On Y-o-Y basis, quarter ended June 2017, operating revenues declined by 5% to Rs 738.88 crore. The company added 1.86 lakh subscribers taking the subscriber base at 15.7 million (net). Average Revenue per User (ARPU) at Rs 148 vs Rs 134 in Q4 FY17. Going forward, ARPUs should get a tailwind as major MSOs have started adopting the prepaid model for revenue collection. Direct collection should help correct certain anomalies in the business model of MSOs, thus helping lift overall industry ARPUs. Ramadan during the last month of the first quarter moderated subscriber additions and recharges which otherwise could have been even stronger. Unlike fiscal 2017, this year the period of Ramadan fell completely in the first quarter as against a Q1-Q2 split last year. Involvement in the GST transition process during the last few days of the quarter also diluted some managerial attention towards the business. The Subscription revenue was at Rs 691.7 crore, grew by 11.5%. OPM declined by 629ps to 27.2%. The loss stood at Rs 11.67 crore against profit of Rs 37.68 crore in the corresponding quarter of last year.

Consolidated Performance

Quarterly Performance (Sequential)

For the quarter ended June 2017, operating revenues inclined by 4% to Rs 738.88 crore. The company added 1.86 lakh subscribers taking the subscriber base at 15.7 million (net). Average Revenue per User (ARPU) at Rs 148 vs Rs 134 in Q4 FY17.

OPM inclined by 34bps to 27.2% mainly due to decrease in other expenditure to net sales. The operating profit inclined by 6% to Rs 201.20 crore.

Other income decreased by 6% to Rs 9.80 crore. Interest cost inclined by 3% to Rs 58.96 crore while depreciation & amortization charge increased by 5% at Rs 182.21 crore. The loss before tax stood at Rs 30.17 crore against loss of Rs 29.09 crore in the sequential quarter.

Tax credit for the quarter stood at Rs 16.23 crore. The loss after minority interest stood at Rs 11.67 crore against loss of Rs 28.33 crore in the sequential quarter.

For the quarter ended June 2017, operating revenues declined by 5% to Rs 738.88 crore. The company added 1.86 lakh subscribers taking the subscriber base at 15.7 million (net).

Average Revenue per User (ARPU) at Rs 148 vs Rs 134 in Q4 FY17. Going forward, ARPUs should get a tailwind as major MSOs have started adopting the prepaid model for revenue collection. Direct collection should help correct certain anomalies in the business model of MSOs, thus helping lift overall industry ARPUs.

Churn at 1% p.m. was slightly higher than the 0.9% p.m. in the previous quarter, but remains manageable.

Ramadan during the last month of the first quarter moderated subscriber additions and recharges which otherwise could have been even stronger. Unlike fiscal 2017, this year the period of Ramadan fell completely in the first quarter as against a Q1-Q2 split last year. Involvement in the GST transition process during the last few days of the quarter also diluted some managerial attention towards the business.

Seasonality impacted the growth in advertisement and bandwidth revenues however, the company remains highly optimistic about the future growth potential of these two revenue line items

The Subscription revenue was at Rs 691.7 crore, grew by 11.5%.

OPM declined by 629ps to 27.2% mainly due to increase in operation expenditure to net sales. The operating profit declined by 23% to Rs 201.20 crore.

After a one-off impact in the last quarter, transponder costs returned to the normal run-rate and were down 22% sequentially. Taking into account content presence on OTT platforms, Dish TV has started renegotiating for its content costs and is glad to have achieved success in reducing costs with one of the large broadcasters recently. Long term investments in brand building and marketing were re-started during the quarter

Other income decreased by 15% to Rs 9.80 crore. Interest cost inclined by 12% to Rs 58.96 crore while depreciation & amortization charge increased by 11% at Rs 182.21 crore. The loss before tax stood at Rs 30.17 crore against profit of Rs 55.03 crore in the corresponding quarter of last year.

Tax credit for the quarter stood at Rs 16.23 crore. The loss after minority interest stood at Rs 11.67 crore against profit of Rs 37.68 crore in the corresponding quarter of last year.

For year ended March 2017

The operating revenues de-grew 1% at Rs 3014.39 crore. OPM declined by 122 bps to 32.3%. The operating profit decreased by 5% to Rs 972.86 crore.

