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Edited Transcript of HTMEDIA.NSE earnings conference call or presentation 4-Nov-19 11:00am GMT

Q2 2020 HT Media Ltd Earnings Call

Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of HT Media Ltd earnings conference call or presentation Monday, November 4, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anna Abraham

Hindustan Media Ventures Limited - Head of IR

* Piyush Gupta

HT Media Limited - Group CFO

* Rajeev Beotra

HT Media Limited - CEO of Print Business

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Conference Call Participants

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* Anita Singh;Inventus Capital;Analyst

* Depesh Kashyap

Equirus Securities Private Limited, Research Division - Research Analyst

* Lalaram Singh

Vibrant Securities Private Limited, Research Division - Research Analyst

* Mahantesh Marilinga

Finquest Securities Private Limited, Research Division - Senior Research Analyst

* Om Damani;Utkarsh Business Consultancy;Analyst

* Rajeev Agrawal

* Rushabh Sheth

Karma Capital Advisors Pvt Ltd - Co-Founder Director

* Sarvesh Gupta;Maximal Capital;Analyst

* Yogesh Kirve

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

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the HT Media Q2 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Ms. Anna Abraham, Head of Investor Relations. Thank you, and over to you.

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Anna Abraham, Hindustan Media Ventures Limited - Head of IR [2]

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Thank you, Stephen. Hello, everyone, and welcome to our earnings webcast and conference call for second quarter and half yearly results for FY '19-'20.

Joining me today on the call is Mr. Piyush Gupta, our Group CFO; Mr. Rajeev Beotra, ED Revenue; Mr. Samudra Bhattacharya, who has been appointed as the CEO of Hindustan Media Ventures Limited; Mr. Sandeep Gulati, CFO of Hindustan Media Ventures Limited; Mr. Pervez Bajan, Group Controller and my colleagues from the Investor Relations team.

You would have gone through the financial results for Hindustan Media Ventures Limited and HT Media Limited. Our remarks today will track for the presentation on webcast, which is also available on the Investor Relations section of our website.

We will now start the presentation, and I would like to draw your attention to Slide #2, which has the disclaimer regarding forward-looking statements. You are requested to give your regards to the same in other statements that we will make today.

Moving on to Slide 3. This gives our Chairperson's comments on the performance of the company, which highlights the impact of broader economic slowdown on ad spend, which has affected the performance of our print and radio businesses. Nevertheless, low newsprint prices and a sharp focus on cost control have resulted in better operating profits despite the muted revenue. She further states that our Shine business has shown good progress during this quarter and expresses cautious optimism in the outlook, given the macroeconomic slowdown.

I will now hand over the call to Mr. Piyush Gupta to take you through the highlights of the results, further to which we will open the floor for question and answers.

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Piyush Gupta, HT Media Limited - Group CFO [3]

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Thanks, Anna. Good afternoon, everyone, and thanks for joining our call. I'll quickly take you through our financial performance, which we put on the webcast.

So if I may move to Slide #5, which is the consolidated performance of the group, as you can see, our revenues have on an overall basis grown by 2%, and our EBITDA has grown substantially by more than doubling themselves out to INR 81 crores as against INR 31 crores in the same period last year. EBITDA margin, therefore, has risen to -- quite significantly to 14%, and PAT margins come down to a minus 4% from minus 8%. Some of you have requested us to publish the net cash number. As you know, in this quarter, we would be publishing our balance sheet and cash flow. But for the investor presentation, we've just captured the number here. So our net cash on a consolidated basis comes at INR 1,153 crores as against INR 1,071 crores in the same period last year. There's commentary on the right-hand side, which explains the stuff that I've spoken about.

If I may move forward to the next slide and come to the business unit performance. First, going on to the Print. So our overall Print business has de-grown by 6% and has come at INR 342 crores as against INR 363 crores in the last year, a decline of INR 21 crores; circulation revenue at INR 66 crores, a decline of 7%; and operating revenue is at 3%. Operating EBITDA comes at INR 48 crores, which is a substantial increase from the same period last year. Some of the key drivers, which is given in the bottom of the slide. Ad revenues have declined because of very sluggish volumes, even as we have made a substantial effort and got some yield increases across various categories, our market share remains the same. So we've kept a steady market share, but because the market declined in Hindi at about 5% and English at about 12%, has basically bleed into our results. National advertising continues to be soft. Although in the local advertising, we've witnessed some growth. Overall operating revenues have declined on the back of circulation revenue drop as well.

Now as you remember, in last fiscal, with quite aggravated commodity prices, there was corrective actions on the realizations on circulation, which has increased in all the nonproductive copies being culled out from the market. However, the big savings there has been the raw material cost, which has improved significantly. Since the last year, and has a selling impact on EBITDA margins.

Moving forward, to a little bit more detail. English revenues have come at INR 203 crores, which is a decline of 6% and circulation revenue is less by about INR 1 crores at INR 17 crores. Growth in ad use during the quarter, although volumes were muted, as I've already highlighted earlier. Local ad spends have witnessed a growth. In terms of categories, BFSI, real estate and auto showed some slight growth. Sequential growth in circulation revenue, though there is a Y-o-Y decline. And the categories mentioned at the bottom of the chart, which are categories like e-commerce, entertainment, FMCG and retail, have been muted.

Moving on to the Hindi. Hindi revenues have come at INR 139 crores, which is down 6% and circulation revenues are down 7% at INR 50 crores. Ad yields have displayed growth, revival in local advertising, as I highlighted earlier, circulation revenues remained flat on a sequential basis, whereas ad spend, the softness in key categories, such as auto, FMCG, retail, medical, health and fitness, has continued.

