Music Broadcast Limited (RADIOCITY) Q4 FY23 Earnings Concall Transcript

Music Broadcast Limited (NSE: RADIOCITY) Q4 FY23 Earnings Concall dated May. 24, 2023

Corporate Participants:

Ashit Kukian — Chief Executive Officer

Analysts:

Analyst — — Analyst

Yash Dev — Unique Securities — Analyst

Ansh Manik — Aquarius Securities Private Limited — Analyst

Rishikesh Oza — Robo Capital — Analyst

Riya Mehta — Aequitas Investment — Analyst

Jigar Shah — AK Securities — Analyst

Karan Sharma — AU Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Music Broadcast Limited Q4 FY23 earnings conference call. This conference call may contain forward-looking statements about the Company which are based on the beliefs, opinions and expectations of the Company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Mr. Ashit Kukian, Chief Executive Officer. Thank you. And over to you, sir.

Ashit Kukian — Chief Executive Officer

Good afternoon everyone and thank you for joining the Q4 FY23 earnings call for Music Broadcast Limited. Joining me on the call is Mr. Rajiv Shah from our IR team and our Investor Relations partner, Strategic Growth Advisors.

Beginning with industry highlights. As per the recent FICCI report, the Indian M&E industry kept up its impressive growth trajectory. The sector expanded by 19.9% to INR2.1 trillion in CY 2022. The radio industry registered growth of 29% to reach 21 billion. During the same time period the industry’s ad volumes increased by 25% over the previous year. In quarter four of FY23, there was a 12% increase in industry ad volumes compared to the same time last year.

Now, talking of our business highlights, during the year we continued a strong recovery curve with quarter-on-quarter growth in revenue. We also maintained a leading market share across all operating main sequences with a consistent volume growth. Our volume based market share has risen to 20% from 19% in the previous quarter and 18% at the beginning of the year according to the adjust market. We are able to maximize the value we bring to the customers by tapping into the power of our extensive network by leveraging our omnichannel presence and marketing. About 38% of our radio advertisers are served by our company. Additionally, in the quarter four of FY23 Radio City secured 33% of the new clients who advertise on the radio for the first time. Our volume based market share — in terms of sectoral — my apologies — in terms of sectoral ad spending, the core of real estate experienced 35% year on year growth. Financing and the financial pharmaceutical sector spend both increased by 19% and 32%, respectively. While the auto sector increased nominally by 3% over the previous year, the food and software industry decreased year on year. The dominant sector grew by 11%. In light of the impending elections, we anticipate an increase in the share of government business in the coming quarters. The proportion of digital sales which we have guided before will grow in the years to come, and I’m pleased to report that we are headed in the right direction. As of FY23, digital contribution stood at 8% from 5.8% FY22 in FY23 annualm our non FCT and digital contribution stood at 32% against 31% in the year before. We believe that the combination of radio and digital will drive the next phase of development in the industry as it represents a seamless transition to harness the power of technology and expand reach. By leveraging our in house knowledge and expertise we have laid down the paperwork in order to develop high quality content and increased audience engagement. This is in line with our digitalization strategy, which places an emphasis on radio, Central Digital Linkages.

As a part of our digital initiative, we are able to generate 32% of our revenue from newly created businesses such as Properties, Proactive Pictures, Digital Sponsorship and Specialties, and we have the second highest client contract in the industry with 38% in Q4 of FY23. I’m happy to share that with regards to the bonus issue of NCRPS, the company received trading approvals from NSE and BSE and the different shares have been credited to the accounts of the shareholders and the same is open for trading with effect from April 20, 2023.

Now coming to the financial performance highlight for the quarter four of FY23. Revenue grew by 12% year on year to 51.4 crores, EBITDA grew by 73% year on year to 10.6 crores, while EBITDA margin expanded by 730 base points to 20.6%. I would like to highlight over here that our operating profit growth have observed the revenue growth. This was mainly on the back of conscious effort over the past few years to reduce costs which has paid off, allowing us to take advantage of better operating leverage, which has led to faster rise in profitability. Adjusted profit of the tax, which is adjusted for interest on NCRPS to the tune of 1.89 crores stood at 1.2 crores.

