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HT Media expects ecommerce cos to continue advertising but does an ad for equity deal with Koovs


HT Media expects to bring down its losses in digital by least 50% in 2017. Its CFO Vinay Mittal said that they intend to bring segment loss of Rs 64 crores down to half in 2017 (rather, FY17). They see the business becoming break-even in 2018, if not profitable. Notes from the conference call:

1. Shine is still small: Shine.com, HT Media’s job portal, made Rs 42 crores in revenues in the financial year ended 31st March 2016, up 30%. For context, the recruitment solutions business of Info Edge, which is mostly Naukri.com, reported revenues of 531.2 crore for the same period. So, Shine.com was 8% of Info Edge’s recruitment solutions business, in terms of revenues.

“We are reducing our (EBITDA) losses on Shine where losses compared YoY for the quarter Q4 have come down substantially from levels of 14 Crores to 7 Crores and for the full year we do expect for them to come down from 49 Crores in financial year 2016 to less than 25 Crores for financial year 2017.”

HT Campus, HT Media’s education classifieds business, reported revenues of Rs 15 crores.

2. Digital content co is being hived off, so it can sell content to others: Both publications, will hold stake in the JV, but not equal. From the HMVL (Hindustan) conference call: “42 crores of cost is going out, similarly you will have about 84 crores of cost that will go out from HT Media. HMVL will end up holding 43% and HT Media 57% in this content company. This content company will sell the content that will be bought by HT Media and HMVL for their newspapers. Billing will be done by the content company and the way the transfer pricing has been done is such that the whole effect will be cost neutral. So HMVL is not burdened with any extra cost”…”The idea is this new company will become a center of excellence for content and it can sell content to third-parties apart from HMVL and HTML.”

Note that HT Media has/had a syndication business called HT Syndication.

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3. Ecommerce advertising has slowed down a little bit: Ecommerce advertising accounts for the mid-single digit advertising for HT Media. It’s up year on year, but growth rates are down: “No, online retailers have slowed down their advertising a little bit, but I do expect them to continue advertising as compared to last year or even if you take Q4, advertising has not come down. The growth of online retail may have come down, but in absolute number we are still seeing them advertising quite nicely in print.”

4. Koovs is a private treaties (ads for equity) deal: The deal is spread over three years (in terms of ad spends).

“This is a classical barter deal, AFE (ads for equity) deal that we are doing. You know I really cannot comment whether this is a first of many, but it is a very interesting opportunity to invest in a listed company in digital e-commerce space at market valuations which are much better than what we see in the private equity space in India“…”we are in discussions with a lot of other prospective companies, we could look at those things on merit but no generic comments saying that this is a first of many. This is a very good opportunity at valuation which was very attractive in the public markets and not in the private markets.”

“…our 3 million goes along with 30 million of cash that they have already tied up, 20 which has already come into the company and the next 8 to 10 which they are currently prospecting, so I think the reason that they have burnt cash is as per the strategic plan. If you analyze their financials, they have historical cash flows of 35 million that they are raised earlier. 70% of it is towards brand building and market related expenses which is part of this strategy. Incidentally we are getting entry at a price which is at discount to the current trading price, so of course they are going as per plan, but they have got very aggressive plans over two to three years, which is story that we bought into.”

5. Radio advertising isn’t being affected by Digital: “No, we are not seeing any big erosion in advertising growth because of digital. Our digital revenue has grown pretty strongly at about 35% to 40%, but in Q4, lower advertising growth in Delhi and Mumbai is not because of advertisers moving to digital although, yes, it has been weaker than the full year, but we do expect it to pickup in the second half of 2017.”

The difference between digital and radio: “Radio is likely to grow faster than print and other mediums perhaps behind digital but unlike digital their business models are hard to create and successful brands are difficult to achieve in radio. It is another story there are not too many players and among the players if you can become number one, number two you stand to make a lot of money, it could be a very profitable business and as you know in most cities in which we have an offering, we are number one, number two.”

6. HT Mobile Solutions Ltd: Their mobile agency business, reported revenues of Rs 55 crores for the year, up 50% year-on-year, and with an EBIDTA of 10%. This is a four year-old business.

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“HT mobile has 3-4 business lines. The major business line is that we look after all the social, digital, internet activity of companies; so much of the business is like agency business in HT mobile”…”When we go to the advertisers we want to give them a 360-degree solution. So we want that not only should we give them a print platform but we should also be able to give them advertising ideas on the digital platform and on the social media platform.”

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