As Market Loses Heat, NDTV Limited Is a Stock to Bet On

Substantial savings across all categories were clearly visible including legal & professional expenses, rent, travel, taxi hire, vehicle running maintenance etc. in FY21. Strong market presence and favourable sectoral dynamics should act as principal growth enablers. Operating and administrative expenses saw a decrease of INR4.31 million in comparison to 2020. This stands in continuation with focus on cost rationalization.

Overview of New Delhi Television Ltd 

New Delhi Television Limited is categorised as a pioneer in India’s news television and digital journalism. The company was founded in 1988 by Radhika Roy and Prannoy Roy. Now, the company is most watched, credible and respected news network in this country and a leader in Internet. Over years, the company has seen expansion of brand portfolio to seize opportunities in ‘beyond news space’ and it has step-down subsidiaries: NDTV Convergence and NDTV Worldwide. NDTV has offices and studios across India which house this country’s most modern and sophisticated production, newsgathering and archiving facilities.

The company has award-winning production teams and creative teams. The company was rated India’s Most Trusted TV Media Brand in TRA Trust Brand Report, India Study 2016. In 2014 and 2015, this company was rated Most Trusted Band across media forms in India, consisting newspapers, radio, web sites and television.

Growth Enablers of New Delhi Television Ltd 

• Best-Ever 1Q: NDTV Group has declared its best 1Q in over a decade as it saw a profit of INR16 crores. Group’s television company - NDTV Limited – saw best 1Q in its history as there was a profit of INR13.9 crores. NDTV Convergence delivered another profitable quarter, with 41% growth in revenue over 1Q21. This is a digital arm of this group. That’s not all! Group even saw some improvements in balance sheet with total liabilities coming down by INR23 crores in this quarter. Bank borrowings fell INR8.7 crores. Given economic landscape, management of group should control expenses. Focus should be on ensuring that its financial position strengthens further. During FY21, standalone total income of the company fell to INR240.72 crore in comparison to total income of INR241.84 crore during FY20. The company saw best-ever annual result, with an all-time-high profit of INR37.99 crores. Significant part of profit was a result of sale of the company’s stake in Red Pixels Ventures Limited. This company owns and operates gadgets360.com, that is being counted as India’s largest tech site. Business recovery should be dependent on how economy recovers, but advertising should increase for festival season. The company continues to leverage huge leadership position in online space for expansion and business growth.
• Strong Subsequent Quarters: NDTV group has declared a profit of INR12.03 crores for 2Q22. This is best-ever 2Q in history of Group’s television company, NDTV Limited, which saw INR 10.18 crores of profit. NDTV Convergence reconfigured some key deals and operations, leading to one-time expense of INR7.5 crore during this period. We expect benefits of this restructuring should be realised earlier than expected. Group’s bank borrowings declined INR33.9 crores since start of this financial year. NDTV Group’s most profitable was 3Q22 in 9 years, with profit of INR27.6 Crores. With this, its YTD profit was INR55.6 Crores. NDTV Convergence clocked its highest-ever revenue in 3Q22.
• Highest-ever Revenue and PAT by NDTV Convergence Limited: This was best and outstanding year ever for group’s digital arm, NDTV Convergence. This company saw highest-ever revenue in FY21 and highest-ever PAT of INR27.91 crore with an EBITDA of 27.43%. Google entered into a partnership with Convergence as premium publisher to launch new content format, “Webstories”. Convergence was chosen to be an early partner of Google News Initiative which launched in Apr 2020. This was on account of credibility and popularity of its content. Convergence received support in 2Q from Google Journalism Emergency Relief Fund. Convergence sold 11.40% of shareholding in subsidiary, Red Pixels Ventures Limited. This sale was made to A R Chadha and Co. India Pvt. Ltd. Convergence is exclusive sales representative for business for 3 years and the company holds 44.16% stake in this business. Red Pixels Ventures Limited continues to be number one news site for gadgets and technology publisher site in this country.

