Company report reliance broadcast network 17th april 2012

C O M P A N Y R E P O R T

India

16th April 2012 Reliance Broadcast Network Rs 53.45

Sector: Media At an inf lect ion point

Four-S reports are available on BLOOMBERG, Reuters and Thomson Publishers

Reliance Broadcast Network (RBN) is rapidly building a strong presence in

the Indian M&E industry. Within 6 years, BIG FM, with 45 stations, is

largest by scale, second largest by revenues and EBIT positive. RBN has a

5 channel broadcasting portfolio within 18 months of first channel launch.

RBN is a potent play of TV + Radio that offers local audiences as well as

scale for national advertisers. Content initiatives BIG Productions and Live

are creating a repute of their own besides in-house competencies.

A high growth media play:

Indian M&E industry is set for high growth of 15% over 2011-16, with

Radio at 21% and television at 17% (FICCI-KPMG report 2012).

RBN’s FY11 revenues grew 36% YoY, higher than industry and at par

with leaders to reach Rs 2.4bn. Radio had 71% share.

In 9mFY12, RBN’s revenues grew 30% to reach Rs 2.3bn. Radio was

67% and Production and TV began with 15% and 4% shares.

RBN’s total revenues are set to grow at 51% over FY11-15 as it

becomes 100-150 FM network and ~ 9 channel broadcasters by FY15.

Business game changers ahead in both radio and TV:

Phase-III will increase radio reach ~3x to over 300 cities. Radio would

be a national media like TV, with improved ability to deliver targeted

local reach. Radio’s share in media ad-pie to increase from 3.8%

presently to 5% by 2016.

Digitalisation of cable TV will improve business economics for

broadcasters.

RBN well positioned to ride the change and turn profitable by FY14

RBN will be a 100-150 station network post Phase III with presence in

key cities missing in its portfolio. BIG FM is already EBIT positive.

In TV, RBN will establish as a strong focused play in English GEC and

targeted regional belts with ~ 9 channel portfolio plus language and

HD feeds. Content will be a mix of cutting edge international, dubbed

and local through BIG Productions. TV to break-even by FY14.

RBN trades at a P/E of 7.4x and EV/EBITDA of 4.7x of our

projected FY14 numbers, at a significant discount to industry’s ttm

PE of 18x and EV/EBITDA of 11x.

With FM Phase III process to start in a few weeks time, RBN is an

attractive investment opportunity currently.

FY10* FY11 FY12p FY13e FY14e FY15e

Revenue (Rs. Mn) 1,807 2,454 3,134 5,045 8,936 12,807

EBITDA (Rs. Mn) -162 -64 -451 192 1,544 3,929

PAT (Rs. Mn) -761 -537 -1,018 -318 940 3,166

EBITDA margin (%) -9% -3% -14% 4% 17% 31%

ROaE (%) NA NA NA NA 22% 49%

P/E Ratio (x) NA NA NA NA 7.4 2.2

EV/Sales (x) 3.3 2.9 1.9 1.2 0.8 0.5

EV/EBITDA (x) NA NA NA 32.0 4.6 1.8

P/BV (x) NA 2.9 4.1 1.9 1.5 0.9

D/E (x) NA 0.5 1.4 0.1 0.1 0.0

* standalone

BSE Sensex 17,151

Nifty 5,226

52 week high (Rs) 99.25

52 week low (Rs) 40.20

NSE RBN

BSE 533143

Equity Shares (mn)

79.45

Face Value (Rs) 5

Market Cap (Rs mn)

4,239

Share Price Performance (%)

RBN Sensex

1 week -4.1 -0.4

1 month -3.3 -1.8

3 month -3.5 5.9

6 month -22.0 2.2

1 year -35.1 -11.5

Shareholding Pattern (Dec’11)

Promoters 65.2%

FIIs/FVCIs 1.3%

MF/Banks 1.3%

Body Corporates 13.7%

Others 18.5%

Company Report: RBN 30 Mar’12

Four-S Research 2

Investment Rationale

One of the fastest growing media companies

36% FY11 growth, better than peer average

36% YoY growth

in FY11 - higher

than industry

average

RBN achieved a turnover of Rs 2,454mn in FY11 with a YoY growth

of 36%. This was at par with industry leaders and higher than peer

average of 27%.

Revenue growth YoY FY11 9mFY12

Peer Average 27% 14%

RBN 36% 30%

Source: Four-S Research

RBN’s total revenues in FY11 were Rs 2,513mn.

Second highest growth in peer group in 9mFY12

RBN repeated the strong revenue performance in 9mFY12 with a YoY

growth of 30% to reach Rs 2,315 in revenues. This included a one-

time royalty write-back of Rs 209mn as other operating income.

Even if we exclude that, RBN’s revenue growth would be 19% YoY,

still second highest in the peer group.

While Radio grew at 21%, entry into new segments of production (Rs

358mn, or 15% share) and TV Broadcasting (Rs 90mn, or 4%

revenue share) resulted in the high growth of overall revenues.

Top play in private FM Radio segment

Number 1 by scale in FM Radio industry

Number 1 in 15

radio markets

RBN has the largest private FM network in India with 45 stations

covering 1,200+ towns and 50,000+ villages reaching 42.6mn

listeners (IRS+RAM).

BIG FM is number 1 in 15 markets and a top 3 player in 15 others by

listenership. As per ADEX data for BIG FM markets, it has a

combined FCT consumption share of 23% in Q3FY12.

Number 2 by revenues in Radio industry

Radio Revenues

hampered by

absence from 7

key markets

RBN has become number 2 by revenues within five years of

operations achieving revenues of Rs 1,750mn in FY11 with a YoY

growth of 16%.

Rs Mn # of stations

1st station launch FY10 FY11

Market Share**

ENIL 32 Oct-2001 2,297 2,722 27% RBN Radio 45 Sep-2006 1,505 1,750 17% HT Radio 4 Oct-2006 431 704 7% DB Corp Radio 17 May-2006 350 469 5%

* Segmental revenues for Radio not available for Sun, Jagran, Radio City (MBPL not listed)


Four-S Research 3

**FY11 sales on FICCI-KPMG 2010 Radio Industry revenue of 10bn

RBN can be expected to reduce the revenue gap with the market

leader post Phase III auctions, when it will have presence in all key

cities.

Makes de-risked entry into TV Broadcasting

Enters via JV with

international

broadcasters to

start higher on

learning curve,

content USP and

optimize costs

RBN made a de-risked entry into TV broadcasting by targeting

segments of English GEC and Regional. It avoided the already

cluttered segments of Hindi GEC, Movies, Sports and News.

RBN has a portfolio of 5 channels at present – 3 in English GEC, 1 in

Regional Hindi and 1 in Punjabi. It has optimized its costs by using

the JV route for English channels. RBN also distributes Bloomberg

UTV in its portfolio.

RBN’s TV revenues were Rs 10.6mn in FY11 with four months of TV

broadcasting operations. In 9mFY12, its TV revenues achieved a

turnover of Rs 90mn, accounting for 5% share of RBN’s revenues.

RBN’s Regional play in Hindi Heartland – BIG MAGIC

RBN launched BIG MAGIC in Apr-11 to cater to Hindi heartland of UP,

MP and Bihar. This is RBN’s first play in Regional TV.

Within nine months of operations, the channel accounted for 12% Ad

spend share of the peer set in Dec-11.

Regional Hindi Channels – ADEX for Dec-11

Second largest ad

earner in HSM

within 9 months

of launch

0

100000

200000

300000

400000

500000

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Spend Rs.mn Duration (s)

Source: Company Data – ADEX

Enters English GEC via 50:50 JVs with global leaders

RBN’s strong

International tie-

ups have the

potential to make

RBN has used the JV route to enter the English GEC segment. This

not only optimizes its costs, but gives it preferential right to top and

latest international content in SAARC region.

More importantly, it has entered into JVs with two of the biggest


Four-S Research 4

it India’s largest

English GEC

broadcaster

names in global TV broadcasting: CBS, a leader in the US markets;

and RTL Group, part of European media powerhouse Bertelsmann

AG, the largest in Europe, which also owns reality TV content leader

Freemantle Media.

RBN’s BIG-CBS JV

RBN has a 50:50 JV with CBS Studios International, a division of CBS

Corporation USA. The JV is called BIG CBS Networks Pvt. Ltd. CBS

Studios International is the leading supplier of programming to the

international television marketplace.

The JV has rights to and has launched 3 English GEC channels in

Nov’10, Mar’11 and Apr’11 respectively named BIG CBS Prime, BIG

CBS LOVE, and BIG CBS Spark. Through these channels, Indian

audiences will have access to latest international content, a strong

USP against English GEC Peers, which tend to play re-runs. CBS’s

popular shows include Survivor, America’s next top model, Sex and

the City and Ringer.

BIG CBS, # 1 English Entertainment Network in India

BIG CBS has established itself as Number 1 English Entertainment

network in India with a combined relative market share of 51%

(TAM: CS 15-44, SEC A, MF, Wk 40, 2011, 7 Metros All Day).

Source: Company TAM Data - 15-44, SEC A, MF, Wk 40, 2011, 7 Metros All Day

English GEC channels – ADEX for Dec-11

BIG-CBS Prime, at

par with AXN’s

disc spends

within a year of

launch

0

100000

200000

300000

400000

500000

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Zee Café Star world AXN BIG CBS NW


Source: Company – ADEX Data


Four-S Research 5

BIG CBS Networks has launched three English channels in less than

a year of operations. For the month of December 2011, the

combined ADEX of the BIG CBS NW was ~60% more than AXN. In

terms of Ad Durations, BIG CBS Network is ahead of Zee Café and

AXN and lags only 21% behind Star World.

The first channel of the bouquet, BIG CBS Prime (launched 29th

Nov-11) garnered a Discretionary Spend of Rs 11.86mn in Dec-11,

higher than AXN’s Rs 11.54mn.

Entry into Punjabi Market with Spark Punjabi

Spark Punjabi,

first international

Punjabi channel,

becomes a leader

within a month of

launch

RBN has launched its first dubbed channel out of BIG-CBS JV to

make an entry in the Punjabi market. This is RBN’s second Regional

TV play after BIG MAGIC.

