getting just on a paid subscription model, so how do we see Mint as turning for us? And like how is the subscription model working? And how big that can be for us in the next 1 or 2 years as we move forward?

Look, I think, Vinit, just break your question into 2 parts. One is, is the trend going towards subscription? I think at the industry level, the answer is an overwhelming yes. Everyone will have their own nuance whereby they will make 2 articles of free read and then you pay for it. Some will have everything. So there'll be a nuance to it. But the general trend is that digital is the way to go and subscription revenues are something that on the digital platform, readers are now getting used to paying. So all the publishers are going after that, including ourselves. How will that evolve? Anyone's guess, but I think the early signs that we have seen are very, very encouraging. So we've seen, especially for a publication like Mint, whereby for the quality of journalism that we put out together, there are a lot of people who attribute a lot of value to it, and they are willing to pay for it. And also, given that we have a strategic partnership with Wall Street Journal. And we are adding new products to our portfolio as we go forward. As you know, last -- we had announced the acquisition of VCCircle, that has its own good content, which kind of sits well with Mint readers. So all these things will come towards -- as a bouquet for all the readers. So subscriptions will definitely be going there, but how big will that become? Only time will tell. But with the market so profoundly changed towards digital with the advent of COVID, I think this trend will only gain strength from here on. I hope that answers it, Vinit.

Yes. Just one more thing. So like, can you give us on the numbers front some perspective that how are -- where are we in terms of subscription for these models currently in terms of numbers, so that we can...

Vinit, I don't have the numbers handy. Why don't you just shoot out a mail, and Amit will send you some details whatever we can, but I don't have it handy right now.

The next question is from Ayaz M.

My name is Ayaz Motiwala from Nivalis Partners out here. Just a quick question on Radio. There's a sharp improvement in revenues, but the EBITDA has barely improved by INR 1 crore. Can you explain that, please?

So let me give you -- Anna, just 1 second. Ayaz, thank you, and good morning, and a happy new year to you as well. Just a high level point, Ayaz. I think what has happened in Radio, if you just track the last 3 quarters, the revenues, obviously, post COVID went down very sharply. But if you just break down the cost structure of Radio, you will realize that more than 50% of the cost is regulatory and government-related costs, which is licensed station, Prasar Bharati, so on and so forth, which, obviously, the entire industry body is representing to the government to see what relief the government can provide. At this point in time, there is no relief. But on the other costs, which are basically within our control, the overheads and various other infra costs that we have, there's been a substantial work, which has been done. Now the operating leverage has come down so sharply because the government cost is not going anywhere, as the revenues build up, and you've seen a very substantial climb up of revenues in this quarter versus the quarter prior, my personal thing is that we will be able to attain a breakeven in the next few quarters. And if the government does decide to give some relief, that will be a cherry on it. But I would request my colleague, Anna, to share her thoughts with you.

Ayaz, I think Piyush broadly covered it. So it's really the fact that beyond a point, we don't have the flexibility of covering costs. There is also some amount of provision on receivables also that we have taken. But the larger point is the lack of ability to correct costs unlike in Print.

What is the write-off on receivables you've taken?

Well, I think we had put out a report in the public domain. It's not a write-off that we have taken. You know that investigation report, Ayaz, if you remember, we had already loaded onto the stock exchanges, and it's on their [ internet ] also. I don't exactly remember the number, but that was the last of it. We have just strengthened our policy, and we are providing for our debtors in a shorter period of time because that was one of the themes in tightening the governance standards that we had undertaken. So in this quarter, the provisioning policy has been tightened, and there'll be some incremental provision is what Anna is referring to.

Right. In terms of the Hindi, there's better progress than the English, the print side of the business. What would you attribute that to? And how sustainable is this sort of recovery. You...

The nonmetro presence, actually, Ayaz, because if you know -- the entire COVID and the related issues have far more accentuated in the metros and not so much in the nonmetro area. And therefore, the impact on Hindi, to start off with itself, is much lower than what we saw in English. And the recovery of those areas have been sooner than the metros as well. That's critically been the difference between the 2.

And my last question is related to things which are not in the quarterly announcement and a part of the presentation, but definitely a part of the business of the company and happened during the quarter, which is investments for -- ad-for-equity kind of investment that you've announced and that's there in the public domain. Piyush, it would be nice if you could throw some more light on that and the other investments that we've talked in the past in terms of real estate assets or office buildings, et cetera, just to sort of keep the continuity on understanding the...

