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Edited Transcript of ENIL.NSE earnings conference call or presentation 22-Jun-20 10:30am GMT

Q4 2020 Entertainment Network (India) Ltd Earnings Call

Jun 22, 2020 (Thomson StreetEvents) -- Edited Transcript of Entertainment Network (India) Ltd earnings conference call or presentation Monday, June 22, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Narayanan Subramanian

Entertainment Network (India) Limited - Executive Director & Group CFO

* Prashant Babulal Panday

Entertainment Network (India) Limited - CEO, MD & Director

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Conference Call Participants

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* Depesh Kashyap

Equirus Securities Private Limited, Research Division - Research Analyst

* Jinesh Joshi

Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst

* Keshav Garg

* Priyam Khimawat

* Rohit Dokania

IDFC Securities Limited, Research Division - SVP of Research

* Samir Rachh

Nippon Life India Asset Management Limited - Fund Manager

* Sanjesh Jain

ICICI Securities Limited, Research Division - Research Analyst

* Sneha Jain

* Yogesh Kirve

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

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Presentation

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [1]

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Thank you, Margaret, and welcome to this conference call, dear friends. I will take 7 or 8 minutes to just give you a quick snapshot of the quarter 4 performance of the company, and then we'll open up for questions. With me is N. Subramanian. I have one question -- request today for you. Because we are all operating from home and I am sure all of you are as well, if there is a question that you specifically want to ask me or to Subbu, please take our name and then ask the question. It is just to make sure that our lines don't cross.

Okay. Coming to the quarter performance. Now all of you know that this is actually the performance of the fourth quarter and the impact of COVID was felt only in the last 15 days of the quarter. So much of what we're going to talk to you about is related to the quarter by itself. Now you will remember that the economic slowdown in the country has been the larger phenomenon in the whole of FY '20. Like I mentioned, COVID came only in the last 15 days. The economic slowdown really started from the time when demonetization was announced in November '16. And since then the GDP growth rate has been coming down. Q4 GDP growth rate, as you very well know, has been reported at 3.1%.

Now the media industry is a derivative industry. It depends on advertisers to [Technical difficulty) for its own revenues. And when advertisers do not perform as well, then the media industry also tends to perform poorly. So keep that factor in mind when we look at the quarter 4 revenues. I will, of course, give you the impact of COVID because that's hot on everybody's mind. But the overall results reflect 2 factors; the economic slowdown and COVID.

First, the revenue. The revenues of the quarter were at INR 149.4 crores compared to approximately INR 175 crores in the fourth quarter of last year. This is 14.8% down. In absolute terms, this is about INR 26 crores down compared to quarter 4 last year. And while this is disappointing, I would like you to just remember that this is probably the lowest degrowth that any radio company has reported in this quarter. And I will come to that point as we go ahead because I want to make the point that we have actually emerged very strong not only in this quarter but over the last couple of years.

Now considering the economic slowdown, I just wanted to remind you that in the second quarter of this year, the company had actually degrown by about 7.9% or, let's say, about 8%. And in quarter 3, it had degrown by 15%, not including the international concerts we did last year. So it had degrown by 15%, so about 8% in Q2, about 15% in Q3. Had COVID not happened, we would have degrown in fourth quarter by about 6%. So it was broadly around on the -- going along the same line, slightly better than the earlier 2 quarters, but then COVID hit. I will tell you what happened as a result of the COVID impact. Out of the INR 26 crores degrowth that we have seen in this quarter, INR 16 crores is attributable to COVID. If we had not suffered the COVID impact, we would still have reported a degrowth. But like I mentioned, the degrowth would have been only 6%, and that reflects the economic slowdown.

Now coming to the -- this is the gloomy news. And you've known that we've been very honest and candid with you since our second quarter. We have told you that the economic slowdown is impacting media companies. So there are really no surprises over here. Now coming to EBITDA, the EBITDA for the quarter was INR 13.6 crores, the underlying EBITDA, and I will only talk underlying without the impact of Ind AS 116. The EBITDA reflects a down -- a degrowth of INR 30 crores in absolute terms. Now don't look at this as a separate data point. It's the same data point as the revenue degrowth of INR 26 crores because, as you know, a large part of the business is radio, and in radio, the contribution margins tend to be very high. So whatever drop in revenues happen, most of it flows down to the EBITDA line. And therefore, these 2 are really the same data point, except that they are expressed differently.

Likewise, the PAT was reported as minus INR 2.2 crore, which is a degrowth of INR 22 crore in absolute terms. Again, it's the same data point, slightly different in number terms, but it's the same data point. So basically, the only data point that you need to remember is that the revenues of the company came down by INR 26 crores. The day the revenues of the company will go back by INR 26 crores or higher, all issues will improve, the EBITDA margins will go up, the PAT margins will go up, everything will go up. So it's a single incident, which is the revenue degrowth. That, as I mentioned, did happen because of the economic slowdown and the COVID 19 impact.

But having said this, let us look at where the company stands on other parameters. And this is where I have a lot of good news to share with you. The revenue market share of the company has been consistently growing over the last couple of years. And this is something that you would expect because when the economy turns down, the advertisers tend to back or put their money behind trusted brands. And there is no brand more trusted than Mirchi in the Indian market. And as a result of that, in the last 2 years, our fourth quarter market share has climbed by 6.5 percentage points or 650 basis points. And we are now at 37.8% market share in the markets in which Mirchi operates, which is the 73 stations in 63 markets. In those markets, we have a 37.8% market share, way ahead of the next player. So clearly, the company has gained in strength in terms of its market share.

If you come to the Solutions business, which is a very, very critical component of the transformation strategy of the company. Again, the Solutions business has done very well. And had it not been for COVID, we would actually have reported a growth in this quarter. So let me give you the numbers first. The Solutions business in the fourth quarter degrew by about 12%, which is a degrowth in absolute terms of about INR 10 crores. Out of this INR 10 crores, the direct COVID impact has been about INR 8.5 crores. And then there has been a lot of indirect COVID impact, which I'm not capturing right now where basically we have ourselves stopped certain events from going ahead. We have not taken it to the logical conclusion date because in the Events business a lot of the closures happen towards the end. INR 8.5 crore represents businesses secured, closed, which we canceled because of on-ground problems. So the Solutions business has reported a fair degree of versatility and a fair degree of strength in its performance. But more importantly, the margins of the Solutions business are important. And here, we have a very good story to tell you.