Spark Punjabi, within a month of its launch in Jan’12, became the

leader in the region with relative market share of 32% (TAM India:

CS4+ Males, Punjab 1 Mn+, 7PM – 12AM, Week 10’2012). With BIG

FM reaching 8 cities in the region and BIG Street’s 3000+ ambient

media options across the markets, BIG CBS Spark Punjabi offers

marketers an integrated media opportunity like none other in the

region.

RBN’s RTL Group JV

RBN entered into a 50:50JV with RTL Group SA to launch two theme-

based channels – extreme action genre and the other in reality

genre.

RTL Group is part of Europe’s largest media firm, Bertelsmann AG.

RBN will get access to RTL’s library of content produced by its group

production house, Fremantle Media Ltd, including shows such as The

X Factor, American Idol and America’s Got Talent, and their various

regional franchises.

The first channel is ready to be rolled out in July - August 2012.

Strong programming skills to help TV foray

BIG Productions, more than in-house content USP

Has one of the

most reputed

production house

and largest

portfolio of

televised IPs

RBN has entered content production with an eye on in-house

competency. Its division BIG Productions is a reputed TV production

house in its own right, with two of its shows completing 500 episodes

milestone and a total of 950 hours of programming till date. RBN

acquired BIG Productions from group company Reliance BIG

Entertainment Private Limited effective from 1st of April 2011.

BIG Productions already has 25 shows to its credit in 8 languages. In

9mFY12, the segment had revenues of Rs 358mn and an EBIT of Rs


Four-S Research 6

5mn.

BIG LIVE, makes a mark in live TV shows

BIG LIVE gives RBN the largest portfolio of televised IPs in India,

with 23 IPs in FY11. RBN has discontinued its activation business

with intent to turn the segment profitable. BIG LIVE develops

national IPs like BIG Star Entertainment awards, local IPs like

Regional Music industry awards and in-house IPs. RBN is in process

of developing sports IPs.

In 9mFY12, BIG LIVE had revenues of Rs 178mn and an EBIT loss of

Rs 75mn.

Set to turn profitable in FY14

While RBN has made losses in its brief history, this is due to initial

investments in setting up the businesses.

While radio business is now profitable, OOH and TV will take a few

more quarters to breakeven after which RBN should be strongly

profitable.

We expect RBN to have EBITDA margin of 31%, marginally lower

than current peer average EBITDA of 33%. We expect RBN’s PAT

margins to reach 25% by FY15.

Radio achieves turnaround, is EBIT positive

Radio business EBIT positive with 15% margins in 9mFY12

RBN has managed a fast turnaround of FM radio, becoming EBIT

positive in Q3 FY11 – within five years of launch of first station and 3

years of launch of 45th station. In H2FY11, Radio had a positive EBIT

of Rs 23mn, limiting the annual loss to Rs 74mn.

In 9mFY12, Radio posted an EBIT of Rs 238mn with an EBIT Margin

of 15.4% and ROCE of 10%.

EBIT Margins FY10 FY11 9mFY12

ENIL Radio 8% 16% 23%*

RBN Radio -20% -6% 15%

Source: Four-S Research *ENIL does not report quarterly segmental numbers. In 9mFY12, it is in Radio and Events only, having sold its OOH business in FY11, so the margin can be considered a close approximation of Radio margin.

With a healthier FY11 balance-sheet

RBN’s D/E was 0.5 in FY11, having reduced its debt from Rs 3bn in

FY10 to Rs 1.4bn in FY11.

RBN had raised Rs 2,832.5mn of equity by preferential issue of over

33.3mn shares to potential investors and promoters of the company

in Sep-2010 at Rs 85 per share. This was at 25% premium to

preceding 26 weeks average market price. A part of the fund raised

was used to repay Rs 2bn of debt.


Four-S Research 7

FY11 BS Ratios D/E Total Asset Turnover

Working Capital Turnover

Peer Set Average 0.2 0.8 3.1 RBN 0.5 0.6 2.4

Source: Four-S Research, Company Data

The entire debt as on March 31, 2011 is ICD from the promoters –

primarily Reliance Capital Limited and Reliance MediaWorks Limited.

RBN, the youngest media company in the peer set, has turnover

ratios only marginally lower than Peer set.

EBITDA to break-even in FY13, EBIT by FY14

RBN’s Radio business is already EBIT positive. We expect the main

TV channels launched in FY11-12 to break-even by FY14. The

dubbed channels will have a quicker break-even due to lower

operational costs. We expect TV segment to be overall EBIT positive

by FY14.

Radio to achieve EBIT margins of 26% by FY15

Radio to achieve

26% EBIT margins by FY15, driven by increased utilization, higher

rates, reduced royalties. Phase

III stations to have quicker break-evens.

RBN’s Radio has an EBIT margin of 15% in 9mFY12 at blended

utilization of 65% and blended Effective Rate of Rs 8,100 per 10

seconds for 45 stations. India has one of the lowest ad-spends on

Radio, leading to enormous potential for growth.

We expect utilizations of existing stations to improve to ~75%

levels. Post-phase III, radio will become a PAN India Media, hence

we expect the blended ERs to improve from Rs 8,100 per 10 seconds

to Rs 11,200 per 10 seconds for the existing 45 stations. The Phase

III stations have been assumed to generate slightly lower ER of Rs

11,500 per 10 seconds for additional 50-100 stations.

This would be comparable to the ER of market leader which is in the

range of Rs 9 to 10,000 for 32 stations currently.

The recent royalty reduction to 2% of revenues, though still under

contest, will further boost the bottom-line. We have taken, 4% for

our projections, in tune with international standards.

Phase III will allow ownership of multiple frequencies and networking

of operations, which will result in lower operational costs per station.

We expect Radio business to achieve an EBITDA margin of 39% by

FY15 and an EBIT margin of 26%.

Market leader ENIL has already achieved an EBITDA of 41% in

Q3FY11. ENIL had launched its first FM station in 2001.

TV Broadcasting to be EBIT positive in FY14

TV to break-even

by FY14 as existing channels

break-even and broadcasting profitability per se increases driven

by digitization

RBN already has 3 main channels on its portfolio in the cost range of

Rs 250-300mn. The channels will break-even within three years of

operations, driven by increase utilization and ad-rate improvements.

With digitization rollout, broadcasters will gain with increase in

subscription revenue share along-with a decrease in carriage costs

as digital cable will have much higher bandwidths.

Driven by industry and RBN’s operational improvement, we expect


Four-S Research 8

TV segment to break-even by FY14. The EBIT margin in FY14 would

be 2%, and will reach 30% in FY15 as more channels break-even.

Production already EBIT positive, BIG LIVE to break-even in

FY13

BIG Productions posted a positive EBIT of Rs 5mn in 9mFY12 in first

year of its operations. It will achieve EBITDA margins of 21% by

FY15.

BIG Live, with improved monetization per IP will break-even in FY13

with an EBITDA margin of 5% that will further improve to 14% by

FY15. RBN has discontinued its activation business in FY12.

OOH, will break-even by FY14 as trading takes traction, will achieve

EBITDA margins of 18% by FY15.

While maintaining a healthy balance-sheet, new growth from equity

RBN will use

equity route for funding TV operations and Radio Phase III auctions

As on Sep-11, RBN’s D/E stood at 1.0x, with Rs 1.7bn of debt on its

books. Out of this, Rs 1.2bn was ICD from promoters.

We expect FY12 Debt level to be similar.

RBN plans to be a low debt company and it will finance its growth –

Phase III auctions and channel launches mainly from equity.

RBN is already in talks with players to raise Rs 3-4bn of fresh equity

without diluting promoter’s stake.

Positive sector triggers ahead

Indian M&E set to grow at CAGR of 15% in 2011-16

Industry growth

drivers – current level of low ad spends, rural media consumption,

Digitization, FM Phase III and Digital media

penetration

India’s advertising to GDP ratio at 0.34% is almost half of the world’s

average of 0.75% and one-third of North America (~1%). Media

reach is also less than developed countries with TV households only

57% of total households.

Under-penetration, low ad-spends coupled with India’s demographics

- rising disposable incomes, youngest population, mobile penetration

position Indian ME industry for good growth ahead.

Indian M&E is expected to grow at CAGR of 15% in 2011-16 to reach

revenues of Rs 1.46tn by 2016. The growth drivers would be

increasing consumption in tier II and tier III cities, Digitization, FM

Phase III and growth of digital media.

Royalty ruling to benefit FM radio industry margins

The royalty ruling at 2% of revenue sharing, as against the earlier

fixed fee model, will result in higher operating margins and hence

quicker break-evens for Phase III stations.

Phase III to transform FM Radio a PAN India media

Phase III will

transform FM into

a mass media option on

FM Phase III will extend industry’s reach to 294 cities and increase

the frequencies 2.4x. The reach will hence increase to more than

90% of population from the 30% at present.


Four-S Research 9

advertiser’s media plan

According to FICCI – KPMG report, the ad-spends on radio which are

at 3.8% of media ad spend as of today, will increase to 5% of media

ad-spends by 2016. This will be the key industry growth driver

making Radio grow at 21% till 2016.

RBN has the potential to combine its Broadcasting and FM portfolio

to emerge as the player with maximum reach. RBN also has the

opportunity to create presence on the key 7 cities that create its

revenue differential with ENIL.

Phase III will allow networking of operations, that will lead to

substantial reduction in costs, especially for new stations and result

in faster break-evens.

Digitization, a reality now, to favour Broadcasters

Top-lines to be boosted by higher

ARPU share and bottom-line by reduced carriage costs

The Indian Government is actively pursuing Digitization of Cable and

Satellite with first phase of metros to be implemented by June 2012

and the entire country to be digitized by end of 2014.

Phase Deadline

I – 4 metros 30-Jun-12

II – Cities with population> 1mn 31-Mar-13

III – All urban areas 30-Sep-14

IV – Rest of India 31-Dec-14

This move will bring many benefits to the broadcasting industry:

Increase bandwidth as digital signal will be able to carry over

500 channels compared to Analog’s capability of 100+

channels

Correct reporting of subscription base will lead to increase in

subscription revenues

MSOs will gain traction over LCOs leading. The ARPU revenue

share to MSO’s, as well as broadcaster, will increase.

