C O M P A N Y                    R E P O R T         India                               Reliance Broadcast Network       ...
Company Report: RBN                                          30 Mar’12                   Investment Rationale             ...
Company Report: RBN                                         30 Mar’12                     **FY11 sales on FICCI-KPMG 2010 ...
Company Report: RBN                                           30 Mar’12it India’s largest   names in global TV broadcastin...
Company Report: RBN                                 30 Mar’12                      BIG CBS Networks has launched three Eng...
Company Report: RBN                                           30 Mar’12                     5mn.                     BIG L...
Company Report: RBN                                30 Mar’12                        FY11 BS Ratios      D/E   Total Asset ...
Company Report: RBN                                 30 Mar’12                    TV segment to break-even by FY14. The EBI...
Company Report: RBN                                30 Mar’12advertiser’s media   According to FICCI – KPMG report, the ad-...
Company Report: RBN                                          30 Mar’12                   Source: ADEX India               ...
Company Report: RBN                              30 Mar’12                  multi-media conglomerate. Tarun is the NewsCor...
Company Report: RBN                                30 Mar’12                  Risk factors                  Internal Facto...
Company Report: RBN                             30 Mar’12                  Advertisement revenues depend on economic facto...
Company Report: RBN                                  30 Mar’12                     Peer Benchmarking                     D...
Company Report: RBN                                           30 Mar’12                    Note:                        1....
Company Report: RBN                                           30 Mar’12                      Profitability lower than peer...
Company Report: RBN                              30 Mar’12                    Balance sheet ratios will improve over FY12-...
Company Report: RBN                                  30 Mar’12                    9mFY’12 peer comparison                 ...
Company Report: RBN                                              30 Mar’12                     Valuation Comparison       ...
Company Report: RBN                               30 Mar’12                      Valuation and Price TargetRBN will get   ...
Company Report: RBN                                       30 Mar’12                    RBN’s Business                    I...
Company Report: RBN                                           30 Mar’12                      RBN is the largest private FM...
Company Report: RBN                             30 Mar’12                     RBN’s Radio business has turned EBIT positiv...
Company Report: RBN                                      30 Mar’12                     RBN has targeted the top end of the...
Company Report: RBN                                      30 Mar’12                    ADEX Data for English GEC for the mo...
Company Report: RBN                                    30 Mar’12                     35%           32%                    ...
Company Report: RBN                               30 Mar’12                  programming. RBN will also develop local prog...
Company Report: RBN                                 30 Mar’12Regional TV + FM     As BIG FM is a market leader in HSM citi...
Company Report: RBN                               30 Mar’12plays in regulated   to complete an advertiser’s bouquet. RBN o...
Company Report: RBN                                   30 Mar’12                     Financial Analysis and Growth Outlook ...
Company Report: RBN                                 30 Mar’12                      Radio to grow at 34% CAGR, triggered by...
Company Report: RBN                                                        30 Mar’12                     BIG Productions t...
Company Report: RBN                                30 Mar’12                  We expect Radio business to achieve an EBITD...
