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Transcript of “Strong, profitable growth seizing the Indian DTH … Mumbai, Kolkata, Chennai Through phases 1...
“Strong, profitable growth seizing
the Indian DTH opportunity.”
NASDAQ: VDTH
27 November 2017
The Indian Government has mandated that all the country’s analog
networks be replaced with Digital Addressable System (DAS)
2012 2013 2015 2016
Videocon d2h is Thriving in a Rapidly Expanding Marketplace
2
DTH’s “Light” Infrastructure is Well Optimized Within India’s Fragmented Last Mile of Service Connection
Model
Phase 4
The remainder of India
to be digitized
Phase 1In 2013, 38 cities
with a population of more than
1 million completed the
digitization process
Phase 2In 2012, four
metropolitan areas go digital
Delhi, Mumbai, Kolkata, Chennai
Through phases 1 and 2, DTH took ~40% market share
Phase 3Over 6,100 towns with a population
of more than
100,000
In phases 3 and 4, DTH occupies ~65-85% market share of the digital subscriber base
Source: Ministry of Information & Broadcasting, MPA report 2014, Company estimates
Currently undergoing digitization process
Conversion from analog to digital is driving DTH growth in India
Videocon d2h has Seized the Indian Market DTH Pay TV Opportunity
3
• In phases I & II, DTH took ~40% market share(2)
• DTH enjoys ~65-85% market share(2) of the current digital subscriber base in areas
that come under phase III & IV digitization
• Greater network capacity enables delivery of premium content packages, driving APRU
• ARPU* has grown from Rs150 in FY13 to Rs207 during FY17 and Rs212 in Q2FY18.
• 7.9-8.0% growth(1) in Indian economy and positive business climate creating rapid
household expansion
• 70-80 million homes of market opportunity
• Around 100 million homes with no television
Strong Indian
economy creating
new PayTV
households
DTH capturing
market share from
cable
Improving ARPU
Phase III and IV of India’s digitization covers 45-50 million analog homes
Note: Starting FY17, Average Revenue Per User ("ARPU") is calculated by dividing revenue from operations by the average of the Company’s net subscribers for the period. Revenue from
operations is considered on a net basis, after netting off the recharge margins or discounts provided to the distributors & entertainment tax. For prior periods, ARPU was calculated by dividing
the Company’s subscription and activation revenue (without netting off the recharge margins or discounts provided to the distributors and entertainment tax) by the average of its net subscribers
for the periods. As a result, ARPU for periods after April 1, 2016 are not comparable with ARPU for periods prior to April 1, 2016 due to this change in the Company’s definition of ARPU.
Source: (1) World Bank – India development update Report (2) MPA report 2014, Company estimates
440 440484
521590 605
650 680
149 180217 217 241 253 275 285
Apr-11 Apr-12 Apr-13 Apr-14 Feb-15 Sep-15 Mar-16 Apr-17
HD pack price (Rs.) SD base pack price (Rs.)
24
27
15
3
15
17
11
4
42
6
3
0 15 30 45 60 75 90
Phase IV
Phase III
Phase I & II
DTH Digital Cable Free Dish Analog Cable
Source: MPA report 2014, Company data, Company estimates
Indian DTH Market Dynamics Highlight Opportunities
4
Significant subscriber opportunity in the next 4-5 years
175
202
63.0%
66.1%
2015 2020
(Pe
ne
tratio
n o
f to
tal h
om
es
)
TV
Ho
me
s (
in m
n)
Gross subscriber (millions)
Net subscriber (millions)
Substantial upside in Indian PayTV ARPU Steady increase in Videocon d2h pack prices
$3.2 $4.5 $4.7
$9.1 $10.7 $10.9
$26.0
India China Vietnam Phillippines Thailand Indonesia MalaysiaGDP growth
(‘14-’16
CAGR)
6.8% 6.5% 5.2% 5.1% 6.5% 3.2% 6.2%
~2.5x
In Rs
Key Operating & Financial Highlights
Videocon d2h’s Strategy Sustains a Track Record of Value Creation
5
10.2
11.912.9 13.3
FY15 FY16 FY17 H1 FY18
23.4
28.6 30.7#
16.1#
FY15 FY16 FY17 H1 FY18
6.1
8.0
10.2
5.3
FY15 FY16 FY17 H1 FY18
Net Subscribers * (Million) Revenue (Rs Billion) Adjusted EBITDA ** (Rs Billion)
-6.2
-2.4
1.2 1.0
FY15 FY16 FY17 H1 FY18(1.6)
0.7
3.9
2.4
FY15 FY16 FY17 H1 FY18
2.6
2.0
1.5 1.5
FY15 FY16 FY17 LTMH1 FY18
Adjusted EBITDA less Capex (Rs Billion) Net Debt to Adj. EBITDA (x)Free Cash Flow *** (Rs Billion)
Net off Entertainment Tax
Note: * Net subscriber means subscribers authorized to receive DTH broadcasting services on account of payment of subscription charges or any entry offer at the time of initial connection, as well as subscribers who are
temporarily disconnected due to non-payment of subscription charges for a period not exceeding 120 days.
