CFO explains why Sun TV cut annual dividends in FY21

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You don’t see a pandemic each different day, that could be a purpose why we went with just a little little bit of warning, stated SL Narayanan, Group CFO, Sun Group to ET Now. has been beneath hearth from buyers after a cut in its FY21 annual dividends. In the previous 5 years the corporate’s dividend payout ratio was at a median of 49 per cent, which has now diminished to 13 per cent throughout the previous fiscal. Edited excerpts:

There has been robust subscription income development and promoting income. What has been the impression of the pandemic in your quarterly efficiency and what has pushed your numbers?

I have to say the pandemic results had been extra substantial in direction of the top of December. If you have a look at the 12 months as an entire, the primary quarter which ended June of 2020, our revenues fell by virtually 66%. But that degrowth diminished to about 27% in the September 2020 quarter. In the latest quarter, we now have really posted a development of about 8% over March 2020.

So, we now have had a really good raise up. If my reminiscence serves me proper, we now have Rs 126 crore of advert revenues in June and we now have touched about 300 plus in the latest quarter which is nearly two and a half instances the run fee of the primary quarter of the final fiscal. Net-net the temper has considerably turn into higher.

The actual query to ask ourselves is will we outdo the income run fee of FY20, as a result of FY21 the business revenues fell by about 20%. People like us who’re very closely depending on the nationwide FMCG advertisers we degrow by a barely greater quantity. But this 12 months all people goes to develop as a result of the bottom is so small. The actual million-dollar query that I requested myself is will we outdo the numbers of FY20 and that’s going to be a operate of the GDP development.

The low dividend payout this time round has been a degree of rivalry given the money on the stability sheet of roughly Rs 3,800 crore. Walk us by the explanation for a similar. Is there a plan on the lengthy haul to take a look at a buyback to flush out the surplus money in the stability sheet in FY22?
I’m glad you could have raised this query, so let me set this attitude first. I’ve been with Sun for greater than a decade now. I simply full the ten years. Let us simply have a look at the time interval from monetary 12 months ended 2011 to the monetary 12 months ended 2020. We have distributed one thing like Rs 5,700 crore and our dividend payout ratio has by no means fallen beneath 50%. In the 12 months FY20, which is the final full monetary 12 months, with out the consequences of the pandemic our payout ratio was 86%.

We have paid out Rs 1,188 crore in dividends, plus distribution tax out of a revenue after tax of Rs 1,385 crore. There will not be a board which is extra focussed on driving return on shareholder fairness than the board at Sun TV. We have been one of the crucial beneficiant firms in relation to distributing money; that surplus of requirement. We have prided our return on fairness ratios. It all the time was round 35%-36%, of late it has fallen to 23%. But then, you don’t see a pandemic each different day. That is a purpose why we went with just a little little bit of warning.

The board has persistently paid out moneys that’s extra of rapid investing necessities regardless that we now have very massive tasks dedicated. We have eight films beneath manufacturing, one is nearly full – the Rajnikanth blockbuster which is able to hit the screens any second now. Then we now have yet one more which is a piece in progress, three the place manufacturing began, and three extra that are in the pipeline the place contracts have been signed and dates have been dedicated.

In phrases of investments, we’re extraordinarily bullish on the years forward. We are additionally making investments in high-quality content material and with all that we are going to nonetheless have plenty of money and the board will definitely take this difficulty and distribute no matter is surplus to our requirement. There is little question in my thoughts on this. Unfortunately, I can’t say something which is in the character of a forward-looking assertion on a name like this. I’m not competent and it’ll even be unlawful beneath the SEBI pointers to make something which is speculative. But suffice to say that the board has persistently demonstrated its resolve to payout cash that’s surplus to our rapid investing necessities.

Given that subscription development has largely been pushed by revenues from OTT for the reason that begin of the pandemic, do you see double-digit development coming in the following few quarters?
Yes. Please bear in mind that only a few properties have tv. I believe that FICCI E&Y report has simply been revealed. If my reminiscence serves me proper, it says virtually 30% of households in India are nonetheless with out tv. That is level primary. There are only a few properties – lower than 10% – which have a second tv. The engagement that tv has is nearly about 235 minutes per day. It is a really excessive degree of engagement that tv has and, in our opinion, there’s ample runway forward.

