Why the Sun Group is over the moon

Sunanda Jayaseelan Hiral Desai | Updated on January 20, 2018


Digitisation of FM radio stations is sure to boost growth in FY17, says CFO Narayanan

After getting relief from the courts, the Sun Group is awaiting government clearance to expand its FM radio network across the country. Speaking to Bloomberg TV India, the group’s Chief Financial Officer SL Narayanan said digitalisation of radio stations in phase III and phase IV rounds will shore up subscription revenues hugely.

Next year, Sun is looking at better earnings growth as an increase in subscription revenues will have a huge operating leverage on its P&L account, as it almost comes at zero cost, he said.

What is the status as far as your FM licence is concerned?

The matter was heard at two different courts and at both — Delhi and Madras High Courts — we got relief. And then the matter went up to the Supreme Court and then again we were given relief.

As both were resolved at the high courts, as far as we are concerned, our stands have been vindicated. So we are just waiting for further information from the Government of India.

Have you heard anything from the government side as to when you will be receiving security clearances? What is the update on that?

This has got nothing to do with security clearances. Basically, we had issue in terms of being allowed to participate in the phase III auctions. So there was a view taken that because of certain security related risks our companies would not be allowed to participate in the auctions. So we approach the High Court and we got relief. And based on those directions, we participated in the auctions. So as far as we are concerned, from our end that transaction is done. It’s just that we are waiting for the final announcement from the government.

There are around 46 FM stations across India. After you get clearances from the government, what is the portfolio that you are looking for FY17, considering all the clearances are in place?

We have got another eight licences including second licences for Mumbai and Chennai. And we have got a few more licences — for Jodhpur, Jammu, Srinagar, Patiala and a few more. So our footprint has certainly expanded. And we wait to hear from the Ministry of Information and Broadcasting on the next steps.

Considering that ad revenues in the previous quarters took a hit on the back of Chennai floods, can you give us an outlook for FY16 as a whole? What’s your expectation when it comes to Q4 and how are you expecting revenues panning out in FY17? Additionally, even cable revenues have been flat. So what is your expectation on these fronts?

You rightly observed that the December quarter numbers were impacted by unprecedented floods that hit us towards the end of November and December. We have substantially recovered from those effects. Although I must say in the month of January, the city of Chennai was still not fully back to normal. Though we still posted 15-16 per cent growth in advertisement revenues in the first two quarters up to September, we suffered an impact in the December quarter. We think the current quarter will be better.

And as we enter the next year, definitely there is a momentum in the economy now on the back of certain initiatives through the Union Budget. If rural demand is up and if digitisation gets implemented in the phase III and phase IV rounds, subscription revenues will go up hugely. So next year should be looking much better because I certainly think digitalisation will be implemented in the phase III rounds. And any increase in subscription revenues will have a huge operating leverage on our P&L account as it almost comes at zero cost. So I am very optimistic about the next year because I do believe that phase III and phase IV digitalisation will get implemented.

Published on March 31, 2016

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