Hindustan Media Ventures Ltd (HMVL) Q3 FY23 Earnings Concall Transcript

Hindustan Media Ventures Ltd (NSE:HMVL) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Aaditya Mulani — Investor Relations, HT Media Group

Anna Abraham — Head, Investor Relations

Piyush Gupta — Group Chief Financial Officer

Analysts:

Ranga Prasad — Private Investor — Analyst

Presentation:

Aaditya Mulani — Investor Relations, HT Media Group

Good afternoon, ladies and gentlemen. This is Aaditya Mulani from the HT Media Group. I would like to welcome you all to our Third Quarter Financial Year 2022-’23 Earnings Webinar. [Operator Instructions]

I now hand over to Miss Anna Abraham, Head, Investor Relations. Thank you and over to you, ma’am.

Anna Abraham — Head, Investor Relations

Thank you, Aaditya. Good afternoon, everyone. I welcome you all to the earnings webinar to discuss the financial results of the third quarter of financial year ’22-’23 of HT Media Group. On the panel today from our side, we have Mr. Piyush Gupta, Group CFO; Mr. Anup Sharma, CFO of Hindustan Media Ventures Ltd.; Pervez Bajan, Group Controller and members of the Investor Relations team.

On the screen now is the earnings presentation. Kindly note that our remarks will track with the presentation on the Zoom webinar. This presentation, along with the financial statements is available on the stock exchanges and the Investor Relations section of our websites.

The Slide 2 captures the disclaimer regarding forward-looking statements which is on your screens right now. Kindly take note of the same. As per practice, we do not provide specific revenue or earnings guidance.

Moving on to Slide 3. This gives our Chairperson’s comments on the performance of the company for the quarter and I quote, “The third quarter of the ongoing fiscal year saw the continuation of the gradual recovery of our media businesses on the back of an improved industry-wide business environment and the annual festive season. However, persistent general inflation acted as a dampener resulting in a relatively muted festive quarter. Raw material costs remained at heightened levels during the quarter but will likely ease off in coming quarters.

Against this backdrop, we continued to improve our business performance on a quarterly basis for the Print and Radio verticals. Overall, the Print segment saw sequential growth in both advertising and circulation revenues, but margins continued to be impacted by high newsprint prices. Radio also saw an improvement on a sequential basis backed by better traction in both the FCT as well as the non-FCT space.

With inflation easing and stabilization of the overall business environment, we are hopeful of capitalizing on the growth in consumer and advertiser spending in the medium-term. We remain committed to delivering credible and trustworthy news and engaging entertainment to our ever-growing audience base.”

Moving on to Slide 4. This gives the agenda for today. We will begin with the performance with basic comments on our consolidated financials, which will be followed by regional [Phonetic] remarks on various businesses. We will open for Q&A session after the presentation concludes.

With this, now I hand over the call to Mr. Piyush Gupta.

Piyush Gupta — Group Chief Financial Officer

Thanks, Aaditya and thanks, Anna. We’ll just track the screen here. So as you can see on slide number 6, we’ve got a consolidated financial summary. So for the third quarter FY ’23, we had a total revenue of INR488 crores, which is a decline of 2% versus the same period last year. EBITDA came at INR28 crores, which is a decline of 74% with PBT at minus INR30 crores and PBT margin at a negative 6%. The key highlights are given on the right side. Total revenue is down Y-o-Y basis, primarily on account of a relative muted macro and festival. Just to expand, in the base — sitting in the base is the political revenue, which came last year, consequent to elections in UP and also there is eight days short of the festive season, because the Diwali timing altered between the second and the third quarter. Net cash as of 31 December is at INR854 crores.

