MUMBAI: From a service that launched in the late fifties out of the studios of All India Radio in Delhi to a sprawling industry, television has indeed evolved as the most prominent medium in India for spreading information, broadcasting news and delivering entertainment.

Overview of the cable industry

According to the TRAI 2013 report, of the Rs 80,000 crore plus media industry, television amasses a whopping 42 per cent with estimated revenues at Rs 34,000 crore.

Considering that television penetration in India is still at approximately 60 per cent of total household as reported by TRAI, a lot of scope for volume growth prevails within the sector.

The television industry value chain consists of content production, broadcasting and distribution. The digitisation of cable television, driven by the recent government of India legislation, however is expected to alter the distribution system. Broadcasters, multi-system operators and DTH operators are expected to benefit the most from digitisation, while the bargaining power of local cable operators (LCOs) is expected to decline substantially.

While TV channels are distributed through cable TV, Direct to Home (DTH), terrestrial and Internet Protocol Television (IPTV) networks, majority of the distribution is through cable TV and DTH platforms.

Comparative analysis of top three TV Cable market players

Market Share

As per TRAI?s latest report, the top three companies leading the Indian Television cable market include Hathway Cable and Datacom Ltd boasting a market share of 23.5 per cent of the phase I and phase II digitised market, which itself is less than 20 per cent of the total C&S market. The Mumbai based Hathway Cable spreads its reach across 140 cities with over 71 analogue and 20 digital head ends acrossIndia.

Following Hathway is the New Delhi head quartered DEN Networks Ltd biting an 18.5 per cent of the entire market and commanding 112 analogue and 17 digital head ends. DEN reportedly added 5 million subscribers in phase I and phase II adding over 1.07 million STBs during the financial year 2013.

At the third spot is Essel group?s Siticable Network Ltd with 11 per cent market share across 3 million digital subscribers and 56 analogue and 14 digital head ends under its wing.

Revenues

Hathway Cable reported quadruple digit revenue at Rs 1132.52 crore in FY-2013, a rise of 11.9 per cent year on year. Its Q4-2013 revenues stood at Rs 231.18 crore, a leap of over 70 per cent as against last year?s corresponding Q4-2012.

The 2007 founded DEN Network reported revenues Rs 700.91 crore in FY-2013, jump of over 61 per cent as against FY-2012. Its Q4-2013 revenues at Rs 271.43 crore too surpassed its peers over a considerable margin.

Although analyst say that these are one time revenues accruing due to STB activations courtesy digitisation, the company officials claim that the growth will be more than maintained owing to the fact that a lot of its analogue subscribers need to be digitised.

DEN claims an average revenue received, net of all taxes and expenses, from the LCOs at Rs 52 per subscriber, however with gross billing and subscriber packaging on its agenda, these per subscriber revenues are deemed to shoot up.

Following these, the Noida based Siticable Networks reported annual revenues at Rs 469.63 crore, as against Rs 342.82 crore in the immediate last fiscal, up by nearly 37 per cent. Q4-2013 revenues stood at 141.28 crore, as against Rs 86.51 crore in Q4-2012. It reported a massive Rs 104 per subscriber revenue, net of all taxes and expenses, from the LCOs.

Expenses, profit from operations, EBITDA

Expenses of Hathway Cable surpassed the four-digit mark reporting at Rs 1024.74 crore, as against Rs 988.73 crore in the financial year- 2012. The efficiency in curtailing its expenses has paid off well, with its profit from operations at Rs 107.78 crore, highest amongst the three.

DEN Network?s expenses in FY-2013 stood at Rs 615.25 crore, as against Rs 417.62 crore in FY-2012. Its expenses for Q4-2013 at Rs 216.9 crore remain the highest amongst the three in consideration. However its increase in revenues has over-shadowed this burden, considering the expansion of its EBITDA margin to 26.2 per cent in FY-2013 as against 17.3 per cent in FY-2012.

