May 30, 2013 01:16 PM IST | Source: CNBC-TV18

Ad mkt improving; eye 12% revenue growth in FY14: Sun Group

We have sufficient inventory in some niche channels, especially comedy, news channel and kids channels. We should be able to deploy additional capacity to good use during the next few months, SL Narayanan said.

The advertisement market now is in a much better position than last year. The 19 percent advertisement tariff hike for six prime channels will be effective from July 15, SL Narayanan, Group CFO, Sun Group said in an interview to CNBC-TV18. It aims to achieve minimum of 12 percent growth in advertisement revenue for FY14.

The company is doing well as far as digitisation is concerned, and target 25 percent DTH subscription revenue growth in the current financial year. "We were growing around 2-2.5 percent un the sequential quarter after September. We grew at 5 percent in December over September. In March, that number has further gone up to 5.6 percent over December," he elaborated.

Also read: Sun TV up on hopes of high demand for share sale offer

Below is the verbatim transcript of his interview to CNBC-TV18

Q: What is the ad market looking like right now and what kind of visibility do you have in terms of both - utilisation of inventory and pricing trends for FY14?

A: The ad market is looking a lot better this time around. Same time last year, we were all dissident. We are surely seeing much better times ahead. In fact we have been encouraged to take a small step forward in terms of increasing prices.

So, for just about six out the nine prime time viewing slots in one of the channels, we have taken prices by an average of 19 percent. Those increases will be effective July 15 of this year.

We have sufficient inventory in some of the niche channels, especially the comedy, news channel and the kids’ channels. So, we think we should be able to deploy additional capacity to good use during the next few months.

Q: What does it seem likely then that you could do in ad revenue growth through the course of FY14? Does it seem possible that you can do something in the 15 percent plus region?

A: We wouldn’t normally give any forward looking statements. However, I think we should grow at a minimum of 12 percent this financial year in terms of ad revenues.

Q: What has your own experience been in terms of DTH subscription and whether that is looking like it’s on the uptrend as well?

A: DTH has been doing exceedingly well because beginning the implementation of our phase one of digitization. We have seen the sequential quarterly growth numbers ramping up. We were growing around 2-2.5 percent sequential quarter after September and beginning December we have seen the number gain some traction.

We grew at 5 percent in December over September. In March, that number has further gone up to 5.6 percent over December. We think that number has the capacity to positively surprise. But we think our subscription revenues could grow at a minimum of 25 percent this year.

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Q: Do you envisage any difficulty in this 19 percent ad rate hike be getting absorbed in July when you actually push it to clients? Do you think you can spread it out beyond the few programs that you are starting with in prime time?

A: Most of these have already been negotiated, signed, sealed and delivered. What we have done is basically correct an anomaly that existed already. These were programs which had ratings and were begging for this correction. These are legacy issues, we have not priced them right so we have just looked at the cost for rating point index and apply those filters and rationalise the tariffs which were a bit all over the place.

This is why some of the slots didn’t increase where as in the other slots, we have done these increases and these have been already implemented. The only thing that we had to accommodate was little bit of time for advertisers. We have decided to put this effective July 15.

Q: Any concerns on loss of market share in your key market in Tamil Nadu or even in Andhra Pradesh and Kerela because of competitive pressures which might have bearing on advertising growth this year you feel?

A: I think competition has always been very active. In the very beginning, there was only Sun TV, one channel in Tamil Nadu in the 90’s. As the years have gone by, a lot of competing channels have come.

So I think over the years, we have lost share but the good news is we continue to hold a fairly dominant share in at least three of the four states. I think the existing viewership shares which are around 62 percent gross in Tamil Nadu and slightly lower in Andhra and Karnataka and about 25-26 percent in Kerela, I think those shares we are confident of holding this year.

Q: How did the offer for sale go through in terms of subscription price, key buyers and what is it that you hope to do with the money raised?

A: That money belongs to my boss. It hasn’t come into the company. It’s a secondary offering so Mr Kalanithi Maran has tendered those shares in compliance of Securities and Exchange Board of India (SEBI) guidelines.

I believe it did very well because from the website reports I saw that the book was over subscribed by 3 times, which only goes to show that there is sufficient interest for media stocks amongst the large institutional investors. I really wouldn’t know who has subscribed for how much at what price.

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