Other income declined by 26% to Rs 47.51 crore. Interest cost increased by 7% at Rs 223.899 crore. Depreciation & amortization charge increased 12% at Rs 663.08 crore. The profit before tax decreased by 54% to Rs 133.40 crore.

Tax outgo for the year stood at Rs 24.12 crore. The net profit declined by 62% to Rs 109.28 crore due to increase in depreciation & amortization charge.

Management Comments:

The proposed amalgamation with Videocon D2h Limited will further help create scale in the highly fragmented TV distribution landscape in India while creating significant synergies through the combination. Drawing inference from our initial estimates and integration meetings held so far, we expect approximate net synergies from the amalgamation to the tune of Rs. 180 crore in FY18 and Rs. 510 crore in FY19. Significant amongst these would be synergies arising from unified content contracts as each major contract becomes due for re-setting.

Dish TV has successfully transitioned to the GST regime. The DTH industry has seen a reduction in the overall indirect tax rates under GST. Though benefits due to the unified tax may take some time to reflect in numbers, the sheer check on tax avoidance in the informal cable sector should be immediately helpful in reducing irrational competition from cable. The Harmonized System Nomenclature (HSN) codes, unit and rate which need to be separately declared in the invoice in value chain right from the broadcasters to the local cable operator, under GST will give a logical and systematic classification to goods and services thus reducing the possibility of misdeclaration by businesses. The total amount of GST to be collected and payable by Dish TV during the current quarter would be to the tune of Rs 135 crore.

The Government has set a deadline of May 2018 for electrification of all villages and 15 August 2022 for electrification of all households in the country. This is good news for the Pay-TV industry as electricity shortage has always had a negative impact on consumption of TV entertainment. With all households in the country getting electrified, television entertainment should get a spike in growth.

The strengthening Indian rupee against the US Dollar is favorable for the business and would also help keep the dollar debt repayment obligations under check. For better inventory management and reduced inventory holding costs, Dish TV initiated a Voucher based distribution system instead of the traditional Physical Box based system to stock its trade partners. Under the new system paper vouchers, instead of physical hardware, would be stocked by the trade partners with the physical box being delivered at the customers place by the service franchisee.

Dish TV is excited about the mega size, strength and reach that it is going to achieve post the formation of Dish TV Videocon Limited. The new company would be riding on the strength of a resurgent economy and a growing market that should help enhance the efficiencies from this mega merger

On July 27, 2017, the Mumbai Bench of Hon'ble National Company Law Tribunal (NCLT) approved the Scheme of Arrangement amongst Videocon D2h Limited and Dish TV India Limited. With all other approvals in place, the only remaining approval is from the Ministry of Information and Broadcasting. The combination of DishTV and Videocon D2h would create one of the World's largest DTH platform

With a normal monsoon so far, the rural economy which had suffered two back-to-back droughts in 2014 and 2015 and then the demonetization shock in 2016 should recover smartly this year.

Further, other reform programmes like using direct benefit transfers to deliver subsidies to the rural masses will eliminate middlemen created subsidy diversions and ultimately help increase the spending power of the rural population.

With more than 75% of its subscriber base outside urban areas, Dish TV has always been a rural heavy DTH business. The company is familiar with its strength and looks forward to ride the reforms driven growth in its key markets.

With digitization spreading to rural India, primary objective is to address the needs of pay-TV viewers in small towns and villages. For the first time in the history of DTH industry in India, indirect tax rates have been separately communicated to the consumers. In an attempt to make TV viewing affordable for viewers, Dish TV introduced the Rs 160 per month (plus taxes) pack this month. In addition, by partly adopting TRAI's new Tariff Order, Dish TV also started offering all channels, except Sports and select south channels, at affordable ala-carte prices of Rs 8.50 and Rs17 (plus taxes) per channel per month for SD and HD respectively. It would be worthwhile to mention here that none of these new offerings would be margin dilutive for business.

Dish TV further enhanced its portfolio of Value Added Services (VAS) during the quarter. The company entered into a partnership with Visiware International, the leader in games for interactive television, to launch Cartoon Network Games with Cartoon Network India. The games will be refreshed on a monthly basis with one game being replaced every month. Dish TV also announced the launch of Disney Active, a fun and engaging service that brings home the magical World of Disney through a host of read along e-books and games. The services will be charged at Rs 40 (including taxes) per month.

Shareholding Pattern

The Promoters stake stood at 64.44%.

Valuation

The stock is trading around Rs 78.35 on the bourses.