No, fair point. Fair point, Ayaz. No, no, I think it's a fair point. Let me just give you some color on our ad-for-equity portfolio, Ayaz. As I've said in the past and I repeat again, ad-for-equity is a very important and a strategic pillar within the organization with really 2 -- in the 2 objectives for this business that we run. One is to basically get great investment whereby we can turn in a decent IRR for all our shareholders. So from our perspective, be it investment in real estate or in equity, we are perpetually trying to see whether we can get into conversations whereby we can take an investment position, which over a mid- to long term can give us more than decent amount of return to our shareholders in terms of IRR. The second objective here is to obviously extend the life of one print medium and to bring more advertisers onto our various mediums, including print, digital and radio. Now as you can see, the COVID times, if I were to just use that as an example, was a great time for us to go out in the market and have those conversations because a lot of businesses, the 2 that we have announced recently, we just named OYO and MobiKwik, some great businesses, the assets suddenly were available at a pretty decent price. And these are all consumer-facing businesses. So either for their corporate communication or for their brand positioning or for their new products and services that they are bringing to the market, a product like AFE sits very well with the strategic fitment of these businesses. That's where we take our investment position. And those are the 2 that we had announced, which are out there in the public domain. And we are perpetually looking at -- if the investment will grow as the business grows because we believe in the -- we believe that the world is not going to 0 with COVID. So with the revival when these businesses will revive, there's a strong push towards digitization. So payment gateways definitely will happen once the travel will start. Hotels, hotel rooms and various other products and services will come back. Now your second part on the real estate assets that we have, both office buildings and various other places, we, at any given point in time within our team, are looking at the most optimal economic rationale for driving value back to the P&L. Whether it is for using to our captive consumption, where we can give up our rented offices, whether it is for leasing and starting a leasing income on the P&L or for selling down the asset if we get good potential possibilities in the market. All those things are evaluated by our [ exit ] teams on a real-time basis. That's how we've been able to drive a lot of value in these things. Sometimes, of course, given the market vagaries, as you can understand, because these are housed in the operating companies itself, it can give rise to mark-to-market issues, which do come off and on, but then there are a lot of mitigants in the way these are structured whereby a lot of benefit comes back to the shareholder. And this has worked very well because this is a minimalistic cash or a cashless way of taking an investment position for long-term sustainable value creation. I hope I answered that to you, Ayaz.

The next question is from [ Mehul Pathak ].

If you go to point number four of the notes to the quarterly results that you have presented, there is a line which states that, pending requisite accruals, impact of the proposal scheme has not been considered in the above results. This is regarding the scheme of amalgamation under Section 230, 232. So what would be the likely impact of this amalgamation? Do you expect more write-offs? If you can throw some light on that. I have one more question. So you want to answer this one? Or shall I go ahead and ask the next one?

Anna, you want to answer this thing?

Yes. You could ask us the second, and then I'll take all the questions.

Second question is, I am not [Audio Gap] between HT Media and Digicontent. Who provides the content? Who pays whom? What is the nature of agreement? So for example, now digital, you are showing INR 25 crores and Digicontent is showing INR 70 crores revenue. So what is the revenue sharing agreement between the 2 companies? Who is responsible for building the digital brand of the company? Is it HT Media or Digicontent? If you can just throw some light on the nature of agreements and the responsibilities. Because HT Media itself creates so much of analog content. So if HT Media prints it on digital, then does Digicontent get revenue? I'm not very clear on how things work. This is not my second question.

Anna, would you like to take a dig at the questions, please?

Yes. So coming to the first question, all these legal entities are actually subsidiaries of HT Media Limited. And it is -- 6 of those, which are merging into one of those legal entities. And almost -- of the 7, almost 6 is 100% and 1 is 99%, and that's the shareholding. So to that extent, from a consolidated point of view, all the performance across the years have all been reflected as and when they happened. So from a consolidated picture, nothing is going to change. However, from -- the fact is that these legal entities will get consolidated. These -- other companies will go away. The -- for the resulting entity, there will be changes in the balance sheet position. The equity and net worth will reflect as a consolidation, all of that. So there is an accounting procedure which needs to follow consequent to any such scheme. But from a consolidated business point of view, since these are all subsidiaries, it's [ risen ]. And to your specific question, there will not be any further impairment on account of this activity at all because it doesn't change the status quo. It's just an accounting process, which has to be followed consequent to the scheme. To the specific question, I'll touch upon it at a high level. And Mehul, I think you've had this query. We can also fix up a separate discussion to kind of take you through the details. But the digital business that you are referring to as part of HT Media actually has nothing to do with the digital business that is part of Digicontent Limited. The digital business that we report in HT Media is Shine, and then there is a business which is -- which we call internally digital entertainment, which is largely related to customers contributing in channels like YouTube, et cetera, and there is a sharing of revenue which we get from Google and Facebook. So that's the only 2 businesses, which is there in digital largely in HT Media. And that is the revenue that you see in the segment results and the growth that you see in the segment results. DCL has 2 parts of the business. It's content business and the advertising business. The content business is all revenue that they earn from HT Media and Hindustan Media Ventures Limited for content provided to them. There is a content sharing arrangement, which we have talked about in the past. So both HT Media and HMVL pay for content that they get the HT Digital Streams, which is the 100% subsidiary of DCL. There is no reverse transaction. So it's -- because digital is the -- the content is generally generated digitally first and, therefore, it is done like that. And on the ad platform, the news platform of hindustantimes.com, the livemint.com and livehindustan.com are operated by the DCL and its companies. And the ad revenue that they monetize is all external, and that is the -- that is sitting only in DCL. So that is the arrangement. Now for any share -- so on the revenue side, it's only content, and advertising content is completely from group companies. Advertising is completely from external parties. There is no sharing of revenue. If there are any sharing of infrastructure, et cetera, there is standard -- related party arrangements to ensure that it is booked. So that's sum and substance of digital. We are happy to take a separate call with you to explain it in further details if you need any more clarity.