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
Company report  reliance broadcast network 17th april 2012
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Company report reliance broadcast network 17th april 2012

  1. 1. C O M P A N Y R E P O R T India Reliance Broadcast Network Rs 53.45 16th April 2012Sector: Media At an inflection point Reliance Broadcast Network (RBN) is rapidly building a strong presence inBSE Sensex 17,151 the Indian M&E industry. Within 6 years, BIG FM, with 45 stations, isNifty 5,226 largest by scale, second largest by revenues and EBIT positive. RBN has a52 week high (Rs) 99.2552 week low (Rs) 40.20 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 asNSE RBN scale for national advertisers. Content initiatives BIG Productions and LiveBSE 533143 are creating a repute of their own besides in-house competencies.Equity Shares 79.45(mn) A high growth media play:Face Value (Rs) 5Market Cap (Rs 4,239  Indian M&E industry is set for high growth of 15% over 2011-16, withmn) 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. Share Price Performance (%)  In 9mFY12, RBN’s revenues grew 30% to reach Rs 2.3bn. Radio was RBN Sensex 67% and Production and TV began with 15% and 4% shares.1 week -4.1 -0.4  RBN’s total revenues are set to grow at 51% over FY11-15 as it1 month -3.3 -1.8 becomes 100-150 FM network and ~ 9 channel broadcasters by FY15.3 month -3.5 5.9 Business game changers ahead in both radio and TV:6 month -22.0 2.21 year -35.1 -11.5  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% Shareholding Pattern presently to 5% by 2016. (Dec’11)Promoters 65.2%  Digitalisation of cable TV will improve business economics forFIIs/FVCIs 1.3% broadcasters.MF/Banks 1.3% RBN well positioned to ride the change and turn profitable by FY14Body Corporates 13.7%Others 18.5%  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 Four-S reports are available on BLOOMBERG, Reuters and Thomson Publishers
  2. 2. Company Report: RBN 30 Mar’12 Investment Rationale One of the fastest growing media companies 36% FY11 growth, better than peer average36% YoY growth RBN achieved a turnover of Rs 2,454mn in FY11 with a YoY growthin FY11 - higher of 36%. This was at par with industry leaders and higher than peerthan industry average of 27%.average 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 industryNumber 1 in 15 RBN has the largest private FM network in India with 45 stationsradio markets 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 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 1st station MarketRadio Revenues stations launch FY10 FY11 Share**hampered by ENIL 32 Oct-2001 2,297 2,722 27%absence from 7 RBN Radio 45 Sep-2006 1,505 1,750 17%key markets 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 2
  3. 3. Company Report: RBN 30 Mar’12 **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 BroadcastingEnters via JV with RBN made a de-risked entry into TV broadcasting by targetinginternational segments of English GEC and Regional. It avoided the alreadybroadcasters to cluttered segments of Hindi GEC, Movies, Sports and News.start higher onlearning curve, RBN has a portfolio of 5 channels at present – 3 in English GEC, 1 incontent USP and Regional Hindi and 1 in Punjabi. It has optimized its costs by usingoptimize costs 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 Spend Rs.mn Duration (s) 50.0 500000 45.0Second largest ad 40.0 400000earner in HSM 35.0within 9 months 30.0 300000of launch 25.0 20.0 200000 15.0 10.0 100000 5.0 - 0 Source: Company Data – ADEX Enters English GEC via 50:50 JVs with global leadersRBN’s strong RBN has used the JV route to enter the English GEC segment. ThisInternational tie- not only optimizes its costs, but gives it preferential right to top andups have the latest international content in SAARC region.potential to make More importantly, it has entered into JVs with two of the biggestFour-S Research 3
  4. 4. Company Report: RBN 30 Mar’12it India’s largest names in global TV broadcasting: CBS, a leader in the US markets;English GEC and RTL Group, part of European media powerhouse Bertelsmannbroadcaster 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 Spend Rs.mn Duration (s) 45.0 500000 40.0 35.0 400000BIG-CBS Prime, at 30.0par with AXN’s 300000 25.0disc spends 20.0within a year of 200000 15.0launch 10.0 100000 5.0 0.0 0 Zee Café Star world AXN BIG CBS NW Source: Company – ADEX DataFour-S Research 4
