U.S. Markets closed

Edited Transcript of ZEEL.NSE earnings conference call or presentation 23-Jul-19 12:30pm GMT

Q1 2020 Zee Entertainment Enterprises Ltd Earnings Call

Mumbai Jul 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Zee Entertainment Enterprises Ltd earnings conference call or presentation Tuesday, July 23, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Bijal Shah

Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR

* Punit Goenka

Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director

* Rohit Kumar Gupta

Zee Entertainment Enterprises Limited - CFO

================================================================================

Conference Call Participants

================================================================================

* Abneesh Roy

Edelweiss Securities Ltd., Research Division - SVP

* Adi Desai

York Capital Management - VP

* Alankar Garude

Macquarie Research - Analyst

* Jaykumar Doshi

Kotak Securities (Institutional Equities) - Equity Research Analyst

* Kapil R. Singh

Nomura Securities Co. Ltd., Research Division - Executive Director

* Karan Taurani

Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media

* Kunal Vora

BNP Paribas, Research Division - Analyst

* Rajiv Sharma

SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research

* Sanjay Chawla

JM Financial Institutional Securities Limited, Research Division - Research Director

* Yogesh Kirve

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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day, and welcome to the Zee Entertainment Enterprises Limited Q1 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Bijal Shah. Thank you, and over to you, sir.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [2]

--------------------------------------------------------------------------------

Thanks, Raymond. Hello, everyone, and welcome to Zee Entertainment earnings call to discuss earnings performance in Q1 FY '20. Joining us today on this call is Mr. Punit Goenka, Managing Director and CEO of Zee; Mr. Rohit Gupta, Chief Financial Officer, along with senior management of the company.

We will start the call with a brief segment from Mr. Goenka on the first quarter performance. Subsequently, we'll open the floor for questions.

Before I pass it on to Mr. Goenka, I would like to remind everybody that anything we say during this call that refers to our outlook for the future is a forward-looking statement and must be taken in the context of the risks that we face.

Thank you, and over to you, Mr Goenka.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [3]

--------------------------------------------------------------------------------

Thank you, Bijal. I would like to welcome everybody to this call and I appreciate you joining us for the discussions on the results of the first quarter of fiscal 2020. We have delivered another quarter of strong performance despite the operational challenges faced by the industry due to the implementation of the TRAI tariff order. We have witnessed a strong uptake of our channels across markets, which is reflected in the 47% growth of our domestic subscription revenues.

Over the years, we have been consistently increasing our viewership share across markets, especially in the South. In some of these markets, our channels were available for free; while in others, our revenues did not match our viewership share. The implementation of the new tariff order has allowed us to price our channels in line with their popularity, thereby leading to a sharp improvement in monetization. Additionally, uniformity in pricing across platforms and increased transparency have led to a step-up -- step jump in this quarter's subscription revenue growth. We expect our domestic subscription revenues for the current fiscal to grow in the mid-20s.

On the advertising front, growth was impacted primarily by the decision to move our key channels out of the FTA portfolio. The full impact of the drop in revenue of these channels was felt during the quarter, which significantly impacted the ad growth. Additionally, as the implementation of the tariff order was underway, during the quarter, the reach and viewership of all the pay channels was impacted. This resulted in advertisers pulling back on their spend and some of them temporarily diverted a part of it to sporting events that promised a higher reach. The underlying demand for advertising remained strong and as the tariff order settles down, I expect the advertising to resume spending. The onset of festive season will further boost the advertising spend.

The domestic broadcast business continues to maintain its position as India's #1 entertainment network. Despite the challenges accompanying the transition to the new tariff regime, our broadcast portfolio continues to strengthen its leadership. While the Hindi portfolio has seen some impact on reach and viewership, Zee TV was the second-ranked channel during the quarter. Our Hindi movie cluster continues to consolidate its leadership position. In the regional markets, we maintained the #1 position in Marathi, Bengali and Kannada markets. Tamil continues to build its viewership on the back of its strong fiction lineup. The performance of the regional movie portfolio was strong during the quarter.

Now coming to ZEE5, in the month of June, its MAUs and DAUs stood at 76.4 million and 6.6 million, respectively. ZEE5 released 18 original shows and movies during the quarter and is on track to achieve its commitment of over 72 original shows and movies in fiscal 2020. Along with content, its partnership with telecom operators and players in the digital ecosystem are helping build traction on the platform. ZEE5 has also witnessed a strong start in the neighboring APAC countries and has ramped up marketing activities in these markets. It has also soft launched dubbed content in 5 international languages.

Coming to the financial performance. Our overall revenue grew by 13% year-on-year to INR 20 billion. EBITDA for the quarter stood at INR 6.6 billion, and EBITDA margins were at 32.9%. Our cash and treasury investments at the end of June quarter stood at INR 17.6 billion. This being the first quarter post the implementation of tariff order, the industry experienced some delays in receiving subscriber reports and billing of subscription revenues, this led to some buildup of subscription receivables towards the end of the quarter. These receivables are now being collected and according to cash and treasury investments as on today have increased to INR 21.4 billion.