If you move on to the next business unit, which is Radio. We can see that our operating revenues are at INR 59 crores, which is 27% growth vis-à-vis the same period last year. If you look at the third comment, which say the radio revenue excluding the Next Mediaworks, which we have started consolidating effective 1st of April, have witnessed, however, a decline of 7%. Operating EBITDA at INR 12 crores, which is down 22%, and operating margins have now come down to 21%.

Again, as in the Chairperson's statement, my colleague highlighted that the soft advertising environment has had a selling impact on radio performance as well. And key categories such as government, real estate, health care and BFSI have shown certain amount of softness. However, growth in FMCG and auto categories has been witnessed in the Radio section. And all the going-in assumptions that we had for Radio One for integration are on track on realizing the cost synergies, as we had highlighted earlier in the calls earlier.

So with that, I come to the end of the presentation, and we can now have any questions that you may have.

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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 Sarvesh Gupta from Maximal Capital.

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Sarvesh Gupta;Maximal Capital;Analyst, [2]

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Sir, now that the festival season is over, how are the impressions from this particular festival season? Have you seen some ad revenue picking up or it continues to remain sluggish like previously?

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Piyush Gupta, HT Media Limited - Group CFO [3]

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I request my colleagues to take that question.

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Unidentified Company Representative, [4]

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Yes. Look, the ad revenue performance continues to be muted in line with the macroeconomic environment. We have witnessed -- some of the large print categories like automobiles, et cetera, have not had a good Q and that has reflected in the advertising spend. So it will be muted.

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Sarvesh Gupta;Maximal Capital;Analyst, [5]

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Sir, even this festival season, if we compare it to the previous festival season, you haven't seen -- is it like a de-growth kind of environment or at least is it flat?

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Unidentified Company Representative, [6]

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Look, certain categories have done well. Certain large categories like automobiles have not done well. Overall, we expect not too much of a growth this particular festive. The festive also is split between 2 quarters this year slightly, compared to last year Diwali was 10 days earlier. So the festival revenues will be split between Q2 and Q3 this year. But overall, it will be a muted performance.

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Sarvesh Gupta;Maximal Capital;Analyst, [7]

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And this is same for both English and Hindi or do we have difference in this...

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Unidentified Company Representative, [8]

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Similar trends. There will be slight differences. For example, categories like 2-wheelers are overindexed on Hindi, not so overindexed on English. So -- and 2-wheelers had a particularly bad festive. So those kind of category impact will be seen. But overall, both English and Hindi will see an increased festival.

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Sarvesh Gupta;Maximal Capital;Analyst, [9]

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Understood. And sir, on your raw material cost, so what is the current cost at which you're getting the raw material at the newsprint and on a per tonne basis? And what is the expectation going forward?

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Unidentified Company Representative, [10]

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Q2 will be at average rate of about INR 37,000. And we are expecting it -- the next quarter to be marginally lower, but there will be some impact of custom duties. So net of that will be marginally lower than the Q2.

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Sarvesh Gupta;Maximal Capital;Analyst, [11]

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Okay. But -- okay. And going forward, is it expected to decline further for us or is it...

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Unidentified Company Representative, [12]

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Yes. There will be some impact of customs duty. But despite that, we think -- we expect Q3 to be marginally lower than this.

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Sarvesh Gupta;Maximal Capital;Analyst, [13]

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And coming on to the customs duty point, I think some of your competitors were mentioning that the industry is lobbying to get this removed. So any idea on that?

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Piyush Gupta, HT Media Limited - Group CFO [14]

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I think your guess is as good as ours. So as you know, we made a representation to the government, and we keep on engaging with the government at company level, at the industry body level. But we cannot say with certainty what the government has in mind. We've obviously made a multiple representations to the government.

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Sarvesh Gupta;Maximal Capital;Analyst, [15]

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Understood, sir. All the best for the coming quarters.

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Operator [16]

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(Operator Instructions) The next question is from the line of Rajeev Agrawal from DoorDarshi Advisors.

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Rajeev Agrawal, [17]

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The first question is more around how the market is valuing the company vis-à-vis the cash on the balance sheet. So any further thoughts? I know this question has come up multiple times in the previous calls. So any update you would want to give on that?

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Piyush Gupta, HT Media Limited - Group CFO [18]

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Well, we don't have any fresh update on, Rajeev. As we have discussed in the earlier call itself, of course, the market is valuing and rightfully so with a very short-term perspective. However, the cash we are utilizing for strategic investment, as we have demonstrated in the last 3 quarters by strategically investing behind one of our priority media platforms, which is Radio, and that's how we plan to use the cash going forward. But obviously, the market is not valuing that currently.

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Rajeev Agrawal, [19]

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Right. I think some of the movement is around Digicontent also. So any update you can give around Digicontent because the way, again, that is being priced is sort of as if it's the business does not even exists? So any update you would want to give around Digicontent?

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Piyush Gupta, HT Media Limited - Group CFO [20]

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Honestly, I can give you a business update. But with reference to the stock price, I would not be able to comment because, obviously, as you rightly said, the market is not looking at value therein. Just to refresh that, when we embarked on this whole journey, the going-in assumption was, if the world is indeed moving digital, we need to refocus our energy on the digital initiatives and not just by hiring a new team and giving them a separate digital business plan, but we also need to house them -- that in a separate legal entity, which will be focused on a digital path premise. That was the whole premise of bringing this entity along. Now that it is listed, obviously, the market is not seeing any value till first time. They see something showing through in the results. As I said, digital is a very different journey. We're also learning on the go. We didn't want to do a big bang investment, and that's the reason we followed the path that we have followed, which is the most capital conservative way of kind of having a digital-first strategy in place. But I won't be able to comment why is the market doing what it is doing. But I think so far, as our business plans are concerned, we are rightly on track. We can see our digital business poised for the partaking in the growth environment that the digital ecosystem is currently going through, but only time will tell how the market will basically reward the business.