Anna, thanks for the very -- Mehul, can I just add a couple of comments, and I think Anna gave you a pretty detailed answer. But look, this whole legal entity amalgamation that we are doing is for simplifying our legal entity structure. Most of these legal entities had basically got added on to over the last many, many years when we were doing various other businesses in education, in some JVs that we were trying to do. Right now that they have outlived their utility, we are basically just doing a simple amalgamation, and it will not have a financial impact. These are all subsidiaries. And we believe that the outcome of the NCLT order should be with us in the next couple of months' time. As far as the Digicontent Limited, I think Anna has already said, most of our -- so the entire digital play of this group is in DCL for driving the digital part of the businesses on news and various other things and contracts awarded, like this thing. It's just the entertainment business in Shine, which is housed in HT Media for historical reasons. So I hope that clarifies.

Very clear. Just one small clarification on what Anna said. But HT Media itself generates huge amount of analog content. Now that analog content, if it is printed through digital -- through DCL and DCL earns advertisement revenue on that content...

It is not printed through DCL. It is -- that content is for the papers. It is because we -- see, the content which is generated for newspaper cannot be used in the digital platform because digital platform content by necessity have to be search engine optimized, short form, different -- which is more amenable to search, et cetera. So it's very -- so the news may be same, but then that is the standard. Like even HT Media or HMVL, all the news that they produce is not self-generated, right? We use Reuters and other new services also. So therefore, it is -- that is a normal wire kind of arrangement that you have, if at all news is done. But this is separate from that.

Yes. I'm talking about stable pieces. Stable pieces generated by HT Media, if DCL publishes, then what? I think you answered most of the question. So...

Yes, no, Mehul, I think the simple answer is most of the content is now generated within DCL, and HT Media, HMVL, et cetera, et cetera, are taking that content from DCL. I think that's broadly the simple contractual arrangement that these legal entities have done, but that's how we function it.

The next question is from Depesh Kashyap.

This is Depesh from Equirius Securities. So the first question is on the Radio business. If you can, please, give an update on the new music royalty rates as per the latest IPAB order? If you can quantify the impact of the new rates on your cost, that will be very helpful.

Well, Depesh, I don't have that readily available. We will send that across to you. We'll send an e-mail to you, Depesh.

Just roughly, like, initially, I think the cost used to be 2% to 3% of your revenue, right? But now will it increase? And by how much? Just a ballpark number will be helpful.

Depesh, I really don't have at top of my mind right now.

Yes, but it's not expected to be a substantial number, Depesh, but we will come back to you.

Okay. But this order is accepted, right? The radio industry has accepted the order?

That's -- yes. Yes, that is the understanding we have.

Okay. Okay. Second question is the newsprint costs have risen very sharply recently. Can you please quantify the increase? And what is the outlook on the same?

Okay. Go ahead, Anna.

So we have currently not seen a major increase in our cost. So quarter 3 is almost at quarter 2 levels only. Having seen -- having said that, in the market, for the domestic inventory, et cetera, there is an increase that is being talked about. So we could see something in quarter 4. But as of quarter 3, we are currently not seeing a major change.

But at the current price, if you can -- INR 35, INR 36 per kg, is that the current price?

34,000 is -- 300 is what we kind of had for quarter 3.

Okay. Okay. And now the increase is around 20%. Is that understanding correct, the market rate?

Well, it's anyone's guess, but we're also hearing same things. The increase is going to be pretty substantial between 10% to 20%. Right now the big problem is also happening because the domestic supplies are not available because of shortage of O&P.

The next question is from [ Mohit Kumra ].

I have 2 questions. One is going back to this whole digital venture investment thing, which is happening in the company. This started off as a trickle, but a lot of money is being invested, like, this is turning into a SoftBank sort of situation. You have invested in OYO, ReviewAdda, MobiKwik. So what -- do you have a game plan? Like you have INR 1,000 crores in cash. I'm only speaking about HMVL right now. Is there some thought behind this how much you -- these are very risky assets. I hope everybody agrees. So do you have any thought process as to how much of this INR 1,000 crores of excess cash you want to invest in these sort of private equity sort of ventures? And what is your game plan on this?

