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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen. Good day and welcome to Music Broadcast Q1 FY '23 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 guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashit Kukian, CEO Music Broadcast Limited. Thank you and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining the Q1 FY '23 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. It gives me great pleasure to talk to you again in times where the country has been fully opened up, and the pandemic seems to have trailed off. To substantiate my point, as per industry research reports, advertising volumes recorded a 5.7x growth in May 2022 year-on-year. The tally of categories has increased by 51%, while the count of advertisers and brands has increased 3x. This brings back the much-needed optimism that many industries, including ours, has been wishing for the past few quarters. While digitalization, as I explained over the last 2 quarters, is driving the next lever of growth with radio at its core. Using the fundamental resources at hand and combining it with the advantages, reach and customization of digital to reach a far greater audience provides better and targeted content and, in some cases, even opening up markets which previously didn't exist. By enabling RJs to produce text, audio and video material, RJs with the strong social media presence also engage with their audience more effectively. Additionally, RJs have grown to be powerful influencers, which ape broadcasters in generating revenue. The volume rebound serves as a more evidence of this. Talking about client count and market share Radio City has continued to maintain a lion's share of 38% of the total clients. From an industry perspective 224,000 clients are new --- in Q1 FY '23 out of the total 405,000 clients who advertise on the radio platform. With the festive period coming and pandemic pulling off across the globe, leading to free mobility and resumption of outdoor events. The upcoming quarter looks promising and will boost our record recovery as guided earlier. Our market share has stood strong over the time and we exited the previous year with a 21% market share. This, at the end of Q1, stands at 18% owing to refusal of certain low ER clients, which is in alignment with what we have always maintained that we are -- we aren't playing the volume game. And while this results in a dip this quarter as far as volume is concerned, but we believe that this will help us having a greater value share owing to the higher prices. Coming to the sectoral ad spend, we observed a phenomenal growth in major sectors, which albeit on a lower base signals strong recoveries and great prospects moving ahead. Real estate which constitutes 17% to the industry grew by 389% year-on-year, while pharma, which contributes 11%, grew by 139% year-on-year basis. A staggering growth was observed in the electrical, auto, food and soft drinks segments as well. With these core category sectors growing by 319%, 115% and 30% respectively and contributing 7 percentage and 6 percentage of volumes respectively to the industry. For the past few quarters, the negative trend observed in the government sector was overturned this quarter with this sector growing 47% and contributing 6% to the industry. Approximately INR 14.75 crores of the top line or 34% of which came from new revenue opportunities. Our internal forecasts predict that these revenues will continue to increase as well. A few lasting cost reductions have been achieved by deliberating or optimizing post yield significant benefits that's expected to continue for the foreseeable future. On the collections front, the company has managed to collect INR 51.73 crores during the quarter of which the collection from government stands that INR 4.89 crores. These efforts on the recovery of revenues have led to the NOD further reducing from 164 days to 135 days. Coming to the financial performance of the quarter gone by. We registered a growth of 116% year-on-year, increasing our top line from INR 20.5 crores to INR 44.1 crores. Our EBITDA has turned a leaf from being a negative INR 9.3 crores in Q1 of FY '22 to turning to a positive INR 8.8 crores in the Q1 of FY '23. This translates to healthy EBITDA margins as well of 19.8% in the current quarter as against negative 45.5% in the same quarter last year, and 13.3% in the Q4 of FY '22. This turnaround is a result of a combination of factors, including realized operating leverage advantages, internal cost efficiencies initiatives and returned advertising expenditures. We have always placed high emphasis on maintaining a healthy balance sheet as seen by the sizeable reserves we have available. As of 30 June, 2022, our cash reserves were INR 273 crores, up from INR 264 cores on the 31st of March, 2022. Demonstrating a good liquidity position. These sources offer the tools needed to take advantage of current and potential future possibilities. Building on several projects from the previous few quarters, digital integrations are evolved into our core pillars. Our social media presence is significant. Across all platforms, we reached about 245 million people. We provide a wide range of digital solutions that give our clients omnichannel, end-to-end solution for their products and services. The sum of all of these factors increased our digital revenue for the quarter by 169%. Lastly, with regard to the bonus issue of the nonconvertible noncumulative redeemable preference shares, the meeting of the equity shareholders and unsecured creditors of the company was held on Thursday, June 23, 2022, wherein the shareholders and unsecured creditors have approved the scheme and thereafter the company has filed the petition with the NCLT for further course of action. We'll keep you posted on the developments as they unfold. With this, I will request the moderator to open up the floor for Q&A. Thank you.
[Operator Instructions]. The first question is from the line of Nisha Desai from NM Securities.
Congratulations on your numbers. I have a couple of questions. First question is we have been seeing record attrition levels in the other industries over the past year and the major rate escalation to retain the talent. So we have observed that the Radio City does a great job at retaining its talent. Are you seeing any shift in that trend or any churn in the talent pool?