**EBITDA is profit or loss after tax as increased by income tax expense, net finance costs, depreciation, amortization and impairment and reduced by other income. Adjusted EBITDA is EBITDA adjusted for the recognition of
fair value of the Employee Stock Option Plan 2014 recognized as an expense over the vesting period which amounted to INR 117.77 million for the fiscal year 2016 and INR 108.25 million for fiscal year 2017.
***Free Cash Flow is Adjusted EBITDA less capital expenditure and net interest expense, as increased by other income
# The Company adopted a change in the accounting treatment of entertainment tax effective April 1, 2016. This change resulted in operating revenue being presented net of entertainment tax, effective from April 1, 2016.
Prior to April 1, 2016, entertainment tax was accounted for under operating expenses, thus operating revenue was presented without deduction of entertainment tax.
Based on Adj.
EBITDA from
Q3FY17-Q2FY18
• Build subscriber base through distribution & marketing
• Enhance revenue realization through superior service & differentiated offering
• Strong focus on localization & premiumization
• Lead market in technological innovation
• Enhance operational efficiencies & improve margins
Strategy Drives Sustainable, Strong Growth
6
0.6
1
0.5
7
0.6
7
0.7
9
0.6
0
0.5
9
0.5
8
0.4
7 0.6
3
0.4
5
0.4
6
0.2
0 0.4
3 0.5
9
0.4
3
0.2
3
0.2
5
0.1
4
0.1
3
0.2
1
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Gross additions Net additions
2.6
4
2.6
5
2.2
4
1.0
81.7
4
1.6
8
1.0
5
0.3
4
FY15 FY16 FY17 H1 FY18
Gross additions Net additions
10
.64
10
.84
11
.27
11
.86
12
.29
12
.52
12
.77
12
.91
13
.04
13
.25
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Net Subscriber Base
10
.18
11
.86
12
.91
13
.25
FY15 FY16 FY17 H1 FY18
Net Subscriber Base
Net Subscriber Base (mn)
Net Subscriber Base (mn)
Strong Subscriber Growth
Gross & Net Subscriber Additions (mn)
Gross & Net Subscriber Additions (mn)
7
Source: Company data
Note: Gross subscribers means total registered subscribers.
Backed by founders with 30+ years of experience in Distribution
3 generations old loyalty in market relationship with the founder family
75% of DTH display counters in retail stores have d2h demo
Large shelf space occupied by brands under the parent group
93% penetration (reach) against Industry average of 85%
Market reach of more than 250,000 Retail stores1
6
2
5
Pan-India Distribution Channel Supports Sustainable Growth
8
4
3
Source: Company estimates
Strong Brand Partnerships & Associations
Source: Company data
9
• Building subscriber base through distribution & marketing
• Enhance revenue realization through superior service & differentiated offering
• Strong focus on localization & premiumization
• Lead market in technological innovation
• Enhance operational efficiencies & improve margins
Strategy Drives Sustainable, Strong Growth
10
0.4
6%
1.1
9%
0.7
3%
0.5
8%
0.4
9% 0.9
5%
0.8
7%
0.8
7%
1.2
7%
0.6
2%
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
20
5
20
5
21
1
21
4
21
1
20
9
20
5
19
6
19
8 21
2
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
0.8
0%
0.7
3%
0.8
0%
0.9
4%
FY15 FY16 FY17 H1 FY18
19
6 20
7
20
7
20
5
FY15 FY16 FY17 H1 FY18
Monthly Churn (%)
Annual ARPU (Rs)
Rising ARPU and Stable Churn
Monthly Churn (%)
Quarterly ARPU (Rs)
11
Based on Total revenue net off
entertainment tax & dealer marginsBased on Total revenue net off
Entertainment tax & Dealer margin
Source: Company data
Note: Churn has been calculated as the number of subscribers who have not made payment for at least 120 days and is the difference between the number of gross
subscribers and the number of net subscribers.