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Rajeev Agrawal, [21]

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Right. And you mentioned that the ad revenue looks to be weak even in the festival season. So is that -- has that anything to do with the fact that ad revenue is moving more digital and that is where you might be seeing a headwind in terms of how the business looks on the paper -- newspaper side, both English and Hindi?

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Piyush Gupta, HT Media Limited - Group CFO [22]

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Well, Rajiv, I think, the reasons are all of the above. As you said, one of the thing is that the world is moving digital. In our lifestyle, we evolved, embraced digital in multiple ways and forms that we have in traction, not just with media, but various other things we do. However, suffice it to say that digital is a very different business and it is priced very differently from the legacy media platforms like print and broadcast, broadcast maybe in TV and in radio. So digital, how will it go? It's not the only reason, while there's a softness because, as I can tell you, digital businesses, even if you look at the domestic businesses of the large global conglomerates, like Facebook and Google, have seen some softness over the last couple of quarters, so has the radio platforms and so have the print and broadcasting platform. I think there's an overall slowdown in the economy, which is the larger macro of a GDP coming to a 5%. And the fifth, after RBI's 5 intervention on the monetary side, shaving off 135 basis points on repo, I think eventually print still has a long-term runway left in front of it. I can't hazard a guess how long it is. But I think both print, digital, the legacy and the new platforms will coexist. And of course, there will be some transmission from legacy platforms to digital, but that's not impairing the legacy platforms at all. That's what we believe.

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Operator [23]

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

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [24]

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So as far as the advertisement revenue decline is concerned, I think 6% in Print business and 7% in the Radio, so how would this number look if you exclude the government advertising during the quarter?

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Piyush Gupta, HT Media Limited - Group CFO [25]

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Well, I think it might be marginally higher because government has now, after the price increase that they gave specifically to the print platforms on 1st of January, does contribute to a better price margin realization, but the volumes have been substantially down. So if I were to isolate -- though we've not done that analysis, if we were to isolate, I think it will be there or marginally worse off, but not hugely.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [26]

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And in Radio business?

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Piyush Gupta, HT Media Limited - Group CFO [27]

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I would say Radio business doesn't have too much of government advertising, but there's been no pricing impact thereof. It will remain more or less the same.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [28]

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I have a second question regarding the staff cost. I think there is a 13% increase in the consolidated staff cost and especially HMVL, the increase is higher. So given the sort of a growth scenario, what is driving the staff costs over the last couple of quarters?

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Unidentified Company Representative, [29]

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So we've mentioned -- the staff cost is looking higher because of a certain reversal that we have done in the last quarter vis-à-vis in the [consol]. So that happened in quarter 2 of last year. On an H1, it won't look substantial because there's just a timing difference between quarter 1 and quarter 2. And HMVL per se is where we are investing behind in print business, so there is -- there will be some level of hiring and cost as...

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Piyush Gupta, HT Media Limited - Group CFO [30]

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And just to extenuate that point, staff cost inflation is not more than 4% to 5% on a like-for-like basis. Of course, there are 2 of our provisions in base, which are done in a different period of time last year. Hence, to that extent, it's not comparable. But if you look at the number from a first half perspective, we are indeed -- and therefore, on a full year basis, we are indeed tracking to a 4% to 5% inflation and not more.

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Unidentified Company Representative, [31]

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And in the consol, there will be the impact of Radio One coming in as well.

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Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [32]

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I was specifically looking at the HMVL, so when can we starting seeing this 4%, 5% sort of an increase in the staff cost, either first...

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Piyush Gupta, HT Media Limited - Group CFO [33]

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So why don't you just put together the first half numbers of HMVL rather than just looking at Q2, the numbers will already deflate. And as we move forward because some two of our provisions, which happened at different periods of time, is vitiating the picture. By the third quarter end, it will come to a low single-digit any which ways.

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Operator [34]

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The next question is from the line of Sarvesh Gupta from Maximal Capital.

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Sarvesh Gupta;Maximal Capital;Analyst, [35]

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Just wanted to understand a bit more on the cover price strategy. So of course, with the ad revenues coming under a bit of pressure in the recent quarters, there is some scope on the cover price side. So are you guys thinking about the same? And secondly, if you can give some industry perspective on -- you know because of this ad slowdown, of course, it would have hit the smaller print media players as well. So are you seeing some of them exiting the business or are you seeing some of them kind of also resorting to higher cover prices?

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Rajeev Beotra, HT Media Limited - CEO of Print Business [36]

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Yes. Look, this whole exercise started last year. Yes, we do look at cover prices all the time, and we have taken cover prices increases as well, not just cover price increases, we have also worked for the last 3 quarters to 4 quarters on our wastages and efficiencies and unproductive copies. However, one has to always walk this very tight rope of where to take up the cover price, given the competitive landscape scenario, keep a little bit of long-term in mind as well because we are also keen to keep growing print readership, and some of that is reflected in IRS results because that is what eventually drives while this current pace of the economy, we believe, will get over. But we need to have a balance between a long-term investment in copies and readership growth. And so suffice it to say, you'll have seen a significant improvement in our realization per copy in the last 3 to 4 quarters. Even as we speak, there are cover price actions which have been taken very recently. So we do keep looking at it time to time.

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Piyush Gupta, HT Media Limited - Group CFO [37]

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And just to add on to what my colleague just articulated, I think since last year that we've seen unnatural hike in the commodity prices, the entire industry, and, of course, we included, started focusing a lot on efficiencies, and that was the right thing to do, still is. This whole unproductive copies, seeing what copies are lending themselves to a better readership and therefore grow a better monetization is something that we watch very carefully. Now that the commodity price cycle has eased off a little bit, we will be building -- we will be looking at building our readership because at the end of the day, we understand that readership is the currency that we want to focus upon. But as Beotra was highlighting, it's a very tight rope, and we keep on looking at those numbers market by market, along with competitive landscape very closely.

