GTPL Hathway Ltd (GTPL) Q2 FY23 Earnings Concall Transcript

GTPL Hathway Ltd (NSE:GTPL) Q2 FY23 Earnings Concall dated Oct. 17, 2022

Corporate Participants:

Pulkit Chawla — Equity Research Associate

Anirudhsinh Jadeja — Promoter and Managing Director

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Analysts:

Pratiksha Daftari — Aequitas Investments — Analyst

Raj Ohja — — Analyst

Karan Mehta — Nirzar Securities — Analyst

Akshay Jain — Equity Research — Analyst

Dharma Venkatesan — — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Q2 FY ’23 Results Conference Call of GTPL Hathway Limited hosted by Emkay Global Financial Services. We have with us today Mr. Anirudhsinh Jadeja, Promoter and Managing Director; Mr. Piyush Pankaj, Business Head CATV and Chief Strategy Officer; and Mr. Anil Bothra, Chief Financial Officer.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pulkit Chawla from Emkay Global Financial Services. Thank you and over to you, sir.

Pulkit Chawla — Equity Research Associate

Thank you, Michelle. Good evening everyone. I would like to welcome the management of GTPL Hathway and like to thank them for this opportunity. Without further delay, I shall now hand over the call to the management for their opening remarks. Over to you, gentlemen.

Anirudhsinh Jadeja — Promoter and Managing Director

Thank you, Pulkit. Good evening everyone. I’m pleased to welcome you all to our quarter two and half year ended FY ’23 earning conference call. Your company GTPL Hathway is driven by the very purpose of being present at your service through its digital cable TV distribution and high-speed broadband products offering. Halfway into 60th year of our operation, I’m happy to share that we continue to be number one service provider in digital cable TV service in India and for broadband services in Gujarat.

The company has registered a strong performance in H1 FY 2023 by growing 10% revenue. Efforts are being made towards aggregating smaller MSO and additionally expanding the broadband penetration. The broadband segment presented great opportunity to grow due to consistent increase in demand for wireline broadband and increase in data consumption patterns. While focusing on growth, we also continue to be a net-debt free company. I now hand over to Mr. Piyush Pankaj, who will take you through business and financial update for the quarter.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Thank you, Mr. Jadeja. Good evening everyone. I hope all of you are safe and healthy. I’m pleased to announce the business and financial performance of GTPL Hathway for quarter two and H1 FY ’23. Our CATV subscriber base as on 30th September, 2022 stands at 8.6 million. Paying subscribers for CATV stands at 8 million. On YoY basis, the increase in active and paying CATV subscribers is 550,000 and 650,000 respectively. We remain the largest MSO in India riding on our quality services and consumer-centric products and services. We expect to grow our digital cable TV business by aggregating smaller MSOs and additionally, expanding the broadband penetration to digital cable TV base.

In the broadband business, we added 135,000 new subscribers on a YoY basis and 25,000 new subscribers on a QoQ basis. Homepass subscribers stood at 5 million as on 30th September, 2022, of which 75% are available for FTTX conversion. The broadband ARPU for quarter two FY ’23 stood at INR450. The average data consumption per customer per month stood at 300 GB, registering a 33% increase YoY. This segment continues to grow as data consumption is increasing due to push for digital growth, digital education, push for hybrid work culture, increased use of social media, et cetera.

I am proud to announce that we have been recognized as The Economic Times Most Iconic Brands of 2022 by The Economic Times. The award is third in our list of accomplishments this calendar year after the company was listed among India’s Growth Champions 2022 published by Economic Times and Statista and among the High-Growth Companies Asia-Pacific 2022 published by Financial Times. These awards are a testimony to our relentless customer-centric efforts.

Moving on to the financial performance. On a consolidated level, excluding EPC contract, in quarter two FY ’23, revenue grew by 10% YoY to INR6,620 million. The CATV subscription revenue stood at INR2,751 million. The broadband segment delivered robust growth of 19% YoY and revenue stands at INR1,198 million led by healthy subscriber additions. Consolidated EBITDA for the quarter stood at INR1,383 million with a margin of 20.9%.

Our continuous efforts to to deliver in our balance sheet and maintaining our net debt free status [Indecipherable] our finance cost, which has reduced by 30% YoY and 5% QoQ. Our borrowings reduced by INR335 million due to repayment of loans this quarter. PAT for the quarter stood at INR459 million, up 6% YoY. We can now begin with the question-and-answer session. Thanks.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of from Pratiksha from Aequitas Investment. Please go ahead.

