May 31, 2012 03:26 PM IST | Source: CNBC-TV18

Sponsorship, airtime to boost margins ahead: Rel Broadcast

In an interview with CNBC-TV18, Tarun Katial, CEO, Reliance Broadcast said the improved EBITDA margin was due to the good cost measures that company took throughout the year on the radio business.

Reliance Broadcast posted an increased revenue of 6.7% at Rs 73 crore in the fourth quarter of FY12, compared to Rs 68 crore in the corresponding quarter last year. The company registered EBITDA of Rs 7.8 crore against Rs 1.4 crore. Its operating margin stood at 10.6% versus 2.1%.  

In an interview with CNBC-TV18, Tarun Katial, CEO, Reliance Broadcast said the improved EBITDA margin was due to the good cost measures that the company took throughout the year on the radio business. The sponsorship and airtime numbers also contributed to the good margins of the company and is expected to do so going ahead as well.

Katial is also hopeful of the television business. According to him, though, CBS channels and MAGIC was launched only a year back, they have surpassed expectations and have done very well.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: Take us through how exactly the margin picture has panned out for you this time around? It's a significant improvement. What led to the margin improvement and what is the sustainability through FY13?

A: We had a total income of about Rs 72 crore in this quarter and all business is broke-even, excluding our television business which is in the investment phase currently. The Q4 operating EBITDA actually went up significantly YoY and that is primarily through some of the really good cost measures that we took through the year on the radio business.

We have been able to take advantage of two or three things. One, the new ruling on the music royalty issue which actually got tabilized for the radio business and that is something that we will see going forward too. That has helped the business make much better margins.

The other has been our ability to be able to use the new guidelines, the GOPA (Grant of Permission Agreement) guidelines to be able to use the hub and spoke model for our radio business. It allows us to pipe many sessions rather than having individual sessions in every single city. It again is a very sustainable cost measure that we will see going forward.

Lastly, we have also seen some good upside on revenue and we were able to see more quality revenues for some of the activation kind of business that we used to do last year, which result in top-line but not in good margins. It has now been replaced with sponsorship and airtime numbers which actually contribute to good margins.

Q: Quick word on the TV business then. How exactly did that pan out and what were the losses that you all incurred and when could we expect a possible breakeven?

A: The TV business is only a year old. The CBS channels were launched last year and so did MAGIC. All of them are doing exceedingly well. CBS is currently the number one English channel entertainment network in the country. It is doing exceedingly well both in terms of advertising and in terms of reach.

MAGIC has been number one in 52 weeks on reach in MP, UP, Bihar. That actually has surpassed all our expectations and the regional business with MAGIC as well as SPARK Punjabi has been a good kicker for us. We have got a long list of advertisers now, advertising from us on all the classic FMCGs, telecom to auto and these are long-term sustainable advertisers.

Also our ability to be able to do a lot of 360 degree in these regions because of our radio presence, gives us a significant advantage over anybody else and any other media company there.

Q: What about raising funds? Can we expect a PE deal in the near-term? The last we heard was about Rs 400 crore likely infusion through a PE route. Do you think that's possible in near-term?

A: Currently the Phase 3 picture which would be our immediate requirement for funding is quite unclear. The radio business is making enough EBITDA to sustain the TV business.

The only expansion that will come will be through Phase 3, which is the new spectrum policy that the government is putting. If the spacing of 0.4 comes in, then hopefully their requirement of funding will be even lower.

We are waiting for the picture to clear up to see when the government will want to kick in Phase 3 and closer to that we will do any such thing.

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