The company appears to be struggling to keep its head above water for the present. One will have to wait and see how the expenditure on fixed assets will help to revive its fortunes
Controlling the world
The electronic media controls the world is the lament of the cognoscenti, and, besides presenting news and views, they also make and mar opinions and reputations. There are reportedly some 720 media channels on the air today offering their profound views of every shade, and just about every other form of consumer education or infotainment. The power that the media channels control comes at some cost and headaches though. As the notes to the accounts of TV Today states -The Company has received legal notices of claims/lawsuits filed against it in respect of programmes aired on its TV channels. The amount of the claims is not stated-and could be substantial-- but the management boldly avers that the claims will not stick in court. Just like that! How is the company so sure that it will come clean? In any event it should have stated upfront the outstanding claims against it -which can be expected to be substantial--even if it does not provide for a dime in its accounts.
Off the investors' radar
But, inspite of their power, the Electronic media are off the investors' radar for many moons now so to speak. It is an irony at that especially since it is the business channels segment within the media grouping that dissect the results of listed companies. But the financials of the business channels themselves are in hock given the competition. The main revenues that roll in are in the form of advertisements, and given the number of channels hawking their opinions on the air waves it becomes difficult to get an acceptable share of the advertisement pie. Meanwhile, the cost of transmission is rising steadily.
TV Today Network is promoted by the media baron Aroon Purie, better known as the owner of Living Media, the publisher of India Today and a host of other publications bearing the suffix 'Today'. In all likelihood it appears that his daughter Koel is the defacto inheritor of the spoils. She is also the executive director of the company. Living Media India Ltd, the holding company owns 57.1% of the equity stake of Rs 297 m -while Reliance Capital is the second largest shareholder with a 13.6% holding. The latter operates under the wing of the controversial and enigmatic Anil Ambani. (Some readers may recall that Anil had earlier, in the 1980s, engineered a massive shift into the media space on behalf of the Reliance group but gave it up as some sort of a bad joke not much later as the diversification went sour). So, in a sense, this is his second homecoming.
Large corporate houses muscling in
But this is the new joke that is enveloping the media industry. In the days of yore the media moguls kept an arm's length distance from corporate houses given the obvious functional challenges, including a possible clashing of interests with the political establishment which could affect the prospects of companies. (Some readers may well recall the recent early morning crash in South Mumbai involving an Aston Martin which failed to get much media coverage). Now cash strapped media houses are rushing pell mell into the welcoming arms of the fat cats of India Inc. Kumar Birla, and Mukesh Ambani are two other immediate examples of corporate honchos who have bought into media houses. What they stand to gain from such lateral investments beats me all ends up.
TV Today is in the business of TV Broadcasting and Radio Broadcasting. The subscription income of the 14 year young T.V.Today Network is mere peanuts in the overall revenue pie. The company owns four TV channels -AAJ TAK, HEADLINES TODAY, TEZ and DILLI AAJ TAK. There is the radio broadcasting division-by what name it is called is not readily ascertainable. It also has a trade investment comprising of equity shares worth Rs 455 m in an associate company called Mail Today Newspapers Pvt Ltd. That is a lot of money for a company of its calling. It has one sibling called T.V.Today Network (Business) Ltd. Then there are the four fellow siblings-Thomson Press India, Today Merchandise Pvt Ltd, Radio Today Broadcasting Ltd, and Mail Today Newspapers Pvt Ltd, and one company under common control called Integrated Databases India Ltd.
The total revenues from operations of the standalone parent amounted to Rs 3.13 bn-up 1.4%. It is obviously very tough going for the company. The top line is also buttressed by other income of Rs 73.6 m against Rs 56.1 m previously. The revenues of the parent is divided under two heads-Sale of services and other operating revenues. The sale of services in turn is made up of advertisement income and subscription income. The former rolled in Rs 2.81 bn while the latter brought in Rs 312.8 m. The other operating revenues made up of fees from training, and SMS income could only fork in Rs 2.2 m. In other words advertisement income accounted for close to 90% of all revenues, while the subscription income accounted for another 10%. The balance revenues are less than monkey nuts. The pre-tax profit rose a little more smartly, or by 7% to Rs 175.7 m. It is important to note here that the other income had some role to play in this pre-tax profit figure. The 'other income' accounted for a cool 42% of the pre-tax profit against a much lower 34% previously. In any event it is a significant contribution.