See as far as any competitive business, risk of good people leaving will always be there. But I think the way we have worked at Radio City is, we have built up a culture which transcends a few requirements from an employee perspective. I think a couple of instances that I would proudly want to talk about. We've all seen how different industries have reacted in the last 2 years of COVID and how they have kind of treated employees. I can probably say that in the last 2 years of COVID we have not asked a single person to go. That's the first sign of dependability that the employees have on an organization during difficult time. Secondly, with all things given within the perspectives of the business that we have had, we have not even cut salaries of people, because we all know how dependent a large part of Indian employees are as far as salaries are concerned. I think these are saving facts that really prove the company's ability to kind of keep their people happy. So we've always seen attrition, obviously, comes from the fact that there is a certain level of unhappiness the employees have from the organization. And then obviously, they start looking out and then possibly they go to the best buyer out. But I think that part of our challenge is not there. Having said that, the ability of this organization to grow from its current position to larger things, which is also a growth opportunity from individual perspective, is what I think a large part of our employee see. Because this whole transition and the transformation that we are talking about from being not just the radio medium, but in multiple channels and platforms and opportunities that is there, I think there's a larger bet for us while people find it happier to kind of continue with the brand Radio City and hence possibly our attrition is lower than the industry standard.
Okay. My second question is, I just wanted to check on the status of on the ground event. Are we doing a large number of on-ground events? And when can we expect to get pre-COVID levels? Also has the unit economics with respect to such events changed post-COVID with additional safety measures, lower grounds are they still a worthwhile exercise?
So honestly the additional safety measures for the kind of events that we do will not lower down the margins for sure, because that's a very small component, number one. Answering your first question, are event led solutions integrated with radio on the increase? Yes, it is. As the market is opening up, we are doing a lot of events and as we go forward from here in the subsequent quarters, you will see a lot of that happening, because when there is no restrain in the market to kind of do events, more and more people want their experiential feels when it comes to on-ground led, integrated led advertising solution. So we are positive that it's going to increase, and you will see that also increasing in our scheme of things from a revenue perspective. Does that answer your question or you have some more?
The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.
Just first question on the market share. It seems that for the last 2 quarters, we are giving up some market share. So, if you can elaborate if our strategy has changed and we are focused more on pricing?
So like I said, we are very clear. Like the first point I made in my statement is that in the Q1 of this year, we have possibly seen the highest radio volume in the last 5 years or so. So, while the volumes are there, I think the only way to increase revenues will now be the yield or ER that you have. To give you the reflection of the last 2 quarters of so-called losing of share vis-a-vis revenue growth. So, while I would not want to name the competitor, but if you would closely look at some of our competitors, there is clearly, over a period of time, one of our close competitors have added 2 percentage points as far as share is concerned. And when you look at the growth, we have doubled the growth of that particular competitor. So the point out here is that if there's a 2 percentage share volume change, obviously your growth would be more than somebody who has actually dropped a percentage share point, right, conceptually if all things remaining the same. But the story is different. We have double the growth of what -- on an annualized basis that we have. Even if I talk about the last quarter, with an increase of 1 percentage point and ours 1 percentage point drop as against a zero increase, we have shown an 8% growth. So to me, it's a clear story of getting the best revenue on both rather than going for everything that is available because that's not a long-term strategy. Because we all know that inventory, at some point in time, is only that much, you can't go beyond that. So it's only revenue gets driven by the effective rate. And that is something which we started in the last quarter last year and we are continuing that strategy. And as you see our results, you'll see that there's an increase in our effective rate from the exit. That, to my mind, is our strategy, and it works well for us.
That's helpful. So are you saying that you are back to the peak over levels in terms of volumes or how should one think about that?
If you look at the Q1 overall volume, it is back to the pre-COVID level. However, the mix of volumes is still not the same, because in the pre-COVID level there were a larger contribution coming from Bombay, Delhi and Bangalore and that contribution is still not to the pre-COVID levels. Now when I'm specifically mentioning Bombay, Delhi and Bangalore, those are the highest yield market for all radio stations, not just for Radio City. So the moment that yield will be added whenever that full recovery of that volume happens. Today, it's still at a 65% - 70% of volume utilization, which has ability to go right up to 95% to 100% if one doesn't go overboard more than that. So that's the ability straight away that to add from a revenue gain perspective.
Okay. And that's again quite helpful. My other question was that on the non-radio business, so it is becoming now increasingly bigger size of the revenue pie. What is the EBITDA margin on that business vis-a-vis the radio business?
See all -- for us, as a thumb rule any business, which is non-radio, our understanding is very clear that it should be a greater delta booster, whether it is EBITDA or tax as far as the business is concerned. And hence, I can probably say that it is a much better margin than the core radio business that we talk about.
I see, and then just last question. Since that Q1 of last year was obviously COVID impacted, so if I look at your following 3 quarters EBITDA margin it was around 25% versus we had done around 30% this quarter. So if that is because of seasonality or you had higher cost, if you could just.
It is a seasonality because right now in even in the last investor call meeting I had said, typically, there is a 15% drop that happens from the Q4 to Q1 and then you have a margin drop in Q2, and then it picks up in Q3 and Q4. So historically, Q3 is the highest quarter followed by Q4, then Q2 and then Q1. So that's the way it follows and I think that is the pattern that we are also seeing right now. So, there's not any great cost, only marginal incremental cost you will see is the digital part of the cost in keeping in line of the future requirements of this organization. Having said that, even with the increased cost of digital, the margin in that part of the business is more than the regular business that we can talk about.
Okay. And then just lastly, on the government side, if you have any comments on that vertical, because your competitor was saying that the government business is still weak. So, I was just wondering what are you guys seeing in that vertical.