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Sarvesh Gupta;Maximal Capital;Analyst, [38]

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Understood. And with regard to your Hindi newspaper in Bihar, I think we've been hearing that the competitive intensity has been relatively higher at least in the previous quarters because the new entrant wanted to gain the market share. So has that situation stabilized now? Or if you can throw some more color into the competitive situation over there?

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Rajeev Beotra, HT Media Limited - CEO of Print Business [39]

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Look, actually, in the last 2 quarters, our relative position in Bihar has actually improved. So if you will look at the competitors and get print orders and the ABC certificates, you'll see that there is a drop. We launched a new product called Hindustan-Smart in -- so actually, we invested in the month of April, launched a new product as well in Patna. So as we speak, now our market share actually is better than it was last year in Bihar, which is also reflected in the recent IRS results. If you'll notice, in the city of Patna, we've gained significantly over the last IRS results. So actually, we are better placed today in Bihar and Patna than we were -- not that we were ever bad, we were always #1 by far, but we have only further increased the lead in the last 2 quarters in Bihar and Patna. So we are in a good place.

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Sarvesh Gupta;Maximal Capital;Analyst, [40]

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And with regard to the competitive intensity, is it settling down now or is it still on the higher side?

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Rajeev Beotra, HT Media Limited - CEO of Print Business [41]

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No. Competitive intensity continues to be high all across, which is why I said, we also recently actually launched a new product as well. Even in the current environment that we've been speaking about, we've been investing in copies and new products and new brands and new supplements. We've launched a new supplement in Delhi also while we are discussing in Bihar. Bihar will also have new product. So competitive intensity continues to be high.

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Sarvesh Gupta;Maximal Capital;Analyst, [42]

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Okay. And the other question which I had asked was...

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Operator [43]

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Mr. Gupta, for any follow-ups, I request you to rejoin the queue, please. The next question is from the line of Om Damani from Utkarsh Business Consultancy.

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Om Damani;Utkarsh Business Consultancy;Analyst, [44]

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Last quarter, we had a profit at consolidated level, if we ignore the one-time, some accounting write-off that was mentioned. And this quarter, we had a consolidated loss. So quarter-on-quarter, what is the main -- I mean, you have mentioned many things when we compare year-on-year. But quarter-on-quarter, what is the main factor that has caused the change between last quarter and this quarter? Is it the decline in advertising or what is it?

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Unidentified Company Representative, [45]

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It is the decline in revenue, which is falling to the bottom line.

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Om Damani;Utkarsh Business Consultancy;Analyst, [46]

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I mean, revenue, both, you're saying circulation and advertising business...

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Unidentified Company Representative, [47]

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Yes, that's correct.

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Om Damani;Utkarsh Business Consultancy;Analyst, [48]

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Because the raw material cost has gone down compared to last quarter. So the actual decline is much more than that in that sense.

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Unidentified Company Representative, [49]

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That's right. And yes, but raw material cost is only a marginal decline, low single-digit, while revenue decline is higher. So that's fallen to the bottom line.

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Om Damani;Utkarsh Business Consultancy;Analyst, [50]

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Okay. And -- but is there a trend here? Do we expect this trend to reverse, when we say the -- so the revenue has declined compared to last quarter, now going to...

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Unidentified Company Representative, [51]

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Quarter 3 traditionally is our biggest quarter for the Print business, and quarter 2 is generally the weakest quarter from a cyclicality point of view. So to that extent, quarter-on-quarter, it will show better results.

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Om Damani;Utkarsh Business Consultancy;Analyst, [52]

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Okay. And the other question about -- so we have a very substantial net cash position. So why don't we -- and we also have at the consolidated level significant debt, and we have a significant cash. So why don't we -- and especially in the current economic environment, why don't we repay some of the debt and be debt-free?

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Piyush Gupta, HT Media Limited - Group CFO [53]

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I think one of the earlier participants actually asked that question. As I said, one of our strategic objectives that we keep this cash is for driving the strategic objective of the business. Just 3 quarters ago, we've deployed a pretty substantial part of this cash in taking 75% economic stake in Next Mediaworks through a scheme of arrangement, which is now being consolidated into our Radio business. So we would obviously like to utilize this cash in driving good asset acquisition and business building rather than dividend setup or utilize that for buyback, which we don't think will add substantial value to shareholders both majority and minority.

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Om Damani;Utkarsh Business Consultancy;Analyst, [54]

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So my question was more about debt than the buyback or any share price-related thing. So in the current environment, if you're making losses at the consolidated level, there's clearly -- and with the framework change and policy change, there's always a risk -- there's risk always there, right, about the debt repayment. I don't know what is the debt repayment schedule, maybe we are very comfortable -- I mean, we have the cash position...

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Piyush Gupta, HT Media Limited - Group CFO [55]

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You know as I showed in the first chart of the webcast itself, on a net cash basis, we have INR 1,152 crores. So obviously, the cash is much higher than that on a consolidated basis. However, most of the debt that you see, which is sitting in the balance sheet, are for temporary working capital mismatches and other CapEx related stuff, which has been done in the past. The CapEx, that obviously has got a finite life of 3 to 5 years and has been financed at pretty competitive commercial terms and is, therefore, value accretive. And so far as the EPS is concerned, most of the short-term debt has arisen because of the working capital requirement is not eroding any value. So from that perspective, I don't think there is any risk of the particular instance that you're saying. So we keep on evaluating our net cash position and seeing if it's accretive to the bottom line, then we keep it as a -- like last year, when the borrowing costs were really rising in the country very sharply before RBI started cutting it down, we paid down a huge amount of debt, something close to about INR 350-odd crores. But at this point in time, with the benign cost and RBI's direction to basically be at a particular thing and not take it up, I think it's a value-accretive thing to keep a healthy level of debt, which obviously gives you a tax shield. And please remember, there are entities in the group, which are marginal tax paying entities, even after the new tax regime, which has been announced by the Finance Minister. Therefore, we keep it.

