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

Good afternoon, everyone. I'm Amit Madaan from Investor Relations team, HT Media Group. I would like to welcome you all to the Quarter 2 FY '21/'22 earnings seminar. [Operator Instructions] Now I hand over the call to Ms. Anna Abraham, Head Investor Relations. Thank you, and over to you, Anna.

Thank you, Amit. Good afternoon, everyone, and welcome to the conference call of HT Media Group. We will be covering this evening the results for the quarter ended 30th September '21. With me on the call today is Mr. Piyush Gupta, Group CFO; Mr. Sandeep Gulati, CFO of Hindustan Media Ventures Limited; Mr. Pervez Bajan, Group Controller; and members of oral Investor Relations team. The results of both Hindustan Media Ventures Limited and HT Media Limited have been uploaded on the stock exchange. So I assume you would have had some time to go through the results. Today, our remarks will track the presentation on this Zoom webinar. This presentation is also available on the stock exchanges as well as the Investor Relations section of our website. Before we get started on the presentation, I will draw your attention to the disclaimer regarding forward-looking statements on your screens right now. Kindly keep this in mind as we progress on the call. Moving on to Slide 3. This gives our Chairperson's comments on the performance of the company for the second quarter of this fiscal year, and I quote: "The operating environment improved progressively during the second quarter as the Indian economy gradually emerged from the impact of the second wave. It was marked by decline in COVID cases, a significant pickup in the pace of vaccination and a sharp recovery in economic activity driven by improvement in consumption demand and sentiment. The positive macroeconomic scenario prompted businesses to revive consumer outreach through advertising. As a consequence, advertising revenue across our Print and Radio businesses has shown significant improvement over the same quarter last year, with both large and small businesses spending on advertising. Circulation revenue too grew well. Our Shine business reported a strong double-digit growth during the quarter, led by Shine Learning. We witnessed improvement in operating profit margins on the back of strong volume growth and better yields, even as commodity prices continue to rise. As the economic indicators continue to improve with the opening up of economy, we are hopeful of capitalizing on resurgent demand, especially during the upcoming festive season. We continue to stay focused on delivering credible, reliable and engaging news and analysis, information and entertainment to our audience." Moving on to Slide 4. This covers the agenda of the day. And as is customary, I will now hand over the call to Piyush to take you through the details of the presentation.

Thank you, Anna, and good afternoon, friends. Seasons greetings and a very happy Diwali wishes in advance to everyone. On your screens, on the webinar, you have the agenda. We'll be looking at the results, both on consolidated and business unit performance. Print, in Print, we'll look at English, Hindi, Digital and Radio. So moving forward, yes. So yes, as you can see, our total revenue on a consolidated dated basis versus the same period last year grew by 46% to INR 440 crores. And if you look at it sequentially, it was even a higher growth at 57%. Of course, the first quarter is the one which was impacted by the second wave of COVID. EBITDA margins at INR 83 crores are far ahead of the same period last year and also ahead of the first quarter FY '22. EBITDA margin comes to a very healthy 19% and PAT at INR 29 crores at a PAT margin of 7%. Net cash, we closed at INR 991 crores. Moving on. If I just delve into the Print business. So on Print, our total ad revenue came at INR 247 crores, which is a 52% growth. Circulation revenue at a healthy INR 50 crores, which is a 13% growth, and hence, the total operating revenue came at 39%. Operating EBITDA, which has gone into the red in the first quarter and indeed the same period last year comes back to a very healthy 12% with operating EBITDA at INR 39 crores. Moving on. If I -- if you just look at the English publication, which is in Hindustan Times and Mint. Our ad revenues in Hindustan Times and Mint came at INR 133 crores, which last -- which in the first quarter was INR 69 crores and last year was INR 76 crores, so a pretty healthy jump of 93% sequentially and 75% versus last year. Circulation revenue are more or less range around at about INR 7 crores, which, of course, in the last year had come down to INR 4 crores. Moving on. If you look at the key revenue numbers in Hindi, our ad revenues came at INR 114 crores, which is a 32% jump over last year and 80% jump over the immediately preceding quarter. And our circulation revenue is pretty much in the same range between INR 40 crores to INR 45 crores coming at INR 44 crores. Moving on. On the Digital segment, our operating revenue came at INR 33 crores. I would like to point a finger on the first note, this VCCircle, VCCircle acquisition is sitting in these numbers. So INR 33 crores as against the second quarter last year of INR 21 crores, with a virtually breakeven. Moving on. And the last segment is our Radio segment. As you can see, our revenues came up to INR 24 crores, which versus the first quarter of INR 12 crores is nearly 100% increase and versus the same quarter last year is about a 59% increase. Operating EBITDA is very close to breakeven, which had really slumped even in the previous quarter and the last quarter is very close to a breakeven situation. And we hope that going forward, with the revenue traction that we are seeing, we'll be able to come back in black sooner rather than later. I will now pause and we will open the forum for Q&A. Over to you, Anna and Amit.

