Dish TV Q3 PAT down 61% at Rs 26.7 cr

Revenue growth slows as subscriber addition becomes a challenge in light of demonetisation

Direct-to-home service provider Dish TV saw 61% dip in net profit in the quarter ended December 31, 2016. Profit after tax in Q3FY17 was Rs 26.7 crore, as compared to Rs 68.5 crore in Q3FY16. While the company’s revenue grew 2.4% year-on-year in the quarter under consideration, increased expenditure (7.2%) and depreciation (13.2%) reduction in PAT.

Dish TV reported subscription revenues of Rs 692.1 crore, up 3.3% and operating revenues of Rs 748 crore. The company harmonised the accounting of entertainment tax in line with industry practice with effect from April 1, 2016.  Earlier, entertainment tax was recorded as an operating expenditure, however, effective April 1, 2016, it is netted off against subscription revenues. Q3 FY16 figures have been regrouped accordingly for the sake of comparison. Year-on-Year revenue growth would have been higher considering service tax rate of 15% in Q3 FY17 as against 14% in the corresponding quarter last fiscal.

EBITDA for the quarter was Rs 249.5 crore compared to Rs 265.4 crore in the corresponding quarter last fiscal while EBITDA margin stood at 33.4%. Jawahar Goel, CMD, Dish TV India Limited explained why: “We believe that the negative impact of demonetisation is only temporary and that with a strong subscriber growth rate, tight control on costs, reasonably steady free cash flows and a healthy balance sheet we should deliver sustainable growth. The rollout of the Goods and Services Tax (GST), a hopefully favourable license fee regime and a revenue conscious cable industry should only add to the strengths of Dish TV going forward.”

Till November 8, the DTH company had close to 30% of its subscribers paying it through various means of online recharges and the balance using the Electronic Payment Recharge System (EPRS) — where a user pays in cash to the dealer for the recharge. With 86% of India’s currency getting pulled out of circulation from the very next day, recharges where the medium of transaction and payment through EPRS declined. 

Goel said: “Limited cash supply made people defer their DTH recharges by a few days or weeks depending on the urgency of other basic necessities. The impact was stronger in the second tier and below towns and cities as most of the economy in these areas runs on cash. Our subscription revenues during the quarter could have been higher by around 8% in a non-adverse scenario. Lower growth eventually resulted in lower average revenues per user as well.”

The fiscal third quarter being the period of festivals is generally the largest contributor to new subscriber additions during the year. Demonetisation, however, impacted Dish TV’s new subscriber additions also with the company recording an estimated 8-10% lower subscriber adds during the quarter.

As a result, Dish TV launched steps to retain consumers and dealers.

“Subscribers, as well as trade partners, were extended temporary credit facilities basis their past transactions pattern. Subscriber awareness drives to promote alternate methods of payment were run both on the ground and on screen in addition to various other initiatives,” said Goel.

Looking at the brighter side of it, demonetisation does promise an eventual less-cash dependent population that should use online payment interfaces over cash for DTH recharges. That’s going to be a boon for the DTH business.

“Though demonetisation has led to an initial distress, it also will result in certain structural changes that are going to benefit the economy in the long run. As far as our business is concerned, the effect has already started coming in. As online payment transactions, credit cards and a less-cash society become buzz words today, we are happy to note an increase in our online transacting subscriber base from 30% to around 38% with around 22 digital wallets and the like being integrated with the company. Every online recharge transaction vis-à-vis EPRS based transaction implies savings on recharge commissions paid by us,” Mr Goel said.