In the Solutions business for FY '20, the gross profit margin of the Solutions business increased from [33%] last year to 36% this year, which is a remarkable increase. And if I look at the EBITDA margin there, which is derived after factoring all the employee costs and directly attributable travel costs, et cetera, in Solutions business, the EBITDA margin improved from 9 percentage points to 18 percentage points in the Solutions business.

Now let me give you a flavor in terms of the absolute numbers. In absolute numbers, the EBITDA that the Solutions business generated in FY '20 was INR 33 crores. Now remember, the investment that we have made in this business is on an average about INR 15 crore. So that's the beauty of the Solutions business: One, it stands -- it holds strong even when an overall advertising market is down; two, it gives us great strength because there are no competitors who are directly in this business competing with us on the Solutions business; and three, it needs very little investment. And if you can manage the margins well, then it's a very profitable business to be in.

Next point is about digital. And one component of Solutions business is the digital business. And in digital business, we basically talk about solutions, we talk about pure digital revenues in terms of our radio stations, in terms of our -- the videos that we do, in terms of the original content videos that we create, some of the podcasts that we create. So the good news over here is that in the fourth quarter, the digital business grew by 24% compared to last year. And if I were to take the full FY '20, then the digital business grew by 37% over the last year. So these are small businesses. Today, the digital business is just about 3% of ENIL's business. But this was just about under 2% last year. So it's grown from 2% to 3%. We believe in a few years' time, this business can grow to 10% or 12% of our revenues. It's growing that fast, and it's actually our foot in the door of the fast-growing digital business, and we are quite excited about that.

If you're interested in knowing some segments that did well, then broadly, the government segment has been underperforming for quite some time now. The volumes were down 42%. The media and entertainment category itself underperformed, clearly because all TV channels and others were under pressure, so that underperformed by 56%. Auto underperformed by 37% -- it fell by 37%. The only sectors that performed well were health and pharma, which grew by 18%. And BFI, which remained flat. So these are the sectorial performances.

In terms of the COVID impact, I already gave you, but the impact on revenues was approximately INR 15.8 crores and the impact on EBITDA was approximately INR 14 crores. So those were the facts that I want you to keep in mind. And the very good news emerging from the lockdown is that the radio listenership has actually shot up dramatically. The research that has been done by IMRB, the Kantar Group, shows that the reach of Radio Mirchi, which is the number of weekly listeners, increased by 55% during the second week, let's say, of the lockdown in April and the time spent on the medium increased by 109%.

So basically, people turned to radio in a big way. Many people were worried that because radio is consumed so much in cars and people are not driving cars during the lock down, will radio listenership take a drop? Actually, the reverse happened. Because another research, which has been done in the U.K., shows that people trust radio more than they trust any other medium. And I think during these times, when there was so much going on in terms of rumors floating around and fake news floating around, I think a lot of people have turned to radio to get the factually right information.

I just have one last bit of information to give you. Just today, as we speak, we have got news that we have -- ENIL has won the license -- the auction in Bahrain for 5 years. And that means that we will be able to launch Mirchi in Bahrain and operate it for the next 5 years.

In the U.S., we have had a fairly successful first year going largely by the plan. We have crossed $1 million in revenue, primarily in the New York, New Jersey market, and I think we are very happy with the performance over there.

With that said, I will open the floor now for questions. And if you need questions, just like I mentioned, you please either take my name or Subbu's name and then ask the question.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question is from the line of Keshav Garg from Counter Cyclical Investments.

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Keshav Garg, [2]

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Sir, I wanted to understand that our operating profit -- sir, I understand in Q4, we had some kind of a hit, sir, but even if we consider that, sir, in 2014, 6 years back, our operating profit was the same that we did in FY '20. Sir, so basically, what's the reason for this stagnation in the EBITDA?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [3]

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Subbu, do you want to take that? Keshav, one second. I was hoping that Subbu would take that question. Okay.

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Keshav Garg, [4]

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Sure.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [5]

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What's your name, please? Hello -- is that...

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Keshav Garg, [6]

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My name is Keshav Garg.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [7]

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Sorry?

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Keshav Garg, [8]

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Keshav, Keshav.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [9]

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Okay. Keshav, one is that the mix of the businesses. Okay, at an EBITDA level, the mix of the business between '14 and '20 has undergone a change, right? In '14, it was by and large, our FCT business. In the last 6 years, the share of the FCT business has declined, right? The second is that we have launched a number of new stations. Even in the current year, we had about 5 stations of batch 2, which was operational and about 4 stations of batch 2, which got operational at the tail end of the last financial year, right? So those overheads are also there at an EBITDA level.

If you look at the post depreciation, okay, when -- if you're looking at Regulation 33, the number there is post depreciation. That has gone phenomenally high, right? The depreciation number has gone up very high because of our batch 1 and batch 2 investments, which was not there in FY '14. We invested close to about INR 450-odd crores, about INR 410-odd crores on license fee and another INR 40-odd crores on CapEx. INR 450-odd crores went on the new stations itself. In addition to that, we paid INR 340-odd crores for the existing licenses. So that depreciation is also there. And the third factor, which has also led to a decline in profit is that Ind AS, the adoption to the new standard, okay, has also impacted our profit to the extent of about INR 8.9 crores. So these are the 3 factors, which in sort of ways will summarize the shift -- the movement in numbers from '14 to '20.

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Keshav Garg, [10]

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Sir, so like you were mentioning that in first quarter, the radio listenership actually has gone up. So that should reflect in our financials also. We should post a strong set of results in the first quarter?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [11]

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Let me take that. Now I wish that were true. But as you know, the first quarter of the FY '21 has been a quarter of lockdown. So the first quarter is going to be a very bad quarter for all media companies. The second quarter is something that we are now awaiting. And the signs are that it will remain a weak quarter. So the first half of the year is going to remain a weak year. And for practical purposes, let's be honest over here, FY '21 overall will remain a weak quarter. But the impact of higher listenership and the trust that people have shown on the radio medium, it will certainly be there for a long-term and it will (technical difficulty) boost in the future, leaving FY '21 aside.

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Keshav Garg, [12]

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Okay. Sir -- and sir, basically, how many of our stations are loss-making currently?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [13]

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Keshav, these are details we'll discuss them with you separately. I think we should allow the next caller to call in. You can touch base one-on-one, and we'll be happy to share the details.

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Operator [14]

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(Operator Instructions) The next question is from the line of Priyam Khimawat from Infinity Alternatives.