[Operator Instructions] The first question is from the line of [ Chaitanya Motani ].

I'm an individual investor. So my first question is, so basically, in the presentation, it's shown that the net cash has fallen from INR 1,033 crores to INR 991 crores. First, I would like to know why is that because we haven't made any significant investments and our profits have significantly increased over the past quarter?

Chaitanya, a very simple answer. Right now, there is some investment which is going into working capital. If you look at the balance sheet, which we have published, there's some amount increase in working capital because as the revenue traction has improved in these 30 days, the collection period always has a 60 to 75 days lag, so there's a buildup in working capital, which will start getting collected in the third quarter. That's the only reason.

Okay. And my second question is that we saw that HMVL had put in a bid for an IPL team. So like basically, in the past 5 years, our stock has fallen from INR 75 to INR 26. I'm talking about HMVL here. So that's basically a 66% fall in our stock price. So -- and there has been a lot of problems saying that our company has been insufficient in capital allocation. So why have we done some -- why did we put something good -- why did you want to go into something like an IPL team?

Well, Chaitanya, good question. So let me try to articulate. Capital allocation is something that the Board considered it to diversify the streams of revenue. If you look at -- of course, our bid was unsuccessful bid, and we obviously fixed our financial box very clearly, understanding if it comes for a rational thing whereby we can have a long-term sustainable returns for the shareholder. And this obviously are very long-term contract, then we would have gone for it because it didn't come for it. It went to what we believe is an irrational territory, we did not go forward. Having said that, you have to understand the diversification journey that we were trying to do in HMVL was to drive the nonprint revenues for a very long period of time. As you know, under the revenue are driven primarily by broadcast revenues and other sponsorship revenues, which don't have a direct correlation with the cyclicality of the print revenues. At the right price, had that happened -- and also the third leg that I'm forgetting in that whole bid is, not just the broadcast revenue, it has a very substantial piece of digital revenues also bidding in it, too. But if you would get that at the right cost, that would still have been worth it. And that in -- the board, in its best governance, thought that we should put in a bid at a right bidding price. Provided we would have got it, this would have been good. But right now, we've not got it so it's water under the bridge.

So sir, basically, the major problem with shareholders with the trust of the management is that, sir, as you can -- obviously, you can see that as stock prices -- stock price has fallen in the past 5 years by 66%, and you haven't even given out proper dividend even when you had such large amounts of cash. Our 2 of larger listed peers have given huge amounts of dividend, sir. Even in this year, sir, Jagran and DB Corp have given out dividends. So why is our company not doing that? Because we are...

Chaitanya, let me -- I've heard your questions, Chaitanya. Let me try to answer this whole bit. This piece around dividend, as you can understand, the majority of the company of HMVL is held by HTML. Most of the money apart from the tax leakage to the government would have come back to HTML. Of course, why have the competition given I can't answer that. But really, the whole thing that I've been trying to explain on various calls is we want to invest business -- monies into businesses which can create a sustainable stream of cash flow. As far as the question around the stock prices is concerned, I really can't comment on the market. But if you track down the stock prices of all the other listed companies, you will see everything is moving in a certain band. So how the markets are valuing it is up to the market to say, and I really can't comment on it. But the markets have not been very kind. And I absolutely believe that if there is a certain lever which will unlock the value for all shareholders, majority and minority, that is what we are trying to explore. Giving out dividend in an easy way out, but really doesn't serve the long-term value for value creation for shareholders.