For FY23, the revenue grew by 18% year on year to 198.9 crores. EBITDA grew by 54% year on year to 42.8 crores, while EBITDA margin expanded by 500 BSPS to 21.5%. Adjusted profit after tax which is adjusted for the interest on NCRPS to the tune of 1.93 crores stood at INR5.4 crores. Our cash reserve at INR295 crores versus INR264 crores in the March of 2022. Our liquidity position continues to remain strong and as guided earlier, this liquidity offers us the leeway to take advantage of current and potential future opportunities.

To conclude, I would like to say that the outlook for the radio industry appears more than just bright, as radio continues to be one of the most relevant mediums to engage the markets. Industry growth coupled with our digitalization strategy and strong control over operating costs will drive the revenue and profitability in the times to come.

With this, I would request the moderator to open the floor for Q&A. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from Aditi Sawant with ADM Advisors. Please go ahead.

Analyst — — Analyst

Thank you so much for the opportunity. I have two questions. First is that it is very interesting that we have been able to increase the operating margins on the back of conscious cost control measures which we must have taken during the last few quarters. So just wanted to understand how much of this will sustain and in what range we can expect the margins to be stabilized?

Ashit Kukian — Chief Executive Officer

So, I think cost right now we are operating at the level that is the most efficient way of operating an organization in terms of cost versus revenue results that we talk about. In terms of margin, I think we are already at a 21% margin EBITDA margin that we are working. And we believe that in the years to come, and especially if you’re talking about the next year, that percent should be substantially improved as we go forward from here.

Analyst — — Analyst

Okay, and is there any further scope of improving our cost structure further?

Ashit Kukian — Chief Executive Officer

No. I think whatever cost measures that we have to take pre COVID and post COVID in terms of efficiency has already been taken care of. And I think if you look at our overall cost revenue ratio, I think that is much in line with the operations that we are doing. On the contrary, there can be a marginal increase in cost that we can do on the investments that we’ll do on the digital front. But when I say that, I keep clearly a communication that our margins will definitely be at least what it is now or improve, any increased cost will not mean decreasing or margin for us.

Analyst — — Analyst

Okay, understood. Thank you so much and all the best for upcoming call.

Ashit Kukian — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Yash Dev with Unique Securities. Please go ahead.

Yash Dev — Unique Securities — Analyst

Hello. Am I audible?

Ashit Kukian — Chief Executive Officer

You are very faint. If you can just be a little louder or you can increase the volume because it’s very faint Yash.

Yash Dev — Unique Securities — Analyst

Hello. Is it audible?

Ashit Kukian — Chief Executive Officer

Now that’s audible, yeah.

Yash Dev — Unique Securities — Analyst

I had one question. The digital businesses recorded phenomenal growth and now contributes 8% share of total revenues. We have previously mentioned that over next four or five years, digital will be 50%. So what additional initiatives we are talking to reach the desired level.

Ashit Kukian — Chief Executive Officer

So, two, three things. I mean, I’ve always maintained that there’ll be a point in time in the next five to six years that we believe our endeavor and we believe there is a potential for digital to go as high as 50% of the overall revenues. So the things that we are currently doing which will help us enable reach that is one through our whole digitalized strategy what we are doing is currently we are playing a lot on the social media influencer marketing requirements that brands have in terms of using our RJs to kind of enable brands to engage with the followers or the reach of the RJ. That’s the first point that we are doing. Secondly, in the content space, we are using a lot of our internal resources to kind of create content on the digital space which brands would like to engage across the various platforms that is there. So we are using the talent, resident talent in the form of RGS content creators within the system to create products and put it on social media platform which in today’s world a lot of brands wants to engage because that gives them a stickiness with the audience and the communication which is far more engaging.

Yash Dev — Unique Securities — Analyst

Okay, thank you. I’ll get in the queue.