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Priyam Khimawat, [15]

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Sir, thanks for the detailed presentation. And we're glad to hear that our Solutions business is doing well, and it has already reached around 20% of our revenue. Sir, just wanted to understand on which part that this year will be a year of many challenges? And how will the Solutions business fare considering that this is more sort of an outdoor activities business? So how do you think that will pan out this year?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [16]

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No. So let me explain what the Solutions business is. The Solutions business -- go back to the name, a solutions business means that we are here to provide solutions to our clients, which means that we ask the clients to state their marketing challenge to us, and we design an appropriate solution, which will deliver the client results. A solution is made up of many components. One component is radio, but there are many other components, which includes the on-ground component, so the on-ground component is only one of the components. The other components are the digital components, and increasingly our Solutions business has been growing on the back of the videos that we make, and we are able to advertise on our social media handles and on over YouTube channels. Then there is the original content [videos] that we make, then there is the podcast that we make. Then there are other media that we use. We may, for instance, use print also, we may use television also. So all these things put together, whatever solution, whatever media is required to put together in a solution, we put it together for a client and deliver that.

Now yes, you're right that the on-ground business will be badly affected in FY '21. In fact, we don't believe that permissions will be available to do on-ground activation till at least October 1, maybe even later in that. And therefore, in FY '21, the on-ground component will be certainly affected. But like I mentioned to you, there are many other components of the Solutions business, and I'm particularly excited about the digital component where we have a lot of strength.

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Priyam Khimawat, [17]

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Okay. Sir, and, second question overall just to take this forward. So like in FY '20, we've seen INR 60 crore -- INR 50 crore, INR 60 crore drop in revenue, if we remove the international concerts last year. But our EBITDA drop has been similar at INR 60 crores. We were INR 150 crores last year, and we've ended this year with INR 88 crore, INR 89 crore. So if our revenues take a big hit this year, how do you see -- what is the kind of cash flows that we're looking at or we've done something on the cost side as well that you would like to share, sir?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [18]

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Okay. So first, let me just answer the general question, and then I'll ask Subbu to answer in specifies about your question. Well, like I mentioned, in general, FY '21 will be a weak year for all corporate businesses in India and also for media businesses therefore. And therefore, we are ready and prepared for a bad FY '21. We've initiated a lot of cost control measures. And while those will not have that much of an impact in the first quarter, if you look at the full year of FY '21, they will have a very significant impact on the cost structure of the FY '21. In fact, as per our estimate, the costs could go down as much as INR 65 crores to INR 70 crores compared to last year. So we have taken those actions. But you're right, it will impact the performance. Subbu, specifics on the financial numbers?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [19]

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Okay. Priyam, t2 points. One is, on your first question on non-FCT, I trust you've received the deck. In the deck, we had about 50-odd slides. There we have spent 30-odd slides on explaining the non-FCT business, the various components of the non-FCT business, okay. Specifically, on your second question, there are 2 points there; one is the revenue drop is inevitable because you know things have not been good in the first quarter and we had...

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Priyam Khimawat, [20]

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Yes, that's completely understandable, yes.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [21]

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Yes. So on the cost side, that's the sort of benchmark level at which we are working, INR 60 crore to INR 65 crore of annualized production and cost, okay? And you will see most of it flowing by the second quarter, some impact in the first quarter. But by and large, from the second quarter onwards, you will start seeing the impact. In terms of cash, roughly, our cash outflow will be about INR 4-odd crores lower than what is there in our P&L because we take certain provisions in the P&L as a conservative measure for which there is no cash outflow. So you will see INR crores 3 to INR 4 crores lower cash outflow compared to what we see in our P&L, I mean on a monthly basis.

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Priyam Khimawat, [22]

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Okay. And Prashant sir, just 1 question to you. In terms of the overall industry, so this year is going to be a very bad year and a couple of acquisitions, both ours and the other player, Radio City's acquisitions are on hold. So how would you see the industry panning out like after 2, 3 years down the line? Do you see further consolidation with, say, BIG FM or some other player dying out completely?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [23]

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Sir, I think it's very, very obvious that FY '21 is going to be a very bad year for many, many weak players. And a lot of the weak players are actually losing market share, they're losing money, they have a lot of debt with cash flows. So they will get sold out or they will get shut down. So yes, I do expect all of that to happen by the end of FY '21. Will consolidation happen? I have not believed that -- I have not been a very big believer in any more large-scale consolidation happening, unless the government relaxes its policies. There are too many restrictions right now. For instance, how many stations can you operate in 1 city? How many stations can you have across the country? Then what kind of approvals you require from the government to sign a deal? These are all just too complex. Everything is too complex in the media business, and that is the reason why deals are not going through, deals are falling flat. So I don't think that's going to change. So specifically to answer your question, I think some degree of consolidation will happen, but I don't expect it to be a very big degree of consolidation. I think a lot of shutdowns will happen but.

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Operator [24]

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(Operator Instructions)

The next question is from the line of Samir Rachh from Nippon India.

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Samir Rachh, Nippon Life India Asset Management Limited - Fund Manager [25]

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My question is for Mr. Panday. So sir, I heard your opening remarks, wherein you mentioned that both our problems are due to: one, due to COVID; and one, due to like slowdown in economy. And I believe both is a temporary problem. And as things get normalized, we'll bounce back in performance. Have I understood it correctly?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [26]

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Well, I think I cannot say that with a very high degree of certainty that we will bounce back. But I think the whole world expects that India will bounce back. So yes, given a period of 6 months or 1 year, I think we will be able to overcome both economic slowdown and COVID.

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Samir Rachh, Nippon Life India Asset Management Limited - Fund Manager [27]

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Right. So sir, you have -- so from your top, it looked like that you're very excited about long-term prospects of the business, and the way you're developing Solutions business also, I think that is also pretty commendable. But I know one thing which I failed to understand is when our stock price has fallen from INR 1,000 to (foreign language) INR 150, 85% fall, and I know market cap is to a -- just around INR 700 crore. And despite such sharp fall, if the majority shareholder is not like taking stake to at least 75%, let us forget not taking it private completely, so what kind of message it sends for a -- to minority, sir, by the way. I really don't understand that.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [28]

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Well, let me just say the larger -- the larger story is that we have been undergoing a transformation exercise for the past few years. And let me explain that the results of the transformation exercise take a certain time to happen. Therefore, it is critical that any participants in the market may not have fully understood the scope and scale of our transformation. But as the results of that will keep coming out, I am sure the confidence in the company and the stock will increase.