  5. 5. Company Report: RBN 30 Mar’12 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 PunjabiSpark Punjabi, RBN has launched its first dubbed channel out of BIG-CBS JV tofirst international make an entry in the Punjabi market. This is RBN’s second RegionalPunjabi channel, TV play after BIG MAGIC.becomes a leaderwithin a month of Spark Punjabi, within a month of its launch in Jan’12, became thelaunch 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 USPHas one of the RBN has entered content production with an eye on in-housemost reputed competency. Its division BIG Productions is a reputed TV productionproduction house house in its own right, with two of its shows completing 500 episodesand largest milestone and a total of 950 hours of programming till date. RBNportfolio of acquired BIG Productions from group company Reliance BIGtelevised IPs 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 RsFour-S Research 5
  6. 6. Company Report: RBN 30 Mar’12 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 RBN has managed a fast turnaround of FM radio, becoming EBIT positive in Q3 FY11 – within five years of launch of first station and 3Radio business years of launch of 45th station. In H2FY11, Radio had a positive EBITEBIT positive with of Rs 23mn, limiting the annual loss to Rs 74mn.15% margins in In 9mFY12, Radio posted an EBIT of Rs 238mn with an EBIT Margin9mFY12 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 6
  7. 7. Company Report: RBN 30 Mar’12 FY11 BS Ratios D/E Total Asset Working Capital Turnover 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 FY15Radio to achieve RBN’s Radio has an EBIT margin of 15% in 9mFY12 at blended26% EBIT margins utilization of 65% and blended Effective Rate of Rs 8,100 per 10by FY15, driven by seconds for 45 stations. India has one of the lowest ad-spends onincreased Radio, leading to enormous potential for growth.utilization, higherrates, reduced We expect utilizations of existing stations to improve to ~75%royalties. Phase levels. Post-phase III, radio will become a PAN India Media, henceIII stations to we expect the blended ERs to improve from Rs 8,100 per 10 secondshave quicker to Rs 11,200 per 10 seconds for the existing 45 stations. The Phasebreak-evens. 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 FY14TV to break-even RBN already has 3 main channels on its portfolio in the cost range ofby FY14 as Rs 250-300mn. The channels will break-even within three years ofexisting channels operations, driven by increase utilization and ad-rate improvements.break-even andbroadcasting With digitization rollout, broadcasters will gain with increase inprofitability per se subscription revenue share along-with a decrease in carriage costsincreases driven as digital cable will have much higher bandwidths.by digitization Driven by industry and RBN’s operational improvement, we expectFour-S Research 7
  8. 8. Company Report: RBN 30 Mar’12 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 equityRBN will use As on Sep-11, RBN’s D/E stood at 1.0x, with Rs 1.7bn of debt on itsequity route for books. Out of this, Rs 1.2bn was ICD from promoters.funding TVoperations and We expect FY12 Debt level to be similar.Radio Phase III RBN plans to be a low debt company and it will finance its growth –auctions 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 2011-16Industry growth India’s advertising to GDP ratio at 0.34% is almost half of the world’sdrivers – current average of 0.75% and one-third of North America (~1%). Medialevel of low ad reach is also less than developed countries with TV households onlyspends, rural 57% of total households.mediaconsumption, Under-penetration, low ad-spends coupled with India’s demographicsDigitization, FM - rising disposable incomes, youngest population, mobile penetrationPhase III and position Indian ME industry for good growth ahead.Digital mediapenetration 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 mediaPhase III will FM Phase III will extend industry’s reach to 294 cities and increasetransform FM into the frequencies 2.4x. The reach will hence increase to more thana mass media 90% of population from the 30% at present.option onFour-S Research 8
  9. 9. Company Report: RBN 30 Mar’12advertiser’s media According to FICCI – KPMG report, the ad-spends on radio which areplan 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 BroadcastersTop-lines to be The Indian Government is actively pursuing Digitization of Cable andboosted by higher Satellite with first phase of metros to be implemented by June 2012ARPU share and and the entire country to be digitized by end of 2014.bottom-line byreduced carriage Phase Deadlinecosts 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 significantRegional TV now Regional Broadcasting has gained traction over past years driven byaccounts for more increased media consumption in tier II and III cities. According tothan half-of TVadvertising industry estimates, Regional advertising grew faster in 2011 at 15%volumes than national advertising. Increasing share of Regional TV in Overall ad volumes.Four-S Research 9