This brings me to the last and the most awaited part of the opening remark, the progress of promoter stake sale plans. As per my last communication, I have said that we have received 2 nonbinding term sheet. Out of that, we now have one binding offer with us. We are expecting to receive another binding offer over the next few days. Once both the offers are on the table, the family will evaluate and take a decision.

I'll be talking to you again very soon about the transaction and how that would further strengthen Zee's growth outlook.

With these opening remarks, we would like to address any questions you may have.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Sure. Thank you very much. We will now begin with the question-and-answer session. (Operator Instructions) The first question is from the line of Abneesh Roy from Edelweiss.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [2]

--------------------------------------------------------------------------------

Yes, sir. Congrats on good profit growth. My first question is on the advertising front. 4% growth is not bad, but my question is you're attributing most of the slower growth to FTA. Now when I see consumption across the different industry: auto, FMCG, durables, it's quite weak. And FMCG companies, if you see Unilever ad spend was almost flattish, et cetera. Second is non-FTA channel because of the tariff order, there could have been drop in the weaker channels, right? Because customer clearly prioritized, and we all know consumer ARPU in most cases has in fact gone up versus earlier in spite of getting lesser number of channels. So why you are attributing most of the slower growth to FTA and not to the slowdown in consumption? And some of the weaker channels getting knocked off, so viewership would have been impacted.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [3]

--------------------------------------------------------------------------------

So obviously, total amount of revenue lost on account of FTA channels, the significant piece of the growth comes from there. I am not saying that that's the only cause, but if you -- if I was to just compare, if FTA had remained as it is in our portfolio, this growth would have been more towards the 10% range. Therefore, the attribution is high -- higher there.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [4]

--------------------------------------------------------------------------------

Okay. So around 5%, 6% impact just from this?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [5]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [6]

--------------------------------------------------------------------------------

But Punit, in the context of the current slowdown which India has seen, liquidity pressure and slowdown in consumption, FTA, this strategy, in hindsight, would you still term it as a right strategy? Because it's happening at a wrong time, right?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [7]

--------------------------------------------------------------------------------

No, FTA strategy is absolutely the right strategy what we have undertaken because the impact that we are seeing on the growth on subscription revenue more than makes up for that loss. And as you will agree, Abneesh, that advertising revenue is cyclical in nature, whereas subscription revenue is far more stickier. And therefore, we have made that conscious decision rightly. It is just that it has happened -- the timing of which may not be the best for us to have recovered part of the growth from the pay, okay, but that's part of life. So I'm pretty confident it should come back.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [8]

--------------------------------------------------------------------------------

And when you say mid-20% kind of growth in subscription domestic, is that large part because of the tariff order? Or is it because of the FTA turning essentially pay?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [9]

--------------------------------------------------------------------------------

No, it's the tariff order plus we are expecting certain migration from the free-to-air channels on to the pay -- subscribers moving from free-to-air to pay.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [10]

--------------------------------------------------------------------------------

Okay. So both would be kind of reasonably contributing to that?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [11]

--------------------------------------------------------------------------------

I will repeat again, Abneesh. Largely because of tariff order, but partly because of subscribers moving from free-to-air to pay.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [12]

--------------------------------------------------------------------------------

Sure. And my second and last question is on the OTT mobile-only option, which I think you and some of the other players are launching. So my question here is already if you see, for you, the annual subscription plan on OTT was quite affordable INR 1,000 and below and then you had cash back and all that. Now with mobile-only, the ARPU will go down further. So when you had initial plans, for example, that over the longer term, OTT can be 30%, 35% of revenue, is that coming on at-risk because even for Netflix, we see very few paid subscriber, mostly it is the -- because of the deals, et cetera. So are you disappointed with the paying -- I think the paying part of the Indian consumer for the OTT?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [13]

--------------------------------------------------------------------------------

Abneesh, unfortunately, not everything I say gets reported. The mobile-only package does not mean that it's only a pricing reduction. It also means a large part of the content will not be available on the mobile handset. Therefore, we are -- it's just creating more packages and bundles for people to choose from. And who are not coming into the INR 999 bouquet, we are creating just another option for them to come and sample using some content, may not be all of it, but obviously, our strategy will be to keep pushing them towards the full bouquet of content, just like we are doing on our broadcast side as well.

--------------------------------------------------------------------------------

Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [14]

--------------------------------------------------------------------------------

You're bullish on -- bullishness on Indian OTT remains -- in terms of pay revenues, at least pay subscription revenues, continues to remain strong, right, as earlier?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [15]

--------------------------------------------------------------------------------

I am bullish on our ability to monetize ZEE5. I can't talk about Indian OTT space.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

The next question is from the line of Kunal Vora from BNP Paribas.

--------------------------------------------------------------------------------

Kunal Vora, BNP Paribas, Research Division - Analyst [17]

--------------------------------------------------------------------------------

First question, can you like -- is there any impact of Ind AS 116 on the EBITDA, depreciation, interest? Anything meaningful to highlight there?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [18]

--------------------------------------------------------------------------------

Rohit?