So Mohit, thanks. I think I'll just repeat myself. One of the -- I think Mehul asked about this thing, but let me just repeat it. All these AFE investments, unlike SoftBank, who's investing cash, we are not investing cash. These are AFE platform basis investment, which is cash neutral. It is just giving us an investment position in view of advertising that we are giving to these consumer-facing companies. So this INR 1,000 crores of cash, will it go down by the investment? The simple answer is no. So I hope you understand the structuring how this works, Mohit.

If I -- I think I don't then because I read on some public forum, for example, that you have invested INR 55 crores in OYO, for example.

Yes. So Mohit, let me tell you, first of all, I don't think these e-mails -- I think you should pick up too many of the social media...

I'm not on social media till date. I am talking about these half-respectable sort of news outlets on the Internet...

All right. Okay. Fair enough. So Mohit, let me just delve into the structuring. What typically you can conceptualize that in your mind is, and I was just explaining that to Mehul also earlier, we use these investments to take an investment position of INR 54 crores in OYO. In view of that, we give them an agreement whereby INR 50 crore worth of advertising is put in from our side in view of INR 54 crores worth of equity that we -- equity position that we take in a company like OYO. So from a cash position, we are neutral, and it really is not a drain on the company's cash pool. So therefore, that SoftBank kind of a position -- and we understand the asset class is very risky, so that Softbank kind of a position does not happen. But what the media picks it up and some of those media outlets report only one side of the transaction, and hence, your question. But so that you are clear, I would like to say that 99% of the time, most of these are cash-neutral transactions. I hope that clarifies.

So essentially, you are buying free call options, like...

Exactly. If you want to use the financial services term, you can call it a free call option. Absolutely.

Okay. So I'll end my first question by saying that I'm shocked that your company is trading at 1/3 of its cash value on the exchanges. Anyhow...

And I would actually like to echo that sentiment. Absolutely.

Okay. Since you are echoing that sentiment, also, I think great investors like Munger and all say that it's not the management's duty to see the day-to-day price of your stock, but you should do something about the overall long-term price levels, and you can't do something about it. Anyhow, I will go my next question now. This is regarding the intercorporate deposits on your balance sheets. This is going up at a very fast rate. It was INR 60 crores in March, it's INR 97 crores in September. Who is this money going to?

See, all of these are going to -- a simple answer before Anna wants to give some details. Simple answer, Mohit, this is precisely the reason we are clearing up the legal entity structure that we have because what has happened over the past is with a multitude of legal entities, we've been forced to have financing through intercorporate deposits. Now once most of these will get cleared out, all these intercompany financing will get cleaned out. We're just waiting for the court order.

The next question is from [ Yash R ].

My question is with regards to the staff cost, the employee cost that you're seeing an increase in HMVL and HT Media as well. Is it on account of an increase in headcount? Or have the salary costs been or the salaries been restored to pre-COVID, somewhat in that direction? Or is it because of the exit pay because of people or some employees are being let go off? This would be my first question.

Sequentially, the cost increase you are seeing is because there were -- consequent to certain actions that we decided on the employee pay, there were some reversals sitting in the earlier quarter.

So I'm sorry, I didn't get that part.

So let me clarify, Yash. The INR 32 crore number that you are sequentially seeing from the quarter prior is an artificially depressed number because there were certain write-backs sitting there, which were not required and hence, those were written back. But if you see on a Y-o-Y basis, you will see that at a group level, the cost has gone down very substantially. And the answer to your second question, whether we have restored the salary back to the pre-COVID level, answer is currently no. But these are just the true-up of numbers, which sequentially are giving you a picture. I would suggest that to look at the employee cost, I think just have a look at the Y-o-Y number because that will give you a correct cost because costs have gone down very sharply.

Okay. And what do you see in the quarter going ahead?

Costs will be flat to declining. We are not building up any cost. Of course, with the advent of the new fiscal year, the salaries will be restored and various other people actions will be taken. Most of the cleanup on the cost side are -- looking at the people template, most of that work has already been done, built into the recent numbers. You will see the fourth quarter number at the same level or thereabout. It's just that whatever the fixed to variable, et cetera, that we had converted, depending on the performance, we will take a final call only after the year-end. And if those payouts have to happen, those costs will be charged back to the P&L. But structurally, we're not taking the cost up at all.

Could you help us with the headcount for HMVL and HT Media?

Well, we don't give the headcount number, but I can tell you...

We don't have the data for right now. But in the annual report, we would have given some data. If you want more recent info, we'll have to come back.

We'll have to come back. We don't give it in the UFR, but I can only tell you, post the employee rationalization exercise, 5% to 10%, if not more, and I don't have exact numbers, of people were separated. So those headcounts have already come down quite sharply.

Compared to what was given in the annual report in March?

Absolutely.

The next question is from Deepan Sankara Narayanan.

Just wanted to understand how FY '22, how are we looking at? So are we expecting revenues returning back to FY '20 levels? And also how has been the recovery rate for advertisement from particular segments, such as government, real estate, education and local retail markets?