Equally, if you look at the investments that Subbu mentioned sometime back that we have made during Phase 3, then everybody knows that the first 2-odd years of a new phase leads to operating losses. And then the performance, the breakeven will happen, and then the station starts pivoting to the EBITDA level and the profitability levels. We have made a huge amount of investment. I mean think of it, this sort of company whose revenue was possibly INR 500 crores 3, 4 years back, we invested as much as 800 -- INR 750 crore to INR 800 crore, 50% more than even our annual turnover. So the heavy investment that we made was bound to pull the margins down for a while. I see these all as temporary problems. And therefore, I see that these will recover just as the economy recovers. I think in a couple of years' time, we should be back to earlier margin levels that we were talking about earlier. Subbu, anything do you want to add to that?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [29]

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Yes. Prashant, here on -- so on Samir's question, Samir, the liquidity in our counter is very low. When the stock is up, I get a lot of investors tell me, your point is, why is the group not taking 3%? The headroom that we have is only 3%. Equally, I have had a number of investors saying the liquidity in the counter is very, very poor, okay, right? So we are at the same level. So when the stock goes up, the liquidity will be down. And so will be the situation when the stock is down. I think, as Prashant said, once the numbers improve, all these rewriting will start happening. We are a very strong company. We have a strong brand. We have a lot of cash in our balance sheet. I think once the advertising market sort of resumes and our transformation gets completed, we will see stronger growth in numbers. Even in the current quarter and for the second half of this year, our numbers have been pretty strong. It's just that the FCT business has declined, and that is why it is not very visible. Otherwise, there is a significant improvement in market share. Our degrowth has been just 50% of the market degrowth. And secondly is that the margins of the non-FCT business have also improved. I will sort of rest my case there. And I think over the next 2, 3 years, you will see a significant improvement in numbers.

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Samir Rachh, Nippon Life India Asset Management Limited - Fund Manager [30]

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I am completely with you when you share the optimism about your company and the industry kind of. But my only question is that when we are having such an exciting opportunities ahead of us. And despite that, our stock price is such a low level. So why majority shareholder is not getting excited about this opportunity. And at least if not taking it private, at least taking its stake to 75%, so that it sends the right signal to the market about the way they see opportunity in this company. So the way operating management is optimistic about the company, somehow it's not reflected in the actions of majority shareholder, so that's my only limited point.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [31]

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Samir, I said that it was possible. Subbu has already answered your question. I think let's move on to the next question over here, and then we'll come back to this later on a one-on-one basis.

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Operator [32]

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(Operator Instructions) The next question is from the line of Jinesh Joshi from Prabhudas Lilladher.

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Jinesh Joshi, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [33]

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My question is to Prashant. I just want to know that, do we have any contracts of the 2 to 3 months wherein the advertiser commits the inventory in advance? And just in case if we have such contracts, during lockdown, have they honored their volume commitment or have they sought for an extension in the contract?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [34]

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You know, Jinesh, long-term contracts are not a characteristic of the media business any longer. Even if there are long-term contracts, those are basically rate contracts, which basically say that for the full year they will give so much business, and this will be the rate and so on and so forth. Usually, there is no such contract, which says that every month they will give the same business. So there's no question of any business having been committed and then it having been dropped on a long-term contract. But like I mentioned in the opening remarks, we did lose about INR 16 crores of revenue in just the last 15 days of March, but those were because of COVID and those were not necessarily from long-term contracts.

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Jinesh Joshi, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [35]

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Okay. Okay. And just 1 follow-up on this part. I understand that post COVID, volumes might be a bit scarce to come by in the initial few months. So say, for example, we are about to get any contract, which -- where the yields are, say, about 20% to 30% lower than the normal levels, will we kind of oblige or will we hold on to the current pricing?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [36]

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So the operating team takes these calls on the ground. And in general, Mirchi does not cut prices and advertisers have now started to respect Mirchi for that. It's like when you go to a shop and it says fixed prices, you feel more comfortable dealing over there. Because you know that you're not going to be made a fool of, right? So advertisers respect that and Mirchi traditionally does not. During the lock down period, Mirchi also announced certain schemes, where if advertisers were advertising a COVID message, for instance, then we were giving them a certain discount. But for regular business, we do not give discounts. And we give discounts only if they are long-term deals or if they come in off season. And then there are a series of such parameters if the operating team bases its decisions on.

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Jinesh Joshi, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [37]

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Okay. I just have 1 last follow-up for Subbu sir. I just want to know what is the capacity utilization for legacy Batch 1 and Batch 2 stations for FY '20?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [38]

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Okay. So the number for FY '20 for existing stations, that's the migrated stations was 75%. Batch 1 was -- so Batch 1 70 stations was 31% and Batch 2 about 18%. So overall network of about 48%, 49%.

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Jinesh Joshi, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [39]

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Okay. Okay. And out of this INR 158 crores of receivable we have on the balance sheet, how much is government related?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [40]

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So the government would be more than close to about 25%, 26%, yes, yes, yes.

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Jinesh Joshi, Prabhudas Lilladher Pvt Ltd., Research Division - Research Analyst [41]

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Oh, it's INR 25 crores, Subbu. The government outstanding is INR 25 crores.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [42]

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Government outstanding. Sorry. Sorry, I stand corrected, INR 26 crores.

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Operator [43]

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The next question is from the line of Sanjesh Jain from ICICI Securities.

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Sanjesh Jain, ICICI Securities Limited, Research Division - Research Analyst [44]

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First on the advertising revenue, just wanted to get your sense on how are you seeing this industry panning out, particularly in the second half? Now we know the first half is completely a washout. Given that this year, we had not had IPL and a lot of launches generally are -- happen during the IPL or during the festive season. Now that IPL did not happen, and we may see a lot of launches during Diwali, do you expect a sharp uptick in the advertisement spend during the festive season and given that our base is also quite favorable?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [45]

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Sanjesh, I actually do expect that to happen, and the reason for that are the following. First is that I believe that the recovery in the country will be far faster than most people are expecting. There's already stories in the papers in Bombay today that migrant workers have started coming back, right? Now production, I was talking to a few friends, and they are saying that production capacities are getting ramped up very quickly. So I have a feeling that India will surprise the world, and you will find that we will possibly recover from this slump induced by COVID far faster than most people are expecting us to. So that's one part of the story. Second part of the story is that as migrant workers come back, as jobs return, as pay cuts are reversed, the demand in the economy will come back very strongly. And typically, I would imagine that the festive season will prove to be a turning point for demand. And therefore, in the rush that happens thereafter, I think the advertising business should really gain from it, is my expectation. And third, I also believe that given the fact that there will be 2 IPLs, I believe, within 6 months, right? One, I am told will happen in October because the ICC World Cup is getting canceled in October, so there might be an IPL in October, November, and there might be another IPL in March, April or April, May. So 2 IPLs within 6 months will prove to be a really big boost for the overall consumer sector. So I am keeping my fingers crossed. But like I told you, nobody really has good visibility at this stage, but the expectations are that it will pick up fast.