Pratiksha Daftari — Aequitas Investments — Analyst

Good evening. Thank you for the opportunity. My first question was on the cable TV side. We’ve been seeing some softening of ARPU since a couple of quarters now. So just wanted your view on the outlook on ARPU here.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Hi, Pratiksha. Here, ARPU you can see that it is at the same level that it was earlier. We are not able to increase the ARPU and we are looking forward that we are going to increase the ARPU as we are entering into new markets and still we are maintaining our ARPU ar the same level because at present we are entering into the market where the average ARPU is less than our average ARPU in those markets, but we are increasing our ARPU in our current markets so that we can maintain our same ARPU, but once we are going to stabilize in the new market, we are going to take up the ARPU. So, I would say on a YoY basis, you will see the growth in the ARPU by March ’23 or by September ’24. By that time, we are going to be stabilized in the new markets.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay, stabilized — so when we say stabilized, we are looking at around 120 [Phonetic] levels, right?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yeah, we are at 120 [Phonetic] levels right now 119, 120 [Phonetic]. That is because we are going into the markets where the ARPUs are less right now. We are going to increase those ARPUs in new markets also. In old markets, we are increasing our ARPU and that’s why we are able to maintain the ARPU right now, but once those new markets are going to get stabilized, which will take six to 12 months, you will start seeing that the ARPU is increasing.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay and if you could just elaborate a little about the growth plans in subscribers in this business because we’ve seen a very volatile trend year and also give a comment on the gross addition and net addition and the churn on quarterly trend.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yeah, so as I have stated that on a YoY basis, we have increased our paying subscribers by 650,000, but the still the revenue for some of the subscribers is going to start from quarter three and quarter four. So we’ll start seeing it in the revenue side also the growth. We are still maintaining that we will do 1 million per annum, which is the target on which we are working towards. Already on a YoY basis, 650,000 we did. We have to do more around 500,000 to 600,000 more in this year and we have to continue that trend going forward also.

Yes, on the churn side, you will see that churn is — from last year, it was a bit under control. Last year, due to COVID and all, it was significantly high, but we have controlled it. We have brought it down, but still pre-COVID era — it is still higher than the pre-COVID era I would say. So, we are trying to take care of that so that we can show more on the net addition side and we are confident that we will get those results.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay and on broadband front, so how do I look at quarterly additions everywhere. I think we are seeing some — the pace of growth has come down drastically in last two quarters. So how do you want to describe the outlook here?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

See, earlier we have given outlook that between 40,000 to 50,000 per [Phonetic] quarter we will do. First quarter we did around 35,000. This quarter it is 25,000 addition mainly because of the monsoons. It was extended monsoon mainly for the Gujarat — for us, mainly it’s happened for one month or 1.5 months, but it was like all three months heavy rains were there Gujarat and that has affected a bit of our net additions. We are hopeful that we are going to cover it in the next six months time and we will come back to the same projections which we have given.

Pratiksha Daftari — Aequitas Investments — Analyst

So which is about — roughly — close to 1 million subscribers by the end of the year.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yes, we are at 870,000 right now. We are looking forward that we are going to add around between 80,000 to 100,000 in this financial year. So, close to 1 million.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay and how about Homepass, like what is the — do we have any target set out here. I think last two quarters, H1 we’ve done 30,000. So how do I look at growth plan here on Homepass basis?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Homepass, yes as I said, we have planned to ramp it up, but because of the rain, we are not able to ramp it up. If you see, we did 150,000, 150,000 last two quarters, from 4.7 million, we have come to 5 million right now. We are looking forward that we close here [Phonetic] somewhere around 5.5 million or 5.6 million. So we are planning to do double that in next two quarters.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. And if you could just comment about the acceptance of Genie box. How has that been going? And I understand that, that should have improved the margins. That clearly is not showing the numbers. So is there anything else out there that is taking time?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Genie box, you can say, last six months, we have seeded around 10,000 hybrid. As I say that, many customers have already subscribed to some of the apps and the want to go for hybrid upon completion of their existing subscription. And second, on the market feedback, we have to come with the lower validity packs and introduce smaller bundles of OTT apps. We have not done [Phonetic] that because of the rains and all [Indecipherable] we should wait for that — for this launch and we are launching at the time of — just after Diwali where we are going to give two type of products.

One product is with the hybrid box and one product is going to be for my existing customers where they can opt for OTT on mobiles also and with broadband and with cable TV both bundled together. So all those launches are going to happen around Diwali and we are hopeful that we are going to get tractions due to this and we will increase our horizon in terms of customers for our OTT.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay and lastly, how much capex have we incurred in each division in this quarter?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yeah, for the six months, we did the capex of around INR210 crores where CATV, it has gone around INR110 crores and broadband has gone INR100 crores.

Pratiksha Daftari — Aequitas Investments — Analyst

CATV INR110 crores and broadband INR100 crores?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yes.