  10. 10. Company Report: RBN 30 Mar’12 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 EV/ Sales EV/EBITDA P/E P/BVdiscount of over Peer Average 2.7 11.7 18.1 3.225% w.r.t. peer RBN 1.9 PL PL 2.5average 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 aFour-S Research 10
  11. 11. Company Report: RBN 30 Mar’12 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 11
  12. 12. Company Report: RBN 30 Mar’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 12
  13. 13. Company Report: RBN 30 Mar’12 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 13
  14. 14. Company Report: RBN 30 Mar’12 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 Vertical Broadcasting Production Publishing Radio Zee N+R N+RRBN has presence Sun TV NW R R R Nacross TV 18 Brdcst N+RBroadcasting DB Corp R Rspectrum 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 9mFY12RBN grew at par Youngest media player, RBN is in the high growing segments – Radiowith industry (15% growth in 2011) and TV (10.8% growth in 2011).leaders in FY11,and grew better in Revenue Growth in FY11, 9mFY129mFY12 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 14
  15. 15. Company Report: RBN 30 Mar’12 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) 9mFY12 revenues (Rs mn) Source: Company reports 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 segmentProduction RBN’s BIG Productions has become one-third of the segment leaderrevenues are one- (listed), Balaji Telefilms revenues in 9mFY12.third of listed 9m Fy12 Revenues Rs mnleader’s Balaji Telefilms 991 BIG Productions 358 % of BT 36% Source: Company reportsFour-S Research 15
  16. 16. Company Report: RBN 30 Mar’12 Profitability lower than peers currently, to catch up RBN currently in losses as it sets up its broadcasting businessLosses mainly on RBN’s EBITDA is a negative of Rs 4.6mn in FY11 and Rs 42.4mn inaccount of new 9mFY12 as it is still setting up operations.segment ofbroadcasting in FY10 FY11 9mFY11 9mFY129mFY12 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 peersThe oldest player, FY10 FY11 9mFY12ENIL has margins ENIL Radio 8% 16% 23%**of ~23%, RBN RBN Radio -20% -6% 15%Radio profitability HT Radio -8% 17% -5%will move up the DB Corp Radio -5% -7% -2%learning curve to * Segmental revenues for Radio not available for Sun, Jagran, Radio City (MBPL notthe same levels 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 16
  17. 17. Company Report: RBN 30 Mar’12 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 ratiosYoungest media RBN’s average asset turnover ratios are marginally lower than theplayer’s turnover peer group. As RBN’s broadcasting business is completely rolled out,ratios are only the ratios would improve.marginally lowerthan peer average Average Average Total Working Asset Cap FY11 Turnover 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 17
  18. 18. Company Report: RBN 30 Mar’12 9mFY’12 peer comparison Revenue growth higher than industry peers Revenue Growth EBITDA Margin PAT Margin 9mFY12 YoY 9mFY11 9mFY12 9mFY11 9mFY12 Zee 21,715 -2% 27% 27% 19% 20% Sun TVRBN has grown NW 13,304 -9% 82% 81% 39% 40%second-highest in DB Corp 11,032 16% 34% 25% 23% 14%the peer group. HT 15,143 15% 19% 16% 10% 9%In losses, as TV JPL 9,341 12% 33% 26% 20% 15%operations are TV18 9,107 52% PL PL PL PLbeing set up. 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 18
  19. 19. Company Report: RBN 30 Mar’12 Valuation Comparison Trading at Attractive Multiples EV/ Sales EV/EBITDA P/E P/BV Zee Ent 4.0 14.9 19.7 3.7RBN is trading at Sun TV NW 6.4 8.0 16.1 4.5attractive DB Corp 2.9 11.5 19.9 4.2valuations, on HT 1.8 11.2 16.2 2.4threshold of new JPL 2.8 11.7 17.8 4.0growth as Phase TV18 Broadcast 1.5 474.9 PL 1.3III unfolds in few ENIL 3.3 12.5 18.7 2.6weeks time 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 ResearchFour-S Research 19
  20. 20. Company Report: RBN 30 Mar’12 Valuation and Price TargetRBN will get RBN plans to use equity route for funding to the tune of Rs 3-4bn invaluations at par FY13, while maintaining promoter’s stake. RBN will require funds forwith industry as it launching more channels and Phase III auctions.evolves as 100+FM stations and We have assumed Shareholder Funds to increase by Rs 3bn, half9+ channels from external investment and half from Promoter - ICD conversionbroadcaster and plus additional investment, if any.breaks-even 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 84Over 50% upside Building the above dilution into projects, we arrive at a target priceto the stock price of Rs 84 by Mar’13. This is based on an EV/sales multiple of 2x, andin next 12 months 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 60 70 80 85 Price 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.Four-S Research 20
