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  • ‘Media and entertainment sector has lost a whopping Rs 640 billion of market value since last year’ : Sadanand Shetty – Kotak Securities vice president

    ‘Media and entertainment sector has lost a whopping Rs 640 billion of market value since last year’ : Sadanand Shetty – Kotak Securities vice president

    Media and entertainment companies have been riding the market boom to expand and fund their diversified ventures. But the tide has turned against them and they are faced with a scarce capital situation.

    Being in the equitties market for over 14 years, Kotak Securities vice president Sadanand Shetty knows best how rough the path is going to be for media companies to tide over the slowdown phase. Managing money on behalf of investors, he is one of the few fund managers to have caught early the trends across verticals within the media and entertainment sector.

    In an interview with Sibabrata Das, Shetty talks candidly about the massive erosion of values media companies have seen over the last one year and how grim the real world is for most of them.

    Excerpts:

    Aren’t these companies seeing a massive skid in valuations?
    The media and entertainment sector has lost a whopping Rs 640 billion of market value since last year due to the global economic meltdown. There is a massive collateral damage to the wealth of media owners. Valuation corrections for most of these companies are far greater than the broad market.

    Most media companies fall under mid cap and small cap categories. These categories have lost much more in stock value than the large cap companies. September ’08 has been the worst quarter in recent times for most media companies that are part of the broad-based BSE 500 Indices. The profits of aggregate listed companies are down by 60 per cent for the said quarter, including losses of new Hindi GECs (general entertainment channels). Slowdown in revenue and rising costs have hit earnings.

    The market has not even spared large companies like Zee Entertainment Enterprises Ltd and Sun TV Network Ltd; they together have lost market value of close to around Rs 160 billion (as of 10 January 2009 over the year ago period). The broadcasting space has alone lost market value of nearly Rs 280 billion. Economic slowdown in general has impacted the advertising revenues of the sector. Subscription revenues, to some extend, provide the much needed cushion to falling profitability of the broadcasting companies.

    Why were media valuations so unrealistic?
    Being emerging businesses, the Indian media and entertainment companies commanded higher valuations. Most media companies have demonstrated robust sales, expanding margins and rapid growth in profits in recent times. The stock market rewards high growth with high valuations. A favourable equity market has also helped companies to raise large funds and command these valuations.

    Weren’t companies stretching themselves too thin in a market hype situation?
    Still, I wouldn’t call these moves as mistakes. Expansions were planned in a growth environment, which now, though, is hitting the speed breakers. But certainly in some cases large capacities have been created ahead of demand curve and investors are suffering in those ventures.

    The industry also witnessed entry of new players with other objectives. For some it was pure market capitalisation as easy money poured into the sector. Investors – foreign and local – have jumped the gun and funded some of the unviable projects. Shortsighted foray into ‘new media’ business verticals that some companies have ventured into will be hard hit.

    What are the lessons to be learnt from this?
    This is the first true slowdown that the industry is witnessing today. It would be interesting to see how managements of the media companies respond to the situation. In general, business plans built on easy liquidity do not sustain for long. Vision, commitment and excellent execution do. Media, like any other services business, is people driven. Backing the right talent with appropriate incentives will yield large gains.

    ‘Economic slowdown will force companies to focus on few verticals. They will have to maintain their market share without burning too much cash‘

    Have media companies become dependent on foreign capital?
    Global media companies except perhaps News Corp. were late to react to opportunities in India. But today almost all the top studios of the world have their presence in India across different media verticals. Favourable economic growth and rapid rise of domestic companies have compelled the global media giants to look at India. For some of these companies, Indian operations have started contributing majorly to their profits in the Asian region.

    We are also witnessing rapid rise in FDI (foreign direct investments) and portfolio investments in media companies. You, after all, can’t ignore the second fastest growing economy of the world. India is also in a sweet spot today because of its huge youth population.

    What are the challenges the Indian media companies face due to slowdown?
    Slowing ad spend, increase in operating costs (specially distribution), and tight liquidity will impact the industry in the medium term. The sector will also have to grapple with excess inventories that have been created in the last few years. Most importantly, economic slowdown will force companies to rethink on their expansion plans and focus on few verticals. Companies will have to maintain their market share without burning too much cash in the process.
    The process of consolidation will also accelerate. I expect incumbents with sound financials to take advantage of the current dismal valuations to further their business interests. Venture capital and private equity participation can’t also be ruled out. We have already seen certain GECs feel the heat. Consolidation in regional markets is also happening and expansion plans have been put on hold in some cases.

    Overall, the economic slowdown will impact the growth plans of most of the companies. Priorities have shifted to consolidating the existing businesses; expansion can wait.