But sir, I understand. I have no problem if the company doesn't give out dividend. We are -- if we try to be a growth story. Sir, it's not just that our -- the market is not rewarding us. So if you see the profits for the past 5 years, they have been consistently falling sir. The accounting [ problems ] have been consistently falling. And the second thing that you stated that, yes, I agree that giving out is easy, but if you -- if our capital is not getting -- we aren't getting a decent return on capital, I think so won't it be better if we get dividends at least. I have no problem if you invest it somewhere. But if the investment is not giving us the returns because evidently it hasn't given us any returns for the past 5 years. So shouldn't you -- shouldn't there be a change in that, sir?

Chaitanya, from HMVL, we haven't done too many investments in the past 5 years, if I may draw your attention to that. We are trying to incubate a new -- a few new products, et cetera, in this year, and you would have seen the unallocated sector that we have done because the markets are changing as rapidly as they are changing. We are trying to create products which basis the demand that we are seeing is coming from the market can create a new revenue stream and that's the whole intent. From HMVL, I don't think we've -- we've invested heavily in the last 5 years. This was an intent to do some rational diversification which obviously was not rational as we found out. And hence, we are still sitting on cash. I would love to deploy it tomorrow, but just for haste, I don't think we should be taking a decision which might -- we might repent later on. I hope I answered your question.

Yes, sir. I would just like to end it, if you are not investing the HMVL cash, you could at least give us...

Chaitanya, may I please ask you -- Chaitanya, sorry to interrupt. May I please ask you to come back to the queue. There are other participants waiting. The next question is from Anish Jobalia.

So I wanted to ask a couple of questions. One is on the Print side and -- on the Hindi Print side. And the second is on the Radio. So first to set the context, if you look at -- first of all, fantastic recovery in the revenue versus the last quarter. So I want to first set the context saying if you were to look at our -- this quarter revenues in the Hindi Print side and if you were to compare that with Q2 of FY '20, so we are down by close to 20%. Now I just want to understand from you and get your thoughts that this 20% difference, is it mainly because of the yields? And has the volumes completely recovered, let's say, versus that particular quarter?

Yes. So the simple answer is yes. I think the pricing in the market is soft. Volumes have nearly recovered. In some places, they have actually exceeded the pre-COVID volumes, but prices are soft at this point in time.

Okay. And could you explain the nature of this recovery, I mean, let's say, versus Q2 of FY '20, today is this recovery, say, much more stronger and more broad-based in terms of our revenue advertiser base? And it would be very helpful to understand, sir, from you that in the next H2, can we continue to see a sequential improvement in the volumes and also versus H2 of last year?

So Anish, look, there are primarily, I would say, 10 to 15 categories, which constitute about 80% to 90% of ad revenue that come in the Hindi publication, indeed also in the English publication. Now at various points in time if you analyze them, there are some categories which are under stress and some which are firing. Now if you see over the last 2, 3 quarters, Auto as a sector, because of either chip shortage or commodity prices or what have you, have been under shortage. So they would, therefore, hold back a little. But as you can see, there are a lot of new age companies and start-ups and their IPO, et cetera, which have been coming. So I would like to believe -- not like to believe, I mean, even if we analyze our categories, I think this is a reasonably broad-based category, some recovery. Some categories, of course, are still not firing. I believe structurally, they will come back as their business model start cranking. On Autos, I read in the newspapers today that now they are reasonably stocked up for whatever input raw materials they required. So I'm hoping that will come back. So I believe it's a reasonably broad-based recovery, which will sustain itself. And of course, with the cost actions that we have taken last year, if we virtually reach about 100% or beyond this thing, the operating leverage will impact the bottom line straight away, and then we'll be in a much better shape.

Right. But sir, I mean, what would be your view on outperforming in H2 of this year versus, say, H2 of the last year? Is there levers enough that you can see on the ground? Because after the second COVID, I think the recovery of the economy has been much stronger versus the first wave of COVID. So what's your view on that?

I personally believe -- Anish, I personally believe H2 of this year, it will be better than H2 of last year. The only wildcard at this point in time are the commodity prices because the newsprint prices compared to the same period last year are at least 25% to 30% higher. That definitely will impact our bottom line. But if the categories on the revenue side, which I'm hoping will come back, if they come back, I think we will be in a better shape than what we were in H2 last year.

