Sun Direct added 2 mn gross subs in first 10 months of FY19

Direct to home (DTH) operator Sun Direct has added two million gross subscribers during the first 10 months of the financial year 2018-19.

During the period 10M FY19, the DTH operator’s activation income registered moderate 5% growth on an annualised basis during. Subscription income registered significant growth at 19%. Gross subscriber addition during the period was 20 lakh (2 million).

While customer acquisition has been healthy in the past, the company had witnessed high churn in the customer base mainly due to a lower number of channels offered.

Sun Direct has been focusing its operations primarily in the Southern region with the share of South India in the net subscriber base high at around 98%.

The DTH operator’s net profit for 9M FY19 has fallen to Rs 5.92 crore compared to Rs 45.27 crore in FY18. The net profit fell on account of increased subscriber acquisition cost and other costs.

The total income of Sun Direct grew by about 13% year-on-year from Rs. 1,215 crore in FY17 to Rs. 1,372 crore in FY18 mainly driven by growth in activation income. During FY18, the activation income grew by 53% on the back of gross subscriber acquisition of 18 lakhs (1.8 million), while the subscription income grew by about 11%.

Recently, Care Ratings had reaffirmed the long-term bank facilities of Sun Direct worth Rs 621.35 crore as CARE BBB+.

The agency had noted that the rating assigned to the bank facilities of Sun Direct TV continues to derive strength from vast experience of the promoters in the media industry, the company’s growing scale of operations albeit concentrated towards South India and significant growth in activation income in FY18.

The rating, however, remains constrained by elevated financial risk profile of the company on account of the accumulated losses in the past and increasing competition faced from its peers and other alternative technology platforms. Going forward, ability of Sun Direct to improve its market share and increase its Average Revenue Per User (ARPU) in a highly-competitive market would be key rating sensitivities.

The outlook is ‘Positive’ as CARE believes that, going forward, with additional transponder capacity Sun Direct is expected to sustain the growth in its net subscriber base and offer a wide array of channels which may aid in improving ARPUs and thereby generate higher cash accruals in the medium-term. The outlook may be revised to “Stable” if the Sun Direct is not able to generate envisaged cash accruals or if there is any adverse change in the regulatory or competitive environment.

Sun Direct uses 13 transponders out of which 9 transponders are from ‘MEASAT’ and 4 transponders from ‘GSAT’. Of the above, 1 transponder from ‘MEASAT’ was added during FY19. This along with addition of 7 transponders during FY18, has enabled the company to increase the number of SD channels offered to around 341 channels from 256 channels earlier and offer 67 HD channels.

Sun Direct is also shifting to HEVC encoding as against MPEG 4 encoding used earlier which will help the company broadcast higher number of channels within the existing bandwidth.

Care also noted that though the company started generating cash profits from FY13, it continued to incur losses till FY16. The promoters were providing financial support to the company by infusing equity in the past. The company had accumulated losses of Rs. 2,706.75 crore and hence net worth continues to remain negative as on 31st March 2018.

Sun Direct is promoted by Kalanithi Maran and his wife Kaveri Kalanithi. Together, the two hold 80% stake in Sun Direct. South Asia Entertainment Holding Ltd (SAEHL), a 100% subsidiary of Astro All Asia Networks Plc (Astro), holds the remaining 20% stake. Astro is a leading DTH operator in Malaysia. Sun Direct started DTH TV services from December 2007, concentrating mainly in South India and expanded its services to the rest of India in September 2008.