With that, I’ll move on. Now we go into the business unit performance coming into Print. We see revenue tracking at INR284 crores as against INR323 crores and operating revenue including circulation revenue payment INR368 crores versus INR396 crores which is a decline of 7 percentage point. Sequentially, that’s a growth of 7%. Operating EBITDA came in negative at INR4 crores versus Y-o-Y INR87 crores last year. Sequentially, it was minus INR14 crores last quarter and therefore it’s a improvement of 73%. Key highlights, if we go, Ad revenue declined on Y-o-Y basis, which is led by volume. I just explained that on a Y-o-Y basis earlier. Circulation revenue has improved on a Y-o-Y and sequential basis, led by increase in realization per copy and operating EBITDA loss on account of higher newsprint prices.

A little deep dive into English. Our Ad revenue came in at INR160 crores as against INR176 crores, which is a decline of 9%. And versus the previous quarter, It’s a growth of 9%, second quarter being INR147 crores. Circulation revenue at INR15 crores versus INR7 crores which is a gain of 122% and sequentially a gain of 18%. And in key highlights, retail, auto, BFSI grew while real estate, FMCG and education remained muted. Circulation revenue increased — improved on the back of better realization per copy and higher number of copies.

Moving on to Hindi. We can see a 16% decline, revenue coming at INR123 crores and sequentially it’s a growth of 1% where they remained flat. On circulation revenue, again, it’s flat at INR45 crores, both sequentially and on a Y-o-Y basis. And key highlights, auto, healthcare, durables grew while retail, education, FMCG remained muted.

A quick look at our Radio business. Revenue grew handsomely to INR42 crores from INR34 crores same period last year, which is a growth of 21% and sequential basis, it’s a growth of 27%. And operating EBITDA came at INR7 crores, which is a growth of 50%, and operating EBITDA margin came in at 17%.

A quick look at the Digital which is sitting in HT Media Group. Our revenues came in at INR28 crores as against INR36 crores last year, a decline of 23% and margins were negative with a negative INR4 crores EBITDA.

I think with this, we come to the end of the presentation. I hand it back to Aaditya and Anna.

Questions and Answers:

Aaditya Mulani — Investor Relations, HT Media Group

Thank you, Piyush. [Operator Instructions] The first question is from the line of Ranga Prasad. Please unmute yourself and ask your question.

Ranga Prasad — Private Investor — Analyst

Good afternoon, everyone.

Piyush Gupta — Group Chief Financial Officer

Good afternoon.

Ranga Prasad — Private Investor — Analyst

At the outset, let me say that I find it pretty heartening to note that the price of newsprint is finally falling. Hope you can see further sharp falls in the price of newsprint in the coming quarters. Could you please throw some light on what’s the average price of newsprint used for Q3 and how you see it pan out in the coming few quarters? That’s the first question. Want me to continue with the second question or wait for your answer?

Piyush Gupta — Group Chief Financial Officer

Yeah, why don’t we answer that first and then you can go to the next question.

Anna Abraham — Head, Investor Relations

Q3 on a consolidated basis, the rate was about INR65,000 [Phonetic] and the next quarter we are hoping to see about 3% improvement on this.

Ranga Prasad — Private Investor — Analyst

Okay. Do you see the trend of newsprint prices coming down consistently or is it you expected for this…

Anna Abraham — Head, Investor Relations

Yes. We are seeing the trend of it coming down consistently and…

Ranga Prasad — Private Investor — Analyst

Fourth [Phonetic] quarter also.

Anna Abraham — Head, Investor Relations

Yes.

Ranga Prasad — Private Investor — Analyst

Okay, My second question is on the expenses front. As far as expenses go, I find a disturbing trend of a sharp rise in other expenses which have increased sharply from Q3 last year and even as compared to Q2. On a standalone basis, other expenses have gone up from INR100 crores last year — in Q3 last year to INR108 crores in Q2 to present expense of INR124 crores, this is in Q3. As a line item, these other expenses are equal to combined expense of raw material and employee costs. I think it would be very helpful and will add to transparency if the other expenses — we have a breakup of the other expenses. And do you see any chance of improvement in the coming quarters on this front?