Pratiksha Daftari — Aequitas Investments — Analyst

And what is the capex plan for the current year?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

We are keeping the same capex plan of between INR450 crores to INR470 crores for this year where 50% is going to be the CATV and 50% is going to be in the broadband.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay, all right. Okay fine, that’s it from my end. Thank you.

Operator

[Operator Instructions] The next question is from the line of Raj Ohja [Phonetic], an individual investor. Please go ahead.

Raj Ohja — — Analyst

Hi, good afternoon. Thanks for the opportunity sir. Sir, a couple of questions. First question is related to subscriber base. So I just wanted to understand how do we plan to increase our broadband subscriber base and especially which areas we will be targeting for coming quarters or a year?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Yes, Raj. Thanks. Raj, threefold strategy is there. One strategy is the B2C strategy, which we are doing right now. The 25,000 or 35,000 which we have seen in the last six months is mainly B2C subscribers and that is going to continue. The second strategy is in the rural Gujarat side where we have to expand. Right now, we are at 110 cities only in Gujarat presence and in cable side, we have presence of around 400 cities. So we have to expand on that plus we are going to leverage the GNL infrastructure, which we have laid for the government and penetrate into the rural Gujarat side.

The third strategy is your B2B segment, which we have started. Already a lot of things are in pipeline there. You can see around 50,000 subscriber base in the pipeline which we are seeing that, that will come to us in the quarter three and quarter four. So this threefold strategy is on which we are working to increase our subscriber base.

Raj Ohja — — Analyst

Okay, that was really helpful sir. So also just wanted to understand the government has been pushing various digital initiatives and motivating to connect rural areas to broadband. So at a macro level, how this thing can help us to increase our — ultimately, how this can increase benefit in a longer run?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

See, as the more digital adoption is happening in India and as the consistency side if you say, that is only wireline broadband, which gives the consistency and any homes — now at least, they are not depending on totally on wireless. They wanted the wireline at home and that is going to help us increase in our subscriber base. The overall industry, if you talk about [Speech Overlap] 110 [Phonetic] million households and out of that, only 25 million households is the wireline broadband right now.

So the opportunity is very big for all the players and we are looking forward that as the government initiatives plus the infrastructure improvement happens in country, the adoption of wireline broadband is going to increase multifold and that’s going to help all the players who were at the forefront of this, that’s going to help them more on that basis. So, it’s a very sunrise industry, I will say, and we are looking ahead to be part of that.

Raj Ohja — — Analyst

Okay. Sir, I have one last bookending question. Like we have been generating good cash flow, and like we have got out of the EPC business. Okay, so I just wanted to understand now what was the impact of this on EBITDA margin going ahead?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

EBITDA margin is going to improve as on the EPC, we are just making the EBITDA of around 8% to 9% and now as EPC project is not there, then the regular businesses, which is at EBITDA margin of more than 20%. That is going to help us in the EBITDA margin.

Raj Ohja — — Analyst

Okay, that was useful sir, thank you.

Operator

[Operator Instructions] The next question is from the line of Karan Mehta from Nirzar Securities. Please go ahead.

Karan Mehta — Nirzar Securities — Analyst

Hello?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Hi, Karan.

Karan Mehta — Nirzar Securities — Analyst

Hi, sir. Thank you for this opportunity. So I just have one question. What’s the amount of recurring capex and the amount of new capex incurred for growth in CATV as well as broadband business for the first half FY ’23?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

The recurring capex is mainly in the CATV side, the main capex your STBs. If I say the replacement STBs, which we had to do from the new boxes, which was in the warranty period and all, which you can say as recurring, it is not then around INR200,000 or INR250,000 in a year. The rest is for the new subscriber base, which we are incurring. So if we are purchasing around 1.5 million boxes, out of that, 1.3 million boxes or 1.25 million boxes is going for the new capex, new subscriber base. Hardly, you can say, 15% is going on the CATV [Phonetic] side. The same trend is on the broadband where we have to do the replacement of your current — old land customers and [Speech Overlap].

Anirudhsinh Jadeja — Promoter and Managing Director

With this financial year, basically, the CATV side, set up box might be a replacement bit higher because we are completely — in this financial year, we are migrating — removing entire MPEG2 box to MPEG4 box. So we are replacing old MPEG2 box and that gives a very good support and feature to upgrading our — especially the channel lineup, addition for new channel for saving for bandwidth overall to the service provider.

Karan Mehta — Nirzar Securities — Analyst

Okay. Sir, can you just quantify this number of recurring capex?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

For this year, I would say the recurring capex will be around — for the 400,000 [Phonetic] boxes, which is around the total capex, it is going to be around 22%, but general, it is going to be somewhere between 13% to 15% on the CATV side. On the broadband side, it is 15%, 15% to 17% it is maintained in that.