The government business is slightly picking up, because now with the state governments -- whenever there is a state government, the state government will start advertising. As we come closer to the 2024, so the last quarter, you may find the government now taking a portion of advertising to create the good effect of whatever we have done in the past 3.5-4 years. So that is what will happen at the second -- and from central government is concerned. State government is advertising and state government will go higher in the markets where there is elections happening. And also, the tourism, with this pandemic and all opening up, you will see a lot of India local tourism ads coming from the government. So that is something which we are looking forward to.
The next question is from the line of Viraj Shah from Shah Investments.
I have a couple of questions. First question is can you help me with the capacity utilization figures of legacy batch 1 and batch 2 stations for FY '22?
Sorry, sorry, come again?
Can you help me with capacity utilization figures of legacy batch 1 and batch 2 stations for FY '22?
So can you be a little louder please? You are cracking.
Sir, can you help me with the capacity utilization figures of legacy batch 1 and legacy batch 2 stations for FY '22.
See the legacy batch 1s are at about 65% utilization level. And the legacy 2 is also approximated at about 60% utilization level. The batch 3 is about a 45% utilization level as of now.
And sir, concerning about the cash and cash equivalents on our books we have been observing the growth in every quarter have we aimed to deploy the cash, whether in inorganic acquisitions or expansion in number of radio stations or any other initiatives?
See, like any expansion of -- currently, like we said, every opportunity is weighed at the time when we feel that there is an opportunity that we need to invest on. Currently, as we speak, there is nothing that I can foresee immediately. However, having said that, as our whole digital ploy gets increased and our whole play gets increased, wherever there is an opportunity we will deploy that, keeping the larger interest of the organization and the sake of shareholders to ensure that there is a great profitability for the existence of brand Radio City as we go forward.
Okay. And what are the current initiatives that are giving us a good ROI, if you could provide an update on that?
So for us, apart from the fact that there is a plain vanilla advertising that the medium always gets, what we, as Radio City has always tried on is this whole creative business as we call or solutions that we provide to advertisers, which is traveling multiple mediums. So today, a lot of our success is coming with the integrated solutions that we give to clients. While it's a much cliched term which I keep saying that the consumer is no more linear, and I keep telling this in every investor call is that. As the consumer is becoming hybrid, we are very clear that we will want to reach out to our brands, consumers in whichever platform the brand, consumer is consuming content, whether it is social media platforms or streaming platforms or on ground or radio. So our solutions are all multiple platform-led solution, and that is giving us huge results because that's how our integrated solutions happen. I've also told that Radio City has always had this space in itself saying that we are great storytellers and our creative content selling is among the best in the business. And that's why our creative team AudaCITY is known as the best creative hot shop as far as radio advertising is concerned. And now beyond radio into even digital advertising. So that's the way we look at it. So for that combination of knowing the punch of what consumers want from a content perspective is what we believe we do best. That's the first part. The second part is that, very clearly, as the world moves itself towards social media influencers, we have a depository of large influencers in the form of our RJs, which we are effectively using for brands to make those communications with their set of audiences. So it's a combination of all this. And lastly, like I said, this all need to have exponential fields for brands when you go on ground, we believe the kind of following our RJs have, we've been able to engage with consumers on ground with specific events, which is one more opportunity that brands see to associate with us. And all this in combination is where the results are coming from.
Yes. It was helpful. And sir, as festive season is coming up, have you planned any initiatives which are you yet to launch?
There is a lot of -- keeping in mind the seasonality, we do a lot of events like during Ganesh Chaturthi, we have customized Ganesha events specific to specific regions. In Bombay, we have something in Ganesha, down south, we have something in Ganesha. With Navratri coming in, we have the Garba Premier League -- the Garba Premier League that we do. So, there's a whole lot of festive led, on ground led, on air led initiatives that we do year-on-year. And we also do a lot of localized events, which allows brands to kind of interface with their consumer. So that's something which is -- and we follow that calendar for ourselves, so that we don't struggle at the last moment to try and put things in place. So right at the beginning of the year, we know what are the major festivals coming. Because in India, they say that when the mood is celebratory the consumption increases. That's the typical mindset. And we try to ride on those celebratory moments of the consumers.
The next question is from the line of Guljod Ahluwalia, an individual investor.
The first question is around the seasonality you mentioned in the business. So please help me sort of understand how this works. So, I'm just looking at the company's pre-COVID revenues. So, the Q1 FY '18 -- okay this is 4 years back -- the revenue was INR 70 crores. The FY '19 again Q1 revenue was INR 76 crores. In FY '20, Q1 revenue was INR 70 crores, okay. And the Q3 FY '20 revenue, which you are saying is the best quarter to be was also INR 70 crores. I think there was no difference in the FY '20 Q1 and Q3 revenue. Now Q3 of last year, the company did INR 60 crores, which I thought the company is coming back to normal. But now the past couple of quarters, again, the revenue is just about INR 45-odd crores. And if I'm looking at historical Q1 numbers, it is around INR 70 crores - INR 75 crores as I just said. So, I don't understand how the seasonality of the business is currently working has steadily come in. And this was a completely normal quarter this year, FY'23, Q1. So, if you could sort of explain how this is working and how we should understand the business.
So, I'll refer to Q3 of FY '20 being lower than Q1 of FY '20. Is that what you said?
No, I am saying that Q1 FY '20 was INR 70 crores and Q3 FY '20 was a INR 70 crores. So, both of them have very similar revenue, so I don't think there is seasonality in Q1 and Q2.