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Sanjesh Jain, ICICI Securities Limited, Research Division - Research Analyst [46]

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But 2 IPLs will be [definite] for us, right, because we will see a lot of advertiser actually going on IPL, given it's quite exciting for some...

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [47]

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No. See what happens is -- no, Sanjesh, I'm sorry to interrupt to you. But you see radio is a support medium and radio works along with television, radio works along with digital and grows alongside the other medium. So when the other medium -- when an IPL kind of an event comes or when the Olympics come, when the main beneficiary happens to be the television business or the print business, you find that radio also grows very strongly along with that. So IPL -- and 2 IPLs within 6 months, I think, will be a big boost to growth.

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Sanjesh Jain, ICICI Securities Limited, Research Division - Research Analyst [48]

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Got it. One on the digital, you mentioned that we are now at 3% of total revenue, and you expect it to go to 10%. Can you share some road map or thought process, how do you see this transition happening? And in what time frame do you see this happening?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [49]

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Yes. So there are -- see, what happens in the digital business is, if you notice digital companies, by and large, digital companies do not make profits. They grow very rapidly. They have large LAUs but they all make losses. Now for a company like ENIL, we could have gone down that path. But we didn't want to go down that path because we are primarily a profit-making, responsible, listed company, right? So we have chosen a path of growth, which is basically keep profitability always in mind. Now over the years, we have developed several products on the digital side, which are market leaders in their categories and which are all very profitable. And I'll give you a couple of examples. The original content business is now about 2.5 years old. And we have a unique expertise we have developed in vernacular languages, in short format content, right, and backed by a radio umbrella, which advertisers and platforms are finding very exciting. So we find that we have skills over there, which will -- so we plan to increase our original video content business by many source.

But the other business that is doing very well is the digital solutions business. Now again, we go to advertisers and we are able to offer them our social media, our YouTube channels and our capability to produce videos to clients, and we bundle that along with other media and we make a solution out of them. That's a really fast-moving item.

The third product that is moving very fast on the digital side is the whole Bollywood piece or the whole film industry piece and all the regional languages. Because again, Bollywood today is expecting far more than just radio. Bollywood today wants us to reach youngsters. And the best way to reach youngsters is through a combination of radio and digital because remember, radio is a profile -- the profile of listeners in radio is very young, and the profile of users of digital also is very young. So if you can combine the two, that gives you a lot of strength. So what I'm trying to say is that over the years, we have developed very good products on the digital side, which has traction in the market, where the profitability is high and where we have established the name. And therefore, I believe that we will be able to grow strongly in the coming years at a profitable rate. I think reaching 10% of the revenue for the company will probably take another 4 to 5 years. We had originally set FY '24 as our target, but I think that will get pushed by 1 year at least.

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Operator [50]

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(Operator Instructions)

The next question is from the line of Sneha Jain from SKS Capital.

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Sneha Jain, [51]

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I wanted to ask, could you give me the revenue of the Bahrain contract that we -- the estimated revenue that you're expecting from the Bahrain contract that we just got?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [52]

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So the Bahrain is not a contract. The Bahrain is a country that we will launch there in the next few months. It's a small country in the Middle East. By itself, it is not really financially material to a large company like ENIL. However, it adds to the strength of our Middle East portfolio. As you know, we have a pretty big business in the UAE. We will also hopefully be launching sometime soon in Qatar, and we now have Bahrain with us, got inquiries from a few other countries in the territory. So in that context Bahrain is important. But by itself, it will still be a small operation.

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Sneha Jain, [53]

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Okay. And second, sir, in percentage terms, could you give me the cost-cutting, like costs cut that you've done in this quarter?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [54]

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Subbu, do you want to take that?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [55]

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Yes. Prashant explained earlier in the call that we are looking at a cost saving of approximately INR 60 crore to INR 65 crore on an annualized level. Since some of these implementations have happened in the latter half of the current quarter, that is June quarter, you will see the impact flowing in largely from the second quarter of this financial year. The number of INR 60 crores to INR 65 crores that Prashant gave earlier was the annualized number.

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Sneha Jain, [56]

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Okay. Yes, that's helpful. And sir, are we seeing any further like reversal from the government or advertisement or something, any uptick or any traction in that area?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [57]

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The government is engaging with the radio broadcasters. However, till date, there has not been much action in terms of increased advertising spend. But as recently as 3 days back, the government has again told us that they are planning to increase the advertising back to earlier levels, which is more than a year back levels. They have told that again to us 3 days back, when we go as an industry bodies, they have told that to us. So our fingers remain crossed. The government's intentions look to be good over here. I think at some point in time, they will also start spending.

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Operator [58]

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The next question is from the line of Rohit Dokania from IDFC Securities.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [59]

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I have 3 quick ones. So Subbu firstly, for you, if you can give us the breakup of FCT and non-FCT revenue for the full year FY '20?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [60]

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Did you get -- Rohit, have you got the handout. You've not got any handout, is it? We have given the details there, FCT, non-FCT margin detail. It's all there in the handout.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [61]

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I actually welcome, sir. Okay. Got it. Got it. I'll take it from there. The other thing is I...

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [62]

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During the quarter, it has just improved by 3% margin. That's what we mentioned earlier in the call, but all the details are there in the handout.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [63]

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Perfect, perfect. I'll take it from there. And Prashant, this one is for you. I mean, I missed some part of the call. So I was just wondering how are things right now as we speak that in the month of May and June, I mean, some of your competitors are talking of 70%, 80% kind of a decline. Are we in that similar range? Or are we doing slightly better? Then I missed those comments which you made.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [64]

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No. I think that ballpark number is indeed correct because there is -- there are no advertisers because there is no supply chain, there's no demand, nothing at all. So advertisers are not spending. We have interesting advertisers, however, who have started again, and there is a lot of optimism that business will start again. But yes, in the first quarter, the business has been very, very bad.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [65]

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Sure. And the last 1 from my side, either Prashant or Subbu can take it. Just wondering if there has been anything formalized as far as the dividend policy is concerned in the Board. I understand that this year is very tough and the Board would have recommended to keep the cash. But just wondering what's the thought process? Because if I'm not wrong, earlier we were expecting some formalization of policy in -- towards the end of FY '20.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [66]

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Prashant, I will take that. So Rohit, we had a chat. We had a fairly long conversation at the Board this time as well. The Board is of the view that we should look at it a little later because this is not the time to sort of increase the dividend given the current environment. So we will have better visibility on our business towards the second half of this financial year. That's when we'll come back and tell you what our thoughts are. We -- I think -- I just want to reemphasize that we do not have any major investment plans. Whatever we have currently are routine maintenance, which again we have cap. So there is no major investment planned. And it is just that at the moment, the motto is very clearly to conserve -- preserve cash, and that's what we are doing like most companies. And we will come back to you during the latter half of this year of what is the Board's decision on that, yes. I know -- we had earlier planned to come back by May. But then given the current environment, the Board has rightly decided to postpone this decision for some more time.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [67]

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Sure. And Subbu, can I ask 1 more question, if I have time?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [68]

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Sure, sure. Rohit, yes, sure.

