Revenue drop partly offset by growth in subscription income: Sun TV Network

Firm says 25% growth in subscription revenues is highly profitable as it doesn't have a high cost of sales apart from commissions; it sees 2020-21 subscription revenue well over double digits

Media tycoon Kalanithi Maran owned-Sun TV has said that the slowdown in ad spend, a high base of movie revenues in the comparable previous period, and loss of IPL revenues have led to an overall drop in revenues and earnings before interest, taxes, depreciation, and amortization (EBITDA). This, however, has been partially offset by strong growth in subscription revenues. Analysts estimate the company's ad revenue to drop by around 20 per cent in FY21E, while subscription revenues would grow at 12 per cent in FY21E.

Sun TV's consolidated revenues were Rs 3,519.85 crore in 2019-20 as against Rs 3,782.54 crore for the corresponding previous year. EBITDA for the year ended March 31, 2020 was Rs 2,275.92 crore as against Rs 2,606.68 crore for the previous year ended March 31, 2019. The Profit after taxes (after accounting of share from joint venture) was Rs 1,385.49 crore for the year ended March 31, 2020 as against Rs 1,433.68 crore the previous year.

S L Narayanan, Group CFO, Sun TV Network Limited said that in the same quarter of last year, the company had higher revenues because of the launch of Rajinikanth's film, Petta.

The company also accrued about Rs 57 crore of revenues on account of IPL because the season started in the last week of March in anticipation of the elections.

"So we don't have the effect of one-off film revenue, nor do we have a truncated IPL season in the current year's March quarter. So that impact will be seen in the top line," he said. Income from the company's IPL franchise 'SunRisers Hyderabad' for season 2019 (partial) was at Rs 244.40 crore as against Rs. 443.91 crore for the year ended March 31, 2019 for two seasons 2018 and part of 2019 and corresponding costs of Rs 139.29 crore compared to  Rs. 224.17 crore for the year ended March 31, 2019 for two seasons 2018 and part of 2019.

During the third quarter was a decline in ad revenue across the industry. Even in the fourth quarter, there has was a slight downfall because of the overall recession.

"I can't say the impact of Covid was fully felt in this quarter because literally, we could see some sort of a stress in cancellation of ads post March 20th. So that way it has not impacted fully, but whatever you're seeing as an impact in the ad is primarily because of the overall macroeconomic scenario, like I think we have witnessed similar such trend in terms of decline in top line for all the FMCG players, automobile players, et cetera. So that's more or less in sync with the industry," said Rajaraman Mahesh kumar, President, MD, Sun TV Network Limited.

He added, April has been one of the tough months, but the company is seeing bounce back in the ads in May and June. So in a relative sense, as compared to what it was in April, it is seeing a good traction, but one needs to wait and watch for overall impact.

Commenting on subscription, Narayanan said, the 25 per cent growth in subscription revenues is highly profitable because the company doesn't have a high cost of sales apart from the commissions it has to pay. He expects in 2020-21, subscription revenue should go well over double digits.

"The Real challenge for our management this year will be to somehow ensure that the fall in ad revenues is not much. And for that, we are exploring every opportunity, and we are trying various ways in which we can incentivise advertisers to spend more on our channels," he added.

IPL may bring in Rs 200 crore pretax profit if all goes well

Sun TV Network has said that if the Indian Premier League (IPL) match happens this year, after removing various confusions and issues around it happening, regarding the Chinese sponsors and tickets being sold, the company would make a pretax profit of Rs 200 crore from its franchise SunRisers Hyderabad. The company is also looking at creating assets like the IPL franchise.

If the tournament does not happen, it will be no revenue, no cost, but if it takes place during the year, it would depend on various things. This includes the broadcaster's terms of contract with BCCI, whether the main sponsor Vivo will remain to be the sponsor, and some of the stakeholders are also backed by Chinese capital. If the broadcaster continues and the sponsorship agreements remain, it would bring in profits to the company, said S L Narayanan, Group CFO, Sun TV Group, in an interaction with analysts.

"We are always looking for something which is relatable to the whole concept of media and entertainment. So we are definitely now on the lookout for assets that can be aggregated to the Sun TV network. And at this point in time, we are not seeing anything which is available. But suffice it to say that we are actually now looking for some opportunities because the business is throwing cash," he added.

After paying dividend of Rs 1,200 crore last year, the company had Rs 2,400 crore of cash as of March 31, 2020 and would like to see how best to use this, he added.