New Delhi Television Ltd (NDTV) expects to turn its business profitable in the fiscal starting in April as a new cable law helps cut costs and boosts subscription revenue.
There are 500 large and about 60,000 small cable TV operators in India with a combined annual revenue of $4.5 billion. Because of slack regulation, operators do not disclose the actual number of their subscribers and piracy is rampant.
A legislation enacted in December requires cable TV subscribers to shift from analogue wire connections to digital boxes by 2014, a move aimed at ensuring transparency.
"Cable digitisation is probably one of the most significant steps that has been taken in a long time," said Vikram Chandra, chief executive of NDTV, whose channels include English news NDTV 24*7, business news NDTV Profit and Hindi news NDTV India.
"We expect a boost to our subscription revenue from this new law but I think the bigger immediate impact will be on carriage fees," he told Reuters in an interview on Monday.
Carriage fee, the amount a broadcaster pays each cable operator for including in his network, usually makes up 30-40% of the company's total cost.
As the shift to digitisation would boost the channel-carrying capacity of cable systems it would lower the fees paid by the broadcaster, Chandra said.
Shares in NDTV, which the market values at $55.2 million, have jumped 40% since the start of 2012, compared with 14% rise in the benchmark BSE index.
With analogue cable, broadcasters never got a fair share of their subscription revenue and had to depend excessively on advertising to bridge the shortfall, Chandra said.
NDTV, which competes with channels such as Bennett & Coleman Co-owned Times Now and CNN-IBN, controlled by Network 18 and US-based Turner International, also sees sharp growth in its internet, lifestyle and consultancy businesses.
It expects these operations to become key drivers as an expanding Indian economy boosts consumer incomes and spending.
"Our immediate target is to get back to profitability," Chandra said. "Last quarter, we hit operational profitability and we are hoping next fiscal year we should be profitable."
He said advertising revenue growth for the industry is expected to remain muted in the coming fiscal because of tough market conditions.
"Advertising is not falling off the cliff and we can expect about 8-9% growth for the industry in the upcoming fiscal," Chandra said.
He also said the company does not have any immediate plans to raise funds.
"We sold our entertainment business after realising in 2008 that the market was headed for a few bad years and repaid all our debt," he said.