Well, the simple answer, Deepan, is some of the sectors you'll have to go in detail. I mean the local markets have been more resilient than the national market. So the big corporate advertisers have still to come. I think that's slow. Government has been off and on. If it's an election year, we've seen some advertising coming from party and government. And some social COVID-related ads which came, but the government has been slow. They gave us a price increase of 25% 2 years ago, but they've shunted down the volume more than 50%. But the local is more buoyant. Will FY '22 be as good as FY '20? Only time will tell. The volume recovery clearly is on that track. But our single biggest problem is on the pricing and the yields. I think that is taking some time. I am reasonably hopeful and cautiously optimist that in FY '22, we will be able to get reasonably decent pricing. Now will that be equal to FY '20 or in that ballpark? I really can't comment on it. Yes. I hope that answers.

Okay. And also, are we seeing the structural ad cycle going down for print media, continuously losing market share to other mediums? Are -- as GDP increase back to normal levels and then 1 or 2 years down the line, are we expecting some growth to come back in the print medium, overall sector as well?

Yes. So look, I think GDP, if you've seen the latest number, I mean, at 7.9% decline versus the 24% earlier, has shown a strong rebound, but there are always big parts -- there are multiple moving parts as far as the macroeconomic is concerned. But as far as the consumer sentiment of -- companies which have a consumer interplay are concerned, I am a very big optimist that there is a lot of demand. We've seen on the essential side in COVID times, companies into essential foods and those companies really get the benefit of it. And I'm talking about P&L, not valuations, valuations all start-up and all those things. But I believe that if Indian economy is headed towards where it is headed, there can't be a situation whereby the media expenditure will be 0.1% of the GDP. It's never the case. India's total media expense as a percentage to GDP has been quite stagnant for quite some time, though pre-2018, if you look at it, it was constantly inching up. I believe that inching up will start. This is a reset which has happened with COVID. But if you are talking about the midterm of 2 to 3 years, I'm absolutely hopeful it will go up. Now whether it will manifest in FY '22 or '23 is anyone's guess.

Okay. Okay. And lastly, as we are discussing that newsprint prices currently has gone up, so do we have any scope for reducing newsprint consumption through pagination or reducing import mix? Otherwise, our gross margin will tend to get impacted over medium term.

Yes. Deepan, I think we are doing all of this, but I will request my colleague, Sandeep, to share his thoughts because there's a lot of work which is going in this area already. Sandeep can give you some more detail. Sandeep, would you like to bear on this one, please?

Sure. So if you look at the gross margins and the kind of recovery which we have done this quarter, and on Hindi side, it is even better than prior years, actually, not only prior quarter. That's the way it has been. And the costs have been kept under quite tight control. We'll continue to see how the situation is overall evolving and then accordingly keep making those choices. But we don't see structurally gross margin going -- dropping sharply going forward. So I think we are in a good zone. And again, it is going to -- how the situation evolves, that's how we will keep taking the calls. And -- but we -- from an operational standpoint, we have a very tight controls kind of to run the operations properly.

The next question is from [ Dharmesh Sangoi ].

My one question is, you've done fantastic on the cost front and the results have shown that. On the other expense, last time, you mentioned that 50% of the other expense is sustainable going forward. And we have seen it. Now, this quarter also, the base is -- in the stand-alone results, is around INR 104 crores of other expense. So will it -- can I assume this will be the base going forward now, 10 -- INR 100 crores, roughly, per quarter?

Okay. So let me just -- okay. So I think Anna has answered this thing. But broadly, in the other expenses, INR 104 crores number that you're saying, I think is broadly sustainable for the very simple reason, various cost-saving initiatives, which were kick-started on the infra side post COVID, et cetera, will all be sustained going forward, the renegotiations on various contracts that we had done. So all those things are absolutely sustainable, and I believe it will be in the ballpark, Dharmesh.

Okay. So INR 100 crore is what...

it is sustainable for this level of operations. Of course, if the recovery comes in sooner and then we need to take -- we will need to spend, then we will spend. But for this level of recovery that we have seen, it's sustainable.

Yes. So Anna, from Q2 to Q3, there was a sharp recovery that has happened, but on the other expense, we have not seen any growth. That's where this question came.

Yes. So things like infrastructure spending, things like traveling, things like printing and service charges or other services that we're using in the company, those things will only go up in a step fashion, if the activity level increases in a step fashion. So right now, though the volume recovery has happened, but these level of expenses are good enough to sustain that level of activity. But if you see another 1 or 2 quarters of 20%, 30%, 40% volume increasing, therefore, the printing increasing, or if you see the advertising revenue increasing, more conversations happening, people under -- start undertaking travel and -- with this vaccination program, then there might be some marginal increases. But even in that case, I don't see it going back to 2-year-ago level in a hurry because we are far away from that, Dharmesh.

Yes. And second question -- second one is other operating income has come down sharply. I think last year, you had booked some forfeiture income.

That's right. That's right.

How much was that if you can quantify, roughly?

It is a substantial portion of the amount that we reported last year. We don't -- so that's why...