Fortunately for me, as a result of I sit in a place the place I additionally look over the financials of sister firm Sun Direct, we’re very bullish on the expansion for subscriptions. The different huge untapped avenue is the smartphone universe as a result of all people now desires information and leisure on the go. Although the engagements ranges will not be greater than 40 minutes a day for cell phone customers, the universe is large and it’s rising. About 450 good telephones are in use and my guess is that at the very least 25% of that’s going to be in South India, the place persons are actually watching stuff like Sun News and KTV. So, we’re very bullish on subscription revenues.

What is the replace on the IPL franchise SunRisers Hyderabad? What is the outlook on revenues from this group in the second half and the way a lot of a optimistic is it going to spell in your general books?
Actually, final 12 months we grew revenue after tax by 12%. That is regardless of a truncated income stream from IPL. Ticket gross sales of about Rs 29 crores we didn’t earn. The 12 months earlier than final, we had ticket gross sales of virtually Rs 29 crores which we didn’t earn as a result of it was in UAE and there weren’t ticket gross sales. And additionally, the sponsors modified and we took successful of virtually Rs 12.5 crores of the title sponsor alone.

Despite that, we now have been capable of pull in some revenues. But this 12 months sadly due to the second wave, it’s got impacted very badly halfway. We imagine that it’s going to revive. Whatever is remaining of the season will occur in UAE, so it’s anyone’s guess what the distribution goes to be from this 12 months’s event. But we will definitely make some first rate sums of cash.


You are additionally betting huge on Sun NXT. Tell us just a little in regards to the subscriber addition and the content material being developed. What sort of development are you anticipating from the digital part?


At this level in time, together with our subsidiary subscribers which is mainly the subscribers that come by our offers with telcos and different OTT gamers, we now have near 22 million subscribers. We are rising very properly. We have premiers of flicks. Each time a film goes on air on Sun NXT we see an instantaneous uptick in subscriber addition. This will solely get higher and higher as a result of as soon as the pandemic results are gone, we are going to begin creating extra content material.

There is a well-oiled engine between Sun TV, Sun Pictures and Sun NXT. And as it’s possible you’ll bear in mind, content material investments have doubled in the final 4 years. If my reminiscence serves me proper, we spent near Rs 900 crores in FY20. FY21 is an aberration as a result of we didn’t have shoots on many months of the 12 months, however we might be spending a substantial quantity on content material and there’s a very well-developed ecosystem of administrators, script writers and producers who work on fee foundation. So, the second issues get to regular you will notice a flurry of releases throughout the board, not simply the linear TV, not simply the film home together with Sun NXT.


Do you assume we are going to see development returning solely by FY22-23? When do you see uptick coming in?


Actually, this 12 months goes to be a development as a result of we’re working off on a really low base. In my thoughts, for those who can develop over the revenues that we recorded for advert gross sales in FY20, we might have achieved one thing substantial as a result of that basically is the Holy Grail at this level in time. FY22-23 I’m moderately optimistic the world would have fully stabilised. The key level to ask is what will occur between now and March 22. That the jury continues to be out, we’re simply protecting fingers crossed. I can’t say greater than that with out violating codes of engagement.

Give us a way as to what the general capex plan in your film manufacturing is? And any message to your shareholders?

See, the content material investments might be largely pushed by films as a result of in this a part of India, it’s films that drive engagement. As I informed you, we now have two films that are virtually full, three extra in manufacturing and three dedicated. It might be a Herculean effort to get all of it out and launched in the following 9 months or so. We will not be even trying that. So, between these films, we ought to be spending near a Rs 1,000 crore on film manufacturing, eight films and we are going to proceed to be consumers for satellite tv for pc and digital broadcast rights.

The sum we now have historically been spending is about Rs 400 to 500 crores. If conditions stabilise we ought to be doing that quantity on an annualised foundation. So, if we see plenty of manufacturing coming off the shelf, we might spend at the very least Rs 200 crore on satellite tv for pc and digital rights. We are fairly optimistic that we are going to spend a considerable sum on content material creation.

The message to shareholders is we imagine your pursuits are greatest served once we develop the highest line and the underside line, defend margins and drive very excessive return on fairness, and that’s it.

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