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Rohit Dokania, IDFC Securities Limited, Research Division - SVP of Research [69]

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Yes. Just 1 more question. So firstly, congratulations on the great sort of non-FCT business that we have built over time and very patiently, I think, that -- it was booking. Now I was just wondering, I mean, if I look at your overall EBITDA of INR 88 crore, INR 90 crores, if I actually removed the INR 33-odd crores of your sort of non-FCT business and add back another INR 10 crore, INR 15 crores of the COVID impact, we are looking at the core sort of radio business EBITDA in the range of about INR 60 crore, INR 65 crores, which is similar to what FY '10 was right, which is almost like a decade back at the core business. So I'm just wondering in this entire transformation, did we sort of lose sight of the core, which sort of got disrupted. And the new business, obviously, is great, I'm not denying that. So what really happened that over a decade our profitability has gone back to similar levels even adjusting for COVID.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [70]

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Prashant?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [71]

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Yes. So Rohit, again, Subbu had explained this earlier in the call, but I will just put it slightly differently. See, I think about 3 or 4 years back before the Phase 3 expansion happened, I think our EBITDA levels have already crossed INR 150 crores, INR 155 crores. So subsequently, the EBITDA have fallen primarily because of the big investments we have made. As you are aware, we've made more than, I think, INR 800-odd crores of investment. And for a company which had revenues of about INR 500 crores or INR 550 crores 5 years back, that was a lot of investment. And then the new stations will take time to launch, they will take time to breakeven and, therefore, they pull the overall EBITDA margin down in the interim. So the last few years the EBITDA margins have been -- have come down, that's largely because of the investments that we make, and they are all reversible.

The second thing is that, like Subbu had also mentioned in his earlier statement, that the nature of the business is changing, right? So while our FCT business remains highly profitable, the Solutions business is a very difficult business to get off the ground. And therefore, in the interim last 3-, 4-year period of time, the margins have always been under pressure and the company has been focusing constantly and thoroughly -- continuously on increasing the margins. And today, the margins, like I mentioned earlier in the call, have become fairly substantially good, and there is still some room left to grow. So again, Solutions business will start contributing to EBITDA growth. The point I am making is that the last 3 or 4 years is where the EBITDA has come down, but those have come down in a very planned manner. Those have not come down as a result of something that we have control of. These were all planned activities, the investments in Phase 3, the growth of the solutions business, the growth of the digital business, the international expansion, these are all part of a planned exercise that the company undertook because it was in a very strong position. So we expect to get back to a far higher EBITDA level than the numbers that I mentioned here, so higher than INR 150 crores in the coming years.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [72]

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And Rohit, if I may add to what Prashant said, we have not lost focus on our FCT business at all, right? Our numbers sort of indicate while the radio -- while we have degrown in the current quarter, right, like many media companies, the radio industry's degrowth is double our growth. So we have seen market share improvement as well. So we have not lost focus on our radio business. It continues to be a high-margin business. And the teams that run the non-FCT business is a separate team. And our market share has also improved -- my numbers tell me that my market share would have improved at least by 500 basis points during the quarter compared to the corresponding quarter of the previous year. Although, from a full year basis, the increase is a little muted because we did not have significant improvement in the first half. But in the current quarter, I have close to 500 basis (sic) [basis points] improvement in the market share numbers.

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Operator [73]

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The next question is from the line of Manish Gandhi, an individual investor.

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Unidentified Participant, [74]

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Great cash collection in difficult times. So first quick one. What is our investment in Bahrain?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [75]

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So the Bahrain is not a -- there's no capital investment because the arrangement with the Bahraini government is that they give us all the infrastructure and the transmission facility and the studio facility also interestingly. So we have no capital investment in it. It is only an annual license fee and that's it, yes.

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Unidentified Participant, [76]

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Yes. Okay. We have one more confusing thing, like all these data and survey showing that people are listening more radio from home. So earlier, we were seeing the trend that mobile listening was going down and car listening was going up. So it is confusing, it includes Gaana and Saavn of the world or it is our own, say, all radio channels' online station, and I think we have launched something on WhatsApp download also. I just -- can you just clarify, Prashant?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [77]

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Yes. Manish, first and foremost, the radio listenership on mobile phones was never reducing. It has always been increasing. However, the growth rate of car listenership was far higher. And the growth rate of car is very exciting for any business because it represents very premium affluent people, and they usually are in the bigger cities. So it's very attractive to advertisers. Obviously, during the lockdown, the car listenership has crashed because there were no cars on the road. But as the cars come back, the radio listenership will also come back. So the listen -- what has happened is that the listenership on mobile phones has drastically gone up in the lockdown period because people have had more time on their hand, and they're devoting time to all media. And let me tell you this thing that it is, in fact, even television has gained a lot during the lockdown and even digital -- video OTT platforms have gained the lot during the lockdown. However, radio has also -- and actually gained as much as these platforms have gained over the entire platforms. So it is not like mobile listenership was coming down earlier and all that. It has always been growing.