There is. So I'll answer that question. You know that there was some kind of a small economic slowdown in FY '20, and that is seen across industries. So, you can see right in the middle of the year, which is in the second -- end of second quarter, we have seen that slowdown happening in FY '20. And hence, you will see that the revenues of the overall year was also lesser than the previous year in that sense. That is because there was some kind of a slowdown which is coming to the economy, and that was what started in Q3 got affected in Q4 and then the rest you know we all have seen the numbers because then the COVID situation started. Typically, for any business, especially in media, like I said, the highest spends always happened in Q3 because this is the quarter value of the maximum festivals, okay? Some change in the few years in the overall advertising has been affected with the IPL play, because IPL seems to be a large in revenue -- and now I'm generally talking media, I'll come to radio later on -- because of the huge investments that happened for brands on IPL. So that, at times, may have skewed Q1 from the so-called erstwhile spend that has happened. But if you look at a thumb rule across industries, across media, and when I say across industry, across media, you will have Q3 being the highest followed by Q4, followed by Q2 and then Q1. And that, if you -- over a period of 8-9 years, you will see that consistency. Abrasions of there where there is an economic slowdown. Or if you refer to our 2008 recession period, you'll have these anomalies in the quarter-wise quarter numbers and that to my mind is not the benchmarking. Secondly, to answer your question of INR 70 crore average quarter, yes, that's the point that you're saying. If I look at my figures in the Q1 of last FY '20, it was at INR 66-odd crores. Now INR 70 crores would be if you're adding the other income into it, it will be about INR 70 crores - INR 71 crores. But typically, that is at INR 44 corer right now very clearly because of -- I'm still operating at the 70% yield of my pre-COVID numbers. And that is why I personally believe that any change to get closer to your pre-COVID numbers will be largely driven by our revenue strategy through your pricing rather than a volume strategy because at some point, the volume will get stagnated.
Okay. So I'm trying to understand that Q3, we seem to be getting back much -- back to normal, Q3 last year. But again, now we are seeing INR 45 crores average run rate which is way lower, at least a good 40% odd lower than the previous Q3 pre-COVID revenues earlier. So, are we going to attain that run rate any time in the next couple of years or that's still a long way?
So that is very difficult to -- I'll need to have a future understanding beyond which, at this point in time, it is very difficult to credit. Having said that, I'm really clear that there are 2 points that I will make in this communication of yours, which is, one is, how close are you going to get to the top line number for pre-COVID? Your company has always been chasing the bottom line. And we always know that we have never been a top line driven company, we have always been a bottom-line driven company. If you ask me a question, I'm more comfortable to say that you will see the bottom-line or the PBT number that we saw pre-COVID in the next 4 to 5 quarters rather than the top line numbers, because top line numbers is today a little colored because of the discounting offer that is happening in the market from a volume perspective. And I've given you a couple of examples of that. So I would look at reaching out to my pre-COVID numbers, PBT, much, much earlier than reaching the top line numbers because like you know over a period of time, we have gotten cost measures, which is working well for us and the business which we are banking, which is beyond radio, like I told you, our better EBITDA boosters or bottom-line boosters than the traditional business of radio. So, my strategy is very clear. Do my best as far as radio is concern and get to the maximum that I can do through rising and volume strategy. The new businesses or opportunities that we create through on ground, through social media, through digital, which is a larger delta booster as far as my bottom line is concerned, and get far closer to the pre-COVID numbers. And beyond the point not really be too carried away with the top line number because of that can at times be misleading. That's my strategy. And I think in a way, we are closely in line with what that strategy is.
Okay. That's very helpful. This second question is overall on the radio industry growth rate. I don't see any light that you share around this. So if you can sort of share the overall market size and how fast or slow the industry is growing. I want to understand if there is any natural growth in this industry or is it just a fight for market share right now? So if you could also create some slides in the presentation that would be helpful, and if you can share some color on the industry growth rate.
Okay. So, I'll talk of the pure radio growth. I mean, I'm seeing pure radio growth, I'm not talking about the initiatives that we do beyond conventional FCT advertising, which is your integrated solution and advertising funded programming, the on-ground led avenues and the digital ads are separate. I still believe that the core radio in isolation will still grow by about 12% to 14%. However, most radio players are today looking at themselves as not just radio. We are radio. We are radio. We are on ground solution providers. We are on digital solution providers, and we are also providers of syndicated content. Now that part of the business, I mean, I can proudly say that you will see at least a 25% to 30% on an average CAGR growth for the next 4 to 5 years. That's the first part. On what basis, I'm saying that because when you are talking about this whole integrated solution, which has a lot of influencer-led marketing-led brand communication that is happening, that space already more than what the radio space is. The radio space is about INR 2,000-plus odd crores, that space of only influencer led marketing is about INR 4,500 crores. So the opportunities double up of what radio is. And we should look at our opportunity is not just the INR 2,000 crores of radio. It is actually INR 6,500 crores of radio plus digital. And if I have to throw in the events part of the business in which we operate as an industry, I think we are already cashing INR 8,500 crores to INR 9,000 crores of business. So, it is no more a share of what 7-8 years back of radio being just a share of the radio business, I think all radio players are looking at the share of the multiplicity of these opportunities, which is in its own 4x more than what the radio opportunity is.