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [19]

--------------------------------------------------------------------------------

Yes, hi. So yes, the company adopted Ind AS 116 this quarter, and there is a marginal impact which is there. So in accordance with that we have also (inaudible) sorting the treatment for all our rentals and leases in question. And the overall impact is roughly about INR 140 million on our EBITDA.

--------------------------------------------------------------------------------

Kunal Vora, BNP Paribas, Research Division - Analyst [20]

--------------------------------------------------------------------------------

On EBITDA, sure. And is it getting offset by depreciation, interest...

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [21]

--------------------------------------------------------------------------------

Really, there is no -- as far as bottom line is concerned, there is no change. Whatever gain you see in the EBITDA is getting offset in depreciation and interest.

--------------------------------------------------------------------------------

Kunal Vora, BNP Paribas, Research Division - Analyst [22]

--------------------------------------------------------------------------------

Sure. Second one on -- can you share your margin outlook for FY'20. You had a strong start. Should we expect current levels to be maintained?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [23]

--------------------------------------------------------------------------------

30% plus is what we are still guiding for.

--------------------------------------------------------------------------------

Kunal Vora, BNP Paribas, Research Division - Analyst [24]

--------------------------------------------------------------------------------

Sure, sure, sure sir. And finally, can you share the number of paying OTT customers? Possible to give any further information on monetization of OTT?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [25]

--------------------------------------------------------------------------------

Not as of now, maybe in the future, we'll share with you. As of now what I've shared is what we can.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

The next question is from the line of Kapil Singh from Nomura Securities.

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [27]

--------------------------------------------------------------------------------

I want to check, what will be your growth outlook for both ad and subscription for full year?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [28]

--------------------------------------------------------------------------------

Subscription, as I said, for the domestic subscription market should be in the mid-20s. Advertising, it's difficult to predict. The next quarter is still looking soft. But I'm quite hopeful H2 will pick up on the back of festive season. But rest assured, whatever the industry growth, we will beat it.

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [29]

--------------------------------------------------------------------------------

And this includes the impact of lost revenue due to the FTA, so despite that you are saying, you will be able to beat industry growth?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [30]

--------------------------------------------------------------------------------

Can you say it again, please?

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [31]

--------------------------------------------------------------------------------

No, I'm saying there is some loss of revenues due to FTA. So despite that you are saying, you should be able to beat industry growth for the full year?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [32]

--------------------------------------------------------------------------------

Yes, absolutely.

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [33]

--------------------------------------------------------------------------------

Okay, okay. And secondly, I wanted to check on the promoter stake sale plan. The offers that you have received, these are from strategic investors or financial investors?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [34]

--------------------------------------------------------------------------------

I am not at liberty to say. As I've said, one was a strategic and one was a financial. Let's leave it at that. We are too close to the deal right now and I don't want to share more details.

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [35]

--------------------------------------------------------------------------------

Okay, okay. We'll look forward to that. And on ZEE5, just one question. Is there any indicative revenue contribution or the kind of -- on both ad and subscription growth, is there any meaningful impact over there during the quarter? And how much is the margin loss right now because of the investments you're making?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [36]

--------------------------------------------------------------------------------

Our margin is factoring in the losses on the account of ZEE5 or any other investment that we may have. The numbers on revenue are not significant enough for them to make a significant impact on the top line, but it's in accordance with our plan and targets.

--------------------------------------------------------------------------------

Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [37]

--------------------------------------------------------------------------------

Okay. I mean historically, you said that it's 400 to 500 basis points margin loss due to investment in ZEE5. Is it in the same range? Or it has come down? That's what I was looking for.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [38]

--------------------------------------------------------------------------------

This year will be the peak investment. I'm not guiding for any specific number for ZEE5.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

The next question is from the line of Rajiv Sharma from SBICAP Securities.

--------------------------------------------------------------------------------

Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [40]

--------------------------------------------------------------------------------

Just a couple of questions from my side. Punit, how do you look at the free cash flow generation this year given that, in the last 2 years, it's been working capital intensive? So how should one look given that you just mentioned that this will be peak investment year for ZEE5? Second is, how do you look at Netflix coming with mobile-only plans? I understand you also going on that same trajectory. But could it change the industry? Any long-term shifts you see with Netflix doing that? And is there any lumpiness in the subscription revenue numbers this quarter? Because if you've grown at 35%, 40%, this quarter, then why are we not guiding for a 30% growth? Why we believe this will be mid-25%?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [41]

--------------------------------------------------------------------------------

So there is an assumption based on how our bouquet rates, et cetera, will be up taken. Today, the revenue that you look at is basis on the composition of bouquet versus à la carte. If tomorrow some of my à la carte channels were to be dropped and bouquets to be replacing them, definitely my yields will come down, right? So if we look at the tariff order, by DPOs, our uptake of bouquet versus à la carte is differentiated. As you'll appreciate, we still don't have deals with some of the DPOs. The moment we enter those deals, our yields in terms of drop from à la carte to bouquets will happen, and therefore, we are guiding for a 25% kind of growth number, unlike what you are seeing in quarter 1.

