See more subdued qtrs before ad spend stabilises: ENIL

Entertainment Network (India) Limited , or ENIL, reported a 9.6% growth in revenue to Rs 77 crore against Rs 70 crore and operating margins expanded to 40.5%. The fall in prices was offset by volume growth which helped the company’s bottomline. “However, pricing has not come down at the client level, but on a weighted average basis,” said Panday.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: What’s the radio advertising market looking like now? Are you seeing strong growth in volumes?

A: Overall the media markets caught the chill as you know; climate change and all that certainly seems to be affecting the media industry. Radio has been flat overall as a category I would say. Print may have grown a few percentage points, television would probably flat as well or up or down a little bit here or there. So overall the media sector has been in a spot of trouble and that’s not really very difficult to understand given the fact that the economy has taken a tumble and generally there has been a policy freeze and interest rates have been going up. So sectors that are typically advertisers have been adversely affected and we have seen the impact of that this quarter.

Also what we have seen is a sudden lumpiness in advertising which means that clients will advertise in October, they will advertise in December, but many of them have given November a go by and that’s the reason why the quarter numbers have not looked very great. Honestly I think that it will take a little more time before the advertising business picks up again, so a couple of more quarters where we have to be a little focused on managing our middle line and staying focused on the bottom-line. I think in the long run nothing much changes really and the sector should do well.

Q: Any price increases that you have been able to undertake though in this quarter on the ad site?

A: In this quarter to expect a price increase is really bit too ambitious. What has happened is that there has been in fact a price drop in most media segments. In newspapers for sure I know that there has been a price tumble, also in radio and it’s been balanced by the volume growth. So its volume growth price drop this quarter. The reason is very simple to understand. This time if you look at the kind of advertising behavior of clients, there are certain categories of clients which are typically heavy on television and radio.

For instance FMCG, telecom or even retail are categories which are typically heavy on television and print and they have really cut back on volumes. So to substitute for those volumes we have had to depend more on sectors like government or sectors like real estate and these are typically lower priced sectors. So as a weighted average the pricing has actually come down this quarter compared to last year, however it’s not that the pricing has come down at the client level. Pricing has come down purely on a weighted average basis.

Q: Are you confident of holding margins at these levels in that case and will you be able to keep expenses under check in order to get to that margin performance?

A: Absolutely. In fact cost management has always been very critical in radio and over the last three quarters I think every company did expand its cost base because of the good year we had last year. So that was pretty obvious, we increased headcount and we did relax a few of the restrictions we had put in the previous periods of time. So I think those will come back again now.

There will probably be a rolling back of some of the numbers that we have. So yes, that’s going to be critical, but yes we will be able to hold onto our margins. I really don’t believe that that’s going to be a major problem.