We don't have the exact number, but it was a pretty substantial portion of that, I would say.

It was in Q3 and Q4, right, Piyush?

Yes. Yes.

Yes.

The next question is from Sidhant Mattha.

Just wanted to know about the print circulation revenue. So for the Hindi one, we can see that it's only 3% Q-on-Q. And there is some -- there's a footnote also, which says that it excludes the impact of book -- copy booking costs. So can you give us a like-to-like number? And what is the reason for just 3% Q-on-Q growth? Do we settle into that number for the 4Q also?

It is a like-to-like number. So there is no -- so it's fairly like-to-like. And for Hindi, the -- it's done in both RPC, and the copy has more or less remained flat. So that's why you're seeing that. So it's a like-to-like number.

Sandeep, would you like to add anything?

Yes. Yes. Okay. Let me add a little more. So first thing, you need to remember that the decline was not that sharp for Hindi. So that's why it was right, and I think Anna mentioned earlier in her comments already. And then that's why the recovery is also -- quarter-on-quarter, you're seeing a little lesser than what you would see in English. That's one comment you need to keep into play. And are we going to not see further increase? It will continuously grow and that the focus has been there. And so we will see further increase, but is it going to be a very sharp increase? That's not going to happen. So it's just gradual continuous increase which you're going to see.

And have we been losing market share in this Bihar and...

No, not at all. Actually -- it's actually other way around. So when you say market share, you can think about both in terms of advertising volumes or the copy shares. We have been tracking that very sharply, closely, and it's only that we have picked up on both the fronts and pretty handsomely. And so that's what could be visible from the last few quarter results. You can also see from all the players in the industry. So that's...

The only thing is basically the IRS data, which was available last year until the fourth quarter, they showed that as per AIR, which is average readership, your market share was falling and your peers were gaining. So just wanted to know...

See actually, first of all, that is now a dated data point, first of all, and the newer survey is going to get -- field work is going to start only a few months down the line. And then we will see the updated results, I think, only a couple of quarters from now. That's number one. The other piece I would also add to it is what we need to keep into play, and since you asked me about the recent months' performance, we have been tracking our -- and this is -- what you're referring to is IRS. What I was referring to was from a copy share as well as advertising revenues, and that was very visible from the recent results, which have been published by all the players. The other comment from an IRS standpoint, I would just say, especially now since you're talking about Hindi, see, everyone -- every player got impacted in the same direction. The only thing you saw was that for Hindi, we got a little more impacted in that quarter results was because, a, we are very large. So what you need to remember is, in those markets, we have a dominant player. So even in Bihar, we are bigger than anybody else. And they don't even come close. So the marginal gap, which you have seen versus others, is because of as they were investing. Good news is that now, in last few quarters, their declines are much sharper as far as copies are concerned and that's visible from the results as well versus ours. So we have been just picking up shares in the last few quarters consistently.

Okay. And then last final question. Do you expect the circulation revenues to, like, become stable to FY '20 levels in FY '22? And have you -- are you planning for a cover price increase? Or what is...

So remember what I mentioned earlier that it is consistently growing and that you will continue to see that trend. So as we continue to build our copies. So from a realization per copy or the pricing, which you were asking, it has not dropped. That's the best part of it. It has not dropped for Hindi at all. And that's what happened. As we are continuously building back our copies, you will see that increase. Will that come to the same level as FY '20 immediately? I think, a, as I said earlier, the sharp was not that great for Hindi. It's just consistently recovering. We are pushing that we go back to those level as fast as we can. And the last piece of answer to your question is about pricing. Those are always under evaluation. I can't comment at this point of time. We -- but that's a consistent or continuous evaluation process, which remains on, and there are -- those opportunities are being evaluated continuously.

And for the English side, what is the strategy there for Hindustan Times?

See on Hindustan times also, the biggest focus right now is to -- you saw that overall decline from a revenue standpoint circulation that's largely driven by the metro impact and then the number of copies. Focus right now is to build back our -- the circulation, and that is very, very strong push going on. And month-on-month, we are inching it up, a, not only growing our number of copies but also pushing our shares. And that endeavor will remain. And that's the growth engine for our business, and that's how it works. So you will see that also moving up in coming quarters. And that's where the more hard work is required to continuously build that. So Hindi, as I said, drop was lesser, consistently improving; English, sharp -- the decline was sharper and build back will also be a little more sharper.

The next question is from [ Rahul Nagnoor ].

Taking further to Sidhant's question, would you like to throw a recovery of circulation numbers for Q3 and January?

Sandeep, would you like to take this?

See, that's what I was mentioning earlier that we are seeing month-on-month consistent improvement. So every month, we see that. And Hindi, first, as I said, the decline was much lesser as compared to overall English, and that we have seen an improvement, and that's consistently improving. So that's number one. English, as I said, sharp -- decline was sharper, and that's what we are pushing there as well. Good news is that month-on-month, that is also increasing. And again, if we dwell a little more into English markets, it goes more -- presence is in more metro markets, and they saw the decline sharper. Good news, whether it is in Mumbai or in Delhi, recovery is also sharper. So as we come back in the next quarter, you will see that change also.