Broadcaster’s revenue share is expected to increase from the

current 10-15% to 30-35%.

As bandwidth increases, carriage cost per channel will go

down, leading to margin improvement for broadcasters.

Essentially, TV channels post-digitization will achieve break-even

faster. FICCI-KPMG estimates share of subscription revenues in TV

industry to increase to 69% by 2016.

As a new broadcaster, RBN stands to gain with quicker break-evens

courtesy top-line increase from subscription and bottom-line increase

from reduced carriage.

Regional Broadcasting gets significant

Regional TV now

accounts for more than half-of TV advertising volumes

Regional Broadcasting has gained traction over past years driven by

increased media consumption in tier II and III cities. According to

industry estimates, Regional advertising grew faster in 2011 at 15%

than national advertising.

Increasing share of Regional TV in Overall ad volumes.


Four-S Research 10

Source: ADEX India

Trading at attractive valuations

RBN is trading at a discount of 29% on EV/Sales multiple and 24%

on Price to Book multiple with respect to peer average.

Significant

discount of over 25% w.r.t. peer average

EV/ Sales EV/EBITDA P/E P/BV

Peer Average 2.7 11.7 18.1 3.2 RBN 1.9 PL PL 2.5 Discount -29% -24%

PL = Posted Loss ttm multiples, taken on quarter ending 31st Dec 2011, CMP 30th Mar 2012, NSE Prices

RBN is also trading lower than its historical multiples of EV/Sales and

Price to Book ratios.

31Mar’10 31 Mar’11 30 Mar’12

EV/ Sales (x) 3.3 2.9 1.9

P/B (x) NM 2.7 2.5

NM = Non Meaningful, as Networth was negative. Source: NSE, Four-S Research

Led by professional management team

Board an eclectic mix of Financial and Media veterans

RBN’s board consists of reputed Chartered Account and Finance

Industry’s professionals – Gautam Doshi, Anil Sekhri, Pradeep Shah

and D.J. Kakalia and Media veterans, Rajesh Sawhney and Prasoon

Joshi.

An able management team

Tarun Katial, CEO

RBN is led by Tarun Katial with over 15 years of experience in media

industry, with previous stints at Star TV and SET.

Tarun Katial has led RBN to grow from a pure radio company to a


Four-S Research 11

multi-media conglomerate. Tarun is the NewsCorp Achiever for Asia

and another for being included amongst the best in the India Today

30 under 30 list.

Asheesh Chatterjee, CFO

Asheesh Chatterjee is a Chartered Accountant and Cost Accountant

with 15+ years of experience including stints at Moser Baer, Sony

Entertainment Television, ICICI Prudential Asset Management &

Ernst & Young. He leads the Finance and Legal aspects including

fund raising, M&A and JVs whilst strengthening credibility and

reputation of the Company within the investor community.

Key Business Heads

Rabe Iyer: Business Head, 92.7 BIG FM

15 years+ experience including previous stints at DB, Saatchi

& Saatchi, Zenith Optimedia, Starcom MediaVest.

Anand Chakravarthy: EVP Marketing & Business Head, BIG Magic

12 years+ experience including previous stints at Lowe India

Simmi Karna, Business Head, BIG Productions

15 years+ experience, earlier Chief Revenue Office at Balaji

Telefilms

Praveen Malhotra: Executive VP, Sales

19 years+ experience including previous stints at Star TV,

Times of India, Radio City

Soumen Choudhury: Business Head, Technology

15 years+ experience including previous stints at Radio City

Meenakshi Roy: Sr. VP, HR

20 years+ experience including previous stints at L’Oreal

India, ABP Limited, Ties of India (NIE) & TATA Special Steels

Gururaja Rao: VP (Legal), Company Secretary

12 years+ experience including previous stints at TCIL, UTV,

McDonalds, Glaxo Pharmaceuticals & People Group

RBN, India’s youngest media company has a team with average age

of 27 years.


Four-S Research 12

Risk factors

Internal Factors

Delay in launch of channels, expansion

The company plans to expand its broadcasting portfolio with 2 JV

channels with RTL planned for FY13 and also has plans for SAARC

distribution and International distribution for MAGIC channel.

We expect RBN to have at least 9 main channels in its broadcasting

portfolio by FY15, up from the current 5.

Any delay in launch of these initiatives will result in loss of revenue

and profitability.

Mitigant:

RBN, till date, has demonstrated timely execution capabilities. Its

distribution agreement for RTL channels with Reliance Digital TV are

already in place. SAARC distribution has taken off with Sri Lanka.

Music royalties appeal still pending

RBN has stopped provisioning for royalties according to historical

agreements and is accounting on a revenue share basis as per the

recent ruling of Copyright Board. However, appeal filed against the

Copyright Board by PPL and some music Labels is still pending. An

adverse ruling could have negative impact on bottom-line.

Mitigant:

The revenue sharing arrangement for royalties is in line with

international norms. The company is acting in tandem with other

radio broadcasters to solve this issue.

External Factors

Regulatory risk

RBN is in a business where operational licenses are issued by the

Government. If for some reason the licenses or contracts are

cancelled, there could be loss of business.

Company’s revenue projections are based on FM Phase III bidding

happening in FY13 and rollouts by FY14. Any delay from Government

in auction of frequencies and/ or providing of infrastructure could

delay the future operations.


Four-S Research 13

Advertisement revenues depend on economic factors

RBN’s revenues are Advertisement dependant. Any economic

slowdown or event that causes advertisers to reduce radio spends,

may adversely impact future revenues and profits.

Mitigant:

RBN has started de-risking its broadcasting model through increased

focus on subscription revenues. It gets its revenues out of local

market, which is less prone to recessionary meltdowns. On the other

hand, it is continuously innovating into new inventories and new

markets to keep the top-line growing.


Four-S Research 14

Peer Benchmarking

Defining peer set

We have benchmarked RBN with listed Media players classified as

follows:

a) Print/ Radio presence: ENIL, HT, Jagran Prakashan, DB Corp

b) Broadcasting/TV production/ Radio presence: Zee TV, Sun TV

Network, TV 18 Broadcast

RBN has presence

across Broadcasting spectrum

Vertical Broadcasting Production Publishing Radio

Zee N+R N+R

Sun TV NW R R R N

TV 18 Brdcst N+R

DB Corp R R

HT N R

JPL R R

ENIL N

RBN N+R N+R N

N = National, R= Regional

Among the group listed above, Entertainment Network (India)

Limited or (ENIL) and RBN are the only radio-heavy players. For

others, radio is a small portion of their overall business.

By FY15, when RBN is a 100-150 FM network and a ~ 9 channels

broadcaster with a pan-India presence, RBN will be able to match

the overall value proposition of its peers. Its competitive advantage

would derive from being able to offer targeted regional campaigns to

advertisers across India. It will also have a pan-Indian footprint to

appeal to the advertisers for national campaigns.

Growing faster than peers

Above peer average in FY11, encores in 9mFY12

RBN grew at par

with industry leaders in FY11, and grew better in

9mFY12

Youngest media player, RBN is in the high growing segments – Radio

(15% growth in 2011) and TV (10.8% growth in 2011).

Revenue Growth in FY11, 9mFY12

FY11 Revenue YoY 9mFY12 Revenue YoY

Zee 30,136 37% 21,715 -2%

Sun TV NW 20,135 39% 13,304 -9%

DB Corp 12,600 19% 11,032 16%

HT 17,674 25% 15,143 15%

JPL 12,211 30% 9,341 12%

TV 18 7,998 33% 9,107 52%

ENIL 4,542 8% 2,156 *

Peer Average

27% 14%*

RBN 2,454 36% 2,315 30%


Four-S Research 15

Note: 1. 9mFY12 average excludes ENIL. 2. Sun TV and Jagran Prakashan’s 9mFY12 figures are standalone

The strategy has paid off with RBN growing at par with industry

leaders in FY11, and second highest in 9mFY12. It has performed

higher than peer average in both the periods.

9mFY12 revenues include a one-time royalty write-back of Rs 209mn

as other operating income. Even if we exclude that, RBN’s revenue

growth would be 19% YoY, still second highest in the peer group.

RBN is number 2 by revenues in Radio industry

RBN is a strong number 2 by revenues as well as listenership.

Annual revenues (Rs mn)

Source: Company reports

9mFY12 revenues (Rs mn)

Note: ENIL’s YTD FY12 revenues are income from operations as ENIL does not disclose segmental numbers. However since, ENIL has sold its outdoor business to BCCL, the revenues comprise mostly of radio operations. YTD FY11 revenues will include OOH revenues hence not comparable to YTD FY12

BIG Productions leaves a mark in its segment

Production revenues are one-

third of listed

leader’s

RBN’s BIG Productions has become one-third of the segment leader

(listed), Balaji Telefilms revenues in 9mFY12.

9m Fy12 Revenues Rs mn

Balaji Telefilms 991

BIG Productions 358

% of BT 36%

Source: Company reports


Four-S Research 16

Profitability lower than peers currently, to catch up

RBN currently in losses as it sets up its broadcasting business

Losses mainly on

account of new segment of broadcasting in 9mFY12

RBN’s EBITDA is a negative of Rs 4.6mn in FY11 and Rs 42.4mn in

9mFY12 as it is still setting up operations.

FY10 FY11 9mFY11 9mFY12

EBITDA Margins

Peer Average 32% 33% 35% 34%

RBN -7% 0% 3% -19%

PAT Margins

Peer Average 22% 18% 22% 19%

RBN -42% -22% -19% -36%

Note: Negative margins and TV18Broadcast excluded in average calculations.

FY11 losses reduced as Radio Business turned EBIT positive. 9mFY12

margins were impacted as RBN expanded its broadcasting operations

with new channel launches and increased distribution.

Going forward, TV Broadcasting will break-even by FY14, as

Channels launched in FY11-12 break-even. The new channels will

have relatively lower operational expenses, quicker Go-to-markets

and revenue traction as existing broadcasting set-up moves up the

learning curve. IP breaks-even in its second year of operations led

by increased monetization. OOH will turn EBITDA positive by FY14,

led by trading revenues traction.