  21. 21. Company Report: RBN 30 Mar’12 RBN’s Business India’s largest private FM network, now adding new verticalsA comprehensive Part of the Reliance Group, RBN is a emerging as a diversifiedplay in entertainment business with play across radio, television, intellectualBroadcasting properties (IP), out of home (OOH) and television production. RBN’s(Radio, TV) and media brands are:Content  92.7 BIG FM – Indias largest FM Network with 45 stations, reaching over 42 mn Indians each week.  BIG CBS – 50:50 joint venture with CBS Studios International, USAs No.1 TV broadcaster.  BIG MAGIC – Indias 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 companiesSecond-highest RBN achieved a revenue growth of 36% YoY to reach a turnover ofrevenue growth in Rs 2,454mn in FY11.peer set 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 IndiaFour-S Research 21
  22. 22. Company Report: RBN 30 Mar’12 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 45.0RBN is the largestprivate FM 40.0network in India 35.0with 45 stationsin operations. 30.0 25.0 20.0 15.0 10.0 5.0 - 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 marketsRBN’s absence in RBN is a leader in key markets of Bangalore, Kolkata and in Hindi7 key cities has Speaking Markets. It has made significant progress in Mumbailed to revenue market.gap with marketleader, a situation Company # of stationsthat maybe A+ A B C D Totarectified with lPhase III ENIL (Radio Mirchi) 4 9 1 7 1 32 1 RBNL (BIG FM) 4 4 1 2 3 45 0 4 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 22
  23. 23. Company Report: RBN 30 Mar’12 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 profileA well-diversifiedadvertiser’sprofile 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 FY11De-risked entry in RBN entered into TV Broadcasting in Nov-2010, with the launch ofTV broadcasting BIG CBS channel, the first out of its 50:50 JV with USA’s topthrough JVs and broadcaster CBS Studios International.acquisition 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, Indias 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 RBN entered into a 50:50JV in Aug 2010 with CBS StudioStudios gives an International, a division of America’s top broadcasting house CBSedge in English Corporation. The JV marks CBS’s entry into Indian subcontinent.content 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 timeFour-S Research 23
  24. 24. Company Report: RBN 30 Mar’12 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 CBSs vast program library.  BIG CBS Prime, a premium GEC targeting urban male audiences  BIG CBS Love, Indias first and only international Womens entertainment channel  BIG CBS Spark, Indias 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 BIG CBS Love Launch – Nov-10, TAM week10’12 Launch – Mar-11, TAM Wk13-14, 2012 (CS 15-24 SEC A – MALE, 7 metros) (CS 15+ SECA – Female, 5Metros)Prime and Love 56%are doing well in 50%their audiences ina short span of 27% 23% 23% 21%time BIG CBS Star Zee Café BIG CBS Star Zee Café Prime World Love World 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 24
  25. 25. Company Report: RBN 30 Mar’12 ADEX Data for English GEC for the month of Dec-11 Spend Rs.mn Duration (s) 45.0 500000 40.0 35.0 400000Prime at par with 30.0AXN, within over 300000 25.0a year of launch 20.0 200000 15.0 10.0 100000 5.0 0.0 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 marketFirst Punjabi The first regional channel out of the BIG CBS JV, Spark Punjabi waschannel from launched on 14th Jan, 2012. It targets the GDP rich markets ofRBN, becomes a Punjab, Haryana, Chandigarh, and Himachal Pradesh. It is presentlycategory leader distributed to over 6mn households in the region.within a month oflaunch 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, 2012Four-S Research 25
  26. 26. Company Report: RBN 30 Mar’12 35% 32% 30% 30% 25% 22% 20% 16% 15% 10% 5% 0% 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 RTLWith RTL JV, RBN With a market capitalization of $15.5bn, RTL Group is number one inwill target the TV and Broadcasting in Europe. It operates 40 TV channels and 31lucrative market radio stations across 10 countries. RTL is also the global leader infor Realty and content production with 9,500 hours of TV programming per yearAction content 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 USPRBN’s Access to CBS and RTL libraries with first right of refusal. Can alsointernational JVs leverage relationships that CBS and RTL have with otherwill give it an International content providers for access to content. The Companyunmatched may launch local formats of the popular international content of CBSprogramming and RTL Group (including Freemantle)edge 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 uniqueFour-S Research 26
  27. 27. Company Report: RBN 30 Mar’12 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 HSMFour-S Research 27