So it is definitely -- in January month, the numbers are better than Q3 or other December months?

Yes. Yes, I can confirm that to you for sure.

Next, we have a follow-up from Ayaz.

Piyush, Anna, my question relates to HMVL employee costs. So you had called out some costs, maybe, I thought on a consolidated basis, and I was not able to understand that. But my question is as follows, because Piyush mentioned Y-o-Y, the costs are down. As I note, the employee costs in HMVL are INR 36 crores versus INR 30.5 crores in the comparable quarter December '20 over '19.

Right. Ayaz, I was commenting at the entire system cost and not on HMVL versus HTML because, as I think Sandeep was just articulating on the print copy question from Rahul just prior to you, I think most of our people investment, paper investment, market-focused investments are going in HMVL. But because the structure of English has changed much more substantially, we have optimized more people from English. Hindi, I don't think we will be optimizing something soon because Hindi, if you look at the financial position also, Hindi is the one which has a much longer runway, which is still much more profitable, whereby we need more investment because things like cover price action, things like different kind of local advertisers coming onto the newspapers, et cetera, is still a trend we are seeing in Hindi. So I don't think people cost optimization you will see in hurry. It will be flat in Hindi. But the major optimization from 15% to 20%, which is coming at a group level, are coming from other businesses, primarily English print, not Hindi print.

And Piyush, if I were to just add a quarter more, well, 3 quarter numbers are out, you probably will have a 20% growth in a COVID year in employee costs. That is -- that in a COVID year when the commentary across all players, across all industries, this is a standout number. And that's why my question. So I wouldn't say it's glaring, but it's a standout number. So if you can call out what are the investments on people front, otherwise, that you are making...

Ayaz, a lot of the investment on the people side in Hindi actually happened in quarter 3 and quarter 4 of last year, if you go back and see the data point. So -- and -- because, of course, nobody was expecting a COVID or a related problem thereafter. And some of what you're seeing is just the annualization of that itself vis-à-vis the base.

No, I'm not clear, I'm sorry. It is extremely unclear. I didn't understand anything from what you just said.

So hold on, hold on, Ayaz, let me try to answer that. Your question is specific to HMVL? Or are you talking at a group level, first of all? I'm slightly confused now.

No, my question is specific to HMVL because that's the...

Yes. So specific to HMVL, I think if you just go back to the call transcripts last year first, second and third quarter, you were seeing -- you would already see that there are a lot of products in various submarkets that we've announced. There's a lot of competitive pressure in Bihar, specifically, that we were facing. We had added some people there, right? Then came COVID -- sorry, you were saying something?

No, sure, I said. Sure.

Right. So to Anna's point, when those things were happening in the third and the fourth quarter of last fiscal, that was the time we were adding people. The cost that you're seeing is nothing but the annualization impact because those people who came in, let's say, September of last year, right, now you're seeing that in -- you are seeing those guys coming into the cost because those are the guys who are drawing salaries. So when this whole COVID thing happened, the rationalization of people that we have done -- so one is the rationalization of people; second is the rationalization of salaries. Most of those things on the print side, if I have to articulate, have happened more on English much, much more sharper. I'm not saying Hindi, it's not happened, but Hindi it's happened in bits and pockets and not any substantial. But -- however, because we had added costs in the third quarter and the fourth quarter last year, those impacts, when you are seeing a cost which was added in the fourth quarter, now you're not seeing that in the base, and suddenly, when you see it now, it looks like why has the cost gone up? When I'm already telling you, there's been a salary cut, which has happened. There have been people let go more in English than in Hindi. It's not a standout number. We are looking at a system level. But if Hindi has got a longer runway, we are not cutting back our people investment there because that's where all the money is going to come from in future more than English because the markets of Delhi and Bombay are still going through a lot of fiscal pain.

Sure. A fair point. I mean this is -- so the 20% increase comes on the back of a 30%, 40% decline in revenues for the current year, and that's why it looks even more sort of glaring in the cost adjustment to the revenue base. That's why I called out that question.

Fair enough. Fair enough. It absolutely looks glaring because suddenly COVID came, 30%, 40% revenues collapsed, and it looks glaring. But I just told you all the details, but I'm also giving you a forward-looking point of view saying that our people investment I don't think we will be cutting very sharply in Hindi. But our people investment in English have been substantially rationalized, both in terms of people and salaries. And I think for the foreseeable future, if the revenue trends between these 2 subcategories remain the way it is, I think this trend is going to continue unless we see a major revival coming in English sometime soon.

Sure. I mean I won't sort of continue the argument just to make a point, but even on just the previous sequential quarter where you had a cost of INR 32 crores, your employee cost has now moved to INR 36 crores.