Operator

Thank you. [Operator Instructions] our next question comes from Ansh Manik with Aquarius Securities Private Limited. Please go ahead.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Hello, sir, thanks for the opportunity. Just one question. If I want to compare the advertising rate compared to the pre pandemic level, what would be the discount rate or lower rate?

Ashit Kukian — Chief Executive Officer

See, today, if you really look at the average rate for the industry, it is still at a 75% of the pre pandemic rates, which is where we believe that as the market gets saturated in terms of volume utilization that will be the first port of call for all radio players. So till the time that was available inventory in the market, which unfortunately was the case in the last three years, there was only that much of limitation to increase rates. To answer your question, there is an upside of almost close to 2020 5% from a rate perspective when you see the market being saturated with volume utilization.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Okay, so our average yield would be 25% lower to come compared to the pre [Indecipherable] right?

Ashit Kukian — Chief Executive Officer

Correct. Okay.

Ansh Manik — Aquarius Securities Private Limited — Analyst

And the second part, what would be the utilization level for Q4?

Ashit Kukian — Chief Executive Officer

Q4 utilization level has been at 72%, which is the highest. Even before pre COVID, we had to have that kind of average utilization level.

Operator

Thank you. Our next question comes from Rishikesh Oza with Robo Capital. Please go ahead.

Rishikesh Oza — Robo Capital — Analyst

Hi, sir. Thank you for the opportunity. So my first question is regarding the interest cost. So what would be the interest cost going ahead with respect to the NCRPS that we have issued?

Ashit Kukian — Chief Executive Officer

It will be on the same rate for the quarter, so roughly around 7.8 crores for the full year.

Rishikesh Oza — Robo Capital — Analyst

Okay. And also one data point on listenership. So could you share the listenership data for the radio industry? What is it currently versus pre COVID level?

Ashit Kukian — Chief Executive Officer

So the listenership data in the last survey that we had done, in all the radio operators together, there was an increase of 25% listenership over the pre COVID listenership. But currently what is happening is a new data service is happening and currently in the next maybe a quarter you will see newer data points being released in terms of audio listenership which will not just cover radio, but the other audio listenership also, which will work from an industry point of view. But to answer your question, there has been an increase since COVID.

Rishikesh Oza — Robo Capital — Analyst

Okay. As for your press, as you mentioned in your March, you have seen a 90% of utilization. So when do we see when do we expect the rates to go up anytime soon, like in further two, three quarters or anything like that [Indecipherable]

Ashit Kukian — Chief Executive Officer

See at the marginal levels I think all radiographs, including us, very clearly believe that with saturation almost coming near to 90% in the end of March, there will be a rate hike that will happen. And I think that’s the measure which most of us as radio players realize will have to take because otherwise you’ll be in the business of over inventory utilization. So I think it’s in the coming but it all depends on how month and quarter and quarter the utilization level happens. The only catch to it is that while the leaders like us and a couple of others will have that kind of utilization level, there are few players still who have the utilization level still not at the maximum level. So they will try and play the rate game and that to an extent sometimes may be an issue. But to answer your question, we at the radio industry level confident and needs, especially for Radio City, that there’ll be a marginal increase to begin with, but over a period of time we want to recover back to the pre COVID level rate that we are talking about.

Rishikesh Oza — Robo Capital — Analyst

Okay, and just one more question, sir. What kind of revenue growth are you expecting for FY24?

Ashit Kukian — Chief Executive Officer

See, I think in the next not just FY24, I think in the next four to five years you will see a CAGR growth of 20% as far as Radio City is concerned.

Rishikesh Oza — Robo Capital — Analyst

Okay, thank you very much.

Operator

Thank you. [Operator Instructions] our next question comes from the line of Ansh Manik with Aquarius Securities Private Limited. Please go ahead.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Thanks for the follow up, sir. With respect to the digital investment, so what kind of the investment we should factor in for the FY24?