Okay. So does the core radio market in itself is around INR 2,000 crores, and we believe that also is growing in 12% plus.
Yes, yes.
Okay. Great. So, if there are some material that can be created for investor presentation that will really help build the confidence.
We'll figure it out.
And just one last point on the NCRPS. What are the next steps and syndicate timeline since you know it's now almost 2 years since you announced this and something shareholders are looking forward to.
I think the major part of the hurdle is over, it all being accepted the shareholders are -- now this is as long the procedure takes place because from our perspective, there is no urgent at this point in time because all that needed to be clear from our side and from the shareholder perspective everything has been done. Now it's just a matter of time as well as the procedural time that takes and that, unfortunately, I can't give you any indication of when it will happen. But we believe in the current set of people are from the government perspective or people who are involved in this are fairly efficient, and we should see soon something coming out of this.
Okay. Any changes in time line 3 months, 6 months?
Honestly speaking, I would love to say it is 6 months, but it is dependable of as and when it happens. We have a strong feeling it will be earlier. But like I said, it's just a speculation from our side.
The next question is from the line of Mohit Khanna from Banyan Capital Advisors.
I just wanted to know if I have missed it before. What was the debt levels for you in this quarter end?
Zero debt, we are a debt free company.
But I can see some sort of finance cost on the P&L. So what exactly is that then that you might be incurring?
This is the finance cost relating to the leases we take out for our stations.
Okay. That basically the -- primarily the lease expense?
Lease. Yes, it is finance lease.
Understood, sir. Sir, another question was regarding the yield. You just said the answer that you are still operating at 70% yield versus pre-COVID, and that is one of the reasons your revenue is down compared to pre-COVID. However, you would see the profitability coming back at the PBT level, which is compared to the pre-COVID. So, what exactly would be the drivers according to you, when you say that the yields might be lower than pre-COVID, but we would be on the PBT level touching pre-COVID levels.
2, 3 reasons. One reason is, like I said, we have done a lot of cost measures, which obviously will reflect in the bottom line, number one. Number 2, like I said, as far as our pricing strategy is concerned, we are looking at marginal movements from what we have had in the last 1.5-2 years as far as our deals are concerned, and that is gradually seen. Even in this quarter, we have grown by about 14% in our leads. So we are looking at that increase. Secondly, like I said, the mix of our business is also now getting added on maybe elements which is beyond radio, and that is the digital part of the business, the on-ground led solutions, which has come back post-COVID. And like I said, all these businesses for us are higher margins than the conventional radio business. Because in the radio business, there's probably a lot of competition, and it is just a share gain beyond that, that's only that's much you can do. But in these parts of the business where there's a lot of expertise and the ability to kind of differentiate ourselves in the kind of solutions you give for the advertisers to pay you a premium, I think that's what the game plan is. And the combination of all these 3, plus whatever gain that remains to be done in the volume part of the business, which was missing, that also will be adding on to the overall revenues. And as you know, we have a fixed cost business. After a particular point, whatever you do on surplus straight way goes down. So that's the reason why once seems reasonably sure that we should be hitting those numbers.
Fair enough. Sir, one additional point, if I can squeeze in here. You've mentioned that the legacy batch 1 stations, I believe those are the high-yielding stations from Mumbai, Delhi and Bangalore are still at 65% operating capacity utilization. Sir any particular reason for these markets to be operating still much below pre-COVID levels? And what is your sense these markets coming back?
So typically for Bombay and Delhi, I think, whatever little residual effects of COVID and little scars that has happened in the month of April and May with whatever that newer variant is, is -- also had affected because it's a mix of local plus corporate advertisers that had we have as a mixture, right? So that was the reason why we believe that, that challenge is still existing. But now that in the last 1.5 months, I think slowly, that is beyond us, because life has come back to normal. So yes, the metro market, especially Bombay, Delhi and Bangalore, unfortunately, as this whole little biased towards COVID being affected because of whatever those numbers were reflecting in our overall scheme of things for the industry, and not just us,, and I think that was reflected in the overall radio volumes. My next question -- the next answer to this thing is, I think already you are seeing of improvement happening. Because life is coming back to normal, and I now the festive kicking in, we believe we should get back to, at least -- if I have to take a risk of putting up the number -- anywhere between 75% to 80% that minimum utilization level, yes. And from there on, at the peak we touch 90%-95%. And of course, like I said, the ERs individual is going to be simultaneously being pushed up, so that will be a combination of the increased volume through this extra utilization of the inventory and that marginal push that we are getting through the ER will be there, net gain that you see quarter-on-quarter.
Right. So, in that scenario, see, in the fourth quarter, we did around 4% operating EBITDA margins. And right now, we are at 9.5%. So will it be a fair assumption on the analyst community side at the investor side to assume around 15% of EBITDA margins in the second half of this year.
I wish I could give you an answer to this. But yes, I mean, our agenda is to do what we are showing as an efficient matter from our side. But I think I would rather want to take -- you also kind of look at it from a perspective of that so far things are played as per the kind of strategic direction we are taking and should possibly believe that we should be able to deliver what we are talking about in terms of the overall margin.
Sir, I mean, I understand you don't give guidance. So, does it -- I mean, I'm only asking if the number looks reasonable to you or not, that's it?