Siticable Networks however still hasn?t broken even with its expenses mounting to Rs 453 crore in FY-2013 as against Rs 375.47 crore in FY-2012. In Q4-2013, its expenses stood at Rs 145.68 crore as against Rs 97.21 crore in the corresponding quarter Q4-2012. However, Siticable?s EBITDA margin too expanded to 18 per cent in FY-2013 as against five per cent in FY-2012.

Net Profits/EPS

Hathway Cable reported a net profit of Rs 15.89 crore in FY-2013 as against a net loss of Rs 49.18 crore in FY-2012. The quarter ending 31 March 2013 exceeded expectations with a Net profit standing at Rs 28.27 crore, as against a loss of Rs 6.79 crore in the corresponding Q4-2012.

DEN Network has considerably improved, especially if one looks at its net profits for FY-2013 at Rs 44.96 crore as against Rs 7.87 crore, acquiring a leading position in the bottom-line. DEN?s Q4-2013 bottom line profits stood at Rs 17.33 crore as against Rs 4.76 crore in the corresponding Q4-2012. On a quarter on quarter basis, DEN?s net profit has marginally jumped to Rs 17.17 crore even with Q4-2013 witnessing provisions for tax rise by Rs 6.79 crore and exceptional onetime expenses on account of impairment of investments to the extent Rs 3.12 crore.

Siticable?s bottom-line showed an improvement in narrowing its loss to Rs 64.07 crore in FY-2013 as against a net loss of Rs 91.34 crore. Q4-2013 however didn?t quite continue the upward trend with net loss rising to Rs 27.81 crore as against Rs 24.34 crore in Q4-2012.

Balance Sheet

Hathway Cable reported a leveraged balance sheet for FY-2013 with its long term borrowings shooting up to Rs 669.08 crore as against Rs 269.95 crore in FY-2012. Its debt equity ration also stands at 0.9:1 with its balance sheet closing at Rs 2680.78 crore as against Rs 1776.51 crore in FY-2012.

DEN network?s consolidated balance sheet closed at Rs 1792.64 crore as on 31 March 2013 as against (FY-2012-Rs 1150.96). DEN recently received over Rs 900 crore through an investment by Goldman Sachs and other QIBs. Its debt equity ratio stood at 0.73:1 for FY-2013.

Siticable (although it boasted a healthy consolidated balance sheet for FY-2013 at Rs 1195.69 crore as against Rs 563.93 crore in the last fiscal) seems to be leveraging itself heavily with its s long term borrowing doubling to Rs 778.60 crore during the year ending 31 March 2013.

Market movement

With Phase I and Phase II of digitisation successfully settling in, the stock price movement of these three TV cable service-providers outperformed the benchmark BSE SENSEX by significantly. The BSE sensex reported a 22.2 per cent growth in the financial year 2012-2013.

Hathway Cable recorded a growth over 68 per cent as on 31 March 2013 as against the corresponding period in the last financial year. The stock is currently trending in the range of Rs 296-259 after recording a 12 month high at Rs 306 around 20 December in 2012.

DEN Networks provides its investors a reason to smile with its stock having grown by over 84.5 per cent year on year on 31 March 2013 as against last fiscal year (31 March 2012). Its share hit a 12 month high of Rs 238.35 on 25 January 2013 while it is currently trading in the range of Rs 216 to Rs 184.

What grabs our attention is the share price movement of Siticable?s stock which magnified nearly 212 per cent as on 31 March 2013 as against the corresponding period in the last financial year 2012. Its share is trading in the range of Rs 21.50-26.80, comparatively down from its 12 month high of Rs 30.30 on 11 January 2013.

Commenting on the overall cable segment, Axis Capital executive director Salil Pitale says: ?Digitisation is leading the much awaited transformation in the cable distribution space and is expected to curb the leakage in the value chain to result in fair distribution of revenues across all stakeholders. Cable MSOs have demonstrated excellent traction in Phase I & II in seeding STBs. While addressability is yet to be fully enforced, the overall progress has been encouraging. The steep run up in the stock prices of listed cable MSOs in recent times indicates the rejuvenated investor interest in the space.?

The author of the article is a budding financial analyst, and the views expressed are his own and indiantelevision.com does not subscribe to it.