And so the major category that you're speaking about is Auto, right?

No, no. Auto just one example I took, Anish. I mean there are multiple categories. But what I'm only saying is as the recovery in those categories built out, they are obviously coming back to advertising, and we've already seen this in this quarter. And I believe we'll go from stem to stern.

Can I just complete my second question, if possible because I wanted to speak on the Radio a bit. So in terms of Radio, I just want to understand the recovery has been, again, as you mentioned, 100% versus last year -- last quarter. So going forward, there also, as a medium, the yields have been most impacted even for more than the Print. So incrementally, what is going to be the strategy over here given the volume recovery has been very sharp on the radio medium, too? So incrementally over the next, say, 4 to 6 quarters, you think that you will be leading a strategy of yield growth or you will continue with volume growth? What...

Anish, we are trying our -- I think Radio will be a slow burn. I think the yield recovery will take some time. We are playing with the product. As you can see, our Fever Delhi station has been converted into a Punjabi station. So on the product format and various of the product intervention, we are trying to drive a different kind of customer. We are already seeing some very good early traction. So I believe Radio will take slightly longer time to recover compared to Print.

The next question is from [ Pawan Tarodia ].

So my question is regarding HMVL. So last quarter, you told that this is due to -- the reported loss was due to the printing papers, the cost was high. So what were the levels in this quarter? And like -- so -- and what are the levels in this current ongoing quarter on the printing paper side? Like what are the cost on the part?

Pawan, as I was just saying to Anish prior to you, the printing paper cost has been rising since the last 2, 2.5 quarters, and it is likely to rise in this quarter, in the current going quarter also, Q3. We don't give forward guidance. But at this point in time, I see no abatement in the paper price internationally. I think it will take another quarter for them to stabilize and come down. But the good news is we are building up inventory at the best possible procurement prices that we can. But in the third quarter, they will marginally go up from where they are still.

Yes. We are -- to just add on to that, we are around INR 44,000 at this point of time.

What also -- my second question is regarding the operating profit. Like in HMVL, I have not seen operational profit for last like maybe 5, 6 quarters, no considerable profit or there was operational loss only, and we are only sustaining on the interest of the income. So what is our plan to reduce this operating cost as such, basically...

Well, I don't know why you say that. I mean, this quarter on HMVL legal entity, operating EBITDA is INR 3 crores positive, right?

I don't think so like it is due to other income only, we are in profits.

I think you should just analyze that. I think it is not because of interest income, that's over and above. With interest income, it comes to INR 42 crores, INR 43 crores, but it is a positive number. And this is after absorbing the higher cost of newsprint, which was your first question. And I think it should go from stem to stern from here on.

[Operator Instructions] The next question is from [ Mehul Pathak ].

An earlier participant had asked this question on HMVL bidding for the IPL team. Now when we look at the balance sheet of HMVL, closing as on March 31, the total reserves plus equity is around INR 1,585 crores. Net block is around INR 250 crores. So roughly, the company has on its book at the most INR 1,350 crores, INR 1,300 crores to INR 1,350 crores to invest by liquidating other investments. So just want to understand at a conceptual or a philosophical level, if you can share some perspective on what is the Board thought in bidding for an IPL team when you have only INR 1,300 crores on your books? An IPL team when I see for the bids, it went for INR 5,000 crores to INR 7,000 crores. So if, let us say, you have won the bid, I don't know what amount you all bid for, where did you plan to raise the resources from? Because then it is like the cart pulling the horse. If you had won it for INR 5,000 crores or INR 4000 crores, you would need a debt or raise some INR 2,500 crores, INR 3,000 crores, and there would be no money for anything else.

Yes, that's okay. Mehul, simplistically stating this INR 5,000 crores and INR 7,000 crores that you are seeing, if you look at the IPL bidding document, these were to be paid on a straight line in the next 10 years. So it was not a straight up payment. So that's one fundamental difference the way you are calculating from the reserves and equity. And also from a reserves point of view, what you're not counting is we've got reasonably -- we've got AFE book, at least half of that is reasonably liquid, which is in real estate, that can also be deployed, but there was no question of putting upfront INR 1,000 crores or INR 1,500 crores and taking away all the resources. All these payouts to BCCI was, as per the bidding documents, was staggered equally over the next 10 years.