Let me answer this question a little differently because I'm will be committing myself to something, because it will be just one statement from my side. I see an upside of my volume revenues going quarter-on-quarter from now on. And I've already made my statement saying that all -- once the critical costs are taken care of any incremental revenue will straight away go down. I mean that's a thumb for us. And we believe that this quarter's level of revenues, we are a breakeven any increase that you will see to whatever extent 6, 7, 5 everything quarter-on-quarter will go down, and that will improve our margin in any case. So that's the way you would want.
Next question is from the line of Dipti Kothari from Kothari Securities.
Sir my first question -- my first question was that, we ended the previous financial year at a strong market share of 21%. However, that has fallen to 18% in the current quarter. So, I just wanted to understand the reason for this call. And if there are any changes in strategy to recover the lost ground.
Well, there is no lost ground. In fact, in the earlier question also I mentioned that we believe that for any business value you have a limited utilization, limited inventory and a long-term plan, you need to look at it from a perspective of what is the kind of revenues we will look at. So I'll just give you a back of the envelope calculation, which we have those recorded volumes happening. Imagine I wouldn't have taken any rate hikes for the quarter of -- quarter 1 of this year and I would have gone with the same share of 21% that I had, I would still done INR 2.5 crores lesser than what I have done. So, for us, the strategy is very clear, its pricing driven it's a strategic call that we have taken to ensure that we believe in the long run, we should have a higher revenue share rather than having a higher volume share. I already gave you examples of one of -- one of my competitors -- and I can give you 2 examples of a share -- volume share increasing by 2%, but revenue growth, half of what I have shown, when I have not actually increased the volume of share. And I look at the 21% exit type. I was 21% last year, but I showed doubled the growth of somebody who added 2% starting from the beginning of the year to the end of the year. So that to my mind is where the strategy gap is. We believe that because of the kind of stations that we have and maybe that is because we have a larger share of fairly more advertising attractive markets vis-a-vis any of the others because if we see our mix of revenues coming from the advertising attractive market as we call where advertisers believe that they have to be present in a large scale, regarding the tail end of volumes and markets that we are, we are able to justify that far more, and it is showing in our results, not just in 1 quarter, but in the annual growth that we talk about also. And as you all know we don't have a long tail.
Yes. Okay. And sir, the EBITDA margins have improved from 13% to almost 20% in this quarter. So, will this margin be improved even further going ahead or do we see some headwinds in the near to midterm tending the margin?
See, we would want to do the best as far as margins are concerned. But as I said, in our exploratory part of the business, while we are looking at a lot of digital future for the company, there could be times we would possibly want to invest more in the short term and get far more in the long term. Those are the days or times where we may not see that matching, but that is as and when, like I said, it will follow the priorities of the organization as far as the business is concerned.
Okay.
It will be by design and not by default.
Okay. And sir, while looking through your presentation, it was heartening to see the return of ad spends and all the major sector growing significantly in volume. So, which sectors in your opinion are expected to sustain this growth in the upcoming quarter?
I think all of the major sectors that you have seen whether it is real estate, whether it is pharma, food and soft drinks. All those sectors will be sustaining because that -- those are the sectors who are any which way is not just in our medium but also in other mediums advertising. So I don't see any sector falling out. In fact, starting the end of second quarter, I also see finance which is currently missing will be back in the foray, which will also add on to the overall volumes.
The next question is from the line of Apurva Mehta from AM Investments.
Sir, just wanted to know this, creative businesses which we are reporting of INR 14.8 crores. And roughly, that is around 35% -- 33%, 34% of our revenues. So, going forward, what can this be -- will creative grow and how can we grow the business? And what is your assessment that can this become a 50% kind of business of your total revenue?
In our overall strategy, we are chasing a 50%,-60% growth on the creative business because but that is an opportunity that we create through pure creative solutions that you give. And that includes digital solutions that we are talking about. So, if you see our presentation, we have grown by about almost close to 170% on our digital part of the business, which is again a creative solution, because it is an idea that created opportunity that we give in the platforms of the choice, which is the digital platform with the consumers. So we are chasing any numbers out there. And you will only see that improving as we go forward. But having said that, we also believe as far as the regular FCT business is concerned, the plain vanilla business, which is, as we said, which is a 65% utilization level in Bombay, Delhi and Bangalore and overall utilization level is at 55% to 60%. When that increases, this is the base you will see what the contribution is. So, I can't clearly kind of tell you whether it is going to be 50% of what you are from a size -- from an absolute number, it will be growing quarter-on-quarter is what we believe.
The last 3 quarters, we were like flattish of INR 14.5 crore - INR 15 crores. Only in Q3, we had a little better quarter when we had clocked INR 22 crores. So I thought this pie would be ballooning over the quarter-on-quarter every year.
It will, because in Q3 and both Q3, the little part of on-ground solutions has started kicking in and our digital sales started going and giving more because when the beginning of last year when we started out, we created certain opportunities and we kind of build ourselves in the ecosystem also to create those great video content and so on and so forth.
Now that kept built up. And that, as you know, for us, it is a large opportunity for us. And that is really working for us. And that is where we believe that this will increase for sure. What percentage I can't guarantee because I also have seen the core of radio also simultaneous increasing. So that is where the only catch for me not to able to kind of give you the percentage per se.
On the yield front, on the exit quarter of Q4, we should see this yield coming to 90% pre-COVID levels or roughly.
No, no. right now, like I told you, it's pre-COVID level is 70%.