On your first question on free cash flows. Definitely, this year also will not be very high on free cash flow generation. But next year onwards, you will see a lot more cash conversion from our bottom line to cash. Definitely, this year will improve, but it will not be as bad as the last 2 years, but next year onwards, you'll see actual ramp-up in free cash flows.

--------------------------------------------------------------------------------

Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [42]

--------------------------------------------------------------------------------

And Netflix?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [43]

--------------------------------------------------------------------------------

Too early to say right now for me to comment as to how that mobile-only will impact. Because at the end, that's just a pricing strategy that they have done. It doesn't really tell me too much about their content strategy. And therefore, as you will appreciate, any OTT platform or content-driven business, the basic need is content. Until that doesn't change, life would not change significantly, right?

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

The next question is from the line of Jay Doshi from Kotak Securities.

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [45]

--------------------------------------------------------------------------------

Just one question. How is the accounting now done for domestic subscription revenues? And what would be the movement in your commission costs or carriage costs if there is any such item in the operating expense item, given that the way those contracts are structured is very different now I believe.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [46]

--------------------------------------------------------------------------------

Bijal, go ahead.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [47]

--------------------------------------------------------------------------------

Yes. Jay, so I mean this is net subscription revenue which has been recorded. So I mean there is per -- as you are aware that out of INR 100 of MRP, that is 20%. So it is after giving all the incentive and all, the net number is recorded. And as a result, that is -- of the new tariff order, we have seen some decline in carriage costs also, which were already negligible level, but that has further declined.

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [48]

--------------------------------------------------------------------------------

So is it right to say then your base quarter numbers at which we are comparing are actually gross numbers? And your current quarter number is net of carriage expense? So effectively, underlying growth would be even higher than what you have reported on domestic subscription in this quarter?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [49]

--------------------------------------------------------------------------------

Yes, that's correct.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [50]

--------------------------------------------------------------------------------

Yes, that is right.

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [51]

--------------------------------------------------------------------------------

Okay. That is right. So second is, sorry, I missed your cash and cash equivalent number as at June quarter end. And you indicated that is INR 21.4 billion as of now. But what was it as at June end?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [52]

--------------------------------------------------------------------------------

INR 17.6 billion.

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [53]

--------------------------------------------------------------------------------

INR 17.6 billion. So just one question here. The other income line item is quite volatile that as you've seen from quarter-to-quarter, so are there any sort of one-offs or anything in that INR 100 crores other income because that looks very high based on your cash and cash equivalent balance.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [54]

--------------------------------------------------------------------------------

Yes. I mean so -- see this other income normally includes the rental income that we get. And there is miscellaneous income and some gain on sale of investments and so on. So at this year, there is some interest income also which has come in from some tax refund, et cetera. So overall, this is the composition of our other income.

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [55]

--------------------------------------------------------------------------------

Would it be possible to call out any one-off component in it? Or should I take it offline?

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [56]

--------------------------------------------------------------------------------

So around 6 -- around INR 600 million is interest on income tax refunds for the quarter. And that will explain the...

--------------------------------------------------------------------------------

Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [57]

--------------------------------------------------------------------------------

The deviation in profit.

--------------------------------------------------------------------------------

Operator [58]

--------------------------------------------------------------------------------

The next question is from the line of Alankar Garude from Macquarie.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [59]

--------------------------------------------------------------------------------

Punit, firstly, you have mentioned in the past that you would prefer to retain management control post the stake sale. So would you still maintain the sale?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [60]

--------------------------------------------------------------------------------

It is very difficult for me to predict the future, so let's see. We are waiting for the binding -- binding offers to come in.

If you are asking my preference? My preference is my preference, right? That wouldn't have changed since the last time I told you.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [61]

--------------------------------------------------------------------------------

Understood. And secondly on this, what -- can you update us on the status of the sale of other promoter assets? The infra assets?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [62]

--------------------------------------------------------------------------------

We'll take it offline. Let's keep this to Zee Entertainment today?

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [63]

--------------------------------------------------------------------------------

Sure. And okay. So secondly, we have seen a sharp improvement in subscription revenues, especially in the southern market. So specifically, I wanted to understand on South India. So apart from digitization in Tamil Nadu, what are the other key factors which are driving this growth?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [64]

--------------------------------------------------------------------------------

As I mentioned that either we were free in certain markets or our pricing was not commensurate to our viewership share. Tariff order gave us the opportunity to reprice our content. If you remember, the tariff has been frozen since I think 2003 or something.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [65]

--------------------------------------------------------------------------------

2005.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [66]

--------------------------------------------------------------------------------

And no price change has been done since then for any of our channels since they were launched. And therefore, this gave us an opportunity to reprice our content.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [67]

--------------------------------------------------------------------------------

Understood. But would it be fair to say that Tamil Nadu would be perhaps the biggest contributor within the southern markets?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [68]

--------------------------------------------------------------------------------

I don't have the numbers. Off-line -- we can take it as we get off-line.