Karan Mehta — Nirzar Securities — Analyst

Yeah, if you can just quantify the — I mean, the amount?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Amount on six months, if I talk about, it is going to be somewhere around INR25 crore out of INR110 crores is the CATV side, which is recurring and in the broadband, it is going to be somewhere around INR15 crores out of INR100 crores in the first six months.

Karan Mehta — Nirzar Securities — Analyst

Okay, okay, yeah. Thanks a lot, sir. This was very helpful.

Operator

The next question is from the line of Akshay Jain from Equity Research. Please go ahead.

Akshay Jain — Equity Research — Analyst

Hello…

Operator

Mr. Jain, please proceed.

Akshay Jain — Equity Research — Analyst

Sir, I just had a few questions. We have increased receivable and even payables are higher compared to H1 last year. I just wanted to [Technical Issues] reasons for the same.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

The total receivables are INR3,565 million. If I compare these receivables with the September of FY ’22, it is almost around INR3,226 million whereas if I compare this from the quarter four or 31st March, 2022, it is INR2,836 million. So increase is cyclical in nature, which is actually predominantly from the marketing and carriage receivable and the same amount of payables are also going up. So it is a kind of — the arrangement between the marketing and carriage parties and the pay channel party.

So it is a contra kind of entry and if you look at the trade payables on 30th September, it is INR5,864 million [Phonetic] and the Q2 of last year, it was INR5,550 million. So it is cyclical in nature if we compare with the September number of last year, then it gives the correct picture. March, yes, the things will come back to the normal.

Akshay Jain — Equity Research — Analyst

Okay. Sir, one more question. I’m seeing that the segmental PBT is improving with the contribution from the broadband segment. So going forward, what is your guidance for the current financial year and the next year on this?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Broadband, as we mentioned in earlier call also that we are making around 40% EBITDA in the broadband business. So as the broadband business will go up, the contribution towards PBT and EBITDA is going to increase in broadband. In CATV side, we are making around 20% to 22% EBITDA margin and that is going to continue. So as the broadband business will start contributing more and more in the revenue side, you will see that the EBITDA and PBT the contribution is going to come more from the broadband.

Akshay Jain — Equity Research — Analyst

And sir, coming to the ARPU of your broadband business, it’s been broadly in the range of INR445 to INR450. Do we see any improvement coming in to the ARPU for broadband segment in the coming quarters?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

We are not giving that the ARPU is going to increase. The whole management and the whole industry is in towards the subscriber additions as the opportunity is very big and we are going to continue that also. Yes, we are going to maintain our ARPU at this level. We are not looking forward that we will make a case about this [Phonetic], but yes, subscriber addition is the main focus right now. Once the business will get mature, at that point of time, we will see that how to increase the ARPU.

Akshay Jain — Equity Research — Analyst

Okay sir, thanks a lot for answering my questions. Thank you.

Operator

[Operator Instructions] The next question is from the line of Dharma Venkatesan [Phonetic], an individual investor.

Dharma Venkatesan — — Analyst

Thank you for the opportunity sir. Sir, my question is on your cable business. Like you have mentioned that you are looking at inorganic acquisitions if anything comes up. So is there any specific region you are concentrating or it’s still in the early stages?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Can you repeat the question? The last question was not very clear.

Dharma Venkatesan — — Analyst

Okay, sir. Like in the cable business, you said like we are looking at inorganic acquisitions. Is this still at very early stages or is there any particular region that you want to expand through inorganic acquisitions?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

No, no. We are looking forward to expand all over India as we are already in 19 states and we are looking forward to enter into a few more states and so we are looking forward for acquisitions in all the states where we are present. Wherever the opportunity is coming, we are going ahead with that and in quarter three and quarter four, you will see that some big acquisitions will come into our fold.

Dharma Venkatesan — — Analyst

Okay, sir. And I was late to join the call so if this question was asked, so pardon me. Is there any update on the court case that we were having or is it still at the same stage?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

No, it is — it’s still under the same situation. So there is no movement on that. We are looking forward. I think one court case is happening in the first week of December at the Supreme Court. So we are hopeful that some movement will happen at that point of time.

Dharma Venkatesan — — Analyst

Okay, sir. As far as I understand that we have a precedent in this case, which actually means that we don’t have to pay the fine. So, that is how it is still there, right or is my understanding wrong?

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

No, no, your understanding is right. You can see our notes, both number seven and eight in our results, which we have given and put it into the books [Phonetic]. You can get a clear picture of those in both seven and eight of the books [Phonetic]. Okay sir, fine. Thank you sir. Thank you for all your time.

Operator

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Piyush Pankaj — Business Head – CATV and Chief Strategy Officer

Thanks everyone for joining the earning call and we look forward to again interact with you on the next quarter results, the quarter three results. Please be safe and healthy. Thanks a lot.