Ashit Kukian — Chief Executive Officer

So I think right now what we are talking about digital investments is right now only in the form of people. Because otherwise the exposure that we are looking from a digital perspective is using resident talent to kind of create content, put it on the social media space and monetize that, which is what all is happening internally. So the marginal increase that you would look from a staff cost, which is what we are talking about, is that we’re not talking about any because this is more people centric than technology Led or any software Led inputs that we are talking about in terms of increasing digital spends, at least for the current year that we talk about. So you will have the same percentage of increase that you saw from last year to this year from a people cost concern is concerned and little bit of marketing that was there for last year also.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Okay sir, got it. And with respect to second person, our quarterly run rate of quarter expenses is around 25 crores. So should we consider normal base for upcoming quarter.

Ashit Kukian — Chief Executive Officer

With whatever little inflationary increase that you would want to look at, that is the only thing that you need us to factor in. Otherwise from a percentage perspective like in the previous callers response also I said it’s an efficient way of managing top line to cost to bottom line and that is what we will manage. And barring inflationary cost, I think you can rest assured that it’s going to be the same.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Okay sir thank you. Thanks for the —

Operator

Thank you. [Operator Instructions] our next question comes from Riya Mehta with Aequitas Investment. Please go ahead.

Riya Mehta — Aequitas Investment — Analyst

Thank you for giving me the opportunity. My question is most of the macro point of view you said that in the next two — three to four years you see a CAGR of 20% coming in. So where do you see this growth coming from? Because I think in terms of minutes per hour we’ve already almost at level of saturation. Do you see the yield going up by almost double digit?

Ashit Kukian — Chief Executive Officer

So when you look at the whole ecosystem from a radio perspective, there are two three areas where the increase can come. And now I’m currently talking about radio and then I will talk to you about where the 20% CAGR is coming. From a radio perspective, the whole market is divided between big market, small market and the saturation that we are talking about is the large markets or ad check markets as we call, which is currently in the March level when we talk about 90%. But when you go into the tire two, tire three cities there is still a lot more gap in terms of the volume utilization level. These are the top markets that we talk about. So growth will come in the smaller markets to volume utilization, which is still not at the peak. In the top market where we are peaking at 90% there will be a marginal increase of yield which will increase in revenues. And to top it up the non FCT as we call, which is not the pure FCT we generated revenues that we create through Linkages with solutions business or the on ground Led activation business with the COVID challenges not being there will add on to the overall numbers A. B, the digital traction that we are talking about you have seen from a five to 8%. And this year will be almost the next year should be 10% of our volume value. So that is the traction that will give you the larger increase in terms of the incremental increase in revenues, vis-a-vis last year.

Riya Mehta — Aequitas Investment — Analyst

Okay, I think I got it. And in terms of digital, are we at breakeven level for the digital as a whole?

Ashit Kukian — Chief Executive Officer

In fact, we have maintained that digital will be an EBITDA booster for us. Throughout the last two years of operation, digital has been giving us more margins than the pure radio margin, for reasons we all know. But now that the radio margin has led to the threshold level, it will start giving the similar kind of returns from a top line to bottom line ratio.

Operator

Sure.

Ashit Kukian — Chief Executive Officer

Okay.

Riya Mehta — Aequitas Investment — Analyst

I think that’s it on my side. Thank you.

Operator

Thank you. [Operator Instructions] our next question comes from Jigar Shah with AK Securities. Please go ahead.

Jigar Shah — AK Securities — Analyst

Yeah, thank you for giving me this opportunity. So, my first question is that what is the outlook on ad spend and how do you plan to further monetize your inventory level?

Ashit Kukian — Chief Executive Officer

So, inventory level has been on the upswing the last one year, quarter on quarter. Given the mood of the various categories that we are interacting with and the fact that government is going election year, we believe that inventory utilization should be on the upside for the current year for sure.

Jigar Shah — AK Securities — Analyst

Okay. My next question is that what was the ad pricing during the year? I understand the industry is still 20% below the pre COVID levels. What was it for Radio City? Also, are we seeing any increase in yields from major contributors like real estate and pharma?