Anna Abraham — Head, Investor Relations

Yeah, so on other expenses, when the detailed financials are issued, we always give a detailed breakup, but I will talk about the major variations this time. It’s partially on account of advertisement and [Indecipherable] costs. Now, this is largely because we had some big events happening this quarter. These are the sequential and last year, both in Print and in the Radio business and therefore there is a increase in cost on account of that. There’s also investments which are happening in the Labs business, which is a new initiative that we have done. The cost of that also sits in this and that’s also accounting for the half of this cost increase.

Piyush Gupta — Group Chief Financial Officer

So thanks, Anna. So, Mr. Ranga Prasad, I think if I just had to add my two bits, clearly one part is the investment in HT Labs that we’re doing, which is giving rise to some of these spends that we are seeing here. And secondly, with the COVID restrictions opening up and on-ground events happening, there are certain events that we are conducting, which is giving rise to certain expenses which are booked in the other expenses line, which is increasing, but they have a corresponding revenue which is also sitting upstairs.

Ranga Prasad — Private Investor — Analyst

You mean we can expect the revenue to come in the coming quarters?

Piyush Gupta — Group Chief Financial Officer

Well, most of the revenue has come in this quarter and some revenue might be — if the — which is linked to the deliverable, if it comes into the subsequent quarter, but the bigger point that I’m trying to make is because we are comparing with the second quarter of last year, when on-ground events were not happening, we were not conducting on-ground events and hence these costs were not coming, now that it is coming to business as usual, on-ground events will happen and we will be committing some expenses on that. But those are directly linked to revenue incidents [Phonetic] which will be booked in our Ad revenue or in our other revenues.

Ranga Prasad — Private Investor — Analyst

Now I also find that the finance costs are increasing quarter-on-quarter. In fact, they have gone up from INR10 crores to, I think, INR17 [Phonetic] crores.

Piyush Gupta — Group Chief Financial Officer

Yeah, yeah. So two reasons actually. Well, finance costs, one of the reasons is the Ind AS 116. So whenever most of our rentals, which are given, which are negotiated for multiple of our offices have to undergo Ind AS 116 treatment, and what typically happens is there’s some part, which is kept in the operating expense. And when you renew a long-term agreement in the initial days of the agreement, a big amount is booked in the finance costs. So it’s basically a Ind AS 116 arrangement. Of course, the second arrangement is the borrowing is definitely more expensive than what it was about a year ago, but it’s a minor impact of that, but also Ind AS 116 impact coming into the finance cost line.

Ranga Prasad — Private Investor — Analyst

Now, I hope with the fall in newsprint prices and [Indecipherable] in corporate expenses, that in the coming quarters we can come back to profitability? Do you foresee that?

Piyush Gupta — Group Chief Financial Officer

Oh, for sure. Look, newsprint prices in a normal situation would have fallen much more sharply than they are falling right now, given this whole geopolitical situation between Russia and Ukraine because if you go back to the commodity cycle of 2017-’18, I mean, what went up in two quarters came down in two quarters also. Right now it’s coming down a little gradually, we are very sure of the direction that the newsprint price will only soften from hereon. But will the gradient be as sharp as it was when it was going up, we don’t think so because right now we are seeing it continuously come down, but in the next two quarters, we are very sure that it will be another 10%, 20% down from hereon. And of course, there is some inventory that we always carry from the business and those things are adjusted on a weighted average basis.

Ranga Prasad — Private Investor — Analyst

Okay. Thank you very much.

Piyush Gupta — Group Chief Financial Officer

Thank you.

Aaditya Mulani — Investor Relations, HT Media Group

[Operator Instructions] Thank you all. With this, we come to the end of the Q&A session. If you have any further queries, please reach out to the Investor Relations team. Our contact details are given in the investor presentation and are also mentioned on our website. I now hand over to Piyush for closing remarks.

Piyush Gupta — Group Chief Financial Officer

Thanks, Aaditya. So thank you everyone for joining our investor call. We definitely hope for a better set of results, as I said that the commodity prices are indeed coming down and the revenue demand pick-up should hopefully see through the economy with the GDP predictions given by Reserve Bank and the World Bank, etc., north of 6%. We look forward to seeing you in a quarter’s time. Thank you all so very much. And have a great day.