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Entertainment Network
ENIL is a leading radio company in India with over 35% revenue market
share and is one of the few profitable radio players in the industry. We
expect strong revenue growth based on higher advertising rates and
inventory utilization. This coupled with lower cost structure (royalty
structure at 2% of net revenues) would enable margin expansion. ENIL’s
strong cash position would enable it to participate aggressively in the
upcoming phase 3 auction.
Company Background
ENIL operates FM radio broadcasting stations through the brand Radio Mirchi in
32 Indian cities and is headquartered in Mumbai. The company also provides
event management services through its subsidiary Alternate Brand Solutions (India)
Limited. Its promoter, BCCL, is the flagship company of The Times Group, which
has a heritage of over 150 years and is one of India’s leading media groups.
Recent Financial Performance
During 1HFY11, ENIL reported 38% YoY decline in revenues and 2% QoQ growth.
Despite this, due to lower costs the group reported an EBIT of `237mn in 1HFY12
vs `74m in 1HFY11. At end-March 2011, the company had net cash of over
`1.5bn.
Outlook
Increasing demand and growing acceptance of Radio as an advertising medium
would result in a further increases in inventory utilization levels and higher ad
rates. Going forward, improving advertising spend, lower cost structure and
announcement of the phase 3 policy would benefit the company.
Conference Meeting Notes
Entertainment Network (India) Limited represented by Mr Dalpat
Jain, AVP Strategy, Finance & IR
Analyst:
Rakshit Ranjan, CFA, rakshitranjan@ambitcapital.com, +91 22 3043 3201
1. Revenue guidance: Whilst 1HFY12 has seen 11.5% YoY increase in
revenues, the second half of the year is likely to experience a marginal decline
given shrinking advertising spends. Advertising spend is declining because of
reduced spending by large advertisers such as consumer durable companies,
automotive companies and telecom players, as these companies are
witnessing reduced demand momentum. Management believes that 14% YoY
decline in revenues witnessed in 3QFY09 was an all-time low, which is not
likely to repeated in the near future.
2. Phase-3 FM rollout: The company is prepared to benefit from the phase 3
bidding process for FM radio stations, which is likely to occur in Mar-Apr 2012.
The group plans to spend `2.5-`3.0bn in capex for its phase 3 expansion to
acquire licenses for around 90-100 stations. Three quarters of this capex is
likely to be funded from the balance sheet surplus cash and ongoing cash
flows whilst the balance is likely to be funded from debt which will be repaid
within two years.
3. Competitive advantages: Management remains confident of its competitive
advantages around: a) first mover status; b) access to Times of India's clientele
and brand reach; and c) ability to attract good quality personnel through its
leadership in the media market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Entertainment Network
ENIL is a leading radio company in India with over 35% revenue market
share and is one of the few profitable radio players in the industry. We
expect strong revenue growth based on higher advertising rates and
inventory utilization. This coupled with lower cost structure (royalty
structure at 2% of net revenues) would enable margin expansion. ENIL’s
strong cash position would enable it to participate aggressively in the
upcoming phase 3 auction.
Company Background
ENIL operates FM radio broadcasting stations through the brand Radio Mirchi in
32 Indian cities and is headquartered in Mumbai. The company also provides
event management services through its subsidiary Alternate Brand Solutions (India)
Limited. Its promoter, BCCL, is the flagship company of The Times Group, which
has a heritage of over 150 years and is one of India’s leading media groups.
Recent Financial Performance
During 1HFY11, ENIL reported 38% YoY decline in revenues and 2% QoQ growth.
Despite this, due to lower costs the group reported an EBIT of `237mn in 1HFY12
vs `74m in 1HFY11. At end-March 2011, the company had net cash of over
`1.5bn.
Outlook
Increasing demand and growing acceptance of Radio as an advertising medium
would result in a further increases in inventory utilization levels and higher ad
rates. Going forward, improving advertising spend, lower cost structure and
announcement of the phase 3 policy would benefit the company.
Conference Meeting Notes
Entertainment Network (India) Limited represented by Mr Dalpat
Jain, AVP Strategy, Finance & IR
Analyst:
Rakshit Ranjan, CFA, rakshitranjan@ambitcapital.com, +91 22 3043 3201
1. Revenue guidance: Whilst 1HFY12 has seen 11.5% YoY increase in
revenues, the second half of the year is likely to experience a marginal decline
given shrinking advertising spends. Advertising spend is declining because of
reduced spending by large advertisers such as consumer durable companies,
automotive companies and telecom players, as these companies are
witnessing reduced demand momentum. Management believes that 14% YoY
decline in revenues witnessed in 3QFY09 was an all-time low, which is not
likely to repeated in the near future.
2. Phase-3 FM rollout: The company is prepared to benefit from the phase 3
bidding process for FM radio stations, which is likely to occur in Mar-Apr 2012.
The group plans to spend `2.5-`3.0bn in capex for its phase 3 expansion to
acquire licenses for around 90-100 stations. Three quarters of this capex is
likely to be funded from the balance sheet surplus cash and ongoing cash
flows whilst the balance is likely to be funded from debt which will be repaid
within two years.
3. Competitive advantages: Management remains confident of its competitive
advantages around: a) first mover status; b) access to Times of India's clientele
and brand reach; and c) ability to attract good quality personnel through its
leadership in the media market.
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