Ashit Kukian — Chief Executive Officer

So, we are from last year to this year, there has been a marginal increase. We would be at around 85% of the Pre COVID level inventories from a quarter perspective, but overall percentage is still at 80%. If I have to look a yearlong average and see between the beginning of the Pre COVID year to the exit of the pre COVID year. So we believe that there should be improvement in margins, in yields through ER, at least in the top market, because those markets are already getting into a saturation mode. And like I said, the entire industry believes that the cost to run the business and profit margins are hit. We need to take that call. And if all the industry players together believe that there is a reason for them to take a call, I don’t think it’s difficult for us to get that incremental cost full yield because of the position each one of us are us, and I think it’s the right way to go forward.

Jigar Shah — AK Securities — Analyst

Got it. Thank you. That’s all from my side.

Operator

Thank you. Next question comes from Gurchyot Aluvalia, an investor. Please go ahead.

Analyst — — Analyst

Am I audible?

Ashit Kukian — Chief Executive Officer

Yeah, you are audible. Yes, please.

Analyst — — Analyst

So, just want to understand what is the impact of an election year? Typically because if I look at the last two general elections and the company’s performance in 2019 and 2014, like financial year end, I don’t see any significant jump in the revenue, hardly 10%, 12% in the last two elections. So what would be the typical impact for election?

Ashit Kukian — Chief Executive Officer

So I think the reference that you’re given for the years may not be the right references because government was already at its peak when it comes to advertising in those years, vis-a-vis. The current form of advertising investments the government is in. So I think that’s the first point of difference between the references you are talking about. So I think to answer your question, I am seeing a 20% to 25% upside on the government spends because of the election year, largely because the base is, if I may look at the peak of government, one third of what it was. So possibly your analysis during that period when the government was already running at the peak would have not really affected much. But today, when the government is not at its peak for reasons we all know about, we believe that 2020 5% is a number which we should all be confident about.

Analyst — — Analyst

Okay, got it. And secondly, just want to understand the overall industry as a whole and the structure. It seems like there is a huge dent in profitability for the business. Right. When Radio City used to do 200 crores, this is around 2015, bigger margin or operating margin was about 30%. Now it’s just about 10% 12%. So I want to understand how has the industry changed in the last seven, eight years with the same revenue? The margins are less than half.

Ashit Kukian — Chief Executive Officer

Yeah. So there are two, three reasons for that. One is of course, the cost to do business was much lesser during the years. And the current event you have seen in the last two to three years is largely because the threshold level of revenues was not reached by any of the behavior players. And art is largely being a fixed cost business where most of our licensing costs and all are fixed. Unless and until you cover those costs, you will always be in the red as a player. But once that threshold level is cost is where the profit margins and the bottom line seems to look better, which is what exactly we have done, because we have covered the threshold level of cost and going forward from here, we believe the margins will only improve. So to answer your question, largely it’s because of the high cost that we pay because of the licensing cost for which the industry is lobbying with the government to kind of rationalize licensing costs, music royalty and also certain costs that we pay to the CTI and so on and so forth. And that is an industry effort to be done to rationalize because we are paying through our nose for those costs. But referring to us. Like I said, in spite of all those things, we have registered a profit. And we believe that this is a story we would want to continue with the measures that we have taken in terms of efficiency management and of course, the growth engines that we are creating in terms of ongoing activities and the digital revenues that we talk about.

Analyst — — Analyst

So what is the fixed cost currently at and at what rate do they increase every year?

Ashit Kukian — Chief Executive Officer

See, if you look at last year, our cost has been what we believe is the efficiently managed cost so that the revenues bottom line is gone. I think we should expect a 13%, 14% increase on costs and a much higher increase in revenues for us to take care of the profitability.

Analyst — — Analyst

Okay, but my question is what is typically the fixed cost basis? Is it like 170 crore? 180? What is that rough number right now? And we expect it to increase 13% 14% every year.

Ashit Kukian — Chief Executive Officer

If you look at our last year numbers where we had done about approximately 170 — so almost 150 crores, 155 crores of that is a fixed cost that we talk about.

