Ad revenues will rise on better price realisations: SL Narayan

Interview with CFO, Sun group

Kalanithi Maran-owned Sun TV Network has decided to increase advertisement tariff by an average 19%. The decision comes at a time when the company reported a 15% growth in advertisement, which was led by FMCG. While the rate hike will come into effect from July 15 for its flag ship 'Sun Tv', company said for other channels it will be phased out.

SL Narayanan, Group CFO, Sun Group told T E Narasimhan that though 2012-13 started with uncertainty, but ended up with satisfactory. The decision to increase advertising rates has been well thought out and effected after ensuring that the market will be able to absorb the additional burden.

How was the quarter and fiscal passed by?
Fiscal 2012-13 has ended on a satisfactory note although we started with some uncertainty, given the fact that the entire TV broadcasting industry had faced challenges in growing ad revenues . The first half of the year ie April to Sept 2012 saw our ad revenues growing at a modest 5%. However, the business environment has improved substantially for us from the third quarter onward; we grew ad revenues by 20% in the quarter ended December 2012 and 15% in March 2013. We are also extremely pleased that the digitisation gains are starting to flow through to the P&L. In particular, DTH revenues have shown significant traction in the last couple of quarters and that augurs well for the coming days.

Any changes in the advertisers profile? What are the prospects going forward?
Not much of a change; almost 55% of our ad revenues come from national FMCG companies and about 33% are accounted by regional brands, again largely consumption led businesses such as garments, jewelry, processed foods etc. With the improving price realisations in telecoms and falling interest rates, we believe that ad spends will go up in segments such as mobile telephony/financial services/auto/real estate.

Will you be able to continue this momentum? how do you see 2013-14?
We believe that Sun TV should grow ad revenues in tandem with the same rates at which the national nominal GDP is expected to grow; however, subscription revenues can grow much faster than last year, especially because the ongoing digitisation agenda is being fully supported by the authorities.

What kind of impact the 19% hike in advertisement will have in your revenues going forward? in the current circumstances you think the customers will be able to observe the hike?
The decision to increase advertising rates has been well thought out and effected after ensuring that the market will be able to absorb the additional burden. These are slots that enjoy consistently high viewership and we are confident that there will be no issues in implementation. Additionally, it should be noted that the price increases are coming up after almost 24 months.

Will you be looking for other channels also? Press release stated that its for Sun TV alone.
We will be phasing out the hikes across the channels; at an appropriate time we will look at revisions in other languages/genres as well.

How much Sunrisers (your IPL) team contributed during the fiscal? How has been the response to the new team?

The IPL operations will start contributing from FY 2014; we are delighted that the Sunrisers brand has quickly carved a niche for itself on the back of some great performances by our players. The team has built a great fan following in the city of Hyderabad.

 

Your thoughts on the dividends..will you continue to pay high dividends?

Sun TV has always followed a liberal distribution policy consistent with the philosophy that any cash that is in excess of immediate investment needs ought to be given to the shareholders; our pay out ratios have gone from 25% to 64% in the last five years, with a six fold increase in aggregate quantums of payments. We cannot comment on the future but we will try to maintain the pay out ratios.

 
What kind of capex Sun lined up for 2013-14? possible to give break-up?

Our capex budget will be in line with past trends and there are no major projects on the anvil.

 

How is radio business are doing?

Our radio brands Suriyan FM in Tamil Nadu and Red FM in the rest of India continue to do well in their target markets. The revenues are up by 26% over the previous year; more importantly, the P&L has posted a strong turnaround and moved from red to black.