Radio companies go out of tune in Sept quarter as ad revenues hit low notes

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Published: November 22, 2019 12:25:43 AM

Entertainment Network India (ENIL), which runs the Radio Mirchi stations, registered a whopping 86.12% year-on-year decline in net profit during the quarter to Rs 1.24 crore.

The share price of Music Broadcast plunged to record-lows on the NSE on Wednesday.The share price of Music Broadcast plunged to record-lows on the NSE on Wednesday.

Radio companies’ results for the September quarter were somewhat off-key with most of them reporting lower revenues. Managements attributed the fall to a drop in advertisements arising out of muted government spending. Private sector companies, too, curtailed expenditure in the wake of a slowdown in consumption, company executives said.

“The big surprise in this quarter was that the government did not recommence its advertising as was expected after the elections got over, resulting in de-growth for the industry, which has around 15% of its revenue contribution coming from the government,” Jagran Prakashan president Apurva Purohit said. The firm owns Music Broadcast that runs the Radio City FM stations.

Entertainment Network India (ENIL), which runs the Radio Mirchi stations, registered a whopping 86.12% year-on-year decline in net profit during the quarter to Rs 1.24 crore.

The Street continues to be concerned about the performance of these companies. The share price of Music Broadcast plunged to record-lows on the NSE on Wednesday. The stock has given up about 69% of its value since January 2018.

The Nifty Media index — the worst-performing sectoral index on the NSE — has lost 27.4% so far in 2019. The share prices of ENIL and DB Corp have declined 61.3% and 14.6%, respectively, between January and now. DB Corp operates My FM brand of radio stations. ENIL, Music Broadcast and DB Corp jointly operate 142 stations across the country.

DB Corp, which reported a 16% y-o-y drop in ad revenues for the radio business in the July-September quarter, claimed that advertisement spends by government saw the ‘biggest dip’. “Real estate was also of almost a flattish growth and there were segments which grew — the automobile had a double-digit growth,” DB Corp deputy MD Pawan Agarwal said.

ENIL MD & CEO Prashant Pandey said business also took a hit as television channels, over-the-top (OTT) platforms and mid-sized FMCG companies slashed marketing spend due to the economic slowdown. Advertisement forms the bulk of revenues for radio channels.

New business offerings like concerts, activations, digital communities and music streaming could collectively constitute up to 20% of radio company revenues today, according to an EY-Ficci report released in March.

ENIL reported a 7% y-o-y decline in revenue from operations to Rs 113.91 crore in the July-September quarter while Music Broadcast’s revenue from operations decreased by 22% y-o-y to Rs 62.53 crore. Last week, Anand Rathi Institutional Research lowered Music Broadcast’s recommendation to ‘hold’ due to the risk posed by macro pressures on key advertising sectors.

DB Corp posted revenues of Rs 531.37 crore, which reflected a slight y-o-y drop. Radio advertising revenue for the quarter stood at Rs 31.6 crore, the company said, down from Rs 37.7 crore in Q2FY19.

HT Media’s revenue from the radio broadcasting and entertainment segment, however, increased to Rs 59.41 crore in the quarter from Rs 46.61 crore in the year-ago quarter.

Music Broadcast’s net profit increased to Rs 18.51 crore in Q2FY20 from Rs 13.38 crore in the year-ago quarter, while expenditure decreased by 10.25% y-o-y to Rs 55.34 crore.

DB Corp’s net profit increased to Rs 75.56 crore in the quarter against Rs 46.17 crore in Q2FY19, while expenses reduced to Rs 469.66 crore in Q2FY20 from Rs 517.85 crore in Q2FY19. Profit after tax from its radio business stood at Rs 5 crore in Q2FY20 against Rs 5.8 crore in Q2FY19.

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