--------------------------------------------------------------------------------

Operator [69]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [70]

--------------------------------------------------------------------------------

So cash at the end of the March was about INR 2,080 crores. And if we compare to cash as of today, so it seems the cash balance seems to have grown INR 60-odd crore. So I mean you spoke about the investments, which will happen during the year, but can you share some quantum of investments especially in terms of the working capital investments? Because it seems like the profit for the -- cash profit would be about INR 506 crores during the quarter, but cash has moved around to INR 60-odd crores.

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [71]

--------------------------------------------------------------------------------

Yes. So it is first quarter, right now, I mean, it's a bit difficult to give you an exact amount, but total working capital investment in FY '20 will be in the range of INR 500 to INR 700 crores kind of an increase, we will see total in working capital in full year FY '20.

--------------------------------------------------------------------------------

Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [72]

--------------------------------------------------------------------------------

Okay. That's quite helpful. And second question regarding the...

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [73]

--------------------------------------------------------------------------------

It would be closer to the lower end of the range, but we just want to keep some buffer for ourselves right now.

--------------------------------------------------------------------------------

Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [74]

--------------------------------------------------------------------------------

Sure. And secondly, regarding the operating costs, I mean you are seeing an increase of about 17% in the first quarter. So this, I understand, largely is compare of the content cost. So is the increase in the first quarter reflective of kind of a number we should expect for the full year basis?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [75]

--------------------------------------------------------------------------------

Yes, Rohit.

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [76]

--------------------------------------------------------------------------------

Yes. So it's a bit difficult to give guidance on a line-by-line basis as far as expenditures are concerned. But I mean our 30% EBITDA margin guidance takes into account overall cost increase which we are expecting. And I mean we'll continue to see on the programming costs. I can just qualitatively say that we'll continue to see increase because as you are aware, the ramp-up of ZEE5 is happening at a very sharp pace, and that cost will continue to hit. And as Punit mentioned, this will be the year of peak investment, so the cost will continue to go up, but still 30% margin we will achieve quite comfortably.

--------------------------------------------------------------------------------

Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [77]

--------------------------------------------------------------------------------

All right. Finally, in terms of our DAU to MAU ratio, which is about 8% or 9%. So could you comment on whether -- is this -- are you happy with this sort of a conversion number? And how does this number stack up against the competition?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [78]

--------------------------------------------------------------------------------

No, no, we are absolutely not happy with the number. The industry standard is 25% range. And given that we are just about 1.25 years old in this business, we expect to be in line with the industry over the next maybe 6 quarters or so.

--------------------------------------------------------------------------------

Yogesh Kirve, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [79]

--------------------------------------------------------------------------------

25%, is this a benchmark for the video OTTs? Or any apps in general?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [80]

--------------------------------------------------------------------------------

Video, video. I only talk about video.

--------------------------------------------------------------------------------

Operator [81]

--------------------------------------------------------------------------------

The next question is from the line of [Sanket Mehdi] from GC Holdings.

--------------------------------------------------------------------------------

Unidentified Analyst, [82]

--------------------------------------------------------------------------------

I wanted to know the gross debt number by end of the quarter?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [83]

--------------------------------------------------------------------------------

Gross debt...

--------------------------------------------------------------------------------

Unidentified Analyst, [84]

--------------------------------------------------------------------------------

And the free cash also. The exact free cash, only the free cash, not the investment number at the end of the quarter.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [85]

--------------------------------------------------------------------------------

While we are digging that out, do you have any other questions?

--------------------------------------------------------------------------------

Unidentified Analyst, [86]

--------------------------------------------------------------------------------

Sir, other question is, what was the receivables also at the end of the quarter? And how much will be the -- out of that will be from the related party?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [87]

--------------------------------------------------------------------------------

Receivables...

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [88]

--------------------------------------------------------------------------------

Sorry. Yes, so when you talk about debt, the only debt we have in our balance sheet is the redeemable preference shares. So as of March 19, the figure was [7,409]. And it's come down a bit by this quarter, June quarter, so a slight decrease in that because of -- so about 700 is our gross debt number. That's the only debt we have in our balance sheet.

--------------------------------------------------------------------------------

Unidentified Analyst, [89]

--------------------------------------------------------------------------------

700, okay. And sir, what was only the free cash or the cash in hand, not the investment part, that number?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [90]

--------------------------------------------------------------------------------

Sorry, I think we have just a small correction. The entire gross debt for the company is INR 11 billion.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [91]

--------------------------------------------------------------------------------

INR 11 billion, yes. So there's some in the current liability, which is redeemable in the next 12 months, which has formed -- which forms part of the current liabilities, so overall, INR 11 billion.

--------------------------------------------------------------------------------

Unidentified Analyst, [92]

--------------------------------------------------------------------------------

Okay. So it's same as what it was by end of the year. That was again INR 11 billion.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [93]

--------------------------------------------------------------------------------

Yes. Correct.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [94]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Unidentified Analyst, [95]

--------------------------------------------------------------------------------

Yes, so it's -- okay. And sir, the free cash, the cash in hand without investments?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [96]

--------------------------------------------------------------------------------

One sec, and also the creditors.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [97]

--------------------------------------------------------------------------------

So as we talk about the treasury and cash, cash and treasury investment is around INR 21 billion at this point in time.