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Operator [56]

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The next question is from the line of Navneeth Bhaiya, an individual investor.

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Unidentified Participant, [57]

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I want to check on your IRS survey. So in Q2, there seems to be a decline across all states in the HMVL readership. So Bihar is reduced from 52 lakhs to 48 lakhs, from 1 crore to 83 lakhs as well as media reports suggest that HMVL have seen perhaps the steepest decline as compared to other Hindi daily. So just wanted your comments on that.

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Piyush Gupta, HT Media Limited - Group CFO [58]

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No, actually, in Bihar, the relative position and specifically in Patna it has improved, if you will notice the relative. Yes, overall there is a readership decline. So Jagran has witnessed some decline and Hindustan also has witnessed readership decline, and we are also trying to analyze which town, where and how. It's a methodology thing which we are trying to dive in to, but relative position, I think Bihar we have only improved. UP also will continue to be a large -- second -- still continue to be the second largest player. So I think we will know a little bit more after the next round, but nothing has changed on the ground in terms of copies where you see the activity. So we'll know a little more maybe after the next IRS round results are out. But suffice it to say, relative positions are fine, and Bihar actually, it has improved. Patna city, Patna town, we are actually -- we have actually gained significantly relatively.

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Unidentified Participant, [59]

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So relatively it is improved. So Bihar in Q1 in your presentation, I think you had said 52 lakhs of copies overall, whereas Q2, it's mentioned as 48 lakhs. So are you seeing that the market has shrinked or if your relative position has improved?

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Piyush Gupta, HT Media Limited - Group CFO [60]

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If you look at the overall readership numbers and other competition, so the overall Hindi readership in some of these geographies has come down compared to prior round.

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Unidentified Participant, [61]

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And similar would be the case with UP as well?

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Piyush Gupta, HT Media Limited - Group CFO [62]

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Yes, UP also, Jagran has witnessed a very large -- very steep decline, so have we. Relatively, we continue to be #2, as I said.

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Unidentified Participant, [63]

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Okay. And what's your net cash level at HMVL level?

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Unidentified Company Representative, [64]

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About INR 1,000 crores.

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Operator [65]

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The next question is from the line of Pawan Nahar, an individual investor.

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Unidentified Participant, [66]

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See, I have a few observations. And essentially, I understand the issues relating to weak operating numbers in recent years or the company's policy of keeping cash for investments and thus not giving dividend. However, it seems inconsistent to see fresh investments being made in private equity and venture capital when I look at the FY '19 annual report and there have been more commitments made. So I'll leave that as a comment. The other thing -- can you hear me?

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Piyush Gupta, HT Media Limited - Group CFO [67]

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Yes, of course, we can. Please go ahead.

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Unidentified Participant, [68]

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The other thing I want to highlight is in the list of more than 300 companies that I follow, right, on a price-to-book basis, price to net worth, HT Media is now trading amongst the lowest, right? It is trading at 0.2x its net worth. So it doesn't look like it's a mere downturn or dividend issue. It looks like there is some other issue here. And just to illustrate this further, the price-to-book is lower than even Vodafone and steel companies in some of which there are solvency issues, right? So it really -- like, you have to think about it, why is it that HMVL is below cash? Why is it that HT Media in the list of 300-plus companies is at 0.2x net worth, lowest, and I repeat, lower than companies which have a solvency period, right? So again, I am not expecting answers here, but I wanted to highlight it.

The other thing is, when I look at your FY '19 annual report, money has been put into the Singapore subsidiary. But there is no disclosure in terms of which are the entities where the Singapore subsidiary has invested, neither in the Singapore annual report nor in the consol'ed annual report, right? So again, in the past, you've made comments that these were add for equity deals, et cetera. But then till I see the transcript -- I mean, till I see it in document out there, it is difficult for me to understand. Then if I were to look at HMVL, you've made a land purchase of INR 25 crores, right? That again seems -- I'm sure it is -- like we tried asking. One of my friends has written a e-mail. We've not heard back. Because INR 25 crores of land in HMVL, I mean, I can only think of building a -- the printing press thing, but that's like a huge amount of money being put. So if you would like to comment on any of these? And finally, just one thing. There are a lots of like companies that we follow, let's say, in your case, the market cap is less than INR 500 crores, right? And there are more than 500 pages in the annual report. It's like there is effort being put, right? It seems to me that there is a trust deficit versus the market. What the market -- it's completely deficit, it is not dividend policy, it is not business downturn, it is something beyond. So you don't need to answer, but if you wish, and if promoters or anybody from the Board is here, it will be great to hear this.

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Piyush Gupta, HT Media Limited - Group CFO [69]

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Well, thanks for a few comments and a few insights. Pawan, this is Piyush Gupta this side. Well, someone from the promoters or the directors are not here. So let me try to make a few points, and this is really our perspective. And I am not even trying to answer each and everything that you said, but let me try to, in all humility, at least try to answer a few things. First of all, on the land in HMVL that you [raved] about, it is a printing press, and I think we have highlighted that in the past. That will strengthen and deepen our UP publication. We have taken a certain land. Land is from the government, and the government rates are what the government rates -- circle rates are. I mean on INR 25 crores, you can basically -- on one side, you can definitely say that it looks like quite a lot, but those -- that land purchase has been done from the government. So that's point number one. Point number two, which was really the first part of your question saying that price-to-book is at a certain abysmally low level and you compared that to Vodafone, et cetera, where there are solvency issues, I totally take your point, I don't have a answer to this thing. Suffice to say that I'm going to just make this point that over the last 24 months, if you look at the share price movement and the price-to-book of all the 3 listed newspaper company, there's been a substantial erosion in share price you know...

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Unidentified Participant, [70]

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They are at one-time book. The peers are at one-time book. I do not wish to use that example.

