Entertainment Network (India) Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Entertainment Network (India) Limited reported a mixed Q3 FY25, with strong growth in digital and non-FCT segments driving domestic revenue up by 9.7% YoY to INR154 crores. The digital business, particularly Gaana, showed exceptional growth, and management expects Gaana to break even within 4-5 quarters. However, the traditional radio business faced headwinds from a shorter festive season and a general slowdown in media markets, leading to a modest 3.2% growth in the core business and a decline in radio volumes and yields.

Highlights

  • Domestic revenue reached INR154 crores, marking a healthy 9.7% year-on-year growth.

  • Digital business revenue reached INR15.4 crores, up by 151% year-on-year, largely fuelled by Gaana.

  • Non-FCT segment witnessed strong momentum, growing 21% year-on-year to INR50 crores.

  • EBITDA excluding digital stood at INR38.8 crores with EBITDA margins at a healthy 28%.

  • Cash balance stood at INR344 crores as of December 31, 2024.

Concerns

  • Radio business faced challenges due to a shorter festive season and overall slowdown in media markets.

  • Core business (excluding digital) recorded only 3.2% year-on-year growth with revenue reaching INR138 crores.

  • Production expenses increased by 39% year-on-year, primarily due to the growth in the event business.

  • Radio volumes have gone down by about 3% over last year.

  • Radio yields are 20% to 25% down on revenue per se compared to pre-COVID levels.

Key financials

2 periods

Headline

  • Domestic Revenue
    ₹154 Cr
    YoY +9.7%
  • EBITDA (excl. digital)
    ₹38.8 Cr
  • EBITDA Margin (excl. digital)
    28%
  • Profit Before Tax
    ₹22 Cr
  • Production Expenses Growth
    39%

Q3 FY25

  • Gaana Cash Burn
    ₹10 Cr

What they filed

Q1 FY27: revenue down 2.8%, net profit down 14.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue114 159 158 117 141 +24%165 +4%142 −10%114 −3%
EBITDA11 30 29 8 11 +2%15 −50%11 −64%9 +19%
Net profit-4 9 12 -5 -4 −1%-6 −168%8 −32%-6 −14%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Digital Business
    ₹15.4 Cr Revenue1.5% YoY Growth26% Share of Total Radio Revenues
  • Non-FCT Segment
    ₹50 Cr Revenue21% YoY Growth
  • Gaana
    ₹12.53 Cr Revenue (Q3 FY25)₹3 Cr Revenue (Q3 FY24)₹300 Blended ARPU15% Paid Subscriber Growth (YTD)
  • Radio Business
    63% Share of Total Revenues (YTD)-3% Volumes YoY Growth75% Yields vs Pre-COVID20% Yields (revenue per se) Decline

Capital allocation

high confidence
  • Capex ₹10.5 Cr
    • Investing in digital offerings ₹10.5 Cr
    investing INR10.5 crores during the quarter, which is almost 26% down over Q1 FY '25.
  • Liquidity Cash ₹344 Cr
    Our balance sheet remains strong with a cash balance of INR344 crores as of December 31, 2024.

Guidance & targets

Profitability

  • Gaana Break-even Profitability · next 4-5 quarters · High confidence next 4 to 5 quarters
    As Gaana revenues continue to scale, losses are narrowing, reinforcing our expectation that the business will likely break even in the next 4 to 5 quarters.

    — Yatish Mehrishi

Volume

  • Gaana Paid Subscriber Growth Volume · YTD · High confidence approximately 15%
    At YTD levels, our paid subscriber growth has been healthy and in the range of approximately 15%.

    — Yatish Mehrishi

Revenue

  • Gaana Price Revision Impact Revenue · FY26 onwards · High confidence reflect from FY '26 onwards
    Since our pricing plans follow our annual subscription model, we expect the full impact of the price revision to reflect from FY '26 onwards.

    — Yatish Mehrishi

  • Overall Business Performance vs Pre-COVID Revenue · by the end of the year · Medium confidence higher than pre-COVID levels
    Overall business, we are higher than COVID, and we believe by the end of the year, we'll be higher than the pre-COVID levels.

    — Yatish Mehrishi

What to watch in Q4 FY25

Gaana Break-even Progress

next 4-5 quarters
Current Expected in next 4-5 quarters
Target Continued progress towards break-even

Why it matters

Gaana's path to profitability is a key driver for overall company performance and valuation.

As Gaana revenues continue to scale, losses are narrowing, reinforcing our expectation that the business will likely break even in the next 4 to 5 quarters.

Risks & concerns

  • Overall slowdown in media markets

    medium

    The media markets experienced an overall slowdown, impacting volumes across various segments.

    Management acknowledged

  • Economy slowdown impacting specific sectors

    medium

    Sectors like real estate, health and pharma, consumer durables, and apparels have seen a downturn, affecting ad spends.

    Management acknowledged

  • Shift in ad sales business model

    medium

    The ad sales business is undergoing a transition, with clients moving towards more solution-oriented and experiential marketing rather than plain vanilla advertising.