That I already addressed, Ayaz, by saying there's a base issue since there's a reversal sitting in quarter 2. That was addressed in the earlier conversation.

In quarter 2 of 2020?

Yes.

Okay. So that's why it's artificially depressed.

Yes, yes, yes.

Yes, it was artificially depressed.

Okay. Sorry. So that's why there were so many costs going around. It's my mistake as well in the sense that some costs and people's interest were on the group level. Since you're doing a combined call, so it gets a little confusing.

Ayaz, may I just request you to come back on queue because we have one more participant.

I just have one more question, please.

Okay. Go ahead, Ayaz.

Yes. So just this -- Piyush and Anna, the costs on the employee front and the Digicontent and the stake that HMVL and HT Media had sort of like equal of 49-51, and then that was sold by HMVL. The earlier question has been asked in terms of digital revenue, et cetera. My question is more on where are the journalists sitting and what is that revenue share agreement that was linked to -- with Digicontent or that content creating company that was the whole idea? So are these employee costs and the Digicontent, all these are sort of interlinked? Or is there a shortfall in my understanding?

No, most of the journalists are sitting in the Digicontent Limited because that is the content creation company, which is then selling out content on a cost-plus basis to various consumers of content, which is HT Media for English content, Hindi company for HMVL and so on and so forth. So the journalists are sitting there. And it's a cost-plus arrangement that, that company has.

We have the last question from [ Aman Vij ].

My question is on the digital front. So we have a business of around INR 400 crores, if I'm correct; INR 100 crores in HT Media and INR 300 crore Digicontent. So sir, what percentage of this business comes from ad? And what are your vision for this business, say, 3 to 5 years forward? Because if we look at the topmost newspaper company who has done very well in digital, New York Times, so their subscriber base has grown 10x in the last 10 years. So any thoughts on the same?

Yes. Well, I think New York Times is a global example. Everyone cites that example. But we have to understand, there's a slight difference in the American markets vis-à-vis the Indian markets from various fronts, the consumer, the reader habits, the paying capacity of the market, the products and so forth. But having said that, I think the simple answer to your question, most of the revenues at this point in time are ad revenues. Subscription revenues, as one of the gentlemen asked earlier, are still very slow, but growing because that is one of the stream of revenue everyone is going towards. New York Times, of course, is in America, which have done it very successfully. So the Indian publishers are on that journey. Our vision for mid- to long term is fantastic on this business because the consumers have shifted so drastically, especially in COVID, that these products -- so right now what are the big themes? One is digital; and when you talk about a news product, the second theme is fake news versus a reliable and credible news. I think a house -- a publishing house like HT has the second one, which is very clearly established for the last 100 years. It's the first one that we are on a journey. Luckily, we started this journey much before COVID and, therefore, we've built some revenues. But if you extrapolate the situation 3 or 5 years out, I think the revenues and the profitability both should be much higher than what it is today.

Sure, sir. And on the first part of the question, could you give a rough split of content proportion and advertising proportion? I understand subscription will be very less, but...

We won't be able to get into that, but you also referred to HT Media. HT Media has revenues given that it's from Shine and digital entertainment, it is a different set of revenue and it is not ad revenue per se. It is database revenue and learning revenue and entertainment revenue. But there is -- as Piyush said, even for the DCL, substantial revenue is from advertising. Exact split, et cetera, we wouldn't want to share.

Sure. And the VCCircle also fits in our subsidiary, Digicontent only, right?

No. It is a 100% subsidiary of HT Media limited post the acquisition because the synergies were seen to be more with the Mint print business.

Okay. But the Mint online business fits in Digicontent?

Only the news website, yes, it's in Digicontent.

Okay. But then VCCircle...

VCCircle is into various things. Content, of course, is one of the things. There are a lot of on-ground things that they used to do, which is our digital events, et cetera, especially in the PE/VC space, et cetera, et cetera. So after a lot of evaluation, with Mint as the business segment, it made a lot of sense. So currently, it is housed as a subsidiary. It's not been merged. Currently, it's housed as a subsidiary under HTML.

Since there are no further questions in the queue, we come to the end of this Q&A session. If you have any further queries, please reach out to Investor Relations team. Our contact details are given in the investor presentation and are also mentioned on our website. I now hand over to Piyush for closing remarks.

Well, thank you, Sankalp, and thank you, everyone, for joining our call today. It's been a reasonably climb-back quarter, the way we look at it, and we hope that the journey will continue into the quarters ahead. All our initiatives around cost, which we took in the first half of this year and the third quarter, as you've seen, of course, festive has buoyed it, but the way we have managed to get our volumes up, pricing is the big challenge that we foresee at this point in time. Also, though Digicontent is not a topic of this conversation on this call, but because a lot of people are talking about Digicontent, I'm very happy to report that digital is a journey that we are strongly and steadfastly onto. We wish to bring a better set of numbers when we come and meet with you guys at the end of the fiscal. I wish you all the very best. Stay safe, stay healthy. And thank you so much for joining our call today.