    It is testing time for media companies. There will be no better time to demonstrate the strength of their respective market/channel shares as we expect ad spend to consolidate towards the top.
    ‘TV content companies have suffered for long due to their fractured business model. Lack of revenue visibility and pricing power have impacted them. There is also lack of long term relationship between content and broadcasting companies‘

    Will news channels have a free fall as they operate in a highly cluttered environment?
    News channels in India have grown significantly over the last few years. But for most companies, it has not significantly added to their profitability due to high operating costs (including distribution). Lack of robust subscription revenues have also impacted the bottom lines of many of these companies. Noise value has gone up due to entry of players with other objectives. We have witnessed the entry of so many non-serious players in the market that I think most of them will fold up in the next two years.

    Only few news channels with strong brand equity and distribution network would be able to make reasonable profits. Companies with strong balance sheets will survive. Rest all will fade away.

    What do you think of the television content companies?
    TV content companies have suffered for long due to their fractured business model. Lack of revenue visibility and pricing power have impacted them. There is also lack of long term relationship between content and broadcasting (who own the IPR) companies. The benefit of new distribution platforms has not reached most of these companies.

    Unless there is substantial change in the current business model, I do not see real scalability coming to companies. TV content companies also suffer from fragmentation. Having said that, this year has been particularly good for content companies as some of the dominant incumbent players have witnessed loss of market. New players have emerged and done well. I expect few credible players to emerge in the future.

    Do you find the cable industry attractive?
    Institutional investors have shown interest in the sector in recent times. Investments have flown into the large incumbents and fledging entrepreneurial-led companies. Investors are betting on eventual consolidation and digitalization of last mile to unlock huge value in the sector. Investors seem to be willing to wait for the interim painful process to unlock long term value. We expect increased investments will go into infrastructure creation and customer acquisition.
  • Radio Mirchi Q3FY07 turnover rises 31%, net profit up 14%

    Radio Mirchi Q3FY07 turnover rises 31%, net profit up 14%

    MUMBAI: The Times Group’s private FM Radio operator Entertainment Network India Ltd (ENIL) – which operates stations under the brand name Radio Mirchi – has announced its results for the quarter ended 31 December 2006.

    During the quarter (Q3FY07), total income grew by 30.6 per cent to Rs 484.1 million compared to Rs 370.7 million for the corresponding quarter in the previous year.
    The Company’s earnings before interest, depreciation, tax and amortization (Ebitda) grew 20.8 per cent to Rs 176.5 million and net profit stood at Rs 124 million, up 13.9 per centg YoY. On a like basis (7 Phase I stations only), Ebitda for Q3FY07 stood at Rs 151.1 million, up 3.4 per cent YoY.

    Total income during YTD December 2006 grew 46 per cent to Rs 1,263 million while Ebitda increased by 15.4% to Rs. 33.50 crores. On a like basis (7 Phase I stations only), Ebitda during YTD December 2006 stood at Rs 347.1 million, up 19.6 per cent YoY.

    The new stations namely Bangalore, Hyderabad and Jaipur recorded Ebitda margin of 28.2 per cent for the quarter. According to data based on Indian Listenership Track 2006 (ILT – Wave 2 conducted by MRUC) for the period September- November 2006, Radio Mirchi retained the number one position in Mumbai and Delhi while establishing itself as the dominant number one station in Kolkata too. Radio Mirchi has increased its lead over #2 player in Mumbai from 30 per cent to 40 per cent while maintaining its 2:1 lead in Delhi, a company release asserts.

    During the quarter, Radio Mirchi premiered the music of blockbusters which include Vivaah, Dhoom2, Babul and Guru on its network.

    Commenting on the performance of the company, Enil managing director and CEO AP Parigi said, “In the emerging competitive landscape, Radio Mirchi has again demonstrated not only its brand leadership in the new markets of Bangalore, Hyderabad and Jaipur but has also demonstrated robust growth in financial terms. In the new markets, within the short span of nine months, the company has achieved an Ebitda breakeven.”

    Based on the present rate of progress, the company is confident of completing rollout of the remaining 22 stations by 31 July, 2007.

  • Radio Mirchi Q2 net up 16% at Rs 49 million

    Radio Mirchi Q2 net up 16% at Rs 49 million

    MUMBAI: Entertainment Network India (ENIL),which manages the radio FM brand Radio Mirchi has posted a net profit of Rs 49.31 million for the quarter ended 30 September.

    According to an official release, the company has reported 16 per cent increase in net profit for the quarter. Net profit rose to Rs 49 million compared to Rs 43 million in the corresponding period last year.
    The company’s earnings before interest, depreciation, tax and amortisation (EBITDA) grew 17.6 per cent to Rs 99 million from Rs 84 million in the same quarter a year ago.

