Ad revenues to rise on better price realisations: S L Narayan

Interview with CFO, Sun group

Kalanithi Maran-owned Sun TV Network has decided to increase advertisement tariffs by an average 19 per cent from July 15. The decision comes at a time when the company reported a 15 per cent growth in advertisement traffic, led by the FMCG sector.

 

, CFO, Sun group, tells TE Narasimhan the decision has been well thought out keeping in view the growing market demand. Edited excerpts

How was the last fiscal?
Fiscal 2012-13 ended on a satisfactory note. The entire TV broadcasting industry faced challenges in raising their advertisement revenues. The first half of the year ie, April-Sept 2012 saw our ad revenues growing at a modest 5 per cent. However, the business environment improved substantially from the third quarter. We grew ad revenues 20 per cent for the quarter ended December 2012 and 15 per cent in March 2013. The digitisation gains have also started coming in. In particular, DTH revenues have shown significant traction in the last couple of quarters.

Any changes in the advertisers profile? What are the prospects going forward?
Not much of a change. Almost 55 per cent of our ad revenues comes from FMCG companies and about 33 per cent from regional brands like garments, jewellery and processed foods. With the improving price realisations in telecom and falling interest rates, we believe ad spends will go up in segments such as mobile telephony, financial services, auto/real estate.

How do you see 2013-14?
We expect ad revenues to grow on a par with the growth in India's nominal GDP for 2013. However, subscription revenues could surprise on the upside when compared with last year's growth because of ongoing digitisation agenda.

What kind of impact the 19% hike in advertisement will have on your revenues going forward?
The decision to increase advertising rates has been well thought out and effected after ensuring the market will be able to absorb the additional burden. These are slots that enjoy consistently high viewership and we're| confident that there will be no issues in implementation. Additionally, it should be noted that the price increases are coming after 24 months.

Will you be looking at other channels also apart from Sun TV.
We're looking forward to go for hikes across all the channels.

What was the contribution of the IPL team Sunrisers during the fiscal?
The IPL operations would start contributing from FY 2014. The Sunrisers brand has carved a niche for itself on the back of some great performances by the players. The team was able to build a great fan following in Hyderabad.

Would you continue to pay high dividends?
Our payout ratios have risen from 25-64 per cent in the last five years. We don't comment on the future but will try to maintain the payout ratios.

What kind of capex Sun has lined up for 2013-14?
Our capex budget will be in line with past trends and there are no major projects on the anvil.

How is the radio business doing?
Our radio brands - Suriyan FM in Tamil Nadu and Red FM in the rest of India -- continue to do well. The revenues are up 26 per cent over the previous year.