Siti Networks LtdQ1 FY18Entertainment

Siti Networks Ltd

Q1 FY18 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Subscription revenue grew by 41% in FY18, indicating strong growth momentum.
→Broadband ARPUs are currently declining due to competition (e.g., Jio), but the company plans to expand broadband in select identified markets like Nagpur to improve returns.
→The active digital subscriber base reached 11.5 million with a focus on increasing ARPU, targeting a 20% ARPU growth this year and expecting double-digit ARPU growth over the next two years.
→The company intends to seed about 2.5 million set-top boxes in FY19, continuing expansion beyond legacy analogue households.
→Content cost is expected to grow around 15%, implying revenue growth needs to outpace cost increase for margin improvement.
→Focus on improving collection efficiencies and tightening working capital to support cash flow and sustainable revenue growth.
→The company is cautiously watching regulatory impacts (tariff orders) that could affect revenue streams like carriage fees.

Margin guidance

Category 3

→Broadband ARPU growth targeted at least 20% increase in the near term (Page 13).
→Operating EBITDA rose significantly in FY18 to Rs. 151 crores (excluding activation income); total EBITDA was Rs. 325 crores (Page 2, 6).
→Content costs expected to grow around 15% in FY19 (Page 4).
→Employee costs trending downward with expectation of further EBITDA benefits in FY19 (Page 12).
→Seeding of ~2.5 million plus set-top boxes planned for FY19, indicating subscriber base growth potential (Page 9).
→Cash flow focus with collection efficiency targets above 100% and working capital improvements (Page 14).
→EBITDA margins improved 2.1 times to 12% in FY18 and growth momentum signaled through ARPU and subscription revenue growth of 41% (Page 2, 14).
→Management is optimistic on revenue and profitability growth driven by ARPU improvements and operational efficiencies over next 1-2 years (Pages 13, 14).

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Fundraise plans

Yes

→No explicit mention of imminent new fundraising through debt or equity in the call.
→Avinash Kumar questioned about the funding gap and possibility of preferential equity issuance to promoters or PE investors due to EBITDA not covering interest and CAPEX.
→Rajesh Sethi responded that whenever there is any equity infusion, the company will inform the market at the right time.
→He disagreed with the assertion that EBITDA can't cover interest costs and emphasized their operating EBITDA was Rs. 151 crores (excluding activation), and total EBITDA was Rs. 325 crores, with finance cost around Rs. 140 crores.
→No specific plans disclosed about raising new debt or equity during FY19 in the call.
→CEO suggested further details on working capital and funding might be discussed offline, indicating no public announcement presently.
→Overall, no confirmed or planned new fundraising announced during this conference.

Order book

The provided transcript and document excerpts do not contain any specific information regarding the current or expected order book or pending orders for Siti Networks Limited. The discussion primarily focuses on financial results, content costs, broadband ARPUs, CAPEX plans, STB inventory, and regulatory issues. There is no direct mention or data on order books or pending orders in the available pages. If you require detailed information on the order book or pending orders, it may not be available in this particular document or call transcript.

Capex plans

Yes

→For FY19, the company plans a CAPEX outlay of around ₹350 crores (Page 5).
→The CAPEX includes both capitalization of material yet to be capitalized plus fresh seeding of set-top boxes (Page 9).
→The target for seeding set-top boxes next year is approximately 2.5 million boxes (Page 9).
→In Q4 FY18, CAPEX spend was close to ₹56 crores; for full FY18, it was about ₹400 crores (Page 5).
→Broadband CAPEX in Q4 FY18 was negligible; the company is working on a robust broadband strategy yet to be announced (Page 16).
→The focus is on investing in new markets where return on investment is attractive, for example, Nagpur and few others identified (Page 17).

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