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Piyush Gupta, HT Media Limited - Group CFO [71]

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I'm commenting on the share price. If you remember, I said on the last 24 months share price of us and the other 2 listed companies, there's been a substantial erosion ranging from 40% to 60%. But of course, some are onetime book, and we are much less than that. I really won't be able to comment on that except for the fact that some of the other companies, which have announced buybacks have given substantial dividends. And these, of course, they have done for, obviously, their business plan and their best strategy. We have, on the capital allocation, said our strategy is to invest in new businesses, which will create long-term sustainable value for all shareholders, majority and minority. We've not been really returning dividend as some of our competitors have been. But that's their strategy. We respect that, and this is our strategy.

On some of the things on the overseas equity infusion that we've done, which is about INR 70-odd plus crores, I think this question came up in the call -- 2 calls ago and I had made a point there that if you happen to be here, we can sit down and we can chat, but I don't want to diverge those things because those have competitive significance. And these are all strategic calls that we and the company are taking in the benefit of all the shareholders. Suffice to say that all our information is audited and you will never find a governance issue, et cetera. So if you are alluding towards that, I'd like to basically put a very strong handle and say, these are all strategic issues. If you come over, we can have a cup of tea, and I would be more than happy to walk you through why we are doing this thing, but it will not be in the best interest of the company to allude on to these things on a open call. So I believe those are the comments I can give.

On the cash side, because this question keeps on coming every time, if you remember, about 2.5 years, we did invest in the Phase 2 licenses. At that point in time, we had run down nearly half of treasury. But on the free cash flow generation, we've brought back the cash level to where they are, and now we've again invested more into a business, which are commanding much better earnings multiple, namely the FM Radio business and Print business, so that we can drive more value. When we also wanted to do this acquisition, if you remember the first part of the acquisition we announced, was through a direct acquisition and not a share transfer, which, obviously, we could not secure the MIB approval for. So we are, at all times, looking at unlocking the value for the larger interest of the shareholders, and that's what we will continue to doing. I hope I managed to kind of answer a few of your questions.

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Unidentified Participant, [72]

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Piyush, first of all, thanks. Today, at least, I am seeing some response coming. Look, I've been hearing your calls for very long. I just respect and I am happy that there is some sense, I don't want to use word for that. The other thing I want to highlight is that, look, you have cash, okay, you don't give dividend, but you're putting money in private equity funds, you're putting money in venture capital, right? That's one thing which doesn't tally. The second thing, I'm sorry to say this and I need to go back and recheck my numbers, but the salary, which the promoters are look -- if you are looking to conserve cash, right, the salary which the promoters or whatever the total payout is actually less -- is more than the dividend, which HMVL gives to minority shareholders plus HT Media gives to all its shareholders. So I'm knocking off the, what we call that, self-ownership effect, right? And then there is -- I mean, you're doing nothing. I mean, like, it's not so difficult. I've also known this market, you know this market, right? I don't think equity investors are that difficult, right, that a company that you have got so much of cash, you're generating cash, is trading below cash. So you have to read all that...

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Piyush Gupta, HT Media Limited - Group CFO [73]

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The last comment that I'd like to make on this cash thing because I know you've brought it up for the second time. But I just wanted to give you perspective for a continuous operation, given the commodity cycles and given the softness in the revenue which now we are witnessing for the last 2.5 years, just a comfort cash for covering your newsprint imports even for a period of 4 quarters is half the entire treasury net cash that we are sitting on. So numbers, in absolute, looks like a very high number, but for a continuous operation, just keep a perspective and you can analyze and cut it either ways, just the mere -- and forget about any other expenses, even employee expenses, just look at the commodity of the newsprint, it's just a cover. If you have to cover for 4 quarters, given the volatility in the commodity price and the softness in the revenue, that's not a cover of more than 4 to 6 quarters. That's just a perspective I'd like to leave you with because one of your colleagues prior in the call said, given these tough situations and we've seen really coming out of this commodity cycle, that the commodity price can really go up 2x within a short period of 4 quarters, and that's what we are trying to sustain, a continuity of operations.

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Unidentified Participant, [74]

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Look, I've understood your point, hopefully you have understood my point. I am hopeful you'll convey it to your management.

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Operator [75]

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The next question is from the line of Rushabh Sheth from Karma Capital.

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Rushabh Sheth, Karma Capital Advisors Pvt Ltd - Co-Founder Director [76]

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Piyush, this one comment and I've been hearing again calls like previously you've said for many years, we've heard about this long-term value creation and investing for long-term value creation. The company has done an IPO almost more than 10 years back and today the stock is where it is. We're honestly not seeing any long-term value creation, my friend. So how do we look at the company investing for long-term value creation?

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Piyush Gupta, HT Media Limited - Group CFO [77]

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Look, these are core strategic cores and Rushabh, when in Bombay also I kind of met you, I kind of you gave you that perspective. Look, as far as legacy business, which still happens to be our core, has been under pressure from both input commodity side and as far as the softness in revenue is concerned for the last, at least, 1.5 years, and that's had a substantial impact on margins and cash. What we are doing for the shareholders is trying to incubate new businesses, whether it's in the radio stream, whether it's in the digital stream. Our digital businesses have been passed on into a separate legal entity, which is the parent company. But the shareholders have got mirror shareholdings in that company as well. The whole idea is, we see the whole value creation equation, which is currently broken because the core is not firing the way it was supposed to fire. So we are trying to incubate new businesses and see what best can be done. But it's not we cannot do. If you remember, 4 quarters ago was showing a margin profile at 35% and our top line growth, which was north of 15% to 18%, and it's just changed in the last 6 quarters. Now, who would have anticipated that? Now that's not our performance in isolation, that's performance for the entire sector.

