The initial public offering (IPO) of Radio City’s operator Music Broadcast has opened today and will close on March 8. The price band for the IPO has been set at Rs 324-Rs 333. The company has already raised Rs 146 crore from its anchor investors. The radio channel is in process of setting up 8-9 new stations out of 11 stations in phase 3. These stations are likely to break even in next two years, Apurva Purohit, Director of Music Broadcast, told CNBC-TV18 in an interview. Presence of Jagran will give Radio City access to local advertisers. Currently, national advertisement contributes 60 percent and the rest 40 percent is local advertisement. Purohit said that the company will maintain its margins on back of new investments and strategic growth plan. “Radio is still at a nascent stage and offers huge opportunities,” RK Agarwal, CFO of Jagran Prakashan said. With 38-40 players in the industry, there is scope for consolidation, which the company will keep looking at, he added.Below is the verbatim transcript of RK Agarwal & Apurva Purohit's interview to Latha Venkatesh & Sonia Shenoy. Sonia: I was looking at some of the statistics and over the last four years the key point is that Radio City has outperformed the industry as far as ad revenue growth is concerned. It has been about 12-13 percent for your company and it has been 10 percent for the industry. Is this a trend that is likely to sustain?
Purohit: I think so. It is because there are some strategic choices we made way back in 2006 that have resulted in this kind of outperforming numbers and some of these strategic choices for example are the kind of markets we selected. So we were very clear that we have to be a nationally relevant player, we have to give a very effective and efficient solution to our clients in the type of number of markets we have and we have to ensure that we are number one or two in each of the markets that we play in and indeed that is how it has played out.
We have a set of 20 markets to begin with and now we have added another set, so a total of 39 markets. We have been in the leadership position as far as listenership is concerned in each of the market for the last five years and that has indeed translated into getting the kind of over performed advertising revenue numbers.Latha: What is the growth plan? Are you planning to expand to other cities, are there inorganic plans. What is your vision for your radio unit?
Agarwal: We at group level believe that radio is still at a very nascent stage and offers huge opportunity in terms of growth whether organic or inorganic. However, what we have in hand currently is setting up of 11 stations which we acquired in phase three and out of 11 stations we have already set up 8 or 9; 2 will be set up in next one month.
As far as inorganic growth opportunities are concerned, industry looking at the size is very much fragmented. There are 38-40 players. So we believe there is lot of possibility of consolidation and we will look for that.
Sonia: Another thing that strikes us is your ability to charge premium advertising rates. I guess that comes with the fact that you are doing so well in many of the pockets but do you think that these advertising rates, which you charge 30 percent higher than most of your peers. In such a competitive market do you think you can continue to do that and will that give you 34-35 percent margins sustainably?
Purohit: We can do that. We have demonstrated it over the last four-five years and again they are backed by two-three reasons. One, as you rightly pointed out, we have been listenership leader in most of the markets that we operate in. Second, as compared to television and print, radio as an industry is at a far lower cost per thousand (CPT). So the differential pricing between television and prints there is a fair amount of headroom to grow there. So for both these reasons and the fact that we are in all the largest markets, our network doesn't have a long tail, so we can give efficient solution to our clients - that gives us the ability to keep raising rates as we have done in the past of approximately 6-8 percent every year.
Latha: What is the listening time of your target audience - when people are driving? It is not much that you all have progressed beyond that, beyond that television and more importantly digital, internet is the commanding space. So your expansions are only linked to driver listenership?
Purohit: That is an assumption that I would like to correct. The fact is that research tells us that drive time is just about 6 percent of the total listenership time. The rest of the time is either at home or very interestingly via the mobile device as an FM receive.
Latha: You believe that you can reasonably maintain this kind of margin; margins are most impressive part of your numbers. Can you maintain this and as well your growth pace?
Purohit: I think for two reasons. Radio as a business is fairly a fixed cost business; there is very limited amount of cost which is linked to revenue. As our revenues grow both on the back of our leadership position, and our ability to raise rates as well as the expansion that we are planning and if you look at the expansion - the 11 new markets that we have entered, most of them are in the Jagran footprint and Jagran will give us the ability to access local advertisers. Right now we are a good blend of national and local advertisers, around 60 percent of our advertising comes from national and the balance comes from local but with the enhanced footprint especially in the stronghold of Jagran our accessibility and ability to reach out to local audiences, which I do not think any other player have and that is the uniqueness that we are a nationally relevant player and we will now get access to local advertisers.
Sonia: These 11 new stations that you have launched or you are going to complete under phase three, what has the growth been like so far?
Purohit: We have just setup in October; the stations are in the process of setting up as we speak.
Sonia: What kind of growth would you be looking at compared to what you have seen in the past?
Purohit: These markets will reach a breakeven as earlier as within two years of operating.
Latha: Generally what has been the advertising scene, cutting across print and radio, where you have an experience? Are you getting that growth momentum or is it only during elections?
Agarwal: The fact of the matter is it has been a tough time since demonetisation, everybody suffered. However, as Jagran has performed even in the tough times. If you have seen Q3 results, we recorded highest growth in the print industry also. Going forward things are not normalised and we expect it would take another two-three months and then growth is going to come back.
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