Hope to see recovery in activations business in Q2: ENIL

ENIL is in a midst of a massive expansion. It has plans to roll out 17 more radio stations, along with 32 stations which have been around for a long time, says Prashant Panday, MD & CEO of Entertainment Network India Ltd (ENIL).Revenue growth of the company is subdued due to weak activation business. "The non-radio business is very dependent on on-ground stuff and this time the rains have affected it," he said.He expects to see a recovery in activations business in Q2 -- in spite of volatility.Speaking on debt he said, "We have a very profitable core radio business that spews out a lot of cash every year. So that cash itself should be enough to clear off the debt".Below is the transcript of Prashant Panday’s interview to Reema Tendulkar and Nigel D’souza on CNBC-TV18.Nigel: Tell us. Your topline growth, a fair bit subdued at around 9 percent. Could you break it up for us? What exactly was the add growth, volume yields, could you explain that to us?A: Let me just explain that ENIL is in the midst of a massive expansion, because we have bid in Phase-III auctions and we have 17 stations to roll out and all of that going on. Therefore, there is a fair amount of investment going in that piece. That pulls the earnings before interest, taxes, depreciation and amortisation (EBITDA) down.But on the other hand, we have the core business, the 32 stations which have been around for a long time and those are growing robustly, EBITDA growth of the order of 11 percent, revenue growth of about 7 percent, which is subdued.Now the reason the revenue growth is subdued is simply because our activations business -- that is a pretty large component, about a quarter of our business is activations now -- had a subdued quarter, but we expect all of that to recover in the second quarter.In terms of yields, the yields have been about 2.5 percent growth this quarter but on a base on 10 percent last year. It has been volume led. The good news is that our core radio business which is 75-80 percent of our business has grown at 21-22 percent. So, that has been a very strong sector of growth for us.Reema: What was the reason for activation having a subdued quarter and what makes you confident that it will turn around if at all in Q2? Secondly, you are saying the EBITDA has been impacted on account of the investments the company is making for its roll out. What was the investment this quarter and what is the trajectory of investments. So, therefore, will your margins remain depressed?A: The non-radio business is very dependent on on-ground stuff. On-ground varies a lot because sometimes, in some place, there is a shower of rains which comes in and this time, the rains have been crazy. So that has affected it.Sometimes, the sponsor pulls out at the last minute. So, there is always more volatility on the activations business and the reason I am confident of its recovery happening very soon is because most of these are not cancellations. Most of these are delays into Q2. So, I can see a pipeline already in place for Q2 and therefore, I am not too worried about that.You talked about the EBITDA. The EBITDA in the new stations, we have been on air for largely about 30-45 days in most of these markets. Therefore, the revenues are very subdued in these markets at his point in time. But the investments are very heavy -- investments in people, investments in marketing, investments in operating costs.Reema: Any number?A: Our EBITDA loss in the Phase-III business is about Rs 9 crore this quarter. So, that is what has pulled it down. If you remove that, core EBITDA growth is 11.5 percent.Nigel: You were just talking about a lot of investments so I need to probe you on your debt picture. How is it looking? If I am not mistaken, you were talking about being virtually debt free by the end of this fiscal. Is that on course? What is your debt figure as we speak?A: At a consolidated level, we are just about Rs 9 crore of debt we carry and that is a very temporary phenomenon. By the end of this year, we should be debt free and also, we should be debt free including the investments that we will probably have to make in the second batch of auctions.Nigel: So, how will you be making those investments then? Are you sitting on some cash?A: We have a very profitable core radio business and that spews out a lot of cash every year. So, that cash itself should be enough to pay for the future round of auctions as well as clear off this debt.