Expect radio biz to break even next year: Midday

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Midday will demerge its investment arm, Midday Infomedia, comprising of Midday Multimedia's entire print business, to Jagran Prakashan. The stock has fallen post this scheme of arrangement. The residual business will now consist of radio business alone.

Print comprised of 76% of the revenue last year, while the balance 24% came from radio.

Speaking to CNBC-TV18, Manajit Ghoshal, CFO, Midday Multimedia said that the company will now be left with only the radio business post the scheme of arrangement. He expects the radio busines to break even and be cash positive next year. He said, the second half of FY11 will see EBIT at close to zero post losses.

Q: Could you first tell us what is left with Midday after the scheme of arrangement and how would you value this radio business?

A: We have got the radio business, which is left now with Midday Multimedia Ltd. It is a holding company and radio business is a subsidiary under that. How we will value the business - that depends on the market perception but revenue business has shown above the market growth not only in terms of total holistic media rates but also in terms of radio rates.

So our topline has grown by north of 20% and next year will be the year when we should breakeven and start making money. So this is a kind of crossroads for the radio business and it is important that shareholders understand that after a lot of struggle in the radio business this is when it turns on maturity curve and it goes on to make money. We expect a little more valuation from the market but I am sure as time goes on, the share price will find its own range.

Q: You have made an EBIT loss of around 13 crore in FY10 and an EBIT loss of around 5.4 crore in first six months of FY11, you said you are breaking even in FY12, can you tell us what your expectations are on the EBIT level for FY11 i.e. the second half and also possibly what is that expectation that breakeven figure you are working with for FY12?

A: On the EBIT level, definitely in the second year we will breakeven but I was actually talking of breakeven at the PBT level in financial year 2011-2012. So that is what is our expectation and clearly the trend in the market is bearing that out so we are quite certain that in the second half of the year, the EBIT will be close to zero. There won't be any losses.

Q: What about FY12 then, when would you return into the black possibly on a PAT level and what are your expectations on the EBIT level for FY12, there are analysts estimations doing the rounds of almost 10-15 crore?

A: If you look at our present cost base when all our seven stations are operational, we have a particular cost base. Until our revenues go to a minimum of around Rs 55-60 crore, we do not cover that cost base. That is expected to be reached next year and thereafter we plan to make big money because radio business is hugely cash surplus business once it starts breaking even.

Globally whether it is Clear Channel or other people, they have seen tons of cash coming in the radio business. We also expect the third phase of licensing to happen, which will probably enhance the term of the license so that also will give a lot of opportunities, new licenses will come in the market so it is a good sector and we see very positive results in the coming year.

Q: What does your balance sheet look like, what is the debt in cash possibly on the books and if you are planning to bid in phase III, how are you going to fund everything?

A: There is some play in terms of the shareholding so new investors can come in. There are already some talks with some new investors but basically we are waiting to see what happens in phase III and if there is some amount of clarity that comes in then we can move fast forward in terms of laying down an outlay for a news stations or taking some other call on that.

Q: I didn't get your debt in cash figures, can you give us those figures currently?

A: That roughly is around 35 crore on the balance sheet. So that is our debt position and right now we are not cash positive but we hope to be cash positive from next financial year.

Q: How are you planning to scale up your revenues, I believe the radio business contributed about 30 crore in FY10, what are your expectations for FY11 and FY12 in terms of the revenues?

A: Those are forward looking statements, I wouldn't venture there but as I said that in the next financial year in FY11-12, we would breakeven so we expect it to be more than covering our cost in the next financial year.

Q: Just another point you spoke about - you are looking at investors coming in, what is the size of sale or the amount of money you are looking to reckon from these investors?

A: That will be decided once the third phase licensing norms are out and we have a clear idea about what is the new playing field that we are bidding in. Once that comes out, lot of action will start in the radio space, not just with Midday but with other companies also. So we will have to just wait and watch that space.

Q: Can you leave us with some - about these new investors which you are possibly in negotiations with, would you be divesting any of your radio stations at all completely like what you did with your publication business or would these new investors be entering and buying a stake in the current business?

A: We have not reached that level yet but the idea from our side at this stage definitely is that new investors will be entering.

Q: Would you look at possibly divesting one of your seven radio stations?

A: Not at this juncture, we are not close to anything but like I said we need some more information on the third phase norms to take any call from that and that has been delayed for quite some time. So all the radio players are waiting for that.