Strong Focus on Customer Service Lowers Churn
Dealer calls the call centre and gives customer details for
installation or customer complaint
Call centre raises a work
order and passes the
details to the respective
service center
Service centre assigns work order for installation or
customer complaint to an engineer
2,800+ Distributors & Direct DealersMarket reach of over 250,000 Retail stores
Fastest growing DTH company in India with 13.25 million
delighted net subscribers (1)
Nearly 320 direct service centers
97%+ installations within 2-4 hours85%+ repairs within 6-8 hours
Source: Company data
Note: (1) As of September 30, 2017 12
d2h Proprietary Services: Fulfilling the Content Gap
Source: Company data
13
• Building subscriber base through distribution & marketing
• Enhance revenue realization through superior service & differentiated offering
• Strong focus on localization & premiumization
• Lead market in technological innovation
• Enhance operational efficiencies & improve margins
Strategy Drives Sustainable, Strong Growth
14
57
48
36
27 23 21
14
Tam
il
Telu
gu
Ma
laya
lam
Kann
ada
Beng
ali
Ma
rath
i
Oriya
Strong Content Focus has lead to Consistent Subscriber Growth
15
Source: Company data,
Note: (1) Channels count as of November 1, 2017
(2) Includes HD services
3) As per company estimates
12
21 26
29
45
62 62
FY
12
FY
13
FY
14
FY
15
FY
16
FY
17
H1
FY
18
HD Channel Count (2) on Videocon d2h increasingSignificant regional focus (1)
The Highest Number of Channels and Services in India (3)
• Building subscriber base through distribution & marketing
• Enhance revenue realization through superior service & differentiated offering
• Strong focus on localization & premiumization
• Lead market in technological innovation
• Enhance operational efficiencies & improve margins
Strategy Drives Sustainable, Strong Growth
16
Constantly Redefining the Viewing Experience: Be Future Ready
17Source: Company data
Latest Technology New Offerings Product Innovation
Technology & Innovations
HEVC
DVB S2
1000 GB HD
DVR
Radio Frequency
RemoteMPEG4
DVB S2Connected Set Top Box
Transforming your TV into a hub of entertainment and knowledge
• MPEG-4 and HEVC technology converts your existing TV into a Smart TV
• Offering a wide range of proprietary services including Smart English, Smart Games, d2h Music, d2h Spice, d2h
Cinema, d2h Cooking, d2h NachLe, d2h Hollywood, d2h Darshan
• India’s First Radio Frequency Remote available to the consumer
• New DVR product can record up to 1,000 GB of content, translating to 1,775 hours of recording
• Connected Set Top Box plugs into any TV enabling apps to stream straight to your TV
• Building subscriber base through distribution & marketing
• Enhance revenue realization through superior service & differentiated offering
• Strong focus on localization & premiumization
• Lead market in technological innovation
• Enhance operational efficiencies & improve margins
Strategy Drives Sustainable, Strong Growth
18
Note: * FY15 Adjusted EBITDA is before accounting for one off securities issue expenses of Rs 105.43 mn and Employee Share based Compensations cost of Rs.
29.74 mn towards provision of ESOP plan of 2014; Q1-Q4 FY16 & Q1-Q4 FY17 Adjusted EBITDA is before accounting for Employee Share based Compensations
cost towards provision of ESOP plan of 2014
1,793 1,775
1,726
1,776
1,872 1,869
1,924 1,923
1,865
1,747
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
23
.4 28
.6
30
.7
16
.1
6.1
*
8.0
*
10
.2*
5.3
26.1%28.1%
33.1% 32.9%
0%
5%
10%
15%
20%
25%
30%
35%
0
5
10
15
20
25
30
35
FY15 FY16 FY17 H1 FY18
Revenue EBITDA EBITDA %
209 216207 205
5561
69 67
FY15 FY16 FY17 H1 FY18
Total revenue per sub EBITDA per sub
6.6 6.9 7.3 7.7
7.6 7.8
7.8
7.5 7.7 8.3
1.9
*
1.9
*
2.0
*
2.2
*
2.5
*
2.6
*
2.7
*
2.4
*
2.5 2.8
28.7%27.7% 27.4%
28.4% 33.0%33.8% 34.4%
31.3%32.2%
33.6%
15%
20%
25%
30%
35%
40%
0
9
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Revenue EBITDA EBITDA %
