Our Subscription likely to increase after NTO 2.0 is implemented: Rohit Gupta, CFO, ZEEL

Rohit Gupta, Chief Financial Officer, Zee Entertainment Enterprises Ltd (ZEEL), talks about FY21 performance and outlook for the ongoing financial year and key growth drivers, the performance of the newly launched channels, content pipeline to lined-up expenditure during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Congratulations on the good numbers. What led to this performance and what is your outlook for the next few quarters?

A: Let’s begin with FY21, which has been an uncertain year for the Indian economy and business at large. There were many operational challenges and economic headwinds but despite that Zee has been performing quarter-on-quarter, which is clearly coming out from our results. So in this quarter, I will like to inform you that our TV viewership share has gone up from 18.2% to 18.9%. In ZEE5 in FY21, we have clocked 72.6 million MAUs and 6.1 million DAUs. This month, we have launched a mega-movie Radhe, which was a Salman Khan-starer and this was across our pay per view platform from ZEEPLEX, ZEE5 and theatres wherever they were open.

If I will talk about Q4FY21, we saw a good recovery in Ad revenue, we had a 9% growth year-on-year and our domestic subscription grew by 5.6%. Overall our revenue grew despite we did not have any movies and no syndication has grown by about 0.7%. If I will talk about FY21, in the first half we were impacted by COVID and our Ad revenues were lower by about 46% and recovery started from the third quarter and we also saw robust growth in the fourth quarter and we have seen the EBITDA coming back. So, overall we grew by 9%. Our margin for Q4FY21 stood at 27.5%. In FY21, our Ad revenue has been down like I said primarily because of the COVID impact in the first quarter and subscription revenue has remained flat this year. Overall margins for the year stood at 23.2%. Our balance sheet is very healthy and our cash and cash equivalents right now are Rs 18.8 billion.

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Q: What are going to be the key drivers for the entire year for you?

A: Before the second wave, which struck a few weeks back, as I said earlier in the third quarter we have seen a sharp recovery and this recovery continued in the fourth quarter as well. Till March, it seemed that FY22 will be a normal year and, we will possibly see accelerated growth in this year. Because of lockdown, the first quarter is now getting impacted. But we are hopeful that we will be able to re-put the Ad revenue loss that we will see in quarter one in the coming quarters if the lockdown doesn’t extend beyond the first quarter. So that is on the Ad side. On the subscription side, revenue has been flat in FY21 and that is one of the primary reasons for an impasse in the implementation of the NTO 2.0. As you know that we have launched several channels last year but were not able to increase our pricing because of this impasse. And, we hope that when NTO 2.0 is implemented, we will see – maybe after disruption of one or two quarters – growth in subscription level.

We hope that when NTO 2.0 is implemented, we will see – maybe after disruption of one or two quarters – growth in subscription level.

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Q: How is your content pipeline lineup for the next few months, especially for ZEE5 as the Cinema opening will take some time in opening due to the pandemic? 

A: Pipeline is quite strong and ZEE5, we have launched 14 plus original shows in this quarter. If I have a look at the pandemic year then we have launched 75 plus original shows plus movies. Interestingly, we are continuously investing in content for our digital platform. As I said, we have launched a mega movie at pay-per-view at ZEEPLEX and ZEE5, as well. In addition to it, we have a lot of content on ZEE5 and we are continuously investing into the content of ZEE5 and you will see in the coming quarters more original shows and movies being released on the platform.

Q: What is the focus on new channels and do you have any plans related to launching new channels in FY22 and what is your target channel count? Would it be a more regional or pan-India basis? Also, tell us about the current channel performance?

A: The performance of the recently launched channels has been very good and our viewership share has been good. Unfortunately, their pricing - as I have said earlier that as NTO 2.0 has not been implemented – which would have gone up and its benefit that would have reflected in our subscription revenue has not happened, yet. We expect that we will get its benefit once NTO 2.0 is implemented. As far as new channels are concerned, the strategy continues with us and we will keep implementing new channels to increase our broadcasting business. We are committed to investing in our broadcasting business.

Q: Can you please share the expenditure that has been lined up for the next year? Also, tell us about the balance sheet and debt situation and how will you fund the CapEx?

A: Our balance sheet is quite healthy, as I have informed you that our cash and cash equivalents are at Rs 18.8 billion. So, it has increased. We have been investing both in the broadcasting business and digital business. We will continue investing in both businesses, whether in terms of movies or in terms of shows. We will keep bringing new and new content to our audience. Secondly, in terms of profitability, we have been posting profitability of 30% to date. But in the next two years – because we are going to invest in content – so, the profitability may come down to about 25% but after two years we expect it to go back to 30% plus once again.

Q: Your expenses have declined significantly from Rs 586 crore to Rs 216 crore. Can you please elaborate on it for us? 

A: Last year, we had some one-offs and they are not present this year. Rest, the way we control the cost, we have always been planning for cost containment and cost management and we will continue to do so. But last year, we had some one-offs but they are not available this year, this is why the expenses are looking low.