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NDTV: Sowing now for reaping later - Views on News from Equitymaster

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NDTV: Sowing now for reaping later

Jul 30, 2008

Performance summary
  • Topline increases by 71% YoY during 1QFY09.
  • EBITDA dips further into the negative during the quarter.
  • Finance charges surge 4 times during 1QFY09 on a low base.
  • Excluding the extraordinary item, bottomline recedes further into the red.


Consolidated financial snapshot
(Rs m) 1QFY08 1QFY09 Change
Net sales 701 1,194 70.2%
Expenditure* 809 2,176 168.9%
Operating profit (EBDITA) (108) (982)  
EBDITA margin (%) -15.4% -82.2%  
Other income 35 42 19.1%
Finance charges 20 102 395.8%
Depreciation 50 70 42.1%
Profit before tax (142) (1,111)  
Extraordinary items - 6,425  
Tax 7 66 853.4%
Profit after tax/(loss) (149) 5,248  
Share from associates 3 18  
Share of minority interest (1) -  
Net profit /(loss) (148) 5,266  
Net profit margin (%) -21.0% 441.0%  
No. of shares (m) 62.5 62.6  
Diluted earnings per share (Rs)**   51.66  
Price to earnings ratio (x)**   7.6  
*Employee stock options included in personnel expenses   **On a trailing twelve months basis

What has driven performance in 1QFY09?
  • NDTV’s flagship channel NDTV 24x7 remained a clear leader in the English news category during 1QFY09, while NDTV Imagine retained its number 3 position in the general entertainment category. Moreover, NDTV Goodtimes has become the market leader in the lifestyle genre. During 1QFY09, NDTV launched NDTV Lumiere in metros across India with theatrical releases of highly acclaimed world cinema.

  • 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 169%, with production expenses increasing the most (nearly 40% higher as a percentage of sales) followed by marketing and distribution expenses (nearly 30% 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 leveraged balance sheet, as seen in the manifold increase in interest costs.

    Cost break-up
    (Rs m) 1QFY08 1QFY09 Change
    Production expenses 135 698 418.1%
    % sales 19.2% 58.5%  
    Personnel Expenses 423 551 30.4%
    % sales 60.2% 46.2%  
    Marketing & Distribution Expenses 118 572 384.1%
    % sales 16.8% 47.9%  
    Operating & Administrative Expenses 134 354 165.0%
    % sales 19.1% 29.7%  
    Total cost 809 2,176 168.9%
    % sales 115.4% 182.2%  

  • During 1QFY09, Universal Studios International and NBC Universal entered into an agreement with NDTV for subscribing to 915,498 shares of NDTV’s overseas downstream subsidiary for an amount of US$ 150 m (Rs 6 bn) resulting in effective dilution of NDTV’s stake from 100% to 74%. NDTV has decided to utilise the proceeds for setting up production infrastructure such as studios and to facilitate its expansion plans in India.

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 392. We shall soon update our view on the stock.

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