Now these macros are having such a heavy bear down on the sector at this point in time that we are suffering from that. But in so far as our strategy is concerned, we have already executed the strategy. One of the investors asked about Digicontent Limited and I said "Look, the whole idea was to get a team, task them with a separate AOP, put that in a separate legal entity, align their interest with the company's and the shareholders' interest and then let's look at firing that away.

If I look at last 4 to 6 quarters, it has shown some movement in that direction. But of course, the world just turned in the last 4 to 6 quarters also that we know. So really, I don't have a straight answer, but I just wanted to tell you that -- and so far as our strategy is concerned, the pillars of strategy have not been changed. We are still trying to incubate more businesses on the digital side. But to just give you a perspective, 70% of India's digital revenues are picked up by global behemoths like Facebook and Google. By the way, that number is no different for United States, where that number of 70% only reached like 60% because it looks like that's a duopolistic kind of a market. But however, people like us have a fair right to win. Now there are legislative processes in the United States Senate and the European Council, whereby the publishers have to be paid for the news, which is used by them -- by these aggregator and platform owners. Now how those things will play out? We don't know. But we are executing to a strategy with a real hope and intent of creating long-term value. But really, if you ask me, whether it's going to happen over next 2 quarters, 1 quarter, 3 quarter, I really would be at best hazarding a guess on that.

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Rushabh Sheth, Karma Capital Advisors Pvt Ltd - Co-Founder Director [78]

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Let me say, my limited point here is that there's a whole issue on capital allocation. I mean, we don't mind. I mean, you're saying that you don't want to distribute money. We will create long-term value out of the investments that we make. The problem that we see is that we have not seen any value creation out of the capital allocation that you have done either to digital. Now you're saying radio dynamics has changed. Of course, you've returned INR 173 crores last quarter on the acquisition of Radio business, which we acquired about a year back or a little more than a year back. I think that's really worrisome sign that -- this is the problem that we see with accumulating cash that the capital allocation continues to be poor and doesn't reflect in the long-term value creation for either the minority or the majority. I mean, we are minority shareholders. I am saying what is happening. I mean, the majority shareholder also is suffering the same state that we are suffering. So I think the whole point is that the capital allocation needs to improve significantly. And I think that's really the point. I mean, I don't -- you've made losses in the digital. For many years, I've heard the company saying that, okay, we will make the digital business profitable. Digital business continues to lose money, and therefore, you're not getting any valuation on Digicontent as well. So I think the whole point is...

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Piyush Gupta, HT Media Limited - Group CFO [79]

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Digital, I just might like to point you out to the fact that our journey onto the digital thing has been in the most frugal manner if you just compare that to the journey, which digital publishers have done on the digital side by creating separate digital news, even creating a separate digital sales forces, et cetera. We try to done -- do the same in the most frugal manner. I hope that you'll appreciate.

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Rushabh Sheth, Karma Capital Advisors Pvt Ltd - Co-Founder Director [80]

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No, I appreciate that. The fact is not the frugal manner. The point is, at the end of the day, in 10 years, we have not seen value creation even in the new lines of businesses that you've entered and that's the limited point that I am trying to make. I am not saying that what you've done is right or wrong. That's not for me to judge. That's for you to decide. For me, I am just saying that whatever you have done clearly in terms of either capital allocation or the decisions that you've made, as a business, have not reflected in terms of either improvement in the profitability or in new business being built, which will generate value for the company. I think that's really the point that I am trying to make. That's all. I mean, I don't want to be judgmental on what you did is right or wrong. I am just saying the end result of it and it's now 10 years. It's not a small time frame that we're talking about. So that's just a limited point I wanted to make on this.

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Operator [81]

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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 [82]

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Just one question. I just wanted some guidance for tax rates in HMVL going forward.

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Piyush Gupta, HT Media Limited - Group CFO [83]

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Well, tax rates in HMVL going forward, and I am not talking about the new tax policy. We are still working out the numbers that we should exercise the option to go into a 25% regime. But the effective tax rate for this fiscal year will be the same, close to the same numbers, which were last fiscal year, anywhere between 28% to 30%.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [84]

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28% to 30%. Okay. And next year, you will probably go in 25% or...

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Piyush Gupta, HT Media Limited - Group CFO [85]

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Yes. We are still doing our numbers, and we will take that decision before 31st of March next year.

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Operator [86]

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The next question is from the line of Mahantesh from Finquest.

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Mahantesh Marilinga, Finquest Securities Private Limited, Research Division - Senior Research Analyst [87]

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I don't know whether these questions are asked or not. Just wanted to get an outlook on the newsprint that is going ahead. I mean, you got a benefit from the newsprint in the latest quarter. But what is the outlook going ahead and what is the trend?

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Piyush Gupta, HT Media Limited - Group CFO [88]

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We believe that the newsprint prices in the subsequent quarters will come down by another 5% to 10%. But as one of my colleagues did point out earlier, there will be a dampness because of custom duty. So half of that benefit is going to be withered away in custom duty. So you can expect some softness, but not above 10% because half of that will be going to custom duty. Unless the government reverses that decision, the 10% benefit will go in the duties itself.

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Mahantesh Marilinga, Finquest Securities Private Limited, Research Division - Senior Research Analyst [89]

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Sir, regarding the circulation volumes, I mean, what was the reason for the slight decline in the volumes?

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Piyush Gupta, HT Media Limited - Group CFO [90]

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As my colleague pointed out earlier, a lot of publishers who had soft revenue scenario have been taking efficiency measures and all the unproductive copies, et cetera, are being culled out from the lower price actions, which was started last year are -- is leading to a situation whereby people who were using 3 newspapers and 2 newspapers and so on and so forth. So therefore, there are copy drops which are happening across the industry as well as including Hindustan.

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Unidentified Company Representative, [91]

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But sequentially, this is an impact versus last year because a lot of corrective actions are being taken now.