  28. 28. Company Report: RBN 30 Mar’12Regional TV + FM As BIG FM is a market leader in HSM cities of Agra, Aligarh,+ OOH make RBN Allahabad, Moradabad and Ranchi, BIG Magic + BIG FM becomes aan attractive compelling propositions for advertisers, seeking to target HSMproposition for without literacy as a pre-condition. RBN aims to make the most outregional and local of it by focussing on Phase III frequencies in the region, especiallyadvertisers 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 distributionInternational RBN has the rights to CBS and RTL channels across SAARC region. Itdistribution a has already started broadcasting the three CBS channels in Sri Lankagood addition to since Feb 2012. The distribution is through region’s largest cabletop-line 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 ProductionsBIG Productions BIG Productions has created over 950 hours of programming in aand LIVE, cater to short span of eighteen months since its launch right across genrestop broadcasters and for both National and Regional channels.in India apartfrom in-house This includes, Sa Re Ga Ma Lil Champs for Zee TV, Badmashsynergies 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 – OOHBIG Street, one of RBN’s OOH division BIG Street is a complementary and tactical playthe largest OOHFour-S Research 28
  29. 29. Company Report: RBN 30 Mar’12plays in regulated to complete an advertiser’s bouquet. RBN operates in the regulatedspace, is a market space and leverages Group’s assets as inventory.leader in Delhi 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 29
  30. 30. Company Report: RBN 30 Mar’12 Financial Analysis and Growth Outlook Inventory increase led growthPHASE III One of the youngest media companies, RBN will transform into 100-stations, 150 network FM station and, ~9 channel broadcaster and a topBroadcasting content house in an industry that is growing twice the country’s GDP.channels will add We expect RBN’s revenues to grow at a CAGR of 51% over FY11-15inventory to reach Rs 12.8bn. Projected Revenues Revenue (Rs. Mn) 14,000 12,807 12,000 10,000 8,936 8,000 6,000 5,045 4,000 3,134 2,454 1,807 2,000 0 FY10 (S) FY11 FY12p FY13e FY14e FY15eYoungest media RBN has reached revenues of Rs 2,454mn in FY11. In FY12, it iscompany will see expected to grow 27% YoY to reach Rs 3,106mn. It has alreadyimprovement in achieved a turnover of Rs 2,315mn in 9mFY12.Ad Rates asbusinesses gain The FY12 growth will be driven by 20% growth in Radio revenues,traction 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 mixNew segments, TVand Production, toaccount for 30%and 12% revenueshare by FY15.Radio remains thebiggest segmentFour-S Research 30
  31. 31. Company Report: RBN 30 Mar’12 Radio to grow at 34% CAGR, triggered by Phase III auctionsPhase III, a RBN’s Radio business will transform itself from 45 stations to be 100-transformational 150 FM station network, post FM phase III auctions. The Governmenttrigger for Radio 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 Rs 11,500 Stations 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 FY15Broadcasting RBN will launch two channels through its JV with Europe’s topportfolio to double 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 shareRBN plans to As RBN launches 2 BIG RTL channels, 3 additional BIG MAGICemerge as a channels and at least 8 more dubbed/ HD feeds of its Main Englishleading regional GEC channels by FY15, it will garner a bigger share of the revenueas well as English pie.GEC Play with 9main channels by We expect TV Broadcasting to generate revenues of Rs 3,843mn byFY15. 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 31
  32. 32. Company Report: RBN 30 Mar’12 BIG Productions to account for 12% FY15 revenue pieIncrease in As number of broadcasting channels increase post digitization andbroadcasting India gets recognized as an outsourcing destination for TVchannels post programming, we expect BIG Productions to reach revenues of Rsdigitization will 1,568mn in FY15. It will account for 12% of RBN’s revenues.help this business 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 FY15RBN to be PAT The radio business is already PAT positive. We expect TV and otherpositive by FY14 segments to become profitable by FY14, making the company PAT positive. FY11 FY12e FY13e FY14e FY15e 60% 49% 49% 40% 31% 26% 22% 19% 17% 20% 10% 4% 0% -3% -4% -6% -20% -14% -12% -13% -17% -27% -27% -40% -60% -50% -59% -80% EBITDA margin EBIT margin ROAE ROACE Radio business is already PAT positiveRadio will achieve RBN’s Radio business is already EBIT positive with margins of 15% inEBIT of 28% by 9mFY12. The recent royalty reduction to 2% of revenues, though stillFY15 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 32
  33. 33. Company Report: RBN 30 Mar’12 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 33

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