Analyst — — Analyst

Okay, and that increases about 13% 14% every year.

Ashit Kukian — Chief Executive Officer

Yeah, approximately. But the revenue growth will be much faster than that because that 13% will be offset by our revenue. Like I clearly said, we are looking at a 20% CAGR year on year for the next four to five years. So there will always be that margins that you will have to increase your bottom line and the operating leverage will continue as efficiently as we have been managing.

Analyst — — Analyst

That sounds great, I hope you can agree on that. Just one last question on the cash distribution, I think the company generated good reserves, about 300 crores. I know there is about 90 crores set aside which has to be redeemed via NCRPS, but any plans for the remaining 200 odd crore cash?

Ashit Kukian — Chief Executive Officer

Yeah. So currently, as you know that the digital journey for us has begin and there are various opportunities that will come on the way as we go forward in our digital play, which is from an influencer marketing platform to a content creator board that we talk about to kind of value that you will create for influencers in the marketplace. So as we go forward looking at opportunities and also because there is a lot of digital from a performance marketing opportunities we will be looking at in the next eight to nine months is where we’ll be closely looking. At opportunities which will help us increase the speed of growth from a digital perspective and any opportunities that comes to us, either in the form of a content creator company or a media marketing company which is in the digital space adding value to brands to engage with the audiences on the digital platform will be open to them, provided it adds value to our whole business place.

Analyst — — Analyst

Got it. But there are no acquisitions lined up — immediately —

Ashit Kukian — Chief Executive Officer

Like I said, right now we are exploring opportunity areas. The moment we find that there is an opportunity that we want to lap up because the cash reserves is that we will take those calls much faster than other people because we can take those calls. Fortunately, the board is in line with our thinking in terms of increasing our digital presence and creating value for our stakeholders because that is the segment which is going continuously.

Analyst — — Analyst

Got you. Can I ask one more question?

Ashit Kukian — Chief Executive Officer

Yeah, please.

Analyst — — Analyst

Just on this 20% CAGR growth for the next three to four years, is it immediately going to start reflecting from Q1 onward? Like Q1 revenue of last year was about 44 crore. And so can we expect like 50 plus crore, 50 crore to 55 crore in Q One and then similarly, or is it going to be a lag in the next —

Ashit Kukian — Chief Executive Officer

I will not be diplomatic out here, but if I have to look at the 20% growth as the business gets distributed between Q1, Q2, Q3, Q4, a percentage very close to that is what we will be looking at for sure. Because that’s where the growth is coming from. And I don’t want to be defensive here because for whatever reason, I’ll say that the growth is 10% to 15%. That means I’m expected to go at 30% in the last second half of the year. So when I’m saying 20%, I’m sticking my neck out and saying we will be close to 20% from a quarter on quarter, a little bit here and there, but I’m putting my neck out and saying that it’s going to be that.

Analyst — — Analyst

Okay, thank you so much. I think that is really helpful. I think this industry has been one of the worst hits of COVID and we’re waiting for — thank you so much and all the best.

Ashit Kukian — Chief Executive Officer

Thank you so much.

Operator

Thank you. Our next question comes from Karan Sharma with AU Capital. Please go ahead.

Karan Sharma — AU Capital — Analyst

Am I audible?

Ashit Kukian — Chief Executive Officer

Yes, you are audible.

Karan Sharma — AU Capital — Analyst

So can you elaborate on the interest on NCRPS component in the profit and loss?

Ashit Kukian — Chief Executive Officer

Come again? Sorry, I didn’t get you.

Karan Sharma — AU Capital — Analyst

Can you elaborate on the interest on NCRPS component in this?

Ashit Kukian — Chief Executive Officer

So we said that around roughly 7.3 crores annually to the same range. What we have been discussing from a quarter perspective, we had already said about 1.93 was what was done for the quarter. You’ll have the same average, around 7 — to 7.3 cross is what we will see at the annual level. Approximately about 2 crores per quarter is what you can take if you want to round it up. [Indecipherable] Sorry. Hello? Yeah, tell me. Hello? Can you hear us? Hello? Sir?

