Operating margins can go up to 24% in 2-3 qtrs: SitiCable

Siti Cable has embarked on huge investment regarding digitisation of cable business. It has already converted 40 percent of its business into digital from the analog mode. The investments required to do so is resulting in depreciations losses. VD Wadhwa, CEO & ED, Siti Cable spoke to CNBC-TV18 about its quarterly numbers where cash margins and operating margins have shown an improvement..

Below is the transcript of his interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Anuj: Good set of numbers for you at least on the topline and EBITDA front but still loose on the bottomline front. If you could tell us by when do you expect to break into the black? A: Currently for the last two years we are in the investment phase because the analog business is getting converted into digitisation and we have already completed about 40 percent of the digitisation in the country. For next two years we will continue to remain in the investment phase so that is why you can see that the losses are only on account of the depreciation part. However, our operating margins are improving, the cash margins are improving. Anuj: This margin of 22 percent this time around is a significant improvement over 14 percent, what is the likely trajectory for operating margins? A: Operating margins can go up to 24 percent in the best case scenario. So we still have scope for another 2 percent improvement on the operating margin side. Ekta: By when? A: It will take another two to three quarters because right now phase-I markets are giving us decent margins. Phase-II markets are catching up with the phase-I market with a gap of about six months or so. Once the phase-II market realisation starts coming at par with phase-I market, our operating margin shall go up. In another two to three quarters time we should be hitting that number.

Ekta: Just explain to us how the subscriber addition is panning out for you at this point in time, what is the competitive intensity that you face at this point especially even from the DTH space? A: Right now we are currently at about 4.8 million digital subscriber and we do have additional 5.5 analog subscribers. So, when we are going into those analog markets, phase-III market is largely in favour of the cable industry. Phase-IV market is the area where the DTH is having an edge over us. To be honest phase-IV market is so widely spread out across the country where we are talking of the towns where between 1000-5000 is the population base. So it doesn’t make any economical sense for me to take my signal there and service that particular geography of the country. So, we are not even targeting those market and DTH has already having a stronger penetration in those markets. \\\\ Our focus is largely going to be phase-III market and the contiguous territory of phase-III market. 60 million is the opportunity and that will take us to 15 million plus subscriber base what we are targeting.