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‘Apolitical’ Sun TV says will grow irrespective of TN govt

A strong growth in ad revenues, and helped by a boost to digitization in the southern states, could lead to Sun TV posting strong numbers in FY17, says the Sun Group’s CFO SL Narayanan.


In an interview with CNBC-TV18, Narayanan talked about the company’s lukewarm fourth quarter numbers, saying ad revenues were hit by the November deluge in Chennai and said going forward, growth should rebound.


“Ad revenues should 14-15 percent for the sector. We hope to match that,” he said.


He was also asked about the electoral verdict where AIADMK romped back to power and said it would not have an impact on the fortunes of the company — the Sun Group is controlled by Kalanithi Maran, brother of rival DMK’s Dayanidhi Maran, and data show there has been some correlation between the government in power in Tamil Nadu and Sun TV’s growth.


“Ours is a professionally-managed, apolitical company. We believe we will continue to grow irrespective of which government is in power,” he said.


Below is the verbatim transcript of SL Narayanan’s interview with Reema Tendulkar & Nigel D’Souza on CNBC-TV18.


Nigel: Let’s talking about the Indian Premier League (IPL) first, last year you accounted for a loss coming from the IPL. This time you are the champions. How does it change things?


A: Yes, it significantly changes the impact because of the price money which will get accounted as revenues on the IPL line. Additionally, we also have a better set of numbers coming on the sponsorship revenues on IPL because of a better climate on selling these properties.


However, if you recall, two years ago because of all the uncertainties and the controversies that were about IPL, it was difficult to sell the sponsorship opportunities but this season we were able to get some good sponsorships at the local level and therefore I do believe that our loss number will be considerably lower this year.
  
Reema: Coming to core business, your ad revenue growth decline of 5.6 percent has disappointed the street. It is at 11 quarter low as well. One reason we understand is the Chennai floods but apart from that was there any other reasons and what can you guide for ad revenue growth in FY17?


A: You are right, in terms of the ad revenue; the sentiment was badly impacted because of the deluge that impacted most of Tamil Nadu towards the end of November; right through December and up to Pongal it was a difficult situation. Most of our large advertisers were without much inventory and in the absence of anything to sell, obviously there was nothing to communicate and that impacted ad revenues, but we see this as a blip. If you look at the overall year, we still grew despite all these reverses we have posted a growth of 6.57 percent on advertising and aided by the improved sentiments on subscription which grew by 15.5 percent in the last quarter and about 11.3 percent for the year as a whole. We do believe that we are positioned well for the next 12 months. I wouldn’t want to give a very precise guidance but if the nominal gross domestic product (GDP) growth is anywhere between 12 and 13 percent on 7.5 percent real GDP growth and about 5-6 percent inflation, ad revenue growth for the sector should be at least 14-15 percent and I do believe that we could grow at that level.       


Nigel: The pleasant surprise came in from your subscription revenue. The street was bracing itself to 9 to 12 percent. You came into the number of around 13 percent or thereabouts. What is the outlook for FY17 and could you give us a number?


A: This is one area where we are completely dependent on the pace at which it gets implemented at the states. Across the four southern states where we have a very strong viewership, we still have some problems in Telangana, Andhra Pradesh and Tamil Nadu whereas in Karnataka and Kerala the implementation has been robust. However, it is well accepted across the universe that digitisation is good for all stakeholders in the media industry. So despite all these bottlenecks that we see in the form of stay orders, I sincerely hope that digitisation gets implemented across the south Indian peninsula soon. If that happens, we do believe that our subscription revenues will see a strong growth because almost 40 million homes are still being served by analogue systems in south India. If they turn digital given the kind of business model that we have, we do not have fixed fee deals, we been ahead of the curve, we have been negotiating per subscriber models with almost all the distributors. The kind of growth that we will see on subscription will positively surprise the street.       


Reema: I believe Sun TV has lost some general entertainment channels (GEC) viewership in Andhra Pradesh and Karnataka. If yes, what is the extent of that and can we expect a revival soon in that because if it does then it is going to continue subdue your ad revenue growth?


A: You are right; we did see some dip in the GEC genre in both Telugu and Kannada but happy to say that starting April of this year with the kind of investments that we have made in new content and new programming, we have seen a very strong reversal of that trends, almost eight-nine shows each in both Telugu and Kannada have been launched and another six new shows which have been launched in Malayalam. However, give us another few quarters; we will come back roaring on all engines.


Nigel: When we had an exit poll, the stock went down close to 10-12 percent. Now we have AIADMK, they have come back into power. How does it affect you because we have seen in the past, we cannot ignore that fact. Data shows us that yes; there is a correlation in terms of revenue growth and the likes. How exactly does it affect. Could you give some clarity to your investors on that?      


A: We like to believe that we will continue to do well irrespective of which government is at the state. This is a very professionally run company and we have a strong franchise. We will continue to do what we believe is in the best interest of our shareholders and we will continue to deliver strong shareholder value. I cannot comment on what would be the impact or the lack of it because of whichever government is in power. I would like to believe we are still apolitical and we will run the company and conform to the best professional standard.