Will focus on expanding geographies post IPO: Ortel Comm

Below is verbatim transcript of the interview:

Q: What’s your view on expansion going ahead because 90 percent of your customer base now comes from Odisha market and there is one concern that analysts have is too much dependency on one market? What are the expansion plans and by when do you hope to get into new cities?

A: Before answering this question I will talk a bit about the business. We are probably the first cable and broadband company on consumer facing B2C model going public. However, as consumer facing B2C, we provide service on our own last mile instead of depending on the local cable operators.

A vast majority of our customers are on our own last mile and what it does to crucial things is it captures the entire revenue stream and also on the same cable we are in a position to provide broadband services. This is little bit about the business.

However, a large part of our customer is based in Odisha because that is where we started from but in the last few years we have expanded to neighbouring states of Chhattisgarh, Andhra Pradesh and West Bengal. I look forward to larger expansion in these three states in addition to Odisha.

Q: Investors may have two problems with your company. From the Draft Red Herring Prospectus (DRHP) we learn that you were making losses up until last year-FY14 and this is the first half where in FY15 you are likely to make a profit, a minor one of about Rs 66 lakh. There would be a worry that you are barely turning the corner and the second worry is because of that you are expensive. EV per subscriber is much higher compared to peers like Hathway Cable and Datacom or Siti Cable Network or Den Networks?

A: Let me answer that in two parts. One, coming back to the profit and loss, instead of looking at the last six months I would request the investors to look at the last two-and-a-half year. There is a trend and where it has turned the corner.

In FY13 it was a negative Rs 25 crore. In FY14 it was negative Rs 12 crore and we are bottomline positive in FY15, so there is a trend of two-and-a-half year to support the track record of performance.

However, coming back to whether the stock is expensive. We are not. I am not sure whether I can give details because of the restrictions but I would request investors to compare my September 2014 numbers with the leading listed peers and on EV/EBITDA basis we are not expensive. It is much attractive as compared to the leading listed peers. Q: Can you give us a sense of your subscription revenue trend that you expect to see from hereon? In FY14 you had about Rs 79 crore of subscription revenues, FY13 Rs 67 and FY12 Rs 65. There has been slight improvement in the last three years. Going forward how much of a growth do you see in subscription revenues?

A: Subscription revenue improvement is a function of two factors. One, there is a mix of products; there is an analog television, there is digital television and there is a broadband service and average revenue per users (ARPUs) go up as you go up on the ladder.

Therefore, as you penetrate more digital and more broadband into the system the blended ARPU goes up and hence the subscription revenue goes up, for example my current subscriber base, which is 527,000, in this 20 percent is digital and 11 percent is broadband and as these penetration ratios go up, ARPU will go up and hence subscription will automatically go up.

In addition to this post the fund raised I will expand the base; the number of subscriber will go up and that will lead to significant improvement in the subscription revenues.