Sun TV to invest Rs 500 cr in OTT and movies, strengthen regional channels

Rs 250 crore will be spent on its Sun NXT initiative, sizeable investments would go toward Bengali and Marathi, which are potentially larger markets than Malayalam

Media tycoon Kalanithi Maran-owned Sun TV is planning to invest around Rs 500 crore in its digital initiative Sun Nxt, to strengthen its regional channels and acquire movies. 

Of the proposed amount, some Rs 250 crore will be spent on Sun NXT, while sizeable investments will go to Bengali and Marathi channels, which it sees as larger markets than Malayalam. Sun TV plans to spend Rs 300–350 crore on five large-ticket movies in FY22 and additionally on small-ticket movies, the management said at a post-earnings call.

The broadcaster plans to launch new TV shows/movies and a Marathi channel in 2021-22, which offers a silver lining to ad and subscription growth.

Sun Television Network (Sun TV) has reported a 18 per cent growth during the quarter ended December 31, 2020 to Rs 441.82 crore  from Rs 373 .45 crore, during the same period last year.

For the quarter ended December 2020, revenues was up around 19 per cent to Rs 972.34 crore from  Rs 814.97 crore, during the same period last yera. Subscription revenues for  the  quarter  was up  by around 3 % to Rs.424.05  crore from Rs 411.85 crore, a year ago.

According to Motilal Oswal report, third quarter revenue growth was led by Rs 200 crore IPL revenue,  while advertisement revenues declined 10% YoY abd subscription revenues were up by 3% YoY.

"Viewership recovery is yet to see a steady uptick, although newfound vigor in fresh content and investments in new channels and OTT should be the key to growth and valuations. A steady dividend payout and low valuation offer support," said MOSL, which expects Sun TV's subscription revenue to grow in the double digits in FY22E. Furthermore,viewership trends are yet to see a steady uptick.

Management expects 2021-22 advertisement revenues to be in line with 2019-20 levels with the launch of some big-ticket shows from the first quarter of 2021-22. They added, content costs are expected to rise 20–25% in FY22E (over FY20 costs).

MOSL expects FY20–23E revenue/EBITDA/PAT of 5%/4%/5% on the back of an improving macro environment,coupled with the revamping of content aiding.