And to add to that, Mehul, over that period, of course, the broadcasting income will also come in.

Yes. Mehul, actually, look, I know those numbers that you all saw in the press were very, very big numbers. But basically, the way we went around this model is, first, we looked at the financial sufficiency. So this -- the number that we wanted to bid to be paid over the next 10 years, then we took an estimate of the broadcasting right, our IRR expectations were set and we were basically creating IRR, which is north of what we are seeing right now. Had we got it for that number, it would have been a very good adjacency to our Media business. But if you don't get that for your bidding price, then the IRR would have fallen massively, and hence, we kind of opted out and we did not revise our bid. That's the long and short of it. But obviously, we were not betting the farm on this thing by pulling debt, et cetera, because that payment was not to be made upfront.

No, I understand, Piyush. Thanks for the clarification. But when you look at HMVL, it generates -- on the best circumstances, makes INR 200 crores of net profit. So for such a big bid to be put in, I think we are lucky and fortunate that we lost the bid.

Well, Mehul, what am I supposed to say.

No, it is very apparent from the balance sheet. Our balance sheet, which is INR 1,500 crores, how big an investment, even if you are justifying by saying that, yes, we would have to pay INR 400 crores or INR 500 crores a year to BCCI.

No, we wouldn't have had to, Mehul, because it's a function of the broadcasting income, right? So it's what they -- what we get is broadcasting income net of what you end up paying as fee. It's -- we see the biggest assumption is on what is the expected broadcasting rights over the next 5 to 10 years. And as equally, media reports around it. So obviously, it was basis of that. Otherwise, we were not contemplating paying this kind of a number over the next 2, 3 years.

Anna, everybody who is bidding is thinking, there is no risk in bidding for IPL. Which...

Of course, there is. It's a -- broadcasting income is an unknown. So obviously, scenarios were done to kind of evaluate that. But yes, it's not a -- it can never be, I mean, INR 500 crores, right, because whatever it is, it will come into negate that.

Even if you look at companies like Sun TV and all, they are not -- everybody thought they would be laughing their way to the bank with the IPL bids, but that is not happening. At the end, even Sun TV makes, after all costs, at least some INR 30 crores, INR 40 crores at the end. So I don't know what was their bidding price and how much is the IRR coming out of that, but it is not very attractive.

Fair enough, Mehul. Now that's water under the bridge. As you said, whatever you said. But had it not come for our bid amount, we were not even contemplating of raising the bid amount is all I'd like to say at this point.

Thank you very much, and all the best for the next 2 quarters, we are looking forward to some good numbers.

Thank you for your wishes, Mehul. And wishing you a happy Diwali to you and Family.

The next question is from [ Yash R ].

So I actually have a couple of questions which are nothing but a buildup of previously asked questions. First one being on the other income part, mainly in HMVL. Now, we are seeing that it has come at INR 40 -- around INR 40 crores. And in the previous quarter, it was around INR 21 crores. So if you can just give us as to what has driven this amount?

Primarily, the interest -- yes, Anna, please go ahead.

Yes. There is -- the large component is interest income. However, any mark-to-market gain that we get on our investment portfolio done through the AFE book also gets reported here. In both, there has been a positive higher number vis-à-vis the previous quarter, which is why we have a higher other income.

Okay. And with regards to my second question, now I'm seeing that in the DBC for HMVL, the cost that we have, those are at INR 61 crores, right? And last year, we were at INR 41 crores. So there is around 50% hike, but the circulation revenue that you're seeing that is hardly 7% above previous year. So what exactly happened here?

Sorry, which is -- your first part of the question was not clear. What were you...

First part of the question was my consumables, the materials that were consumed, that's at INR 61 crores versus INR 41 crores last year. So that's around 50% -- almost 50% hike, but by circulation revenue, I can see, it's hardly at INR 44 crores.

Can I request -- yes, no, I got your question. Can I request Sandeep Gulati to take that question, please. Sandeep.