--------------------------------------------------------------------------------

Unidentified Analyst, [98]

--------------------------------------------------------------------------------

Yes, but that will include the investments also. I just want the free cash.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [99]

--------------------------------------------------------------------------------

Yes, so we don't have that breakup right away with me. You can take it off-line.

--------------------------------------------------------------------------------

Unidentified Analyst, [100]

--------------------------------------------------------------------------------

Okay. And sir, the debtor -- debtors, total debtors as actual amount? And how much is from the related party?

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [101]

--------------------------------------------------------------------------------

Just a second. INR 22,676 million.

--------------------------------------------------------------------------------

Unidentified Analyst, [102]

--------------------------------------------------------------------------------

INR 22,676 million. And out of that from the related party, it would be?

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [103]

--------------------------------------------------------------------------------

So that data, we do not have right now available, but it is -- I mean nothing much has changed since release of our annual report. But what related party debtors were, it has come down slightly from there, but the exact number, I will not be able to give you immediately.

--------------------------------------------------------------------------------

Operator [104]

--------------------------------------------------------------------------------

The next question is from the line of Karan Taurani from Elara Capital.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [105]

--------------------------------------------------------------------------------

My first question was regarding the subscription revenue. Can you point out any kind of positive impact on this because of ZEE5?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [106]

--------------------------------------------------------------------------------

No, the number is quite small on ZEE5 as of now for it to have a significant impact on the 37% -- or the 47%.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [107]

--------------------------------------------------------------------------------

And any more partnerships or deals in pipeline now for the ZEE5? Or as you said all the telcos are now already done for?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [108]

--------------------------------------------------------------------------------

No, we still have one of the large telco deals to happen. And also, in another telco, the full integration is yet to happen. So I would say, of the 3 telcos, 1.5 are done, 1.5 yet to be done.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [109]

--------------------------------------------------------------------------------

And when do you see that, I mean, happening?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [110]

--------------------------------------------------------------------------------

I have stopped giving forecast on things that I can't control.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [111]

--------------------------------------------------------------------------------

Okay. Just one last thing on the subsidies. So what really drastically changed from last quarter to this quarter from a 4% to 26% kind of a growth. I mean was it the strategy with the MSOs? Was it your channels? Your genre, which you are focusing upon? I mean what exactly happened for the subscription growth?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [112]

--------------------------------------------------------------------------------

Yes, Bijal, go ahead.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [113]

--------------------------------------------------------------------------------

Yes. So you are talking about subscription growth acceleration. See, last quarter, we had told you last quarter itself that there was a disruption on account of implementation of tariff order and that has actually negatively impacted growth. So you are comparing a phase which was negatively impacted. And on top of that what has happened in 1Q is that a good part of tariff order stabilization has happened, though it has not fully settled. And we have seen an improvement in our -- improvement in monetization of our viewership. So as Punit mentioned that despite having built a significant viewership over the last several years, our channels were really not priced in line with the popularity. And it is like, kind of, I mean, under new -- old tariff order, it would have been a long journey, but new tariff order gave us a chance to reset this pricing. So that has allowed us to significantly improve our monetization. And on top of this, this tariff order is, I mean, kind of -- discrimination between the platform is not possible, which has also led to an improvement in subscription revenue growth. So this is much more on expected line, in fact, for last 2, 2.5 years, we have been guiding that tariff order will allow us to properly monetize the viewership, which we have and we are seeing that evolving the way we had envisaged.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [114]

--------------------------------------------------------------------------------

Just to give you one example and I think somebody else also asked me this on Tamil Nadu. So Tamil Nadu, our channel was priced at INR 0 before the tariff order. But during the tariff order, we got the opportunity to revise the pricing to INR 10. So that's how our strategy on pricing, not discounting, has worked. And that strategy has paid off for us.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [115]

--------------------------------------------------------------------------------

So basically, as I am -- what I am guessing is that the share from the end of the distributor to the broadcasters basically improved. Is that fair to assume?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [116]

--------------------------------------------------------------------------------

I think share from the last mile has improved for the entire value chain. I don't think it's just share from the DPOs. But the improvement that has happened in the market overall also has benefited.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [117]

--------------------------------------------------------------------------------

Right. And lastly, in terms of your dealings or your partnership with the MSOs. MSOs, we've been seeing some kind of resistances and all. Last quarter around as well something had happened that some of the MSOs were not kind of pushing your channels and you were relying more in terms of the DTH revenue. So is it that, again, you are like heavily depending on MSOs or DTH? Or is it more a balanced approach right now?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [118]

--------------------------------------------------------------------------------

It's pretty much balanced approach right now. The market is pretty evenly split, like 65 -- sorry 45%-55% in favor of MSOs today. And while we do not have deals with some MSOs, our deals with all DTH operators are in place, but -- and at the end, now we are looking at consumers. We are not focusing on DPOs alone.

--------------------------------------------------------------------------------

Karan Taurani, Elara Securities (India) Private Limited, Research Division - VP & Research Analyst for Media [119]

--------------------------------------------------------------------------------

Okay. There's more of a full demand, which is coming from the consumers' end which is driving this growth, basically?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [120]

--------------------------------------------------------------------------------

Exactly. Exactly.