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Unidentified Participant, [78]

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And last one. So our best 2 stations have done so well. And Batch 1 stations are not exactly doing like Batch 2. So what will be our strategy going -- because we have again regained market shares, which we had lost 2 years back, and that's a very good thing. But our Batch 1 stations will be very critical going forward to maintain or increase our market share. So your thoughts on that.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [79]

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Yes. So Manish, what we are realizing is that when the market is down, as it is right now, then advertisers tend to go to the leader station. And therefore, in every market that Mirchi operates in, Mirchi is gaining a lot, and that's captured by the market share that we have got. However, where a second channel exists, it becomes a little complicated. And what I mean by complicated is the following: In markets like Bangalore, where the second channel is a different product entirely, it's a Hindi language channel, while the first one was a Kannada channel, or in Hyderabad, where the second one is also a Hindi channel when the first one was a Telugu channel, it does very well; or even in Ahmedabad or Pune, there the Mirchi Love product is in Hindi, while the original Mirchi is Gujarati and Marathi, say, the Mirchi Love product does very well. The struggle comes in the smaller markets or in the Hindi belt market where if you -- like Kanpur or Lucknow where we find that Mirchi and Mirchi Love both, from an advertiser's perspective, seen as alternatives of each other. And therefore, together, they are not pulling. So either you get business from Mirchi or you get business from Mirchi Love. And therefore, in all honestly, the -- unless the economy really picks up fast, I find that this will remain a challenge for another few years to come, right? When it comes to Batch 3 stations, and most of them are in new markets, where the first time Mirchi is entering, I mean that's a clear winner because there is a huge demand amongst advertisers to buy Mirchi.

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Operator [80]

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The next question is from the line of Yogesh Kirve from B&K Security.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [81]

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So Prashant, I understand the ad volumes are impacted across the industry. But you have seen wherever there has been the sharp increase in the engagement, the ad volumes have been sort of fared well. So if you look at digital or the television news channels, or the television at large, the volume decline has been 30%, 35%. Now, if you are seeing such a strong engagement based on your survey, so why isn't it translating into the ad volumes being relatively better from where we are currently? So any thoughts there.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [82]

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I'll tell you -- yes, I will tell you why. See, first of all, remember, in the television business, I agree with you that the news channels have done well. And that's because, clearly, in a crisis everybody is going to news channels, spending much more time over there and, therefore, there is an opportunity for some degree of advertising to happen over there. Now who are advertising on these channels? Largely, health and pharma products and those kind of products, which are advertising on news channels, very male-oriented, very health and those kind of things. However, if you look at GECs, which is the mainstay of the television business, and while you're right that the volumes are not down 80% or 70% like in radio, the volumes in television are probably down 50%, don't forget that the pricing is down another 50%. Every GEC is basically giving 1 spot at the price of -- I mean, they're giving 2 spots to the price of 1 spot because television, remember, works on an automatic algorithm. So you know how television planning is done? Television planning is done using [BAS] data through a software. And therefore, the software allows the price to float in such a way that the volume will always tend to remain full. However, newspapers, out-of-home, radio do not work that way. All of these mediums work on manually setting the price and deciding how much volume you want to get. So television, by and large, will always remain full on volumes, but the price will vary, while radio the price will usually remain same, but the volumes will vary. So that -- this is a core difference you must remember always.

Now in radio, there's one other thing, and that's true for newspapers as well, that a lot of the advertising is retail. And till the time retail picks up and is alive and kicking, where you have footfalls happening, to that extent, retail revenues on radio will remain muted for that much time. One other factor on radio is that it was -- one of the biggest advertisers of radio has been the central government. And like I mentioned, the central government have been very absent for the last 12 months, right? And even in the fourth quarter, we -- our business from central government was much, much lower. The business from state governments was higher. But the business from the central government was much lower. That's the reason why the radio business volumes are lower compared to television.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [83]

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Sir, are we are looking like television, they are doing 1 place 1 slot free. So whether we resorted to such kind of strategies practically?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [84]

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So like I mentioned earlier in the call, these are decisions the operating team takes at the grassroot level. By and large, we do not do deals like this because like I mentioned earlier, radio is not sold on an algorithm. And therefore, if you drop the price too much, then it becomes very difficult to regain the price. In television, the price is regained automatically because the algorithm matches supply and demand, and the price goes up automatically as the demand picks up. So we have to follow different strategies, but these are decisions operating teams take at the grassroot level, and these efforts are led by the Chief Revenue Officer of the company and the Chief Operating Officer of the company. They take the decisions on a daily basis.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [85]

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Okay. That's helpful. And second quick question regarding the cash flow generation during the quarter. I guess you have mentioned INR 60 crores. So what are the drivers of that? The EBITDA was, I think, about INR 12 crores, INR 13 crores adjusting for change in accounting. So what are the other drivers of cash flow generation?

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [86]

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Yes. So let me answer that, Yogesh. It is largely better collections. Usually, our collections tend to be better in the last quarter. This time, we have stepped up efforts on collection pre-COVID, and that has thankfully paid rich dividend. So it is largely better collection and better management on the tax side as we're sort of try to see how we can adjust our TDS and adjust our advanced taxes all very well. So this is largely because of that. But primarily, about 80%, 90% of it, I will attribute to better collections.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [87]

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Sir, the receivable compared to the September levels, I think those are down about INR 20 crore, INR 25 crore, so...

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [88]

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So there are 2, 3 parts to the receivables. There are receivables, which are trade receivables and there are non-trade receivables as well, okay, advances and stuff like that on the non-FCT side. So when I'm talking about collections, I'm not talking about just about trade receivables, yes. And also, we had a step up. You are looking at the September numbers. We did see an increase in receivables in the December quarter. And that has also sort of reversed through better collections in the March quarter.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [89]

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Thank you, Yogesh. Margaret, can we have one last call, please, and then we can end the call.

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Operator [90]

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The next question is from the line of Depesh Kashyap from Equirus Securities.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [91]

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Sir, Solutions business has done much better in this quarter, INR 65-odd crores versus INR 47-odd crores in the last quarter. Can you please highlight what were the drivers of the same? And what is the outlook for FY '21 of the Solutions business, please?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [92]

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Well, like I have been saying, Solutions business has many components. But primarily, they're all designed towards giving clients options apart from pure advertising. And the focus is on finding answers to our clients' marketing challenges. Now in the fourth quarter, we always have a very big Solutions business because we do a lot of intellectual properties. For instance, our Mirchi Music Award was a very highly successful show this time, again, in terms of revenues, in terms of profitability and in terms of the TV viewership it generated. Then our Mirchi Top 20 show again saw very high traction this time in terms of revenues and also in terms of the margin generated.

