TV18 has reported muted ad. Growth of 2.8% YoY, which is largely in line with TV ad. Revenue has seen a negative impact in this quarter primarily due to 1) RM pressure for many consumer companies, which have resorted to cost control measures 2) negative impact of Omicron in the first half of the quarter and 3) shift towards digital advertising.  

As per our estimates, TV ad. Revenue has grown 6%YoY in this quarter and TV18 has underperformed vs industry averages, as large scale GEC content has struggled in terms of advertisement pricing growth; overall ad. revenue for FY22 remains 4% lower vs pre-COVID levels (FY19). Uncertainty on subscription revenue prevails due to NTO 2.0 implementation, which too has impacted overall growth. TV18 has been able to turn around the business in the last three years EBITDA margins have moved up 1,250bps towards 18.8% led by 1) various cost control initiatives (content cost rationalisation and lower operating expenses) and 2) subscription revenue growing at a CAGR of 12%. The recent announcement with Bodhi Tree will ensure that they are able to aggressively bid for IPL rights, due to a capital infusion of INR 150bn; the amount of stake sale/dilution for Viacom18, due to for this capital infusion still remains uncertain due to the availability of limited information.

-Consolidated revenues grew by 11% YoY on a low base to INR 1,496.2mn (LY was 5% decline YoY);  performance in Q4 was mainly driven by movies business and ad revenue growth. For FY22, Consolidated revenues grew 23% YoY primarily driven by ad. Revenue growth (which remains 4% lower vs pre-COVID levels – FY19)

-Ad revenues during the quarter grew 2.8% YoY, despite a low base (11%YoY decline last year), impacted mainly due to 1) increasing inflation, 2) worsened by Russia Ukraine conflict and 3) dampening consumer demand. Subscription revenues continue to remain subdued, down 3.6% YoY & down 1% QoQ at INR 4510mn achieving 96% of pre-COVID levels (Q4FY20), as the subscriptions business continues to remain under stress on the back of NTO 2.0 uncertainty. For FY22, ad revenue had a strong growth of 32% YoY (on a low base – 20% YoY decline last year), led by TV advertising volumes reaching record levels and Digital advertising continuing to gain traction.  

-The entertainment segment (38 channels) reported 11%YoY revenue growth for the quarter and grew 26%YoY helped by ad. Revenue growth/movie business. In terms of EBITDA margin, the latter declined 310bps YoY to 15.7%; on a full-year basis EBITDA margin in the entertainment segment grew 470bps YoY to 20.7%, helped by better operating leverage. Flagship GEC Colors launched four fiction shows and was at second rank in the GEC genre, Colors Cineplex had a viewership share of 17% in the FTA segment; Kannada/Marathi channels were at second and third rank in their respective genres

-News segment (20 channels) reported a revenue growth of 10%YoY for the quarter helped by broad based ad. Growth; on a full year basis, revenues grew 14%YoY. EBITDA margin in the news segment declined 540bps YoY to 21.4% due to higher programming costs; on a full year basis, margins expanded 470bps YoY to 20.7% helped by cost control measures. CNBC TV18 was the leader in English business news, whereas News18/CNN News18 had a 10%/12.9% viewership share in their respective markets

-In Q4FY22, EBITDA margins were 17%, down 370bp YoY; impacted by higher marketing and distribution cost and other operating expenses which grew 30% YoY & 19% YoY. While for FY22, Consolidated margins improved 80bp YoY to 18.8%, which was highest ever, despite intermittent COVID impact.

-PAT during the quarter was INR 2,209mn, down 12% YoY impacted by 1) lower margins,  2) dip in other income and 3) increase in taxes, which was partially offset by reduced interest expenses and depreciation expenses by 20% and 14% YoY respectively. For FY22, PAT stood at INR 9,262mn, up 24% YoY, despite impact of INR 1,320mn higher tax provision during the year.  

-Digital: Voot‘s paid subscriber base (Voot Select) saw a sharp jump during the quarter, driven by its offering of exclusive content, digital original shows and a portfolio of sports properties. In Q4, Viacom18 Studios distributed the Hindi film ‘Gangubai Kathiawadi’ in the overseas territories and Viacom18 Studio’s digital content production arm, Tipping Point delivered the second season of the super hit web series ‘She’ as part of its output deal with an OTT platform.

 -Viacom18 partnership with Reliance and Bodhi Tree:

• On 27th April, Viacom18 announced a strategic partnership with Reliance and Bodhi Tree Systems, As part of this partnership, INR 1,51,450 mn will be infused by Bodhi Tree Systems and Reliance. In addition, the JioCinema OTT app (currently owned by RPPMSL) will be transferred to Viacom18. Paramount Global (formerly known as ViacomCBS), reaffirmed its commitment to the partnership as a strategic partner in Viacom18. It will continue to supply Viacom 18 its premium global content as well as launch Paramount+ in India in partnership with Viacom18.
• This partnership between Reliance, Paramount Global and Bodhi Tree Systems, will enable Viacom18 to transform into one of the largest TV and digital streaming companies in India.

-Capital infusion to enable investments for long-term growth: Infusion of ~Rs. 15,000cr in Viacom18 will enable the Company to make the right investments in high growth businesses – Digital, Sports, and Regional Entertainment, to set it on a long-term growth path. This cash infusion will help Viacom18 scale up its content offering for both Digital and TV, to create a holistic content offering for the diverse Indian audience.

Financial Snapshot:

*The author is Karan Taurani, SVP – Research Analyst (Media, Internet & Consumer Discretionary), Elara Capital