--------------------------------------------------------------------------------

Operator [121]

--------------------------------------------------------------------------------

The next question is from the line of Adi Desai from York Capital.

--------------------------------------------------------------------------------

Adi Desai, York Capital Management - VP [122]

--------------------------------------------------------------------------------

Two questions. From the strategic view side, are you -- should we still expect the same timing in terms of further news on this, that's July 31? And so that was one question. The second on the dealers of the binding term sheet. I don't know if you guys could talk about it, is that from the financial or the strategic investments? And thirdly, on the results, I just wanted a bit more color on the financial income and the mark-to-market profits this quarter versus April.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [123]

--------------------------------------------------------------------------------

So firstly, it's a matter of days before we make the announcement on the stake sale. Whether it's financial or strategic, I am not at liberty to say right now. You will hear from us in a few days' time, and it'll be pretty clear which way we go. On the results, Bijal, sorry about that.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [124]

--------------------------------------------------------------------------------

Sorry, I think you were asking me about other income, is it?

--------------------------------------------------------------------------------

Adi Desai, York Capital Management - VP [125]

--------------------------------------------------------------------------------

Yes, that's right. That's right. The other income and then the mark to market.

--------------------------------------------------------------------------------

Bijal Shah, Zee Entertainment Enterprises Limited - Head of Corporate Strategy & IR [126]

--------------------------------------------------------------------------------

So the other income, as we just said that around INR 600 million is interest on income tax refund, which we received during the quarter. And if you remove that, it will explain, I mean, the other income will be in the trajectory of the previous quarter. And as far as fair value through profit and loss account is, see the -- as far as redeemable preferential which we have are listed on stock exchanges, and as per accounting standards whatever is the change in value of this redeemable preference share flow through to P&L in the line item fair value through profit and loss account. So this is change in value of the preference share, which is listed on stock exchanges. Primarily, there is -- and that's the fair value adjustment for the quarter and for earlier quarters also.

--------------------------------------------------------------------------------

Operator [127]

--------------------------------------------------------------------------------

The next question is from the line of [Romil Oza] from [RMO Investment].

--------------------------------------------------------------------------------

Unidentified Analyst, [128]

--------------------------------------------------------------------------------

I'm just wondering, will Zee Media be part of any stake sale process since there's a lot of value unlocking possibilities out there?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [129]

--------------------------------------------------------------------------------

No. Zee Media cannot be part of any stake sale process because of the FDI norms that exist in that sector.

--------------------------------------------------------------------------------

Unidentified Analyst, [130]

--------------------------------------------------------------------------------

But that's at 49%, right?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [131]

--------------------------------------------------------------------------------

Sorry?

--------------------------------------------------------------------------------

Unidentified Analyst, [132]

--------------------------------------------------------------------------------

That's at 49%, right?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [133]

--------------------------------------------------------------------------------

Correct. That's right.

--------------------------------------------------------------------------------

Operator [134]

--------------------------------------------------------------------------------

The next question is from the line of Vishnu K from JM Financial.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [135]

--------------------------------------------------------------------------------

This is Sanjay Chawla here. Punit, just wanted to get your sense on what was the total growth rate in TV ad spends in the industry overall in Q1? I mean did we see a decline at the industry level? What would be your sense? And what's your outlook for the full year for the industry?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [136]

--------------------------------------------------------------------------------

So if you -- if I was to remove sport, the industry has declined almost 6%.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [137]

--------------------------------------------------------------------------------

6% drop ex sports.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [138]

--------------------------------------------------------------------------------

Ex sports.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [139]

--------------------------------------------------------------------------------

Okay. What would be your outlook on a full year basis? I mean do you see growth coming back closer to double digits on a full year basis?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [140]

--------------------------------------------------------------------------------

I think it will be high single digits to very low double digits.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [141]

--------------------------------------------------------------------------------

Okay. And that is inclusive of sports.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [142]

--------------------------------------------------------------------------------

Yes, yes, including sports.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [143]

--------------------------------------------------------------------------------

Okay. And I missed the earlier part of a commentary. Was -- in the domestic subscription revenues, was there any catch-up element also in the sense what was not corrected or not provided for in the previous quarter and came up in this quarter?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [144]

--------------------------------------------------------------------------------

Very small number is there. I think it's about INR 15 crores, INR 16 crores.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [145]

--------------------------------------------------------------------------------

Okay. And a question, also on the domestic subscription, on a like-for-like basis, how does your pay-TV ARPU that you realize from DTH compare with that of what you collect from cable operators? What was the gap before tariff order? And what is it now?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [146]

--------------------------------------------------------------------------------

See, it's not a straightforward calculation, Vishnu (sic) [Sanjay]. As I was saying earlier, every DPO is selecting either multiple channels or multiple bouquets from my stable. And therefore, you can't compare that X was the yield earlier from DTH and now it is whatever it may be. So it's actually become far more complicated in terms of how our billing cycles have changed. So while the cable MSO ARPUs are improving significantly, but so are the DTH also.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [147]