Our other show, which is the Mirchi Cover Star show, which we launched 2 years back and which we expanded into the South this time saw a lot of traction happen. But at the same time, largely because of the economic slowdown, we were not able to operate some of our music award shows in some of the vernacular languages. Despite that, my television [IP] business has done very well. Also my core solution business, where I give digital solution that I give solutions to my clients, has done very well in this quarter. So as a combination of all of that thing, basically, there are a lot of engines which pull the solutions wagon ahead, all of them have, put together, done very well.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [93]

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Understood. And sir, if you can throw some light on Bahrain announcement. What kind of upfront fees are we going to pay? And what is the license fee, if at all?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [94]

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Like I mentioned to you, Bahrain is -- there is no investment required in Bahrain except for working capital, of course. So there is no upfront payment fees to be made. There is no investment to be made in CapEx. The government gives you the studio, the government gives you the transmission facility. You go and operate the station for 5 years, and every year you pay the government a certain license fee. That's the model. And you make the advertising money, and that's your to keep. So it's a simple operate model, it's for 5 years. And at the end of the 5 years, you can stake your claim to renew the license. It's a simple model. There is no onetime entry fee or those kind of things over there.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [95]

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Understood, understood. Sir, lastly, you have highlighted that the cost control measures that you will do this year will mainly be starting in second quarter, right? Sir, does it broadly means that the first quarter, the cost structure will be similar to quarter 4?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [96]

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Well, what I meant is that the full impact of the cost cuts will come in the second quarter. But many of the decisions were taken even before COVID, which benefits we will see in the first quarter. Many decisions which were taken at the beginning of the first quarter are the kind of benefits, which will accrue immediately. For instance, we have currently disbanded our MIP or incentive scheme for the first 6 months of the year. So that will have an immediate impact in terms of the first quarter. But in general, yes, many of the other schemes that we have -- other measures we have taken will take a few months to have full impact. So I think by second quarter and then certainly after that we will see the full impact happen.

Margaret, can we call this meeting off? Or is there 1 -- maybe 1 last question and then we can call it off.

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Operator [97]

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The next question is from the line of Manoj Duhan from ND investment.

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Unidentified Analyst, [98]

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Congratulations on your increase in market share. My question is in the last year, radio as a medium of advertisement, how it has performed? Has it gained or lost some percentage?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [99]

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So the radio as a medium overall has remained at its level of about 4.5% of advertising. It has grown at the same pace as the media industry has grown at. So there hasn't been any share gain, but there hasn't been any share loss as well. It's steady.

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Unidentified Analyst, [100]

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Okay. Now as you pointed out that consolidation will happen in case of because of the shutdowns, inventory is not a problem for most of remaining player. Do you think that probably will shift to the remaining player if the radio station -- weaker player can shut down or radio size will decrease?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [101]

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Well, I don't think that -- see, today, there is one thing which is very clear that there is almost 100% repeat usage of radio. So once an advertiser uses radio, then the advertiser keeps coming back again and again. Very importantly, we've also seen that with the solutions business, there are new advertisers who are coming to the medium, who haven't come on the back of radio alone. And they are also repeating the business on the solutions side. So that's a very good sign for the medium. So I think that even if a couple of players were to either shut down or become effectively not competitive in the market, then the business will shift to the stronger players.

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Unidentified Analyst, [102]

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And we will be beneficiary of that.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [103]

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I'm 100% sure about that.

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Unidentified Analyst, [104]

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And third -- my last question is, even our Solutions business requires low capital, but this year would be bad in terms of utilization of every sources. Is solutions business have a high fixed cost in general?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [105]

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See in the Solutions business -- Subbu, and you can answer this after I have just given this short answer. In the Solutions business, you have to focus a lot on operating -- on your direct variable costs, and you have to generate a high gross margin. That's very, very important to do, which means that you must be ready to give up some events if they are not going to be profitable in that year. Like I mentioned, we did not do 3 different vernacular Mirchi Music Awards because we were not going to make gross margin. So that's the first thing. The second thing is that you have to take care a lot of the headcount that you put behind the Solutions business, and what cost you incur on the headcount? What cost you incur on travel? What cost you incur on the other expenses over there? So it's not something that's very easy to learn. It has taken us also a long time. Today, we have a robust system of generating high gross margin. And we have a very tight mechanism to keep the overheads down in the business. That is what is required to generate good margins in the Solutions business.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [106]

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Manoj, just to add on to what Prashant said, I think the question was asked of me even 2 quarters back, I don't know, but I recall a question like this from somebody, okay? And we had said that we will sort of be at INR 35 crore to INR 40 crore on the cost level below gross margin for the non-FCT business. This year, that number has been about INR 34 crore. So we are lower than the lower end of the range that we had indicated, I think, in the first quarter or the second quarter.

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Unidentified Analyst, [107]

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Okay. My last question is, we have reduced the cost that like you said the INR 60 crores, INR 70 crores. And as we normalize, how much could be the permanent reduction in the cost going forward?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [108]

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Good question, Manoj. Like we have been saying, both I and Subbu, that this INR 60 crores to INR 70 crores is an annualized cost. Some of the cuts are permanent. Obviously, headcount reduction has been done with a strategic mindset because we believe that some businesses will need lesser headcount and some businesses can be automated or run in a more efficient manner. Some costs may return. However, they will only return when the corresponding revenues return. So costs which are related actually to revenues, for instance, in the Solutions business, the moment the Solutions revenues pick up, so we'll add some of the cost elements back. But if the business remains low or if on-ground doesn't get deals further, then those costs also will not come back. So remember, it's an annualized impact, INR 60 crores to INR 70 crores. Whether we achieve INR 60 crores or INR 70 crores will depend on how bad or how good the business is. If business picks up, then we can also start incurring some of the costs.

Thank you. And Margaret, let's call this meeting to a close now.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [109]

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Prashant, any closing comments?

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [110]

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Yes. So Margaret, can I just make the closing comments?

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Operator [111]

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Yes. Sir, you may go ahead.

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Prashant Babulal Panday, Entertainment Network (India) Limited - CEO, MD & Director [112]

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So I just want 1 last statement to make friends. And that is that in the first quarter and the second quarter of this year, everybody knows that the impact of COVID is going to be very, very drastic and dramatic on the entire corporate sector. That's one way to look at it and to feel gloomy about the entire corporate sector. But I think what you must really focus on is trying to find out in each company what is it that they have used this crisis for. And I am very happy to say that in Mirchi, we have used the crisis in a very productive way. We've used the crisis to increase our market share. We have used the crisis to increase our margins in our Solutions business. We are going to use the crisis to further our digital business. So I think we are -- I think the process of transformation will become faster in ENIL as a result of the crisis and the pandemic that has happened. So my request to you is to just keep an eye out on that, and we will keep reporting back to you every quarter on this.

If there are questions that you would like to ask, you can please email us. The details are there in the presentation, and that's all from my side. Thank you very much.

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Narayanan Subramanian, Entertainment Network (India) Limited - Executive Director & Group CFO [113]

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Thank you.

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Operator [114]

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Thank you. On behalf of Entertainment Network (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.