BARC's no. 1 rating to propel ad revenue growth: Sun TV

Tamil general entertainment channel (GEC) Sun TV has posted a 16 percent ad revenue growth in the second quarter of FY16. In an interview to CNBC-TV18, SL Narayan, Group CFO, says this growth will be further propelled going forward with Broadcast Audience Research Council (BARC) ratings.

The rating agency earlier this month deemed Sun TV the number one channel across India, leaving behind popular Hindi GECs like Star Plus and Colors.

Narayan says fall in commodity prices and rising gross margins has caused many fast-moving consumer goods (FMCG) companies to increase their promotional spends. There has been a subscription revenue growth of 10 percent, including international, direct-to-home (DTH) and cable subscriptions, he says, adding that phase-III digitisation will be a key driver for its growth.In the company’s radio business, Narayan says that Sun Group has got the approvals it needed and that it will not offload any stake in its Sunrisers Hyderabad, a franchise of the Indian Premier League (IPL) team.Below is the verbatim transcript of SL Narayanan’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18.Anuj: A word on your add revenue growth. We have seen 16 percent add revenue growth. This in itself is a high number do you think it is sustainable at this kind of number going forward?A: It looks pretty good at this point in time because we see a revival across sectors in terms of add spends. The hypothesis that I am hearing is because of fall in commodity prices and rising gross margins a lot of fast-moving consumer goods (FMCG) companies are stepping up investments in promotion. So, I believe that things should look better from these levels. Ekta: What can you do in the next two quarters in terms of an add revenue run rate? Do you think it will be better at or below 15 percent?A: As you know we don’t give any precise guidance’s but suffice it to say that we should be maintaining a fairly robust momentum. Ekta: How was subscription growth this quarter?A: Subscription growth has been, if we just combine all formats which is international and DTH and cable we have done at about 10 percent. The next big trigger is going to be linked to the pace of digitisation which is still on paper. It is believed that on January 1st of 2016, phase III will get kicked off. It is something that can materially change the run rate for subscription revenues; because we believe that in South India alone another 20 million homes could go digital as part of phase III. Since we are very strong in southern India we could see some very strong gains in terms of our subscription revenues.Anuj: The next big trigger of course for your company is the radio business. If you could tell us how is that going to shape up and any clarity from the Information and Broadcasting (I&B) ministry on the licences that you won? A: Radio business in terms of its numbers is not a very significant proportion of our consolidated financials. But we have got our relief in terms of the approvals, wherever we had some request for intervention. We have gone ahead with the process and we have re-emitted the money due. We have got what we wanted. There are certain places where we thought the prospects could be good but the prices went completely out of scale. So, we chose to not bid in some very expensive locations. Otherwise we are happy with the way things have ended.Ekta: Just a quick word on the IPL business and correct me if I am wrong but is it a part of your consolidated financials and if so how did it perform this quarter?A: Sunrisers team is owned by Sun TV Network limited but we have had no activity during the quarter. All the cost and all the revenues are booked in June 30th quarter because the tournament starts sometime in first week of April and ends towards end of May. So, we have a practice whereby we book all the revenues and all the cost in that quarter. So, which is why that quarter is not exactly comparable in terms of our run rate to the rest of the year. However, net-net we are very happy because our rate of growth has gone up and the profit after tax (PAT) is up by almost 41 percent this quarter. These are very healthy set of numbers.Anuj: A word on the IPL team, if you could give its financials and are you staying with it or any plans to sell considering that IPL itself is going through a bit of turmoil?A: Whatever it is we are not going to get rid of the team or anything. There has been a lot of speculations. So, at this point in time it is very much part of the company. As we have seen from examples all over the world whether it is English Premier League or NBA or Major League Baseball teams only go up and value. Since this is a franchise which is in perpetuity and considering that cricket will continue to be a preferred sport for a lot of Indian kids, the appeal of IPL will be there for at least in the foreseeable future. Ekta: For the bottom-line this quarter I am sure you must have incurred operating cost at least for the team if not revenue recognition. Would that have been recorded?A: There is absolutely nothing on IPL this quarter Ekta: Just a quick word in terms of your Tamil channels and your other language channels. What was the growth rate between both of them and any launches on the same?A: We don’t comment on individual channels because that is a lot of sensitive information. However, what is really heartening this quarter is the announcement by Broadcast Audience Research Coucil (BARC) that Sun TV is number one channel in India. Across genres, across languages we have been voted the number one channel in the country. That is something which we think is great news for all of us.