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Mahantesh Marilinga, Finquest Securities Private Limited, Research Division - Senior Research Analyst [92]

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Okay. And one more thing like, are you seeing any uptick in the ad volumes now, like marginal green shoot suffering?

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Piyush Gupta, HT Media Limited - Group CFO [93]

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Too early to say. We are always hopeful in the beginning of every quarter, but I don't see we are seeing too many green shoots at this time.

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Mahantesh Marilinga, Finquest Securities Private Limited, Research Division - Senior Research Analyst [94]

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And sir, you are telling it in a positive front or in a sarcastic way you are telling?

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Piyush Gupta, HT Media Limited - Group CFO [95]

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Not in a sarcastic way. I am basically saying, we always are hopeful that every subsequent quarter will bring in some green shoots, but some of the other sector plays [foul sport]. When we are very hopeful about some sector, auto certainly went into pressure, which has been a big sector for us. At this point in time, you know we were hoping in this subject, the e-commerce and various other discretionary categories will fire big time, which has also not happened. So we are hopeful. But at this point in time, there are no green shoots. Because you asked about green shoots, we don't see too many green shoots at this point in time.

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Operator [96]

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The next question is from the line of Vijay Subramaniam from [First Line].

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Unidentified Analyst, [97]

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I just want to know is the de-merger of the Radio business and merging it with the Next Mediaworks, is it currently being put on hold? Number two, I just want next time -- I know you bat every time very hard for the company and the management. But I don't know whether these investor property is going -- is really listened by the management or the Board of Directors. And if you could actually take this printout and just show it to them and believe, and then next time if one of them come and attend, that would be very good.

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Piyush Gupta, HT Media Limited - Group CFO [98]

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Well, on the second point, I can only tell you that we share our inputs with all the concern. But coming on to the first point, which was the merger and the demerger, as I said, Vijay, that was the original plan, but we've still not been able to secure the MIB approval on that. We would obviously have like to go in that manner. But if we do get -- if the government does have more clarity on that, we would obviously like to unlock the value for all the radio shareholders by doing that.

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Operator [99]

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The next question is from the line of Anita Singh from Inventus Capital.

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Anita Singh;Inventus Capital;Analyst, [100]

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My question was on the tax. So could you throw some light on the increase in tax expenses this quarter?

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Unidentified Company Representative, [101]

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Vis-à-vis last year, it is a function of the -- last year there was a pressure on margins and PBT on account of being heightened newsprint prices. So there is improvement in PBT and the taxes have increased basis that. But the H1 number would be more representative of what the...

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Piyush Gupta, HT Media Limited - Group CFO [102]

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So I think the simple point is, Anita, you should look at that H1 number in totality rather just the Q2 number. That's just a true up. But as my colleague pointed out, compared to last year, there margins were being eaten by heightened commodity prices. The PBT number will be better in HMVL specifically and hence the higher taxes.

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Anita Singh;Inventus Capital;Analyst, [103]

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(technical difficulty) low end versus (technical difficulty)

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Operator [104]

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Ms. Singh, your voice is breaking up. Can you move to a better reception area?

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Anita Singh;Inventus Capital;Analyst, [105]

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Hello?

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Piyush Gupta, HT Media Limited - Group CFO [106]

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Anita, your voice is pretty -- coming from a distance. You'll have to be closer to the microphone, please.

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Operator [107]

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Since like we lost the connection from Ms. Singh, we move to the next question from the line of Lalaram Singh from Vibrant Securities.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [108]

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Sir, you mentioned about inorganic or using capital to grow in areas like Radio and digital for HT Media. For HMVL, can you throw some color?

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Piyush Gupta, HT Media Limited - Group CFO [109]

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HMVL is a part of our core business. As one of the other investors asked prior to this about rather largish investment, we've been deepening our presence -- look, in HMVL, the critical markets for us are Bihar, Jharkhand, UP and Uttarakhand apart from Delhi. And we've been deepening our presence, and that's the reason we did that investment of land acquisition in setting up a new printing facility in Kanpur, which happened last year, which is already firing away. So on our core, we have been investing, and we will keep on investing. I don't think we are shying away from that objective at all.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [110]

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Okay. Secondly, for the last -- we are also open to inorganic opportunities within HMVL. Any color on that?

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Piyush Gupta, HT Media Limited - Group CFO [111]

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Yes, we're always open. So if there are good opportunities, we're always -- our Board is always vested to evaluating these opportunities. And as and when good opportunities come, if there is a shareholder proposition, we evaluate, and based on that, a decision is taken always.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [112]

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No, I understand that. I was expecting a much more -- sort of more color on, are we seeing -- are companies available for sale, particular regions, that would be helpful. We know that...

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Piyush Gupta, HT Media Limited - Group CFO [113]

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It won't be -- it will be a conjecture. I won't be able to answer that thing because it's just a conjecture at this point in time. But as I said, as and when good opportunities are presented to us or they present themselves, we have a healthy debate on that. And as we have a robust balance sheet, we wouldn't shy away from deploying our balance sheet for future growth creation opportunities.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [114]

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Last question, if I can take that. Thanks. Are you open to doing a merger between HMVL, HT Media and listing just one company, delisting the entire group?

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Piyush Gupta, HT Media Limited - Group CFO [115]

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At this point in time, there's nothing like that on the cards, is all I can say.

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Operator [116]

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Thank you. As there are no further questions, I now hand the conference over to the management for closing comments.

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Anna Abraham, Hindustan Media Ventures Limited - Head of IR [117]

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Thank you, everybody, for attending our conference call, and we look forward to interacting with you next quarter. Thanks. Thanks for joining.

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Piyush Gupta, HT Media Limited - Group CFO [118]

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Thank you, everyone. Thanks for making the time.

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Operator [119]

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Thank you. Ladies and gentlemen, on behalf of HT Media, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.