• Strong Track Record and Market Position: NDTV Limited is in business for last 30+ years and has always been a leading content provider. Subsequently, it entered news broadcasting with launch of first channel in this country. Accordingly, the company was able to develop editorial skills, build its brand name and improve viewership base as years went by. NDTV and its subsidiaries saw expansion of its brand portfolio to seize and capture opportunities in beyond news and television into digital content, e-commerce etc. One prominent subsidiary of the company is NDTV Convergence Limited. This company was set up to use synergies between television, Internet and mobile. NDTV 24X7 is English news channel and a flagship channel of group. NDTV 24x7 was voted as ‘India’s Most Trusted Brand – 2020’ in English News category. It has a team of renowned journalists and it commands significant audience base. It broadcasts programs to 100+ countries (such as UK, USA, Canada, South Africa, Middle East and most of SAARC Countries). NDTV India is Hindi news channel that is being broadcasted in India and several other countries. NDTV India has a wide coverage of audience and is a free to air channel.
• Industry Overview: Indian Media and Entertainment sector saw a fall of 24% to INR1.38 trillion. This exhibits that revenue was taken back to CY17 levels. Last quarter of CY20 showed significant improvement in revenue for most segments. M&E sector should be able to recover upto 25% in CY21 to reach INR1.73 trillion, and then compound at 13.7% to touch a milestone of INR2.23 trillion by CY23. While television continues to remain a largest segment in this sector, digital media took over print and online gaming took over film entertainment in CY20. Digital media revenue saw 6% growth to reach INR234.9 billion. By CY23, estimates are there that it should double to INR424.5 billion. Digital advertising was not impacted in CY20, circumventing any blow despite slow April to June quarter when India went into lockdown. After that, most categories decided to increase digital advertising as there was an expansion in their online sales. Categories including online education, gaming, OTT platforms and digital payment platforms lent support to growth. Scalability was seen in e-commerce advertising and touched INR35 billion in CY20. On an average, people in India spent ~4.6 hours a day on phones and increased consumption of data by 15% over CY19. Online entertainment was able to aggregate 450 million consumers in CY20. Digital content subscription saw growth of ~50% and online sports was seen going behind paywall. More and more people consumed entertainment online because pandemic forced people to stay indoors. Subscription revenue made only 3.3% of segment in 2017 which later increased to 19% by CY20.

Conclusion

The company's total comprehensive income was INR378.58 million during FY21 against total comprehensive income of INR114.98 million for FY20. During FY21, the company saw a reduction in its net debt level by INR214.20 million from INR792.38 million to INR578.18 million. Finance cost of the company decreased INR8.14 million, with decline principally stemming from reduced loans and lower interest expenses. Production costs for FY21 decreased INR90.91 million as against to year ended Mar 31, 2020, due to lower spend on consultancies, hiring, travel etc.

On a standalone basis, the company declared best-ever annual result for FY21, with net profit of INR379.91 million against a net profit of INR130.33 million in previous year. On standalone basis, total income of the company fell to INR2,407.23 million in comparison to total income of INR2,418.45 million during FY20. Consolidated results for NDTV Group were best in more than a decade, with net profit of INR748.60 million in comparison to net profit of INR279.27 million during FY20. Total income at group level was INR4,079 million against a total income of INR3,929.61 million during FY20. These milestones were seen even though there was a massive setback to economy on account of Coronavirus pandemic, leading to advertising getting slashed.

Stock price of NDTV Limited saw a significant run up of ~261.5% between Apr 16, 2021- Apr 13, 2022. This run up was principally supported by strong inclination for news channels. Group’s adequate liquidity profile and established market position should continue to lend support to further increase in stock price.

Exceptional return of NDTV Limited’s stock was way more than delivered by Sensex. Between Apr 16, 2021- Apr 13, 2022, Sensex delivered only ~19.5% return. Stock of the company trades at ~18.08x FY20 EPS, which is at a deep discount to sectoral average of ~24.32x. Thus, dirt cheap valuations of this company favours going long on it.

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