Sure. So basically, if you -- I know -- good that you asked that question, sir. Circulation revenues are driven by the overall the print orders which we have and which has been growing, and that's what you have seen a gradual growth there. But the paper consumption is also a function of the ad volumes which are getting printed, so which as -- you have seen significant jump there, and that requires more pagination in the paper. So that's one driver. And the other thing which we alluded towards earlier as well, the newsprint prices have shot up significantly over time. Last year, we hired the stocks at much lower prices. We were at the lower end of the cycle. At this point of time, they are creeping up. So those are the factors which are driving this change.

And just to add one point, Yash, to what Sandeep just alluded towards. As one of the prior speakers said, the recovery in Q2 has -- after the second wave, has been much sharper than the first wave. So if you remember same period last year, our print orders were still lower than what they are now. So right now, as we build up our print order, so there are more copies what they were in the second quarter last year. And of course, the prices are higher and ad volumes are much higher, therefore, more paginations at.

So what are the copies -- where are we standing in terms of copies for this quarter for HMVL?

No copies data we -- is not something which -- we don't share.

Actually, we are building it up. Yash, if you want more information on that, I would request you to kind of look up the ABC website and you'll get good information from there.

Okay. Just one thing. You said the newsprint rate was around INR 44,000 for this quarter.

Yes.

What was it last period last year?

About...

INR 33,000. Same period last year, it was INR 33,000.

Okay. So 25% hike is something that you're seeing over here.

And we are expecting a little more as we go forward because we are seeing -- we are hoping that it'll only stabilize after that.

[Operator Instructions] The next question is from [ Chaitanya Motani ].

So the AFE -- last quarter, you said that the INR 250 crores worth of shares are part of the AFE. So is that part of net cash? Or is that excluding net cash?

No, no. AFE is not counted in cash and cash equivalent. That is not counted in net cash. That's sitting in the investment line.

So basically, it's about INR 1,100 crores net cash in HMVL and INR 215 crores more, right?

Well, I...

The entire AFE book in HMVL will be another INR 300 crores because it's not just equity, we also have real estate. So about INR 280 crores to INR 300 crores will be additional investment.

And lastly, my second question is that, like you said that you're trying to diversify your streams of revenue. And like we won't be able to successfully bid for the IPL team. So what are your future plans to diversify the business in HMVL?

Look -- yes. Chaitanya, look, I think at any given point in time, the Board is looking at multiple opportunities. I think, look, the big thing which is happening is we are seeing that the digital medium is virtually on steroids and we are seeing super normal growth come there. As a matter of fact, in our sister organization, which is DCL, which is parallel to HT Media, we are seeing superlative growth happening there. So there are multiple proposals, which the Board is deliberating. Obviously, I wouldn't be able to call out those proposals unless and until the Board adopts those proposals. But those -- all those proposals are how do we participate in the new economy and those growth rates, and there is a certain element of digital medium because that's also called that we are seeing that the consumers and the customers are wanting that.

I understand, Piyush, that you can't reveal the names of the opportunities, but can you broadly tell -- I know there's digital, then under digital, there's streaming, there's broadcasting, there's OTT. So that's what I'm trying to ask. In which fields you are good...

Look, Chaitanya, I can give you themes. But I won't be able to delve any more into that. All these things that you just said, either trying to develop these products in-house, which we are doing within HMVL, or looking at various opportunities, which are being presented to the Board, the Board is deliberating, all those things are in works. Now the product work that we are doing, obviously, is gaining stem to stern, maybe in 1 or 2 quarters, we will be bringing those products to the market. We can't say right now. But as far as the inorganic stuff is concerned, maybe those things will go forward or not go forward, at the right time, we will definitely come to all the investors and announce that.

[Operator Instructions] Since we have exhausted all questions from our participants. With this, we come to the end of our 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.

Thank you, Rishan. After a reasonable successful quarter after many, many quarters, I'm happy to report that our businesses are now poised to grow from stem to stern. As I said, the only headwind that we see right now are some input prices, which also in the -- not exactly in 1 quarter, but in the short term, we are very sure that they will also normalize to a certain level. I hope that we will be turning out better results, and we -- I look forward to seeing you all in the next quarter's conference call. Till then, I wish you the best of health and a very happy Diwali in advance to all the investors. Thank you very much. Have a great day.