Radio and Production are already EBITDA positive, hence we expect,

the company on the whole to be EBITDA positive by FY14.

Radio business turns a strong EBIT positive

RBN’s radio business turned EBIT positive with YTD FY12 margin of

15%, compared to a loss posted in FY10 and FY11, leading to a

positive ROCE of 10%.

EBIT margins of Radio peers

The oldest player, ENIL has margins

of ~23%, RBN Radio profitability will move up the learning curve to the same levels

FY10 FY11 9mFY12

ENIL Radio 8% 16% 23%**

RBN Radio -20% -6% 15% HT Radio -8% 17% -5% DB Corp Radio -5% -7% -2%

* Segmental revenues for Radio not available for Sun, Jagran, Radio City (MBPL not

listed) **ENIL does not disclose quarterly segmental numbers. However, after OOH sale in FY11, the 9mFY12 revenues would predominantly be radio revenues. Hence, total EBIT margin will be a close approximation to radio margin.

The market leader ENIL, is into operations since last 11 years,

having launched its first station in Oct-2001.

RBN and the rest of the peers (listed) launched their first stations

post Phase II in 2006. Being one of the youngest Radio as well as

Media company, being EBIT positive in 9mFY12 is quite

commendable.


Four-S Research 17

Balance sheet ratios will improve over FY12-14

Leverage higher than peers

Traditionally M&E sector has very low leverage, being a cash rich

industry. RBN is the youngest peer set company. Presently, its

leverage is higher than peer set.

D/E FY11 Sep-11

Zee 0.0 0.0

Sun TV 0.0 0.1

DB Corp 0.3 0.3

HT 0.2 0.3

JPL* 0.3 0.4

TV18 0.8 1.0

ENIL - -

Average 0.2 0.3

RBN* 0.5 1.0

*FY10 standalone

RBN will use the equity route to raise funding for future initiatives.

RBN’s Board approved issue of equity shares to Qualified

Institutional Buyers upto Rs 10bn in Sep’11.

Turnover ratios

Youngest media

player’s turnover ratios are only marginally lower than peer average

RBN’s average asset turnover ratios are marginally lower than the

peer group. As RBN’s broadcasting business is completely rolled out,

the ratios would improve.

FY11

Average Total Asset

Turnover

Average Working

Cap Turnover

Zee 0.7 1.9

Sun TV Network 0.7 2.7

DB Corp 0.8 3.5

HT 0.8 14.3

JPL* 0.9 5.6

TV 18 0.6 1.4

ENIL 0.9 3.3

Average 0.8 3.1

RBN 0.6 2.4

Publishing players have higher turnover ratios than Broadcasters.

RBN’s TA turnover is comparable to TV18 and slightly lower than Zee

and Sun TV.

RBN’s Working Capital turnover is better than TV18 and Zee and

marginally lower than Sun TV.


Four-S Research 18

9mFY’12 peer comparison

Revenue growth higher than industry peers

RBN has grown

second-highest in the peer group.

In losses, as TV operations are being set up.

Revenue Growth EBITDA Margin PAT Margin

9mFY12 YoY 9mFY11 9mFY12 9mFY11 9mFY12

Zee 21,715 -2% 27% 27% 19% 20% Sun TV

NW 13,304 -9% 82% 81% 39% 40%

DB Corp 11,032 16% 34% 25% 23% 14%

HT 15,143 15% 19% 16% 10% 9%

JPL 9,341 12% 33% 26% 20% 15%

TV18 9,107 52% PL PL PL PL

ENIL 2,156 * 18% 31% PL 17%

Average 14% 35% 34% 22% 19%

RBN 2,315 30% 3% PL PL PL

Source: NSE, Company data, Four-S Research

Revenue growth average excludes ENIL, Margins average excludes

SUN TV NW

RBN achieved revenue growth of 30% YoY in nine months ending

Dec-11. RBN’s growth was second highest in peer group.

This includes royalty write-back revenue of Rs 209mn in other

operating income. Excluding that YTD growth is 19% YoY, still second

highest in the peer group.

RBN’s YTD losses were Rs 821mn mainly due to Rs 673mn loss in TV

segment as the company is in the phase of launching new channel

operations.

Its Radio segment had a positive EBIT of Rs 238mn at a margin of

15% and Production has a positive EBIT of Rs 5mn at a margin of

1%.


Four-S Research 19

Valuation Comparison

Trading at Attractive Multiples

RBN is trading at

attractive

valuations, on

threshold of new

growth as Phase

III unfolds in few

weeks time

EV/ Sales EV/EBITDA P/E P/BV

Zee Ent 4.0 14.9 19.7 3.7

Sun TV NW 6.4 8.0 16.1 4.5

DB Corp 2.9 11.5 19.9 4.2

HT 1.8 11.2 16.2 2.4

JPL 2.8 11.7 17.8 4.0

TV18 Broadcast 1.5 474.9 PL 1.3

ENIL 3.3 12.5 18.7 2.6

Average 2.7 11.7 18.1 3.2

RBN 1.9 PL PL 2.5

*Valuation is based on TTM financials as of December 2011 and CMP of 30th Mar

2012; Consolidated results taken wherever available. Source: NSE, Company data, Four-S Research

RBN is trading at a discount of 29% on EV/Sales multiple and 24%

on Price to Book multiple with respect to peer average.

RBN is also trading lower than its historical multiples of EV/Sales

and Price to Book ratios.

31Mar’10 31 Mar’11 30 Mar’12

EV/ Sales (x) 3.3 2.9 1.9

P/B (x) NM 2.7 2.5 Source: NSE, Four-S Research


Four-S Research 20

RBN will get

valuations at par

with industry as it

evolves as 100+

FM stations and

9+ channels

broadcaster and

breaks-even

RBN plans to use equity route for funding to the tune of Rs 3-4bn in

FY13, while maintaining promoter’s stake. RBN will require funds for

launching more channels and Phase III auctions.

We have assumed Shareholder Funds to increase by Rs 3bn, half

from external investment and half from Promoter - ICD conversion

plus additional investment, if any.

We have taken the conversion price of Rs 60 per share, at a nominal

premium to current market price for the equity dilution in FY13. For

a total amount of increase in Shareholder’s funds by Rs 3bn,

outstanding shares will increase from 79.45mn to 129.45mn.

March 2013 target price – Rs 84

Over 50% upside

to the stock price

in next 12 months

Building the above dilution into projects, we arrive at a target price

of Rs 84 by Mar’13. This is based on an EV/sales multiple of 2x, and

FY13 turnover of Rs 3.1bn. We have used the EV/sales metric as till

FY13, EBITDA will still be much below stable values, while PAT would

be negative.

It is possible to apply more valuation metrics based on FY14

projections. The calculation below suggests a target price of Rs 114

for Mar’14.

Method Multiple Price Target

EV/ Sales (x) 2.0 136

EV/EBITDA 11.0 129

P/E 18.0 131 Average Price 132

Source: Four-S Research

Sensitivity to FY13 conversion price of Rs 60 per share

FY13 Conversion Price

60 70 80 85

Price Mar’13 84 89 93 95

Price Mar’14 132 140 146 149

If the conversion happens at the historical allotment price (Sep-

2010) of Rs 85 per share, the price target for Mar’13 would be Rs 95

and for Mar’14 it would be Rs 149 per share.

Valuation and Price Target


Four-S Research 21

RBN’s Business

India’s largest private FM network, now adding new verticals

A comprehensive

play in Broadcasting

(Radio, TV) and Content

Part of the Reliance Group, RBN is a emerging as a diversified

entertainment business with play across radio, television, intellectual

properties (IP), out of home (OOH) and television production. RBN’s

media brands are:

92.7 BIG FM – India's largest FM Network with 45 stations,

reaching over 42 mn Indians each week.

BIG CBS – 50:50 joint venture with CBS Studios

International, USA's No.1 TV broadcaster.

BIG MAGIC – India's first entertainment channel for Hindi

Speaking Belt

BIG RTL – 50:50 joint venture with the leading European

entertainment network RTL Group

BIG LIVE –Intellectual Properties

BIG PRODUCTIONS – Television content production house

BIG STREET – OOH properties

One of the fastest growing media companies

Second-highest

revenue growth in peer set

RBN achieved a revenue growth of 36% YoY to reach a turnover of

Rs 2,454mn in FY11.

Revenue FY10 FY11 FY11 Growth 9mFY12 YoY

Zee 21,998 30,136 37% 21,715 -2%

Sun TV NW 14,258 20,134 39% 13,304 -9%

DB Corp 10,578 12,600 19% 11,032 16%

HT 14,129 17,674 25% 15,143 15%

JPL* 9,419 12,211 30% 9,341 12%

TV18 6,035 7,998 33% 9,107 52%

ENIL 4,221 4,542 8% 2,156 **

Average

27% 13%*

RBN* 1,807 2,454 36% 2,315 30%

* FY10 standalone, (Rs Mn)

*Excludes ENIL, as 9m revenues not comparable YoY due to its OOH business sale.

RBN’s revenue growth was higher than peer set average of 27% and

at par with industry leaders Zee Entertainment and Sun Network. In

9mFY12, its growth was higher than the peer average and second

highest in the group.

RBN began its journey in 2006 with BIG FM

RBN started operations in 2006, after successfully bidding for 45

licenses in FM Phase II rollout.

A part of AdLabs, company now known as Reliance Mediaworks, it

demerged in FY09.

BIG FM – the largest private FM network in India


Four-S Research 22

RBN is the largest

private FM network in India

with 45 stations in operations.

RBN is the largest private FM player in India with 45 stations. RBN is

number 1 in 15 markets and a top3 player in 15 others. It has a

reach of 42.6mn listeners (IRS+RAM).

Top 5 private FM players

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Radio Mirchi Big FM Red FM Radio City Suryan FM

Source: Listenership in millions, IRS Q4, 2011

RBN’s BIG FM, started operations in 2006, whereas Radio Mirchi

(ENIL),Red FM and Radio City have been in operations 2001-02

onwards, being Phase I entrants.

Moreover, as FM becomes a PAN India medium post Phase III,

measurement vehicles will have an extensive reach in tier II and tier

III cities. This will better reflect BIG FM’s performance. At present,

the measurement vehicles are more oriented towards Metros and

some Key cities.