    On a like basis (comparing seven old stations only), EBITDA for the quarter stood at Rs 103 million, up 22.4 per cent year on year (YoY).

    Total income for the quarter recorded at Rs 424 million, while net sales (net sale indicates airtime sales) had been registered at Rs 411 million.

    The expenditure incurred amounting to Rs 325 million has been attributed to production expenses (Rs 24 million), license fees (Rs 21 million), marketing expenses (Rs 130 million), administration & other expenses (RsS 72 million) and employee cost (Rs 79 million).

    The company had introduced Employees Stock Option Scheme (ESOP) for its future and existing permanent employees and directors and future and existing permanent employees and directors of its subsidiary company and holding company.

    Quoting the data based on Indian Listenership Track (ILT – Wave 9), an independent research conducted by MRUC, for the period July- September ’06, the company states, “Radio Mirchi enjoyed the highest listenership of 4.46 million in Delhi out of a total listenership of 6.02 million listeners, comfortably ahead of the competition.”

    In Mumbai too, Radio Mirchi dominated listenership with 2.21 million out of a total of 4.98 million listeners. Commenting on the performance of the company ENIL CEO & MD AP Parigi said, “We continue to focus on building listenership through sustained innovations in marketing and programming as the latest listenership numbers in Delhi and Mumbai indicate. We are confident of magnetising this and maintaining our growth trajectory.”

    The company launched Visual Radio in Mumbai in September ’06 after it launched in New Delhi in July ’06.

  • Radio Mirchi inaugurates new studio in Bangalore

    Radio Mirchi inaugurates new studio in Bangalore

    BANGALORE: Radio Mirchi today inaugurated their new office and studio in Bangalore. Youth icon John Abraham was the guest of honor and spoke to Mirchi listeners on air. Thereafter, he interacted with his fans who were selected through a contest and invited to the studio for a tête-à-tête with the actor.

    In a little over 100 days, Radio Mirchi has become one of the leading radio stations in Bangalore with a steadily increasing loyal listener base. As per the latest Car Tracks conducted by, IMRB, Radio Mirchi has over 50 per cent market share, claims an official Radio mirchi release.

    Entertainment Network (India) Limited (ENIL) MD and CEO AP Parigi attributes the success of the station to “delivering programmes that are relevant to the people of Bangalore. This is a station for Bangaloreans – speaking their language and touching upon their day to day lives.”

    Radio Mirchi 98.3 FM, a part of the ENIL, was launched in Bangalore on 28 April 2006.

  • Radio Mirchi goes on air in Bangalore

    Radio Mirchi goes on air in Bangalore

    MUMBAI/ BANGALORE: Following a trial period of one week, Entertainment Network India Ltd (ENIL) radio brand — Radio Mirchi formally went on-air in Bangalore today. Radio Mirchi 95 FM is the second 24 hour FM radio station to go on-air in Bangalore.

    The first FM radio station in the city is Music Broadcast Pvt LTD Radio City. Radio Mirchi is the first brand to go on air in the phase II FM, within three months after completion of the Phase II bidding.

    The information & broadcasting had earlier this year awarded 280 licences to 36 private operators for running FM radio stations in 91 cities.

    Speaking on the potential of FM radio to revolutionise media consumption, ENIL CEO and MD AP Parigi said “Radio’s strength is its immense flexibility, adaptability and suitability for a modern and active life. It is the best companion. Thus our aim is to deliver programmes that are relevant to the people of Bangalore. This is a station for the people of Bangalore – playing their music and speaking their language.”

    He further added that “We expect the Mirchi style of programming of Radio Mirchi to revitalise the position of radio in Bangalore, just the way we have been able to win the loyalty of listeners in Mumbai, Delhi, Kolkata and other cities.”

    The station is positioned as a sunshine channel, with a baseline which reads “It’s Hot” With round the clock programming, Radio Mirchi will bring in contemporary music, city happenings, Bollywood gossip, special interviews, exclusive film promotional tie-ups and lots more. 24 hours hit Hindi music is what Radio Mirchi promises to deliver to its listeners, informs an official release.

    Radio Mirchi 93.3 FM will broadcast a diverse mix of shows including Hello Bangalore, a charged up breakfast show to say hello! to a bright new day; Bombat Bhama, a gossip based show for the housewives; Bitti Ticket, for the latest gossip from the films, an afternoon show for the students; Chill Maadi, a chilled out evening drive time gaming show; Mirchi Talkies for retro music and Dr. Love, to handle teenager love problems.

    Moreover, the station uses the ‘best of class’ transmission and studio equipment to broadcast crystal clear stereophonic sound to its listeners.