The other income factor
A breakdown of this other income is interesting. In the current year it includes a write back of provisions no longer required of Rs 36.2 m and a new head of account called 'lease rental' which brought in another Rs 21.3 m. Together, theyponied in Rs 57.6 m. In the preceding year such contribution was limited to write backs which netted Rs 37.5 m. So it is accounting entries which are bringing in the big bucks under the 'other income' head. I must however add that the company has made a generous provision for 'doubtful debts and advances' of Rs 51.3 m for the year against Rs 39 m previously. It will be nice to know against what debts due to it and advances that the company has made, that it has written the provision in the P&L account.
The geographical segment reporting gives a different take and a clearer picture to the financials. The revenues are accounted for under two streams - TV Broadcasting and Radio Broadcasting. The former is a profitable proposition earning a PBIT of Rs 328 m on revenues of Rs 3.08 bn, while the latter is a dead loss proposition earning a negative PBIT of Rs 132 m on revenues of Rs 108 m. So this is where the company has to work on very diligently.
The major revenue expenses
There are three big individual items of revenue expenditure - employee benefit costs, advertising and production costs. At the top of the heap is the first named --involving an outlay of Rs 931 m against Rs 933 m previously. Next in line is advertising at Rs847 m against Rs 870 m previously. The last in line is production costs at Rs 390 m against Rs 401 m previously. Curiously enough all three items of expenses in the current year are lower than in the preceding year. (It looks like there were no increments handed out during the year!) With a lack of growth in revenues, the company applied the brakes on all the three big ticket expense items and came out a winner. Where it could not apply the brakes was in the depreciation provision.
The depreciation provision was up to Rs 210 m from Rs 140 m previously. The company has been spending mega sums on capex in the immediate past. The cash flow statement reveals that the company spent Rs 1 bn in the last two accounting years. According to the fixed assets schedule it spent some Rs 1.8 bn in the immediate past. This includes a brand new building at a cost of Rs 802 m (the building does not bring in revenues), and plant and machinery which presently has a gross value of Rs 2.1 bn. The gross block consisting of tangibles and intangibles is currently valued at Rs 3.8 bn. The company seems to have added to the gross block without disturbing the debt burden-and the company should be credited for this good work. The total borrowings at year end amounted to Rs 602 m against Rs 564 m previously. (The debt includes term loans of Rs 173 m (Rs 238 m)which is classified as 'borrowings from another party'. What type of loan designation is this anyways?). It would appear that the additional shares that were issued to Reliance Capital may have helped fund the capex. The securities premium account boasts of a credit balance of Rs 523 m. It is of some credit to the company that it was able to keep the interest outflow on the debt to Rs 57 m -inclusive of bank charges--though only Rs 33 m has been debited to the P&L account-the balance has apparently been capitalised.
No benefits yet from capex splurge
But the bigger issue is that the company does not appear to have benefited to any extent as a result of this rush of capex. At least this is what the revenue figures bear out. The revenues for the year have only inched up, but fortunately the company was more than up to the task by applying the brakes on major revenue expenses. Unlike manufacturing companies, media units cannot commission new capacity and expect a corresponding increase in revenues. Apparently the management had some sound judgement in mind when they went for the mega expansion-and some of it may have gone into its fledgling (?) radio broadcasting. The annual report however offers no clue on how the company plans to get more bang for the buck on its additional investments.
There is also its investment in its associate company, Mail Today Newspapers, which is yet to earn any returns. The parent has acquired Rs 10 face value shares at Rs 43 per share for god knows what reason. Not that it alters the picture one bit this way or that. The returns if any are a long way of and that is not the first priority of the promoters anyways. The auditor's have made a comment on this investment, but the company has brushed it off saying that given the nature of the investment, the outlay is safe. We have no other public information to go by.
The parent makes do with one sibling as stated earlier -TV Today Network (Business) Ltd which is some eight years young. But the directors' report also states that no operations have commenced as yet. There is no clue on what the parent has to offer in respect of this idling company.
This is not a company which will elicit any investor interest unless the management is more forthcoming on its longer range plans. The annual report is devoid of any serious statements of intent. The share price (Rs 5 paid up) did a waltz of its own though, gyrating from a low of Rs 52 in the early part of the financial year to a high of Rs 94 during the latter part of the financial year. This could be due to the low volumes of floating stock on tap.
Disclosure: I do not hold any shares in this company, either directly, or under any non discretionary portfolio management scheme
This column Cool Hand Luke is written by Luke Verghese. Luke has been a business journalist, financial analyst and knowledge management head with a professional experience of more than 20 years. An avid watcher of the stock market, he has written extensively on stock market trends. His articles have featured in Business Standard, Financial Express and Fortune India amongst others. He has also been the Deputy Editor, Fortune India and the Financial Editor of The Business and Political Observer.