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NDTV: Taking the big leap forward - Views on News from Equitymaster

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NDTV: Taking the big leap forward

Apr 17, 2008

Performance summary
  • Topline increases by 32% YoY during FY08.
  • EBITDA dips further into the negative during the fiscal.
  • Other income surges 17 times YoY during FY08 on a low base.

  • Bottomline recedes further into the red.

  • The board of directors has proposed a final dividend of Rs. 0.8 per share payable out of the past profits.

Consolidated snapshot
(Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change
Net sales 815 1,222 50.0% 2,785 3,661 31.5%
Expenditure* 812 2,288 181.9% 2,839 5,175 82.3%
Operating profit (EBDITA) 3 (1,066)   (54) (1,514)  
EBDITA margin (%) 0.3% -87.2%   -1.9% -41.3%  
Other income 3 61 2064.3% 12 218 1658.9%
Finance charges 6 76 1130.6% 11 242 2203.8%
Depreciation 54 68 25.3% 189 231 22.2%
Profit before tax (55) (1,150)   (241) (1,768)  
Tax 19 25 29.3% (97) 88  
Profit after tax/(loss) (74) (1,174)   (144) (1,857)  
Net profit margin (%) -9.1% -96.1%   -5.2% -50.7%  
No. of shares (m)       62.5 62.6  
Diluted earnings per share (Rs)         (29.7)  
Price to earnings ratio (x)         -  
*Employee stock options included in personnel expenses

What has driven performance in FY08?
  • Topline grew by 32% YoY during FY08 on the back of new channels launched. The company added 5 broadcast properties in FY08 and plans to launch more lifestyle channels, including a film-based one.

  • The decline at the EBITDA level is due to the initial costs incurred in setting up new platforms, which take a few years to break-even. Infact, total cost has zoomed by 82%, with marketing and distribution expenses increasing the most (nearly 20% higher as a percentage of sales). Going forward, the company’s performance is also likely to remain under pressure in the medium term due to a levered balance sheet, as seen in the manifold increase in interest costs.

    Cost break-up
    (Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change
    Production expenses 146 640 339.6% 533 1,217 128.2%
    % sales 17.9% 52.4%   19.1% 33.2%  
    Personnel Expenses 325 492 51.3% 1,328 1,710 28.8%
    % sales 39.9% 40.2%   47.7% 46.7%  
    Marketing & Distribution Expenses 113 741 555.3% 407 1,256 208.4%
    % sales 13.9% 60.6%   14.6% 34.3%  
    Operating & Administrative Expenses 228 416 82.1% 571 992 73.9%
    % sales 28.0% 34.0%   20.5% 27.1%  
    Total cost 812 2,288 181.9% 2,839 5,175 82.3%
    % sales 99.7% 187.2%   101.9% 141.3%  

  • Other income includes the profit from sale of investment in Astro Awani Networks (Malaysia) to one of its subsidiaries NDTV Emerging Markets BV, as part of its plans to focus on increasing its presence in news-cum-entertainment channels across emerging markets. It amounts to Rs 106 m accounting for 49% of the company’s other income in FY08. NDTV Emerging Markets BV is a 50:50 joint venture with NDTV Networks Plc, which is a wholly owned subsidiary of the company.

  • The company issued 124,460 shares in FY08 pursuant to the exercise of stock options by certain employees under the ESOP scheme. It has also granted 100,000 stock options to a whole time director subject to approval from the shareholders and the central government. During the year, the fringe benefit tax on exercise of stock options amounting to Rs 14.5 m has been paid by the company, which will be recovered from the employees. We have treated all stock options related charges as personnel expenses.

  • A memorandum of agreement (MOA) has been signed to sell a 26% stake in NDTV Networks Plc to NBC Universal Inc. The stake is proposed to be divested at a price of US$ 150 m.

  • The board proposed a final dividend of Rs. 0.8 per share (face value of Rs. 4 per share) amounting to Rs. 50 m payable out of the past profits.

What to expect?
Going forward, the subscription revenues will drive the topline as more players compete for the advertising revenues.

The company is evaluating options to restructure its business, including the demerger of its news-related businesses into a separate entity. Its subsidiary, NDTV Networks Plc, currently holds the investments in news-related and “beyond news” business (entertainment and lifestyle channels such as NDTV Imagine, NDTV Lifestyle and NDTV Labs).

The creation of focused entities will enable the company to bring in strategic and financial partners. The company has decided to constitute a committee to evaluate various options.

The stock is trading at a current price of Rs 413. We shall soon update our view on the stock.

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Feb 21, 2019 11:13 AM