Shemaroo's TV broadcast biz break-even plan derailed due to second Covid wave

Media company Shemaroo Entertainment has said that its original plan to achieve break-even on its broadcast business in H2 FY22 has been pushed back due to the impact of the second Covid-19 wave, which saw corporates cutting down their advertising budgets, thereby hitting the broadcast industry hard.

In CY2020, Shemaroo had entered the broadcast business with the launch of free-to-air (FTA) channels Shemaroo TV (Hindi GEC) and Shemaroo MarathiBana (Marathi movie channel).

"We had budgeted for it to break even in the second half of the year. Definitely, the second wave has pushed it back, there is no doubt about that. How much back, only time will tell, and it will be very difficult for me to put a number on that," Shemaroo Entertainment CEO Hiren Gada said during a Q4 earnings conference call.

In Q4, the company spent Rs 13 crore on the broadcast business net of revenue. For the full fiscal, the company spent Rs 58 crore on the broadcast business net of revenue. In FY22, the company's investment plan in the broadcast business will be lower compared to FY21, Gada revealed.

"The company has been in an investment mode with various new initiatives, hence it is important to note that expenses made on these new initiatives net of revenue for the period under review. For Q4 financial year 21, expenses on the new initiatives net of revenue were at 13 crores. And for the entire financial year it was at 58 crores," he added.

Adjusting for investments in new initiatives, Shemaroo's adjusted EBITDA from existing operations would have been approximately Rs 24 crore for Q4 FY21, representing a margin of 31%. For FY21, the adjusted EBITDA would have been approximately Rs 70 crore, representing an EBITDA margin of 22.5%.

In Q4, Shemaroo's operational income stood at Rs 78 crore, while EBITDA came in at Rs 11 crore. The company reported a net profit of Rs 2.2 crore. For the full fiscal, the operating income was at Rs 311 crore, while EBITDA and net loss stood at Rs 12.6 crore and Rs 22 crore respectively.

The digital media revenue during the exit quarter of FY21 stood at around Rs 37 crore, which was down by 20% year-on-year. For FY21, the digital media revenue stood at Rs 149 crore, which is down by 25% year-on-year. Traditional media revenue in Q4 stood at Rs 41 crore which was down by 47% year-on-year and for FY21 it stood at Rs 162 crore, down by 49% year-on-year.

"During the second lockdown, there will be some impact on subscription, advertising, and syndication revenues across Shemaroo business. Although we expect that it will not be as severe and prolonged as the previous lockdown," Gada said.

Shemaroo will be ramping up content offerings on both channels. Gada said Shemaroo MarathiBana has built a very strong consumer affinity. "And the next phase for MarathiBana is the content ramping up phase where there are some significant content tie-ups that are underway and this will play out over the next two, three quarters in terms of the whole programming part, et cetera. So, that’s something there’s a clear roadmap on the content side in terms of newer tie-ups for that. And that will of course be accompanied by a marketing push on the channel side. So these are the two key drivers for MarathiBana."

He also mentioned that the outstanding inventory has come down. In September 2020, inventory stood at Rs 743 crore, while in March it came down to Rs 730 crore. Answering a question on the increase in inventory level in FY21 compared to FY20, Gada highlighted that this was due to the impact on the company's syndication business.