BIG FM’s performance in key markets

RBN’s absence in

7 key cities has led to revenue gap with market leader, a situation that maybe

rectified with Phase III

RBN is a leader in key markets of Bangalore, Kolkata and in Hindi

Speaking Markets. It has made significant progress in Mumbai

market.

Company # of stations

A+ A B C D Total

ENIL (Radio Mirchi) 4 9 1

1

7 1 32

RBNL (BIG FM) 4 4 1

0

2

4

3 45

The market leader by revenues, ENIL has one-third or 33-35% of

market share by revenues. ENIL, though has lower number of

stations, it has maximum presence in A and A+cities.

RBN is number 1 private FM in 15 cities, which are, Agra, Aligarh,

Allahabad, Amritsar, Asansol, Bareily, Bikaner, Chandigarh,

Guwahati, Gwalior, Jammu, Jodhpur, Mysore, Solapur and Goa.

In phase II FM auctions, RBN missed out 7 key cities of Pune,

Ahmedabad, Nagpur, Jaipur, Lucknow and Patna. RBN will rectify the

situation in Phase III bidding. While Pune and Ahmedabad will help

close the revenue gap with ENIL, Patna, Lucknow, Jaipur and Nagpur

will help the lead in the Hindi Speaking Belt.


Four-S Research 23

RBN’s Radio business has turned EBIT positive with Rs 238mn of

EBIT in 9mFY12, a margin of 15% and ROCE of 10%.

BIG FM Advertiser’s profile

A well-diversified advertiser’s

profile

RBN had 1,936 advertisers as on Q3 FY12. The advertisers are

equally spread among national, local and regional advertisers.

Building a niche TV broadcasting business

RBN enters into Broadcasting in FY11

De-risked entry in

TV broadcasting through JVs and acquisition

RBN entered into TV Broadcasting in Nov-2010, with the launch of

BIG CBS channel, the first out of its 50:50 JV with USA’s top

broadcaster CBS Studios International.

RBN has strategically targeted segments where it has potential to

emerge as a segment leader with low capital expenditure targeting

quick break-evens.

RBN is a 5 channel broadcaster currently

Within 14 months of first channel launch, RBN now operates a 5

channel bouquet of – BIG CBS Prime, BIG CBS Love, BIG CBS Spark,

Spark Punjabi and BIG Magic. RBN recently entered into distribution

of Bloomberg UTV, India's premier business news channel.

BIG CBS channels – Prime Love and Spark cater to audience with

urban sensibilities, while Spark Punjabi and BIG Magic cater to

Punjabi and Hindi speaking markets respectively.

RBN-CBS JV – BIG CBS Networks Ltd.

JV with US’s CBS Studios gives an

edge in English content

RBN entered into a 50:50JV in Aug 2010 with CBS Studio

International, a division of America’s top broadcasting house CBS

Corporation. The JV marks CBS’s entry into Indian subcontinent.

CBS Corporation is a mass media company present across US and in

key international markets. Its 2011 revenues were $14.25bn, with

net earnings of $1.32bn. CBS Broadcasting was #1 in US with

12.1mn viewers and 14 out of top 20 watched programs.

With this JV, RBN will offer viewers 25 hours of fresh programming

each week per channel, a strong USP in the English entertainment

segment.

BIG CBS channels perform well in short span of time


Four-S Research 24

RBN has targeted the top end of the SEC pyramid through its BIG

CBS and BIG RTL JVs for Tier 1 or Tier 2 cities. It targets urban

audiences or audiences with urban sensibilities who demand latest

international content. With BIG CBS JV, RBN has access to over

70,000 hours of content from CBS's vast program library.

BIG CBS Prime, a premium GEC targeting urban male

audiences

BIG CBS Love, India's first and only international Women's

entertainment channel

BIG CBS Spark, India's first international Youth entertainment

channel with music as central theme

BIG CBS Spark Punjabi, India’s first international Punjabi

channel

The first three channels are in Top 8 metros while Spark Punjabi

targets the high GDP rich states of Punjab, Haryana, HP and

Chandigarh.

Relative Market Share of BIG – CBS channels

BIG CBS Prime

Launch – Nov-10, TAM week10’12 (CS 15-24 SEC A – MALE, 7 metros)

BIG CBS Love Launch – Mar-11, TAM Wk13-14, 2012

(CS 15+ SECA – Female, 5Metros)

Prime and Love

are doing well in their audiences in a short span of

time

50%

27% 23%

BIG CBS Prime

Star World

Zee Café

56%

23% 21%

BIG CBS Love

Star World

Zee Café

Source: TAM Data, Week on Week GRP

BIG CBS Prime and BIG CBS Love channels are distributed to 42.5mn

households having recently inked a deal with Dish TV.

BIG CBS Spark

Launch - Apr-11, (CS 4 - 24 AB – MF, 5 metros)

Source: TAM, Week 13-14 2012, 8pm-midnight

BIG CBS Spark is a lower cost category channel compared to Prime

and Spark. This entertainment channel has music as its central

theme and its closest competitor is VH1.


Four-S Research 25

ADEX Data for English GEC for the month of Dec-11

Prime at par with

AXN, within over a year of launch

0

100000

200000

300000

400000

500000

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Zee Café Star world AXN BIG CBS NW


Source: Company data - ADEX

In the month of Dec-11, BIG CBS Prime, within 12 months of

operations, was at par with AXN by discretionary ad spends.

BIG CBS Prime’s has already launched international content like

Survivor, NCIS, CSI, The Defenders. It also has in-house produced

content like India’s Sexiest Bachelor, ‘BIG Wheels’ taking advantage

of its in-house division – LIVE.

BIG CBS Love has in-house produced content like ‘I Love Style’,

‘India’s Glam Diva’ and international shows like Ringer, Excused,

Next Top Model, Oprah Winfrey Show, Rules of Engagement,

Everybody loves Raymond.

BIG CBS Spark has content like Spark Livewire, Non Stop Pop, Hip Hop

Mcs and Power Chords in its stable.

Spark Punjabi launch in 2012, marks entry into Punjabi

market

First Punjabi channel from

RBN, becomes a category leader within a month of launch

The first regional channel out of the BIG CBS JV, Spark Punjabi was

launched on 14th Jan, 2012. It targets the GDP rich markets of

Punjab, Haryana, Chandigarh, and Himachal Pradesh. It is presently

distributed to over 6mn households in the region.

Spark Punjabi, within a couple of months since its launch, has

garnered 32% market share in Prime Time among Males in the

region.

Relative Market Share: TAM India: CS4+, Males, Punjab, 1mn+,

7PM-12AM, Week 10, 2012


Four-S Research 26

32%30%

22%

16%

0%

5%

10%

15%

20%

25%

30%

35%

Spark Punjabi 9xTashan Mh1 PTC Chakde

Launched Jan’12 Aug’11 Jun’07 Aug’08

With BIG FM, reaching 8 cities in the region and BIG Street’s 3000+

ambient media options across the markets, BIG CBS Spark Punjabi

offers marketers an integrated media opportunity like none other in

the region.

BIG RTL

With RTL JV, RBN

will target the lucrative market

for Realty and Action content

With a market capitalization of $15.5bn, RTL Group is number one in

TV and Broadcasting in Europe. It operates 40 TV channels and 31

radio stations across 10 countries. RTL is also the global leader in

content production with 9,500 hours of TV programming per year

across 54 countries with more than 300 programs on air world-wide.

With its BIG –RTL 50:50 JV, RBN will launch two channels in 2012:

An action & thrill genre based content for men (CS 15+ SEC

ABC Males) with both Hindi & English language audiences.

A full-fledged reality based channel in English language

The market potential can be judged from the fact that while there are

a number of Reality and Action programmes on TV, not a single

channel focuses solely on the same.

Channel Programming ADEX Disc Spend

CY 2011(Rs mn)

UTV Action Dubbed Hollywood movies 732

MTV Music + reality 252

Channel V Music + reality 398

UTV Bindaas Reality + Music 1371

BIG RTL has already signed a distribution deal with Reliance Digital

TV.

English GEC Content USP

RBN’s

international JVs will give it an unmatched programming edge

Access to CBS and RTL libraries with first right of refusal. Can also

leverage relationships that CBS and RTL have with other

International content providers for access to content. The Company

may launch local formats of the popular international content of CBS

and RTL Group (including Freemantle)

While the benefits are the not immediately visible, as CBS content

contracts with other channels (for programs like Indian Idol, etc)

expire, RBN will have the opportunity to become an English (non-

movie) Genre market leader with cutting edge, latest and unique


Four-S Research 27

programming. RBN will also develop local programming for this

audience segment.

All CBS and RTL content is HD ready – can be leveraged to launch HD

channels going forward.

BIG MAGIC, #1 in Hindi Speaking Markets

BIG Magic is RBN’s entry into the Regional GEC space targeting the

underserviced market of UP + MP + Bihar +Jharkhand, featuring

locally relevant content across humour, movies, music, reality shows,

Bollywood, action, non-fictional local connect programs and dubbed

programs.

It is a leader in the category, with highest GRP and share among all

Regional channels in Hindi Speaking Markets, as per TAM results. The

channel has a distribution of ~10mn households in the HSM.

BIG MAGIC delivered a 4 week unduplicated average reach of

12.5mn in Dec-11, 27% higher than Mahuaa and 17% higher than

Dabangg.

Relative Market Share of BIG MAGIC – Week 50’11 – CS 4+

(TAM)

BIG Magic is 50% cost-effective than regional print, hence will gain

at regional print’s cost.

Adex of Regional Hindi channels for Dec-11

Within 9 months of launch, BIG MAGIC has managed second highest

discretionary spend among Hindi regional peers in Dec, 2011. The

duration of Ads is lower than peer average, indicating that it has

commanded a premium price in the market and the potential growth

from increasing inventory fills.

BIG MAGIC + BIG FM, advantage RBN for HSM


Four-S Research 28

Regional TV + FM

+ OOH make RBN an attractive proposition for

regional and local advertisers

As BIG FM is a market leader in HSM cities of Agra, Aligarh,

Allahabad, Moradabad and Ranchi, BIG Magic + BIG FM becomes a

compelling propositions for advertisers, seeking to target HSM

without literacy as a pre-condition. RBN aims to make the most out

of it by focussing on Phase III frequencies in the region, especially

the missed out stations – Patna, Lucknow and Nagpur.

