On July 8, 2010, the Board of Directors of the Company in-principle approved the sale of ENIL's entire equity stake of 83.44% in Times Innovative Media Ltd (TIM) to Bennett, Coleman & Company Ltd (BCCL) for a cash consideration of Rs 45 crore. Additionally, BCCL will repay the Company's loan to TIM of Rs 42.50 crore and also absorb the obligations under the financial guarantees provided by the Company on account of TIM as on the date of the proposed transaction of Rs 31.23 crore. The Company would not be consolidating the numbers for TIM in Q2FY2011.

As per the recently published Indian Readership Survey (IRS) 2010 Q1, Radio Mirchi has emerged as a clear leader with over 41.2 million listeners across the country. Radio Mirchi tops the charts with the largest cumulative listenership of 15.1 million in the eight key cities of Mumbai, Delhi, Kolkata, Hyderabad, Bangalore, Pune and Ahmedabad. It leads in 25 of its 32 cities across the country.

Quarterly Analysis (Consolidated)

For the quarter ended June 2010, ENIL reported 32% rise in operating revenues at Rs 115.04 crore. Revenues from radio business grew 15% at Rs 57.53 crore which was entirely volume growth, OOH revenues grew 49% at Rs 46.03 crore and event management business revenues were up 71% at Rs 11.53 crore.

The Company turned profitable at operating level with profits of Rs 14.75 crore against loss of Rs 6.44 crore in the corresponding quarter previous year. As a % of net sales, production costs were down 60bps at 13.8%, license fees were down 1290bps at 27.4%, employee cost decreased 190bps at 17.4% and other expenditure decreased 600bps at 23.4% whereas marketing expenses increased 110bps at 5.2%.

OPM of Radio business improved 670bps at 25.1% whereas OOH business reported profits of Rs 0.58 crore against loss of Rs 13.94 crore in the corresponding quarter previous year and event business reported loss of Rs 0.26 crore down 85%. The margins were impacted by private treaty provisioning of Rs 3.69 crore.

Other income for the quarter was up 136% at Rs 16 lakh. Interest cost (net) decreased 72% at Rs 0.90 crore and depreciation & amortization decreased 15% at Rs 11.31 crore on the back of 23% decrease in depreciation at Rs 5.92 crore. The resultant PBT was at Rs 2.69 crore against loss of Rs 22.83 crore in the corresponding quarter previous year. Tax provision including deferred tax was at Rs 2.19 crore. The resultant PAT stood at Rs 0.50 crore against loss of Rs 22.66 crore in the corresponding quarter previous year. Accounting for minority share in loss in TIM of Rs 0.59 crore against share of loss of Rs 3.24 crore in the corresponding quarter previous year, the resultant net profit was at Rs 1.09 crore against loss of Rs 19.41 crore in the corresponding quarter previous year.

FY2010 Performance (Consolidated)

For the year ended March 2010, ENIL reported 1% fall in operating revenues at Rs 422.82 crore. The revenues from radio business was up 1% at Rs 230.85 crore. The revenues from OOH business were up 5% at Rs 156.11 crore and of event business was down 27% at Rs 41.52 crore.

The Company turned profitable at operating level with profits of Rs 44.48 core against loss of Rs 9.53 crore in the previous year. As a % of operating revenues, production expenses decreased 180bps at 13.4%, license fees were down 850bps at 31.1%, marketing expenses decreased 50bps at 4.6%, and employee costs decreased 200bps at 16.1% whereas other expenditure was stable at 24.2%.

Radio business reported improvement in OPM of 370bps at 25.8% whereas OOH business reported 75% fall in operating losses at Rs 14.73 crore and event business reported loss of Rs 0.43 crore against a profit of Rs 0.73 crore in the previous year. The margins were adversely impacted by provisioning for private treaty of Rs 20.01 crore whereas benefited by lower license fees of Rs 10 crore.

Other Income stood at Rs 0.72 crore down 79%, and interest cost (net) decreased 16% at Rs 12.12 crore on lower net debt at Rs 27.67 crore against Rs 131.87 crore at the end of the previous year. Depreciation & amortization charge was flat at Rs 52.56 crore. Loss at PBT level was down 73% at Rs 19.48 crore. Tax provision including deferred tax was at Rs 2.30 crore against tax credit of Rs 0.25 crore in the previous year. Loss of PAT level was down 70% at Rs 21.78 crore. Accounting for minority share in loss of TIM of Rs 6.46 crore down 49%, the resultant loss at net level was at Rs 15.32 crore down 75%.

Radio business

For the quarter ended June 2010, Radio business reported revenues of Rs 57.53 crore up 15% which was entirely volume growth. Revenues from 10 legacy stations grew 13% at Rs 41.55 crore and from new 22 stations grew 18% at Rs 15.98 crore.

OPM improved 670bps at 25.1%. As a % of net sales, production costs were down 210bps at 8.5%, license fees were down 10bps at 5.2%, and other expenditure decreased 870bps at 26.5% whereas marketing expenses increased 250bps at 10.4% and employee cost increased 160bps at 24.4%. OPM for 10 legacy stations improved 400bps at 30.8% whereas that of other 22 stations was at 10.4% against loss of Rs 0.6 crore in the corresponding quarter previous year.

Other Income was minimal, and interest (net) was income of Rs 0.31 crore against cost of Rs 1.73 crore in the corresponding quarter previous year. Depreciation & amortization charge was down 7% at Rs 8.35 crore. Tax provision including deferred tax was at Rs 2.19 crore against tax credit of Rs 0.04 crore in the corresponding quarter previous year. PAT was at Rs 4.31 crore against loss of Rs 1.45 crore in the corresponding quarter previous year.

Commenting on the performance of the company Mr Prashant Panday, CEO, ENIL said,

"Overall, the advertising markets are looking up. The zing is back! Those brands which have invested in brand building during the down-turn of the last 18 months are likely to gain in the coming quarters. Our strong listenership has made Mirchi a permanent feature of most advertising plans. We look forward to a quick resolution of the music royalty issue and thereafter to Phase III."

Commenting on the performance, Mr N Subramanian, Group CFO, ENIL said:

"The deal is positive for ENIL as it will release significant cash for the upcoming Phase III investments in the radio business. It will also improve the consolidated profitability of the Company going forward."

Shareholding Pattern

As of June 30, 2010, total foreign investors hold 10.09% (9.97% at end of sequential quarter), Promoters hold 71.15% (71.15% at end of sequential quarter), MFs/FIs & Banks hold 0.76% (1.88% at end of sequential quarter), and others hold 18% (18% at end of sequential quarter).

Valuation

The shares of the company are trading at Rs 208.9 on the bourses discounting the standalone TTM EPS of Rs 5 by 42 times and EV/EBITDA of 14.2 times.