    Management acknowledged

  • Digital disruption and competition

    medium

    Pure ad sales of digital, which previously grew 40-50%, have now slowed to 10-15% growth, indicating increased competition and maturity.

    Management acknowledged

  • Shorter festive season

    low

    The festive season was shorter this year, impacting overall media volumes.

    Management acknowledged

Q&A highlights

1 direct, 1 evasive
Gaana subscriber numbers and ARPU Evasive
I will not be able to share with you the exact numbers of subscribers. You can come and meet us or speak to Sanjay on a phone separately. We don't divulge our subscriber numbers right now for competitive reasons.

Management declined to provide specific subscriber numbers for competitive reasons, making it harder for investors to track Gaana's growth metrics directly.

Asked by Rishikesh

Reasons for 39% increase in production expenses Direct
That's largely because if you look at the non-FCT segment, which is growing, the event business has almost doubled. So that's the reason. It's a direct variable cost to the event business what we do.

Management clarified that the significant increase in production expenses is a direct variable cost linked to the strong growth and doubling of the event business within the non-FCT segment.

Asked by Deepan Narayanan

Radio business downtrend and future Partial
I don't think radio is dying. It's never been dead across the world. The thing is people look at radio in a very different way. It's actually the ad sales, which has been an issue across the board. ... our strategic intent over the last few years it has been very clear that we no longer want to be just a radio company, but a multimedia company.

Management reframed the perceived downtrend in radio as a shift in the ad sales business and reiterated the company's strategic pivot towards being a multimedia entertainment enterprise, rather than just a radio company.

Asked by Shikhar Mundra

Utilization of cash balance Partial
So, we keep evaluating opportunities to grow the business. And as we've taken about a year to stabilize Gaana, and we keep discussing with the Board on the utilization of this part.

Management indicated that the substantial cash balance is being evaluated for growth opportunities, with discussions ongoing with the Board, especially after Gaana's stabilization.

Asked by Shikhar Mundra

Dividend payout policy Partial
Now having the business stabilized on Gaana, the business is looking much better in a healthy position, and we now have a visibility on the breaking even part, we will now evaluate on this part also. But having said that, we've been consistent on the dividend year-on-year.

Management suggested that with Gaana's stabilization and clearer path to break-even, the dividend policy will be re-evaluated, implying potential changes or increases in shareholder returns.

Asked by Shikhar Mundra

Gaana PAT for Q3 and YTD Partial
Se we are investing, as I said, on Gaana. We have reduced our losses by about 25% over the Q1. On the third quarter, we have invested about INR10 crores in the Gaana business. As I said, it will remain in investment phase for the next 4 quarters, by the time it should break even.

Instead of providing a direct PAT figure, management focused on the investment phase and the reduction in losses, indicating that Gaana is still in a growth and investment stage rather than being profitable.

Asked by Meghna

2 min read 5 chapters

Detailed narrative

Strong Digital and Non-FCT Growth

Entertainment Network (India) Limited reported robust performance in its digital and non-FCT segments during Q3 FY25. Digital business revenue surged by 151% year-on-year to INR15.4 crores, significantly driven by Gaana. The non-FCT segment also demonstrated strong momentum, growing 21% year-on-year to INR50 crores. These segments were key contributors to the overall domestic revenue growth of 9.7% year-on-year, reaching INR154 crores.

Gaana's Path to Profitability

Gaana, the company's music streaming platform, is showing promising signs towards profitability. Its revenue for Q3 FY25 was INR12.53 crores, a substantial increase from INR3 crores in Q3 FY24. The company successfully revised its annual pack pricing from INR299 to INR599 in July 2024, with the full impact expected from FY26. Management anticipates Gaana to break even within the next 4 to 5 quarters, with the cash burn for Q3 FY25 reduced to INR10 crores, which is 25% less than Q1 FY25.

Challenges in Traditional Radio Business

The traditional radio business faced headwinds in Q3 FY25, primarily due to a shorter festive season and a general slowdown in media markets. The core business, excluding digital, grew modestly at 3.2% year-on-year to INR138 crores. Radio volumes declined by approximately 3% year-on-year, and yields were 20-25% down on revenue per se compared to pre-COVID levels. Despite these challenges, the company maintains a healthy 27% market share in the radio segment.

Strategic Shift to Multimedia Entertainment

Management reiterated its strategic intent to evolve from solely an FM radio company to a comprehensive multimedia entertainment enterprise. This shift is evident in the strong performance of experiential marketing and solutions businesses, which are gaining traction as the overall ad sales market transitions. The company believes that while the ad sales business is in a transition phase, the solutions business is performing well and will continue to drive growth.

Financial Metrics and Capital Allocation

For Q3 FY25, EBITDA excluding digital stood at INR38.8 crores, with a healthy margin of 28%. Profit before tax for the quarter was INR22 crores. International operations remained EBITDA positive, contributing INR2.1 crores. The company maintained a strong balance sheet with a cash balance of INR344 crores as of December 31, 2024. Investments in digital offerings amounted to INR10.5 crores during the quarter, reflecting the focus on strengthening digital capabilities.

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