Operator

Karan has disconnected his line from the question queue. We move on to our next question, which is from RIA Meta with Equators Investment. Please go ahead.

Riya Mehta — Aequitas Investment — Analyst

Hello, thank you for my follow up question. My first question is in regards to the growth which we are guiding for how much would come from volume, which is inventory and how much would come from yield.

Ashit Kukian — Chief Executive Officer

So if you really want to give me — for me to give that answer will be on the basis of how the industry gets played for the quarter. But I would want to say that almost 80% first quarter will come from volume and on the marginal, 10%, 15% will come from the yield increase, because there are markets yet to be saturated as far as the first quarter is concerned.

Riya Mehta — Aequitas Investment — Analyst

And going forward, this would volume would go down and yield would increase is what I’m doing.

Ashit Kukian — Chief Executive Officer

Like I said, given the large market, small market distribution, if you have been listening to me, I think using for the thumb rule, put almost 80% to 85% for the current yields will still be volume and about ten to 15% will be the value.

Riya Mehta — Aequitas Investment — Analyst

And in terms of government advertisement, what are the — is it lower than the normal real estate and education and how does it stand out? Could you give some more insights on it?

Ashit Kukian — Chief Executive Officer

Look at the correction that has happened over the COVID period. The government rates are pretty much in sync with some of the core categories, but that is a room for improvement. And we believe that increase the government is already noted, taken note of, and if all goes well, we should be in a happy position to give you the details that the government has already decided to increase rates for the industry.

Riya Mehta — Aequitas Investment — Analyst

Okay, does the government come up with six monthly or annually revised rate or how is it?

Ashit Kukian — Chief Executive Officer

The government decides this once in a while? So it’s not the impact for us. For the radio industry, the growth has not been taken for the last at least five to six years. So that’s the reason why we are confident of the individual representations by individual players. At [Indecipherable]and the government have realized that at least from the government perspective, the radio industry is underplayed from a value perspective. And that is the reason why the government, through Tri recommendations, is planning to increase. And we have put indicators that it’s almost there on the card. And hopefully before the next quarter, if that comes in, I should be in a happy position to say that the rates have increased.

Riya Mehta — Aequitas Investment — Analyst

And there was a case law between all the radio companies and a particular company wherein we have also basically, I think we’ve appealed to the court that this case law was regarding radio players having to pay a certain amount to the author or the original composer. So could you give some more insights on what is it right now?

Ashit Kukian — Chief Executive Officer

It still stop duties for us because whatever claims that is being given and the references that have been given are being fought because industries right now it is subjudice in the Supreme Court.

Riya Mehta — Aequitas Investment — Analyst

Madras High Court has given a ruling in favor of the other party.

Ashit Kukian — Chief Executive Officer

We have appealed against it and it is right now in the Supreme Court.

Riya Mehta — Aequitas Investment — Analyst

Okay, if it comes against, what would be the material impact on our revenue?

Ashit Kukian — Chief Executive Officer

Honestly speaking, the way the whole we are confident that it will not be negatively impacting us because we are given the situation and the circumstances, there’s no way we would be asked to pay that responsibility, we believe lies with the labels.

Riya Mehta — Aequitas Investment — Analyst

Okay, thank you.

Operator

Thank you. Ladies and gentlemen. [Operator Instructions] our next question comes from Ansh Manik with Aquarius Securities Private Limited. Please go ahead.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Thanks for the follow up opportunity, sir. With respect to March utilization of 90% volume or volume utilization of 90%, if you can guide us what led to such high utilization that would be helpful.

Ashit Kukian — Chief Executive Officer

March utilization of 90%. What was the last statement [Indecipherable]

Ansh Manik — Aquarius Securities Private Limited — Analyst

So if you can guide me — guide us what led to such high utilization?

Ashit Kukian — Chief Executive Officer

So yes, the industry has started — real estate has started advertising in a big way given the fact that markets have opened up certain segments like auto has started investing. So the categories which is buoyant and has an affinity towards radio have started advertising and hence the increase of utilization levels has happened.