Distribution of Bloomberg UTV

RBN has included India’s premier Business News channel –

Bloomberg UTV in its Distribution portfolio. RBN will gain with having

a de-risked option into news segment with this deal.

With BIG RTL’s first channel launch on cards in July - August 2012,

RBN will be a 7 channel portfolio.

International distribution

International distribution a good addition to

top-line

RBN has the rights to CBS and RTL channels across SAARC region. It

has already started broadcasting the three CBS channels in Sri Lanka

since Feb 2012. The distribution is through region’s largest cable

operator – Lanka Broadband Network. The model is fixed license fee

model and will ensure regular revenues. RBN has plans to distribute

across the entire SAARC region including Bangladesh, Nepal, Bhutan,

Maldives, Pakistan and Afghanistan.

RBN also plans to distribute BIG MAGIC and local Indian

programming globally.

RBN’s plays in TV production, IPs and OOH

BIG Productions

BIG Productions and LIVE, cater to

top broadcasters in India apart from in-house synergies

BIG Productions has created over 950 hours of programming in a

short span of eighteen months since its launch right across genres

and for both National and Regional channels.

This includes, 'Sa Re Ga Ma Lil Champs' for Zee TV, 'Badmash

Company' for Colours, 'Comedy Ka Maha Muqabala' for Star Plus,

'Star One Horror Nights' for Star One, 'Pardes Mein Mila Koi Apna' for

Imagine, ‘Super Woman’ for ETV, 'Swapnachya Palikadle' for Star

Pravah, 'Moti Baa' for ETV Gujarati, 'Halla Bol' for ETV Marathi,

'Money Money' for Maa TV and more. Two shows have reached 500

episodes milestone – Motibaa and 'Swapnachya Palikadle.

BIG Productions will attract more third party programming as

international media houses start outsourcing programming to India.

BIG LIVE

RBN is India’s largest owner of televised IPs, over 30 IPs within two

years of inception. RBN has a multiyear contract with leading Hindi

GEC channel to produce industry award show.

In Dec-11, it announced second edition of BIG Star Entertainment

Awards, with leading Bollywood actors as performers. The first show

had ratings of 5.78 TVR, one of the highest ratings for a televised IP.

BIG Street – OOH

BIG Street, one of

the largest OOH RBN’s OOH division BIG Street is a complementary and tactical play


Four-S Research 29

plays in regulated space, is a market

leader in Delhi

to complete an advertiser’s bouquet. RBN operates in the regulated

space and leverages Group’s assets as inventory.

With a presence in 75 cities, 5000+ Media vehicles, 25 Million – Pan-

India reach, BIG Street is the largest OOH player in the country.

RBN has over 45% market share in key market of Delhi with key

properties of Delhi Metro Rail Corporation (DMRC), Delhi Airport

Metro Express (DAME) Line, DMRC LineII, DMRC Line III and DTTDC

(Delhi Tourism and Transportation Development Corporation) Street

Furniture Makeover project.

RBN has launched innovative Digital Pods to further increase

inventory in premium spaces like malls etc.


Four-S Research 30

Financial Analysis and Growth Outlook

Inventory increase led growth

PHASE III

stations, Broadcasting channels will add inventory

One of the youngest media companies, RBN will transform into 100-

150 network FM station and, ~9 channel broadcaster and a top

content house in an industry that is growing twice the country’s GDP.

We expect RBN’s revenues to grow at a CAGR of 51% over FY11-15

to reach Rs 12.8bn.

Projected Revenues

1,8072,454

3,134

5,045

8,936

12,807

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY10 (S) FY11 FY12p FY13e FY14e FY15e

Revenue (Rs. Mn)

Youngest media

company will see improvement in Ad Rates as

businesses gain traction

RBN has reached revenues of Rs 2,454mn in FY11. In FY12, it is

expected to grow 27% YoY to reach Rs 3,106mn. It has already

achieved a turnover of Rs 2,315mn in 9mFY12.

The FY12 growth will be driven by 20% growth in Radio revenues,

53% growth in OOH, as DMRC properties go to market and trading.

IP revenue has seen a decline, as RBN has discontinued its activation

business is now focused only on televised IPs. The new segments of

TV Broadcasting and Production are estimated to generate 5% and

14% of revenue share respectively, led by 3 new channels and

demand for TV content.

Changing revenue mix

FY11 revenue mix FY15e revenue mix

New segments, TV

and Production, to account for 30% and 12% revenue share by FY15.

Radio remains the biggest segment


Four-S Research 31

Radio to grow at 34% CAGR, triggered by Phase III auctions

Phase III, a

transformational trigger for Radio

RBN’s Radio business will transform itself from 45 stations to be 100-

150 FM station network, post FM phase III auctions. The Government

plans to start the bidding process as soon as June 2012. We expect

the entire process to be over in FY13 itself, with revenue generation

of new stations starting in early FY14.

Hence, we expect Radio segment to generate revenues of Rs

5,578mn by FY15. Out of this, 54% will come from Phase II stations

(45) and rest from Phase III stations. We have assumed RBN to bid

and win 2A+ frequencies, 5 A category frequencies, 10B category

frequencies and a minimum of 50 C and D category frequencies.

Key metrics/ assumptions FY12P FY15e

Blended Utilization Phase II stations 65% 75%

Blended Rate for 45 Phase II stations Rs8,100 Rs 11,200

Blended Utilization Phase III stations 52%

Blended Rate for 50-100 Phase III

Stations

Rs 11,500

Rate in Rs per 10 second

Radio will account for 44% of revenues in FY15, down from 71%

share in FY11.

RBN will be a ~9 channel broadcaster by FY15

Broadcasting

portfolio to double RBN will launch two channels through its JV with Europe’s top

broadcaster RTL Group. RBN will also launch more MAGIC-like

channels with own programming to cater to other regional belts –

like Gujarati, Marathi, Punjabi, Bengali etc. Hence, the main channel

portfolio of RBN will increase from 5 at present to ~9 by FY15.

Additionally RBN will maximize regional advertising potential by

launching feeds of the main channels. It will launch dubbed versions

of its Main English channels as well as launch HD feeds.

TV Broadcasting to gain traction, 30% of revenue share

RBN plans to

emerge as a leading regional as well as English GEC Play with 9 main channels by FY15.

As RBN launches 2 BIG RTL channels, 3 additional BIG MAGIC

channels and at least 8 more dubbed/ HD feeds of its Main English

GEC channels by FY15, it will garner a bigger share of the revenue

pie.

We expect TV Broadcasting to generate revenues of Rs 3,843mn by

FY15, accounting for 30% of RBN’s revenues.

FY 15 metrics # of channels + feeds

BIG MAGIC 4

BIG CBS (50% JV) 3 + 9

BIG RTL JV 2

Spark Punjabi is the first regional feed from BIG CBS Network.


Four-S Research 32

BIG Productions to account for 12% FY15 revenue pie

Increase in

broadcasting channels post digitization will

help this business

As number of broadcasting channels increase post digitization and

India gets recognized as an outsourcing destination for TV

programming, we expect BIG Productions to reach revenues of Rs

1,568mn in FY15. It will account for 12% of RBN’s revenues.

BIG LIVE or IP to account for 8% FY15 revenue pie

RBN already has developed ~30 televised IPs in a short time, a mix

of National, Local and In-house IPs. Its national IP like Star BIG

Entertainment received revenues of ~Rs 70mn in FY12. We expect

BIG LIVE to develop and own ~60 televised IPs by FY15 and witness

increased monetization per IP.

The IP segment will achieve Rs 1,080mn in revenues by FY15 and

account for 8% revenue share.

BIG Street to grow at 36% CAGR

As RBN’s DMRC property gets monetized in FY13 onwards, and RBN

starts marketing of external properties, we expect OOH to generate

Rs 727mn in revenues by FY15. Most of RBN’s DMRC contracts

extend beyond FY15.

Trading revenues will account for 30% of OOH revenues.

PAT turnaround in FY14, margins of 25% by FY15

Radio profitability, TV break-even to turn RBN PAT positive by FY15

RBN to be PAT positive by FY14

The radio business is already PAT positive. We expect TV and other

segments to become profitable by FY14, making the company PAT

positive.

-3%

-17%

-50%

-13%-14%

-27%

-59%

-27%

4%

-4%-12%

-6%

17%10%

22% 19%

31%26%

49% 49%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

EBITDA margin EBIT margin ROAE ROACE

FY11 FY12e FY13e FY14e FY15e

Radio business is already PAT positive

Radio will achieve

EBIT of 28% by FY15

RBN’s Radio business is already EBIT positive with margins of 15% in

9mFY12. The recent royalty reduction to 2% of revenues, though still

under contest, will further boost the bottom-line. We have taken, 4%

for our projections, in tune with international standards.

Phase III will allow ownership of multiple frequencies and networking

of operations, which will result in lower operational costs per station.


Four-S Research 33

We expect Radio business to achieve an EBITDA margin of 39% by

FY15 and an EBIT margin of 26%. Market leader ENIL has already

achieved an EBITDA of 41% in Q3FY11.

RBN’s Radio rates will grow closer to market leader

With FM emerging as PAN India medium with 1085 frequencies, it

will get re-invented as mass media vehicle. Hence, the ad rates for

the whole industry will also witness an increase. FICCI KPMG predicts

Radio’s share in total advertising pie increase from 3.8% in 2011 to

5% in 2016.

In particular, RBN’s Radio rates could close the gap as RBN

establishes presence in all key stations.

We expect utilizations of existing stations to improve to ~75% levels.

Post-phase III, radio will become a PAN India Media, hence we

expect the blended ERs of existing stations to improve from Rs 8,100

per 10 seconds for 45 stations to ~ Rs 11,200 per 10 seconds. The

current market leader gets range of Rs 9 to 10,000 for 32 stations

presently.

TV Broadcasting to be EBIT positive in FY14.

RBN already has 3 main channels on its portfolio in the cost range of

Rs 250-300mn. The channels will break-even within three years of

operations, driven by increase utilization and ad-rate improvements.

