Sun TV expects double-digit ad rev growth rate for Q3FY13

SL Narayanan, Group CFO at Sun Group says 55 percent of the ad revenue for the company came in from the FMCG sector, where he expects a distinct shift in spending pattern. "We expect double-digit ad revenue growth rate for the third quarter of this year," he told CNBC-TV18 in an interview.

Sun Television Network reported a 15.8 percent decline in its net profit for the second quarter at Rs 151.65 crore. Media baron Kalanithi Maran-promoted broadcaster had reported a net profit of Rs 180.12 crore during the corresponding period a year ago. Income from operations for the second quarter dipped to Rs 433.34 crore as against Rs 451.26 crore registered during the same period last year, the Chennai-based company said in a filing to the BSE.

Shares of Sun TV were up 1.96% at Rs 335.25 a piece in early morning trade.

Below is an edited transcript of the interview on CNBC-TV18.

Q: Let us start with the projection that you are giving for ad revenue growth; what are you seeing in this market to get the confidence of a double-digit growth going forward?

A: The confidence basically stems from what we see at the ground level. We have been consistently guiding for a muted growth in the first half (of the year). In fact, we have been consistently guiding to a low single-digit growth. But beginning October 1, we see a distinct shift in spending pattern, especially the FMCG space. Almost 55 percent of our ad revenue basket comes from FMCG, which is consumer staples. We also see a lot of momentum on consumer discretionaries-like jewellery, watches etc.

Baring the financial services and insurance verticals, almost everyone is firing on all cylinders, therefore we do expect double-digit growth beginning Q3.

Q: Is there a possibility that this is just a festive seasonal blip for a couple of months and then the trend weakens again or would you say it is a durable change in trend?

A: All this is based on some fairly anecdotal references gathered from one-to-one interviews with a lot of marketing managers and media buyers. Traditionally, the first half is not very strong for the regional TV broadcasting business. As luck would have it, we had Navratri last year in Q2 and this time around Navratri has fallen in Q3. That is a fairly strong spending season in the Udaya side of the business, which is Kanada Broadcasting.

So, we will see a fairly strong shift in the ad spend patterns of most of our advertisers. Q4 is again a fairly strong season because of Sankranti, Pongal and the spill over from the New Year's Eve. The second half is always been very strong for Sun TV. This time it is coming on the back of shift in spending from most of our customers which gives rise to a fairly optimistic stance going forward.

Q: What is happening on the Arasu front in terms of revenue contributions since you started the deal?

A: The Arasu deal was filed sometime in August. We have seen some contributions coming in at a monthly rate of Rs 2.5 crore. We have made a little less than Rs 4 crore because it was implemented during the month of August. Going forward, we will see a run rate of Rs 7.5 crore every quarter. But more importantly, the subscription revenues have taken a shot in the arm after the resolve with which digitization has gone through.

We are seeing a very strong momentum in the DTH sales not only in one of our group companies, but channel checks do reveal that sales across the board has gone up 3-4 times in terms of daily activations for the industry. So, we have been growing at 2-2.5 percent on a sequential quarter basis. Going forward, that growth rate seems to go up, which is very good for our subscription revenue stream.