--------------------------------------------------------------------------------

So -- but in terms of the gap because historically, we've always heard for 10, 20 years that cable -- more than 10 years that cable tends to generate lower ARPUs for you on a per customer basis because of the lump sum structure and those kinds of things. Now these things have changed post NTO. So I mean how -- has the gap closed, and where do you see medium to long term, the gap could be?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [148]

--------------------------------------------------------------------------------

So apples-to-apples, there cannot be any differentiation based on -- suppose somebody has picked my INR 39 bouquet or Hindi bouquet, 2 operators who've picked that bouquet will get same pricing, whether it's DTH or cable, doesn't matter. But if a cable company chooses only Zee TV out of that, they are paying INR 19 and not INR 39.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [149]

--------------------------------------------------------------------------------

Right, of course.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [150]

--------------------------------------------------------------------------------

You understand? It's not apples-to-apples. So everything pricing-wise is apples-to-apples. If a DTH company chooses X and the same X is chosen by an MSO is the same pricing

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [151]

--------------------------------------------------------------------------------

Right, of course. It depends on the selection by DPO and the customers.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [152]

--------------------------------------------------------------------------------

Exactly. So if you take the -- some of the DPOs who have not done a deal with us or have not picked up our bouquets and are operating only on à la carte with us, their pricing will still be lower than that of DTH.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [153]

--------------------------------------------------------------------------------

All right. Of course. So we have seen a double-digit decline in the international subscription revenues. What would be your -- what could you tell us about your outlook on medium- to long-term trend here?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [154]

--------------------------------------------------------------------------------

One second. Double-digit degrowth in...

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [155]

--------------------------------------------------------------------------------

Almost 9%, 9.5% decline in international subscription.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [156]

--------------------------------------------------------------------------------

It was on account of the channels being displaced from couple of platforms in the MENA region.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [157]

--------------------------------------------------------------------------------

So you think that's something which -- so could it moderate going forward, I mean? But we still expect a decline overall, right?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [158]

--------------------------------------------------------------------------------

No, no. We generally expect a decline in terms of rupee terms. Dollar to dollar, it remains pretty stable or flat. But now with the introduction of ZEE5, it will be like a hockey stick, a little drop to begin with, and then we will start seeing growth coming back.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [159]

--------------------------------------------------------------------------------

Okay, okay. And lastly, if I could just squeeze in one question. On the MAU, monthly active users, we've seen a pretty solid pick up this quarter after a slightly muted previous quarter in the MAU. What according to you are the factors that drove the MAU increase in 1Q?

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [160]

--------------------------------------------------------------------------------

Both India as well as overseas, so a part of earlier quarter the number I gave you is only India numbers. Now that International is launched, that also contributes to the MAUs.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [161]

--------------------------------------------------------------------------------

So then from a India point of view, did we see any significant pick up as well? I'm sure there would have been...

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [162]

--------------------------------------------------------------------------------

Yes, we did see a significant -- we did see an increase in India as well, but it got further strengthened with the international numbers.

--------------------------------------------------------------------------------

Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [163]

--------------------------------------------------------------------------------

So my question is more from a distribution and content point of view. If there's anything that contributed among these factors to the MAU increase.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [164]

--------------------------------------------------------------------------------

We had our app go live on the KaiOS platform, which helped the significant increase.

--------------------------------------------------------------------------------

Operator [165]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of [Sudhir Ranga] from [AV Advisors].

--------------------------------------------------------------------------------

Unidentified Analyst, [166]

--------------------------------------------------------------------------------

Is there a time line till when you will be waiting for the second offer? Or you will be moving ahead with the only offer available right now, is the first question? Second question is with respect to the numbers. I wanted to know why this finance cost came down considerably from INR 114 crores last quarter to INR 20 crores this quarter in the consolidated numbers.

--------------------------------------------------------------------------------

Punit Goenka, Zee Entertainment Enterprises Limited - MD, CEO & Whole Time Director [167]

--------------------------------------------------------------------------------

On the offer for stake sale, I'm expecting the second offer to come in, in a matter of days. If that offer was not to come in, then of course, we will be going with the binding offer that is already on the table. And I'm quite hopeful that the second offer will also come in, and therefore, the family would have enough discretion to make a decision.

--------------------------------------------------------------------------------

Rohit Kumar Gupta, Zee Entertainment Enterprises Limited - CFO [168]

--------------------------------------------------------------------------------

On the finance costs, like I mentioned earlier, the finance costs primarily due to the dividend that we pay on our preference shares -- redeemable preference shares and a large part of that was paid in the quarter ended 31st March, where you see a very huge amount there. And a small part is paid in this quarter. Plus I also explained the treatment of Ind 116. The impact of that is the (inaudible) rentals and leases, which were earlier accounted for as rental and leases above the line -- above the EBITDA line is now accounted for in depreciation and interest (inaudible).

--------------------------------------------------------------------------------

Operator [169]

--------------------------------------------------------------------------------

Thank you very much. That was the last question. On behalf of Zee Entertainment Enterprises Limited, that concludes this conference.

Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.