Revenue and EBITDA per avg. net sub (Rs per month)
Annual Revenue & Adjusted EBITDA (Rs billion)
Consistent Profitability Reflects Videocon d2h’s Industry Leadership
Hardware Subsidy per Sub (Rs)
Quarterly Revenue & Adjusted EBITDA (Rs billion)
Source: Company data
Revenue from Q1 FY17 is net off Entertainment Tax
Revenue from FY17 is net off
Entertainment Tax
19
Revenue for FY17 is net off
Entertainment Tax
7,501
6,502
7,6497,269
6,249
2,870
FY13 FY14 FY15 FY16 FY17 H1 FY18
36.2% 37.8% 39.9% 40.8%
17.2% 16.0% 15.4% 14.5%
21.1% 18.6% 11.9% 11.8%
25.5% 27.6% 32.8% 32.9%
FY15 FY16 FY17 H1 FY18
Content costs Fixed costsVariable costs Reported EBITDA margin
37.0% 38.1% 38.5% 37.5% 38.7% 38.7% 39.6% 42.5% 42.0% 39.7%
16.1% 15.6% 15.6% 16.6% 16.1% 15.0% 13.9%16.6% 14.9% 14.2%
18.6% 19.0% 18.9% 17.9% 12.5% 12.7% 12.4%10.2% 10.9% 12.5%
28.3% 27.3% 27.0% 28.0% 32.7% 33.6% 34.1% 30.7% 32.2% 33.6%
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Content costs Fixed costs Variable costs Reported EBITDA margin
(6,728)
(2,580)(1,558)
744
3,932
2,420
FY13 FY14 FY15 FY16 FY17 H1 FY18
Capex (Rs mn)
Videocon d2h Finances Managed to Sustain Growth, Minimize Risk
Adjusted EBITDA* less capex (Rs mn)
Source: Company data
Fixed, Variable and Content Cost (% of Revenue) Fixed, Variable and Content Cost (% of Revenue)
Revenue
used for the
calculation
is net off
entertainme
nt tax
starting
Q1FY17
20Note: * Adjusted EBITDA for FY15 is before accounting for one off securities issue expenses and Employee Share based Compensations costs towards provision of
ESOP plan of 2014; Adjusted EBITDA for Q1FY16 to Q4FY17 is before accounting for Employee Share based Compensations costs towards provision of ESOP
plan of 2014.
Adjusted EBITDA* less capex (Rs mn)
Fixed, Variable and Content Cost (% of Revenue)
Videocon d2h Investment Profile Reflects Management’s Value Building
Approach
21
World’s fastest growing pay TV market in
the fastest growing “large economy”
Leading distribution, customer
service and content offering
Seize Upside Potential
Build Downside Protection
Strong balance sheet with low leverage
Strong Board structure SEC compliant financial reporting
Strong revenue and EBITDA growth
driven by operating leverage
Robust free cash flow generation potential
Strong market presence and industry
leading share of subscriber additions
Note: * Revenue reported is net off entertainment tax for Q1FY17 – Q1FY18
Videocon d2h Extends its Value Creation Track Record
Rs in mn Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 * Q2FY17 * Q3FY17 * Q4FY17 * Q1FY18 * Q2FY18 *
INCOME
Revenue from operations 6,628 6,901 7,315 7,715 7,633 7,762 7,774 7,549 7,726 8,346
6,628 6,901 7,315 7,715 7,633 7,762 7,774 7,549 7,726 8,346
EXPENSE
Operating expense 3,791 4,021 4,266 4,414 3,994 4,052 4,074 4,071 4,142 4,391
Employee benefits expense 309 303 304 291 322 315 302 349 277 240
Administration and other
expenses 146 198 178 183 178 183 220 235 208 276
Selling and distribution expenses 509 496 590 664 640 607 527 575 614 633
Depreciation, amortization and
impairment 1,427 1,489 1,508 1,665 1,711 1,685 1,697 1,773 1,793 1,816
Total Expenses 6,181 6,507 6,846 7,218 6,845 6,843 6,820 7,003 7,034 7,357
Profit / (Loss) from operations 447 394 469 497 787 919 954 546 692 989
Finance costs/Finance Income
(Net) (765) (802) (797) (778) (759) (717) (653) (687) (678) (763)
Other Income 12 6 9 9 9 9 10 24 3 17
Profit/(loss) before tax (307) (402) (319) (272) 38 211 311 (117) 17 243
Income tax expense
Current tax - - - - - - - - - -
Deferred tax (63) (156) (99) (60) 11 63 93 (29) 5 75
Profit/(Loss) after tax (244) (246) (220) (212) 27 148 218 (87) 12 168
Strongest Financial Results to Date
22
23
Market Cap as on Sept 30, 2017: USD 946 million
Free Float: 35.5%
Shares Outstanding: 424,997,937
Investor Relations Contact:
Nupur Agarwal
Tel: +91-22-4255-5000
Email: [email protected]
NASDAQ: VDTH