    ENIL had launched its first radio station in the city of Indore in October 2001. At present Radio Mirchi is operational in 10 cities which includes Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Jaipur, Indore, Ahmedabad and Pune.

  • Radio Mirchi turnover rises 58 per cent in FY06, net profit at Rs 295 million

    Radio Mirchi turnover rises 58 per cent in FY06, net profit at Rs 295 million

    MUMBAI: Entertainment Network India Limited (ENIL) has posted a 57.69 per cent rise in gross turnover to Rs 1.2 billion for the fiscal ended 31 March 2006, as against Rs 762.2 million a year ago.

    Net profit stood at Rs 294.6 million as compared to a net loss of Rs 179.2 million in FY 2004-05.

    The earning before interest, depreciation, tax and amortisation excluding license fee for the year was Rs 445.7 million, a rise of 61.5 per cent over the previous year.

    For the last quarter of FY 06 fiscal, net profit was at Rs 54.9 million. ENIL, the company which operates FM broadcasting under the brand name of radio Mirchi, has announced its results for the first time since its initial public offering (IPO) in February 2006. Comparative fourth quarter figures for the previous year are, thus, not available.

    ENIL’s consolidated net profit stood at Rs 310.5 million for FY 06 while total income was at Rs 1.4 billion. Earning before interest, depreciation, tax and amortisation was Rs 407.6 million.

    Under the consolidated results fall the wholly owned subsidiary company Times Innovative Media Private Limited (TIMPL) for a period of five months. TIMPL was incorporated on October 26, 2005 and it acquired Event Management (3600) and Out of Home Media (Times OOH) business from Time Innovative Media Limited (TIML).

    ENIL has set its sights on increasing its turnover from the additional radio stations to be set up this year. The company has already launched its radio stations in Hyderabad, Jaipur and Bangalore.

    Times OOH won advertising rights of Delhi Metro – Connaught Place and Dwarka (13 stations), Kolkata Metro (80 hoardings spread across the city) amd Delhi-Noida toll bridge for a license fee of Rs.340 million payable over two to five years.

  • Radio Mirchi 95 FM launches in Hyderabad

    Radio Mirchi 95 FM launches in Hyderabad

    MUMBAI: Entertainment Network (India) Limited has launched its Radio Mirchi 95 FM radio station in Hyderabad. The station went on-air at 6 am today, with the voice of Southern superstar Chiranjeevi being the first voice on the station.

    Radio Mirchi 95 FM Hyderabad is the 10th station of ENIL to start operations. Radio Mirchi 105 FM Jaipur and Radio Mirchi 93.3 FM Bangalore went on air on 17 April, making them the first private FM radio stations to go on-air under the Phase II of radio privatization.

    In the Phase II bidding process, over 250 frequencies across 90 cities were successfully auctioned in a process that lasted 5 weeks in January and February 2006. ENIL was successful in winning 25 licenses in addition to the 7 stations it already operates.

    Speaking on the occasion, ENIL MD & CEO A P Parigi said that with these back to back launches, ENIL had managed to demonstrate its project management capabilities. He added that in all three stations detailed market research was carried out to provide inputs to programming – so that the station reflected the tastes and aspirations of each city.

    Under the Phase II rules, radio stations are permitted to commence broadcasting by way of interim transmission facilities in Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Jaipur.

  • Radio Mirchi launches in Bangalore and Jaipur

    Radio Mirchi launches in Bangalore and Jaipur

    MUMBAI: Entertainment Network (India) Limited (ENIL), which runs radio stations by the brand name – Radio Mirchi, has launched FM radio stations in Jaipur and Bangalore under the same brand name.

    Radio Mirchi 105 FM (Jaipur) and Radio Mirchi 93.3 FM (Bangalore) have become the first private FM radio stations to be launched under the Phase II of radio privatisation.

    In the Phase II bidding process over 250 frequencies across 90 cities were successfully auctioned in a process that lasted five weeks in January and February this year. ENIL won 25 licenses in addition to the seven stations it already operates.

    ENIL managing director and CEO A P Parigi said, “ENIL had established a landmark by launching radio stations barely two months after the completion of the bidding process. This was due to the meticulous planning and speedy implementation by the team at Radio Mirchi. This would not have been possible without a proactive ministry of information and broadcasting and other agencies like the Wireless Planning Cell and SACFA that put various permissions on a fast track basis and made the launch of radio stations possible in a short period.”

    Under the Phase II rules, radio stations are permitted to commence broadcasting by way of interim transmission facilities in Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Jaipur. ENIL is already present in Mumbai, Delhi, Kolkata and Chennai.

    The seven stations that ENIL already operates Radio Mirchi in the cities of Mumbai, Delhi, Kolkata, Chennai, Indore, Ahmedabad and Pune.