With digitization rollout, broadcasters will gain with increase in

subscription revenue share (~30% of monthly ARPU from 15% at

present) along with a decrease in carriage costs as digital cable will

have much higher bandwidths.

Driven by industry and RBN’s operational improvement, we expect

TV segment to break-even by FY14. The EBIT margin in FY14 would

be 2%, and will reach 30% in FY15 as more channels break-even.

Production already EBIT positive, BIG LIVE to break-

even in FY13

BIG Productions posted a positive EBIT of Rs 5mn in 9mFY12 in first

year of its operations. It will achieve EBITDA margins of 21% by

FY15.

BIG Live, with improved monetization per IP will break-even in FY13

with an EBITDA margin of 5% that will improve to 14% by FY15.

OOH, will break-even by FY14 as trading takes traction, will achieve

EBITDA margins of 18% by FY15.


Four-S Research 34

RBN to use equity for Capex, control debt, lower interest burden

Phase III auctions and rollouts will require additional expenditure to

the tune of Rs 2 – 2.5bn. This is assuming a one-time license fee

outgo of Rs 1.5bn, assuming RBN to bid for 50+ stations. The Phase

III will involve more C and D category stations, for which, license

fees would be lower. In some of the new D category stations, the fee

can be as low as Rs 0.5mn per station. (Ministry of Broadcasting)

License Fees assumptions Phase II Assumed new

(Phase III)

License Fees Rs 1.6bn ~Rs 1.5bn

Stations per Category

A+ - B 18 15+

C 24 15+

D 3 20+

Total 45 50+

RBN has already started the process to raise additional equity to the

tune of Rs 3-4bn where promoter will match external equity to

maintain stake.

Funding/ BS Assumptions

Rs Mn FY13

Equity transactions

External equity investment 1,500

Promoter’s ICD conversion/ investment 1,500

Shareholder’s Equity Dilution 3,000

Debt transactions

New Debt

Repayment 1,200*

* ICD Conversion

We have assumed that RBN will manage to raise at least Rs 3bn of

equity which will contain Rs 1.5bn from an external investor.

Promoter’s will get ICD converted and if required put more to match

the external equity.

BS Ratios improve over FY11-15

RBN’s D/E will increase to 1.4 in FY12 maintaining the debt level

disclosed as on Sep-11.

RBN will convert its promoter’s ICD of Rs 1,200mn in FY13. Hence,

D/E will reduce to 0.1x. As RBN gets PAT positive, it will repay all

external debt to be nearly a debt-free company in FY15 as per media

industry norms.


Four-S Research 35

RBN’s activity turnover ratios will improve over the years as

businesses mature and start breaking even.

0.5

1.4

0.1 0.1 0.0

0.6 0.7 1.0

1.2 1.2

2.6

3.9

5.1

7.1

8.5

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0


D/E Total Net Asset turnover Net Working Cap turnover


Four-S Research 36

Industry Analysis

Indian M&E sector – New growth begins

Indian M&E sector

will be a Rs 1.4 trillion industry by 2016

The Indian Media and Entertainment industry is a Rs 728bn industry

today reaching 146mn TV households, 181.91mn readers, 132mn

internet readers with over 623 channels, 82,000 newspapers and

893mn radio listeners.

The industry grew at a CAGR of 9% since 2007 to cross the 700bn

mark. It is at a threshold of accelerated growth of 15% in next five

years driven by consumption in tier II and tier III towns and digital

media.

Indian ME – Yesterday and tomorrow

Rs bn

Source: FICCI-KPMG 2012 report

The industry had a growth of 11.7% in 2011, and is set to grow at

13% in 2012 to reach Rs 932bn by the year end.

Low ad spend, attractive demographics

India has the second largest population in world with a median age

of 26.2 years. Its growing per capita consumption and the low media

penetration are strong drivers for future growth.

India’s advertising to GDP ratio is a low 0.34%, half of the world’s

average of 0.75%.

0.34%

0.97%

0.64%

0.44%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

India North America Western

Europe

China

Source: E&Y report


Four-S Research 37

TV to retain leadership, account for half of the pie

Five years ahead,

TV would be as

big as the whole

industry today

TV, the largest medium, currently accounts for 45% of industry

revenues, or Rs 329bn. FICCI-KPMG predicts TV to grow at CAGR of

17%, higher than the industry, to reach Rs 735bn in revenues by

2016.

Source: FICCI-KPMG industry report

TV industry grew 10.8% in 2011 to reach Rs 329bn. Advertisement

revenues contributed Rs 214bn or 35% of revenues while

subscription revenues contributed 65%.

The industry is expected to grow by 15.5% in 2012 to reach Rs

380bn by year end.

Under-penetration, Digitization, Regional to be future

growth drivers

TV penetration in India is still ~60% compared to 90%+ in

developed markets, leaving a good headroom for future growth. TV

penetration in India could touch 70% by 2016 driven by rising

incomes, and reducing cost of sets.

TV Penetration in 2011

Source: FICCI-KPMG industry report

Presently, Cable and Satellite reaches 81% of TV households. DTH is

growing fast driven by Government’s digitization mandate and

commitment.

FICCI-KPMG expects subscription revenues to grow from Rs 116bn in

2011 at CAGR of 14.7% to reach Rs 230bn by 2016. Share of

subscription revenues would increase to 69% in 2016. The growth

drivers here would be increasing demand for paid content leading to

higher ARPUs (expected increase from 160 at present to over 250 by


Four-S Research 38

2016) and increased penetration. Indian ARPUs are one of the lowest

globally – at $3.6 compared to $70 in US and $80 in UK.

The number of C&S households is expected to be up to 188mn out of

which 89% would be paid C&S.

TV viewership in India is also low ~150 minutes compared to

developed countries – US (300+), UK (240). As TV content improves

in quality and quantity, we can expect viewership times to increase.

DTH reach was a subscriber base of 37mn in 2011, a penetration of

31% in C&S base. FICCI-KPMG expects DTH base to increase to

86mn by 2016.

Digitisation game a changer for Broadcasters

RBN, and other

broadcasters, will

get revenue

benefits from

increase share of

subscriber’s ARPU

Broadcasters will

benefit from

decreased

carriage fee

The number of TV channels in India is ~623. With DTH expansion,

Digitisation and launch of new channel formats like HD, Pay

Channels, the number of channels will rise further leading to an

increase in TV inventory.

In 2011, TV ad revenues growth was only 10.3%, impacted by

economic slowdown, as the economy recovers, ad spend growth will

pick up. TV Advertisement revenues are expected to grow at a CAGR

of 18.7% to reach Rs 505bn by 2016.

The Government of India has passed the Digitization bill in Dec

2011, fixing a mandate for complete digitization by December 2014.

C&S will move to DAS (Digital Addressable System) for distribution

and will transmit only digital signals. TRAIs implementation of

National Broadband plan by 2013 will be an enabler for the same.

The phase-wise deadlines are:

Phase Deadline

I – 4 metros 30-Jun-12

II – Cities with population> 1mn 31-Mar-13

III – All urban areas 30-Sep-14

IV – Rest of India 31-Dec-14

Digitization will bring all around benefits for the TV industry. The

consumers will get better quality reception and increased choice of

channels.

Dynamics of distribution industry will shift in favour of MSOs getting

control over LCO. The subscription ARPU share to MSOs and

Broadcasters will witness a significant increase post-digitization.

ARPU Revenue Share

Stakeholder Pre-Digitization Post 2016

Consumer ARPU 100% 100%


Four-S Research 39

LCO 65-70% 35-50%

Distributor 5% 0-5%

MSO 15-20% 25-30%

Broadcaster 10-15% 30-35%


With ARPUs expected to increase 1.5x to Rs 254 by 2016, and

broadcaster’s share increasing 2-3 times, we expect Broadcaster’s

subscription revenues to increase at least 3.5x by 2016.

FICCI-KPMG expects subscription revenues to account for 43% of

Broadcasting revenues by 2016, compared to only 30% in 2011, an

increase of ~2x.


Carriage fee will decline over next 2-3 years as DAS will give a

bandwidth of over 500-600 channels compared to the limited

bandwidth (~100 channels) of analog cable.

Growth of the regional TV market

Consumption in regional markets account for 73% of Indian Urban

consumption (EY). Advertisers are shifting to regional media to

capture this consumption.

Regional advertising grew at 15% in 2011 to reach XXbn. The

growth was higher than national advertising growth. Regional

industry is less affected by economic slowdown.

Regional TV was the largest genre having accounted for 33.4% of

viewership in 2011, compared to 27.4% by Hindi GECs.

Regional broadcasting has gained traction with many national players

launching dubbed versions or acquiring regional channels (UTV –

Action Telugu, TV18 – ETV, Discovery Tamil), etc.

Hindi language accounts for 50% viewership share, followed by

English (10%) and Tamil (10%).

Radio among the highest growing segments

Radio will become

a truly PAN India

FICCI-KPMG predicts the top 3 fastest growing segments to be

Digital Advertising (30% CAGR), Gaming (29% CAGR) and Radio


Four-S Research 40

medium post

Phase III rollouts

(21% CAGR).

Radio is the only traditional media in the top 3 growing at par with

new age media models.


The Indian Radio industry grew 15% in 2011 to reach revenues of Rs

11.5bn. The industry witnessed ad rates increase of 7-10% and

improved utilization.

Top 8 metros have a utilization rate of 70-85% whereas non-metros

have utilization 0f 50-65%. The growth is faster in non-metros as

utilization increases.

FICCI-KPMG expects Radio to grow at a high CAGR of 21% to reach

Rs 29.5bn by 2016.

The cheapest media set for an explosive growth post

Phase III

Current ad spend on radio in India is 3.8% in India compared to 10 –

12% globally. FICCI-KPMG expects ad-spend on radio to increase to

5% by 2016 driven by phase III rollouts and local media

consumption increase.

Radio is the only medium that has no prime time like TV or does not

have a shelf life like a newspaper, is a good reminder medium;

caters to the max TG across all SECs. The radio growth will also be

driven by increase in listenership – as more people will listen to radio

from their cars and mobiles, an option other media can hardly offer.

