Viacom18 posts net profit of Rs 81.01 cr in FY19

Viacom18 Media, the 51:49 joint-venture between TV18 Broadcast and Viacom, has posted a net profit of Rs 81.01 crore during the fiscal FY 2018-19. The net profit is lower than the Rs 83.46 crore earned by the company in FY18.

The profit before interest lease depreciation and tax (PBILDT) was also lower at Rs 201.86 crore as against Rs 213.94 crore. The company’s total operating income dropped to Rs 3666.75 crore compared to Rs 3687.25 crore a year ago.

According to CARE Ratings, Viacom18’s total income was marginally lower in FY19 as the previous year included revenues from the box office hit ‘Padmaavat.

However, the company’s total operating revenue excluding film revenue has improved by 7% on a y-o-y basis owing to a recovery in advertisement revenues with the continued improvement in the ad-environment.

The growth in the Hindi GEC segment was mainly on account of higher pricing power enjoyed by the company on account of it being a dominant player in the Hindi GEC market.

It further stated that the profitability margins in FY19 have declined marginally in FY19 owing to continued investments in Voot and new initiatives.

The margin has also been dragged by New Tariff Order (NTO) / DD Free Dish shift impact wherein the viewership has been impacted as the process of consumers choosing channels/packs and on-ground realignments in distribution value-chain are still underway.

CARE noted that the margin is expected to improve in the medium term led by increased marketing intensity by the company, content at a value price-point and improved distribution tie-ups.

The rating agency has reaffirmed the bank facilities as well as the commercial paper issue of Viacom18 worth Rs 1275 crore and Rs 500 crore respectively.

The ratings take into account its strong financial flexibility as well as its strategic importance for the media business of its parentage through closer integration and alignment with the Network 18 Group, with ultimate ownership by Reliance Industries Limited (RIL).

It added that the ratings also factor in Viacom18’s stable operational performance in FY19 driven by continued growth in the broadcasting and content division largely comprising revenue from Colors and comfortable overall gearing level as well as adequate liquidity.

The ratings continue to derive strength from the strong parentage and healthy performance of its flagship channel ‘Colors’ with its consistent presence in the top Hindi General Entertainment Channels (GECs) in terms of television viewership and entertainment content offerings in various genres.

The credit strengths are, however, partially offset by the reliance on a channel ‘Colors’, expected cash outflow on account of investment in its digital platform Voot and continued investments in newly launched initiatives, working capital intensive nature of operations and inherent volatility of the film production and distribution division.

Furthermore, CARE stated that the ratings also take into account the nature of the main source of revenue, i.e., advertisement, which is sensitive to factors like market competition, the quality and popularity of content being broadcast, trends in the media sector, regulatory changes and to the level of economic activity in general.

Going forward, the ability of Viacom18 to maintain its market position in leading genres and improve its market share in other genres along with higher subscription revenues through benefits of digitisation, performance of its investments in its digital platform Voot and the regional GEC portfolio along with its ability to sustain the revenue and profit growth amidst increasing competition are the key rating sensitivities.

Viacom18 Media is a subsidiary of TV18 Broadcast Limited (TV18), which is the broadcasting arm of Network 18 group. TV18 owns 51% in VMPL while the remaining stake is held by MTV Asia Ventures (India) Pte Ltd and Nickelodeon Asia Holdings Pte. Ltd (Viacom Inc. group companies).