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Media and Entertainment Q3FY22 preview by Karan Taurani

Technological innovation and more internet access will continue to affect how Indians consume material; there will be a greater market for localised content, and different business models will emerge, says Senior Vice President, Research Analyst (Media, Consumer Discretionary & Internet), Elara Capital.

According to reports, India's media and entertainment (ME) sector would be the fastest expanding in the world in terms of consumer and advertising spending and will be worth over Rs 4 lakh crore by 2025. The sector is expected to develop at a CAGR of 10.75 per cent over the following four years, resulting in a Rs 4,12,656-crore industry by 2025, according to PwC

"TV segment, which was the first traditional medium to grow YoY last year (Q3FY21) backed by festive, is expected to continue its growth trajectory," said Karan Taurani, adding that ad spends for SUNTV/Z/TVT are slated to grow 12% /9%/8% YoY. On the profitability expect it to be muted for SUN TV with higher content cost; profitability for other genres too will remain in a narrow band due to higher content costs. News genre to generate major traction with the viewership spike on the pandemic. The merger of Zee with Sony to help the broadcaster with market leadership with comprehensive content offerings. This further enhances its sports offerings and acquiring broadcast rights which we believe to be a major facelift competing with other OTT players," he adds.

Further ahead on exhibitors, he added: "Multiplex to outperform previous earlier quarter post-pandemic and generate positive cash flow. With the launch of Sooryavanshi / Spider-Man / Puspah, the average occupancy has revived sharply in this quarter (Q3FY21) towards almost 60% of pandemic levels; large content was to drive recovery towards pre-COVID levels in Q4; however, restrictions around the third wave will negatively impact recovery process which may be delayed by 3-6months. Other metrics like SPH and ATP have largely come back to pre-COVID levels and have also seen growth for selective content and markets. The footfall in comparison to Q3 FY 20 has substantial growth with the opening of multiplex and a single screen in most of the markets, as this is expected to be the best quarter for exhibitors since the outbreak of COVID. Ad. Revenue will be the last one to recover due to high exposure towards local advertising. We estimate an EBITDA margin of 26.3% (Q3 FY 22) PVR and 23.8% (Q3 FY22) for Inox, which is still much lower (~500-700bps) as compared to the peak in pre-COVID times," he says.

Further with caution of note with a resurgence of COVID case and the reinforcement of restriction across states, could make Q4 another quarter with tepid growth.

On radio, he remarked: "This medium is estimated to report the slowest growth vs other forms of traditional media, as we expect recovery back to pre-COVID levels for this medium to be slightly elongated. The viewership is more skewed to specific population channels and with WFH we estimate viewers to have shifted to wider horizons; COVID has accelerated shift towards digital, which has further negatively impacted consumption patterns for this medium. We expect ENIL/MBL to report ad. revenue growth of 4.3%/18% YoY (35.2%/31.1% lower as compared to Q3FY20 – pre-pandemic levels); in terms of ENIL, the non-radio segment remains to be muted as revenue recovery remains to be a mere -34.8% (vs pre-pandemic levels). ENIL/MBL are estimated to report a better EBITDA margin QoQ as it will grow 1062bps/565bps, however, margins remain to be much lower as compared to pre-COVID levels due to lower revenue."


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