Yes. But in the exit Q4, we will be increasing the ad rates definitely and also…
We have increased by about 40-odd percent from Q4 to -- from last Q4 to now. So as we go forward to 90%, see, this all rate game is not just one player game. You, I am sure will understand that. And the challenge is that, for some strange reason, someone who we already believed was as much premium as we were in the marketplace has suddenly shown a different strategy, and that is not really helping the industry per se. So having said that, like I said to each his own strategy, we will be naturally moving ourselves to a much better price placed player, which we always were and ensure that our margins through that strategy will be more than what we would conventionally do which is garnering up volumes in the market.
Sir, your guidance of 40% kind of growth which was there against last year, roughly 35%-40%, do you stick to it or it will be now because Q1 is softer. So it will be difficult to reach to that kind of thing.
See, for us, like I said, our play the newer forms of business is where we are taking the larger growth. 30%-35% growth is what one should conventionally chase to be having a sizeable share of the business that we are. And given the base of what last year it is. So, we are facing aggressively the business in that format.
The next question is from the line of from Omkar Hadkar from Mirabilis Investment Trust.
Hi Ashit, this is Srinivas here from Mirabilis. Ashit, I just wanted to get more color on the utilization of the fairly solid cash reserve that we have, we have been collecting more than we earn. So broadly at INR 270 crore kind of a balance sheet size, what are the optionalities that are there? Because last year, the company was not able to declare dividend, I suppose because of loss. But broadly -- and I understand the NCRPS was in some way, result in some cash being kind of set aside for that. But broadly, as a management and board level, what are you looking at in terms of options for utilizing on the cash, either in terms of, say, business acquisition or see some kind of further return of cash to the shareholders?
See, like I told you, a large part of our strategy is futuristic in terms of our deployment of our digital strategy that we have, which is playing a larger role in this whole influencer marketing space and the money is -- the opportunities is lying out there. As we go forward quarter-on-quarter and as we build up our resources in that part of the business, we will keep a close eye of opportunities, which will help us scale that part of the business apart from the normal growth that we are looking at. And that is one area we would be actively looking to kind of see if there is any investments required. As far as the radio business is concerned, I think we are already existing in the core advertising attractive market. And because the digital part of the business has given me a greater bottom line, I would rather chase that part of the business more than the core radio, which I think we have a substantial business. And that is the way it is unless there is an opportunity which tells us that even that play is available, and we will play. So, like I said, it's a decision that will come over a period of time, as we progress ourselves and I still see the position improving from our overall scheme of things. And hence, I think the best way to look at it is little of the cost. And I told you one of the -- one of the biggest companies in India was looking at opportunities of existing outside the country in the business that they wanted to, but advised to keep the money to share of internal competition. And I know -- you know who I'm talking about. So if they can think about keeping the money for themselves for a better time with the kind of cash reserves, I think I should be allowed that prudency to keep that cash for better time and invest it intelligently.
Okay. And any feedback at a board level on how to look at the cash distribution to the shareholders because I mean I understand that at the PBT level we don't need much, but at least on a cash level.
I can only tell you one thing. Your company has always been looking at the interest of the investors always and whenever there is an opportunity, you know that in whatever little opportunities whether we are always more than happy to do that. I will only urge you to have faith that let things play out the way it is in a much better fashion than it is. And the Board is mindful of this need that arises from the kind of investments that you do on the face that we show on us, and they would not want to let you down. But like I said, it will only come over a period of time for us to even give you any kind of an indication.
Right. The second question is on the other expenses. Like this quarter, we have INR 22 crores versus say INR 24 crores to INR 25 crores in the last year. So, is there any cost rationalization or are there more seasonal items which came in the second half of last year because of which it has dropped.
So last year, what we did is this question I had answered last time also, we've been kind of very clearly looking at our debtors and to ensure that there is - we don't veer away from the fact that, that is the potential loss of revenues not coming in because for whatever financial ability as some part of your debtors would be. We have increased in the last half of last year a provision for doubtful debts and that's possibly reflecting in the -- in our PML.
Okay. And just to kind of close a loop on that, what are our like old debtors, especially I think government accounts had a lot of pending dues broadly how has that old bucket trended for you in the say.
See the government has been a little slow, but our commercial accounts are really well in control. So, we see no reasons from a commercial perspective of having any challenges. However, the government is a little slow, but traditionally and historically government, even if it is over a period of time there has never been bad debt for us, and we believe that is the way it is going to be for us.
At this point of time of the kind of pending debtors, I think the last number we have is for the last quarter is that INR 75 crores, INR 76 crores. That would have come down, I suppose. So broadly of the current outstanding debtors, which would be the.
INR 70 cores now yes.
INR 70 cores okay. And any -- within that any major slow-moving debtors which are yet to be provided for?
No. If you see, even in this quarter, we have provided. But as we go forward, we have a process in which we see if there is a provision needed irrespective of the P&L, we do provide that. And hence you could see in the last year in the second half, we provided more when we did all analysis. So that is an exercise we do continuously, and we can assure you that if there is a need, it will be provided for.
The next question is from the line of Mohit Khanna from Banyan Capital Advisors.
Yes, sir. Just a follow-up on the category growth that you have in the presentation. So, what are the other growth or the categories which haven't really grown as much and sort of lagging and what is your sense when they are going to come back on the growth trajectory.