Reach of radio would grow to 90% of India post Phase III (higher

than TV and print). Now players can aim to have the reach that All

India radio enjoys and the emergence of larger players with higher

reach will enable the Radio industry to pursue better measurement

across more cities which will showcase the ad potential for the radio

industry.

One can easily expect listenership also to grow over 3 times. This will

make Radio a very attractive medium for advertisers. The industry

players expect the ad rates to grow 2 to 3 times in proportion to

listenership.


Four-S Research 41

Set to evolve into the most potent national advertisement platform

with Lowest Cost Per Thousand

Phase III changing the game

Phase III will address many challenges of Radio industry.

839 new FM channels covering all cities with population more

than 100,000.

227 new cities.

Ownership of multiple frequencies allowed subject to not

more than 40% of total channels in the city.

Networking allowed: This will help Radio players to reduce

Capex and Operational costs for smaller stations as they will

be able to operate a hub-and-spoke model.

News, Sports and Current Affairs Allowed: Opportunities for

additional content, Varied content

License Period & M&A: License period increased to 15 years

from current 10 years; M&A allowed - Promoters allowed to

sell stake after 3 years of operation.

FDI increased from 20% to 26%.

The process is expected to be kicked off as early as June 2012.

With Phase III, FM will reach most of India’s population and will

occur as a national mass media on advertiser’s media plan. On the

one hand, owning multiple frequencies will allow increase in

inventory especially in places and periods when inventory utilization

crosses 100%. On the other hand, costs would get rationalized

through a longer license period, networking of operations and

relaxed norms for M&A.

Music Royalties verdict: Higher margins

Past year has been a victorious year for Radio industry with regards

royalties. In July 2011, industry won a case against Indian

Performing Right Society Limited (IPRSL) scrapping the IPRS

royalties to be paid on radio broadcasting.

Copyright Board Verdict has opted for fee based on a revenue based

system. Many music companies have already moved to 2% revenue

share agreements. Others like T-Series are still fighting, but sooner

or later we would see radio industry moving towards International

norms of 0.5% to 4% revenue share arrangements for royalties.

This has had a direct impact on Radio margins, as earlier, royalties

accounted for as high as 7-10% of revenues.

This will also mean that the new radio stations launched in phase III

will achieve break-even much faster through revenue-share as

against fixed royalties.


Four-S Research 42

Content production

With implementation of digitisation, bandwidth constraints or earlier

analog cable will go away leading to a significant increase in number

of TV channels, both national and regional. This will increase the

demand for original programming proportionately.

India also offers cheaper production costs compared to developed

countries. To take advantage of the cost arbitrage, international

firms like Endemol and Freemantle have started producing local

programming.

Industry is moving to western model of production houses owning

and syndicating IP

Outdoor

The OOH industry was impacted by the economic slowdown, growing

at 7.6% in 2011 to reach Rs 17.8bn.

FICCI-KPMG expect the growth to be better going forward at 10%

CAGR and expect the segment to reach Rs 29bn in revenues by

2016.

The share of Transit Media (Airports, Metros, trains etc.) has

increased from 22% in 2009 to 30% in 2011.

The segment growth will be driven by ad-spend revival and

increased inventory of regulated spaces like malls, transit

infrastructure, etc.


Four-S Research 43

Profit & Loss Statement

FY10* FY11 FY12e FY13e FY14e FY15e

Income from operations 1,807 2,454 3,134 5,045 8,936 12,807

Direct costs 788 1,148 2,510 3,623 5,369 6,815

Personnel cost 450 561 524 579 785 863

SGOE 732 809 551 652 1,239 1,200

Total direct expenses 1,970 2,517 3,585 4,853 7,392 8,878

EBITDA -162 -64 -451 192 1,544 3,929

Depreciation & Amortisation 364 363 394 405 632 650

EBIT -526 -426 -845 -213 912 3279

Other Income 41 59 30 50 89 128

Interest charges 275 172 203 155 121 91

PBT -761 -539 -1,018 -318 940 3,376

Taxes - -3 - - - 210

PAT -761 -537 -1,018 -318 940 3,166

*Standalone (Rs mn)

Segmental Revenue Break-up

Revenues FY10* FY11 FY12e FY13 FY14 FY15

Radio 83% 71% 67% 43% 47% 44%

OOH 9% 9% 10% 10% 7% 5%

IP 8% 19% 8% 12% 9% 8%

Production 0% 0% 14% 16% 13% 12%

Television 0% 0% 5% 18% 24% 30%

Other segmental 0% 2% 3% 2% 1% 1%

Less Inter-segmental 0% 0% -6% -1% -1% -1%

Income from operations 100% 101% 100% 100% 100% 100%

Financial Annexure


Four-S Research 44

Common Size Metrics FY10 FY11 FY12e FY13e FY14e FY15e

Income from operations 100% 100% 100% 100% 100% 100%

Direct costs 44% 47% 80% 72% 60% 53%

Personnel cost 25% 23% 17% 11% 9% 7%

SGOE 40% 33% 18% 13% 14% 9%

Total direct expenses 109% 103% 114% 96% 83% 69%

EBITDA -9% -3% -14% 4% 17% 31%

Depreciation & Amortisation 20% 15% 13% 8% 7% 5%

EBIT -29% -17% -27% -4% 10% 26%

Other Income 2% 2% 1% 1% 1% 1%

Interest charges 15% 7% 6% 3% 1% 1%

PBT -42% -22% -32% -6% 11% 26%

Taxes 0% 0% 0% 0% 0% 2%

PAT -42% -22% -32% -6% 11% 25%


Four-S Research 45

Balance Sheet

FY10 FY11 FY12e FY13e FY14e FY15e

Sources of Funds Share Capital 231 397 397 647 647 647

Reserves and Surplus 1,440 4,097 4,097 6,847 6,847 6,847

P&L Balance -1,737 -2,273 -3,291 -3,609 -2,668 498

Shareholder's funds -66 2,221 1,203 3,885 4,826 7,992

Loan funds 3,066 1,194 1,708 508 508 8

Total Liabilities 3,000 3,415 2,911 4,393 5,333 8,000

Application of funds Gross Block 3,529 3,624 3,722 3,817 6,468 6,628

Less accumulated depn/amort 1,109 1,492 1,885 2,290 2,922 3,572

Net Block 2,420 2,133 1,837 1,527 3,546 3,056 WiP including capital advances 66 77 85 93 102 113

Goodwill - 174 174 174 174 174

Investments - 10 10 10 10 10

Current Assets Inventory 3 101 73 150 186 243

Debtors 705 834 814 1,179 2,077 2,991 Cash and Bank Balance 121 87 123 1,298 259 2,862

Loans and Advances 523 986 1,083 1,935 2,448 3,509

Total CA 1,353 2,009 2,093 4,561 4,970 9,605

Current Liabilities CL 812 956 1,253 1,935 3,428 4,912

Provisions 27 31 35 38 42 46

Total CL 839 987 1,288 1,973 3,469 4,958

Net CA 514 1,021 805 2,588 1,501 4,646

Total Assets 3,000 3,415 2,910 4,393 5,333 8,000

(Rs mn)


Four-S Research 46

Cash Flow Statement

CFS FY11 FY12e FY13e FY14e FY15e

PAT -577 -1,018 -318 940 3,166

Add Depreciation / Amortisation 363 394 405 632 650

Add Interest Expense 172 203 155 61 31

(Inc)/Dec in Sundry Debtors -201 21 -365 -898 -913

(Increase)/ Decrease in Loans and Advances -369 -97 -852 -513 -1,061

(Increase)/Decrease in Inventories -54 28 -77 -36 -57

Increase/(Decrease) in Trade/Other Payables -10 301 685 1,496 1,489

Cash Generated from Operations -677 -168 -367 1,682 3,305

Provision for doubtful debts 94 - - - -

Operating Cash-flow- A -583 -168 -367 1,682 3,305

Purchase of Fixed Assets -50 -106 -104 -2,660 -170

Purchase of Investments -254 - - - -

Cash from Investing activities- B -305 -106 -104 -2,660 -170

Proceeds from Share Capital 2,823 - 3,000 - -

(Repayment)/ Proceeds of Secured Loans

-2,020 513 -1,200 - -500

Interest Paid -20 -203 -155 -61 -31

Cash from Financing activities- C 784 310 1,645 -61 -531

Change in Cash= A+B+C -103 36 1,175 -1,039 2,603

Opening Balance 121 87 123 1,298 259

Closing Balance 85 123 1,298 259 2,862

(Rs mn)


Four-S Research 47

Ratios


Per Share Numbers

EPS -7 -13 -2 7 24 CEPS -2 -8 1 12 29 Book Value per Share 26 13 29 36 60

Profitability

EBITDA margin -3% -14% 4% 17% 31% EBIT margin -17% -27% -4% 10% 26% Net margin -22% -32% -6% 11% 25% ROAE -50% -59% -12% 22% 49% ROACE -13% -27% -6% 19% 49%

Growth Ratios

Revenue growth 36% 28% 61% 77% 43% Activity/Turnover Ratios

Total Asset turnover 0.6 0.7 1.0 1.2 1.2 Net Working Cap turnover 2.6 3.9 5.1 7.1 8.5 Average Debtors turnover 2.9 3.8 5.1 5.5 5.1 Debtor Days 124 96 72 66 72 Average Payables turnover 2.6 2.8 3.2 3.3 3.1 Payables Days 142 129 115 110 119

Current Ratio 2.0 1.6 2.3 1.4 1.9 Quick Ratio 1.9 1.5 1.7 1.4 1.4 Cash Ratio 0.1 0.1 0.7 0.1 0.6

Solvency

Debt Equity 0.5 1.4 0.1 0.1 0.0 Leverage Ratio 1.5 2.4 1.1 1.1 1.0 Interest Coverage -2 -4 -1 15 106

Valuation Ratios

P/E -11.0 -4.2 -22.0 7.4 2.2 P/BV 2.9 4.1 1.9 1.5 0.9 EV/EBITDA -110.0 -13.0 32.4 4.7 1.8 EV/Sales 2.9 1.9 1.2 0.8 0.5


Four-S Research 48

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http://www.four-s.com/

Date post:	20-Jan-2015
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Company report reliance broadcast network 17th april 2012

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