Ansh Manik — Aquarius Securities Private Limited — Analyst

Similar trend would be also observed in the month of April.

Ashit Kukian — Chief Executive Officer

Pardon me?

Ansh Manik — Aquarius Securities Private Limited — Analyst

Similar trend would also be replicated in the month of April or there was any declining utilization.

Ashit Kukian — Chief Executive Officer

See, typically what happens is if you look at the way investments happens on radio or largely on various mediums. The third quarter is the highest quarter followed by the second quarter. Then the first quarter is the lowest quarter and then the second. So you will find that the utilization level will fluctuate between investment that happens on radio. And I’m repeating myself just in case you have missed the point. Third quarter is the highest. So you’ll have the highest level of utilization. Not surprising because that’s the peak season and the festive season that is followed with the second fourth quarter which is the highest investing quarter across mediums. I’m not just referring to Radio then followed by the second quarter of the year, which is financial year. The first quarter happens to be the weakest in terms of utilization level and also from revenue generation perspective. Sorry.

Operator

Do you have any more questions for the management?

Ansh Manik — Aquarius Securities Private Limited — Analyst

No. Thank you.

Operator

Thank you. Our next question comes from Aditi Kasbekar with — an investor. Please go ahead.

Analyst — — Analyst

Are you able to hear me?

Ashit Kukian — Chief Executive Officer

Very much clear Aditi. Good afternoon.

Analyst — — Analyst

Good afternoon. Thank you for the opportunity to ask the question. I saw that in terms of your volume contribution increase in the fourth quarter real estate and finance and pharma are the top three sort of industries that contribute to your volume. But going into the election year we are expecting government to start contributing higher which is currently at about 7% — mix to change dramatically and if yes, then is it that in terms of sort of the margin or the rate increases that are allowed? Are the rates across sort of different clients depending on which industries they come from, et cetera? Or is it fairly uniform? Like even if for example government were to become say 20% does that mean. That it’s a relatively lower margin business compared to what a real estate would be giving you? Or are the margins fairly sort of just dependent on that 155 crore of fixed cost and then the operating leverage that comes from there on kind of a metric.

Ashit Kukian — Chief Executive Officer

See real estate and food and software inherently will be slightly lower on rates because that’s the way the industry and the category operates. So if you are looking at rationalizing real estate cost versus government cost the government rate will be slightly marginally better than the two categories that we are talking about. Categories like finance, auto and electrical and electronic appliances will be higher on rates as compared to government as of today. So I think currently if I have to look at it from last year’s contribution, if government increases, given the fact that your top two categories out of the five is food and shopping and real estate which is slightly on the lower end of rate as compared to relatively, you’ll find a higher yield coming if that happens. Sorry? If government comes in. Got it? That’s clear answer.

Analyst — — Analyst

The second question was you mentioned that 155 crore odd is the sort of fixed cost which will probably grow at 13 14%. And then if we assume that the remaining 10% is the variable cost which sort of remains variable, then we will be possibly talking about EBITDA margins, which are sort of 25% plus kind of levels, which is something that we’ve seen in the last cycle. But do you believe that getting to those kind of levels is sort of feasible in the current over the next year or so?

Ashit Kukian — Chief Executive Officer

Very much feasible. Very much feasible. If all goes well, we’ll demonstrate that in this year.

Analyst — — Analyst

Understood?

Ashit Kukian — Chief Executive Officer

That’s clear.

Analyst — — Analyst

Thank you very much.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Ashit Kukian for closing comments.

Ashit Kukian — Chief Executive Officer

We sincerely appreciate your participation in today’s earnings call. I’m confident that Radio City will continue to deliver on stakeholders expectations and live up to the trust report in it. The presentation, earnings release and results are all available on the corporate website and stock exchanges. If you have any other further queries, please get in touch with any one of us or with Strategic Growth Advisors or Investment Relations partners. Stay safe and take care. Goodbye.

Operator

[Operator Closing Remarks]