Yes, I personally believe, like I said, finance is a category, which will come back in a big way in the subsequent quarter. I also believe e-commerce and OTT platforms will come up again and will be advertising more. And that will come during the festive for sure reasons -- obvious reasons. And the regular category, which is there, is already growing, whether it's the real estate or not. Finance, which is a high-yielding category for us, typically growth largely in the second half of Q3 and Q4, hugely dominated by finance. So those are the categories which is absolutely near absence, I can say. There are but they don't form in the top 10 at this point in time. So those are happier times for them because we have categories in which invariably year-on-year, whether there is recession, whether there is economic slowdown has had a space in the medium of radio and have been continuously advertising with the medium.
And when we see real estate as a category or pharma as a category that has posted very strong volume growth. Are you also witnessing some sort of yield improvements in these categories?
See, for us, real estate is a category which is largely volume driven. Having said that, there's a lot of corporates, which has got into the real estate category, which values the brand and is willing to pay the premium. And name all the top, whether it is Godrej, Mahindras, all big corporates are into real estate, and we are -- and even the -- and if I have to go local someone like a Prestige in Bangalore or a bigger real estate agents in Delhi. We are very clear that we only pick up people who are premium from a property perspective, and also from a pricing perspective. Because like I said, that's the only reason why you will see that we are not blindly chasing volumes. We are very prudent about what volumes. So, while the real estate industry will increase, our volumes will be depending on the kind of clients that we are cashing if they become actual fortunately for us, most of them are actually across the country, whether it's Bombay, Delhi, Bangalore, and that's the happier sign for us.
The next question is from the line of Apurva Mehta from AM Investments.
Sir, just wanted to know, are we trying to make more digital content and gain market share. Is there any possibility to have more marketing people and gaining market share? Is it possible because we have a lot of cash to we can use some of this cash to create more business, which is long-term beneficial to us. And now the normalization has returned there is no COVID everything, so the picture is more clear. So, can you even spend more and generate more business kind of thing?
See, I have answered this question in the past. The digital -- world of digital business is worth INR 36,000-odd crores. And even if I take and I have visited this in the past investor calls also, 50% of that is your displayed, your classified display and as such money. That leaves you with about INR 18,000-odd crores, which is structured between influencer marketing mix, which is both influencer marketing and advertising-funded video along with that and content creation along with that. If your answer is to that, should I increase my digital inventory through the resources that I have got and have a larger share of advertising. I don't see the business driven by volume rather than the idea like solutions and impact that we create through the influencer marketing platform that we are talking about or an influencer marketing solutions that we are talking about. So at this point in time, we are not -- and that's the reason why even when people ask me about pure radio, do you want to increase more opportunities in radio? Because unless and until I see there is great value coming from an overall scheme of things, I will not blindly go because there is an opportunity available. So, to answer your question, the resources are there, yes. We are using it resourcefully as of now. But as we see the play increasing, you will see some logical investments happening, which will give us 3x of what we are doing currently as far as that business is concerned. And purely when I'm saying that it's the digital-led advertising business that we talk about.
Okay. So, when you see opportunity coming in, you will spend more money that will generate more revenue.
Yes, it's all about short-term investments for long-term gains.
Ladies and gentlemen, we will take the last question from the line of V.P. Rajesh from Banyan Capital Advisors.
Yes. So going back to your comment about saying that you will be targeting the highest PVP in the next 4, 5 quarters. So, when I'm looking at your historical financials, March '19, you did a PBT of INR 95.5 crores. So, should we assume that, let's say, fiscal year '24, you could be at something similar level? Is that the right way to think about and interpret your comment?
I was talking about the '19 - '20, which is a pre-COVID year for us because if you go earlier, things were different, that was a different ecosystem and so on and so forth. Between then now there has been a 3 change that has happened. Whether it is in terms of available inventory, the overall scheme of being the sentiment, the available opportunity from the world of advertising as far as consumer brands are concerned. So I think it is logical to look at where we were pre-COVID as of immediate pre-COVID. Now the answer to your question is that do you want to see that kind of figure, of course, over a period of time, you will see that figure because that's not all our overall game plan is, but I would rather hit the first figure, which is the pre-COVID '19-'20 figures, more than earlier years, it had many reasons why it was that. And that, I think, is now gone in over bit and I would want to possibly stitch the features with the aim that I should be as profitable I was in the year '18-'19, and that's the whole game plan.
Sorry, I'm confused. So, March '20, you did about INR 29 crores of PBT, March '18 is INR 75 crores. So you are saying your first target is to hit this 29-mark of year ended profit…
That sir is aspiration. And we would want to believe that the market will equally pan out, and we want to have competitive stations. Also, be prudent in their incentivizing the market in terms of what ways to operate because it's a competitive world. If you see competition going left, right and center discounting, you can't just stand there and say that I want to push this overall scheme of things in terms of the ER so that's the challenge. That is only that is in our scheme right now.
That was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for joining us in this earnings call. The organization will undoubtedly continue to expand on the advancements made in the previous year. The knowledge gain and the resilient built up to strengthen our dominant position in the market, further streamline operations, create higher-quality content using our incredible talent pool and utilize a wide network will help us achieve that. The presentation and results have already been posted to the company's website and stock exchanges. Please feel free to contact any of us or SGA, if you have any more questions, share space and take care. Good bye.
Thank you. Ladies and gentlemen, on behalf of Music Broadcast, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.