An overview of the impact of demonetization on digital, telecom, payments, cable, device, Internet, and ecommerce businesses:
Part 1: Telecom operators, ISPs, Cable operators and vendors
1. Airtel: Airtel noticed “some immediate impact in the few days post demonetization”, which “was there for a few weeks, but like we saw in some of our other businesses, like DTH, that recovery was reasonably quick. There were some postponement of purchases, but it was quite quick.” Airtel was hurt largely by Reliance Jio’s “Welcome Offer” of giving data free. More details here.
2. Reliance Communications: “though a beneficial long term initiative, (demonetization) has resulted in short-term adverse impact for all operators by affecting the recharge behavior during the quarter. ”
3. Idea Cellular: Idea reported “minor effects of demonetization”, saying, “first and foremost, the impact of demonetization has been very minimum. So, most of the revenue decline is primarily on account of new entrant (Jio).”
4. Onmobile Global (Mobile VAS): “There was deterioration in revenues from India, mainly due to the reduced re-charge rates triggered by demonetization in November and December 2016.”
5. Ortel (ISP & cable operator): “Collections in older subscriber base suffered due to the process of transition from Analog to Digital and demonetization. Demonetization and increased competitive situation impacted broadband subscriber growth (source)
6. Dish TV (cable operator): “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.”
Part 2: Classifieds and Online directories
1. 99Acres: “…people were in no mood to buy property”, and 99 Acres saw an “overnight drop of about 40-45% in traffic in Q3”. Because of this, the company “failed to meet internal targets during the quarter”. “In terms of collection growth we came in about Rs 10 or Rs 11 crores short in 99acres“…in 99acres we were growing at 23% till Q2 and suddenly our collections growth was actually negative in Q3. So these are based on sort of some of the targets that we had set for ourselves.”
“…in terms of traffic, almost all our sites have recovered, so we are back to pre-demonetization levels in traffic and therefore I expect that even revenue growth will follow, there could be a lag of a couple of months between traffic recovery and revenue recovery but ultimately that should happen as well.”[via Info Edge Earnings Call]
2. Naukri.com, Jeevansathi, Shiksha: Info Edge again, said that “we think we lost about Rs 8 to 10 crores of business in Naukri, and maybe we lost about a crore maybe in Jeevansathi and Shiksha”…”In Q3, our business was impacted to some extent because of demonetization, the small and medium enterprise were hit more than large enterprises“…”[via Info Edge Earnings Call]
3. Meritnation: “Demonetization has not helped because at least for the home sales team, which was the field sales team, some of that collection used to be in cash, and that has been impacted but hopefully it should recover next month or two.”
4. Canvera: “Demonetization did have an impact out here because lot of wedding expenses would be impacted and it has not fully recovered yet and we are hoping that by next month or a month after it should recover and then it will be on track to pursue breakeven. But both these we are still figuring it out.” [via Info Edge Earnings Call]
Part 3: Ecommerce and affiliated businesses
1. Gati (ecommerce logistics): Cash on delivery immediately declined, but there was marginal recovery immediately. The effect was seen in both B2B and B2C businesses. “COD related ecommerce volumes showed a significant fall immediately in the days after the announcement and there was a marginal recovery few days later.” Its margins were down by a couple of percentage points, and growth was slower as compared to previous quarters. Gati reacted quickly by laying off 900 delivery people, reducing the number of pin-codes serviced, and introducing digital payment options across India. Much more detail here.
2. Infibeam: While the company makes no mention of demonetization, the decline was attributed to the removal of Cash on Delivery, which “led to this muted performance in Q3FY17 for most of the e-commerce retailers. Infibeam must be among the least affected company in the given scenario.”
Since then, “The business has picked up since then and in Q4FY17, the company is expected to see a normal performance in e-commerce retailing business. There has been a shift noticed in consumer’s behaviour as consumers have moved to cashless payment methods using the digital payment instruments.”
Part 4: Media
1. Eros (movies): For the quarter, revenues decreased by 42.4% to $19.6 million in the three months ended December 31, 2016, compared to $34 million in the three months ended December 31, 2015 mainly due to the negative impact of the rupee demonetisation on cinema footfalls. (Earnings Details)
2. HT Media: “I mean as a consequence of demonetisation, even if you look at our competitors who have already declared results, and the other guys who will, you know the volumes are substantially lower. Even in December, I mean the full flurry of demonetization has been felt both in November and December. We are hoping that January will be better, but December was also substantially down.”
“There are few categories and sectors which have had a significant impact. For example the government category has actually not contracted. It has actually expanded. To that extent that category has grown, but real estate, education have taken a very big brunt. E-commerce etc have grown, but the weightages have shifted.”
“FMCG and retail are sectors which have suffered in a big way. You must have seen some of the results of the FMCG companies. Real estate has been underperforming for a while. Auto was slow, but it is coming back with some new launches. All the sectors except for Government and BFSI (E-wallets etc), have underperformed.” (more here)
3. Zee Entertainment: “Despite the impact of demonetization on our advertising revenues, we have improved our EBITDA margins”…”Advertising revenue growth during first 40 days of the quarter, i.e. predemonetization was similar to the growth seen in H1 of FY2017. We believe that advertisers’ willingness to invest in their brands remains intact. However, the timing of spends has been re-calibrated to an extent to suit the change in dynamics due to demonetization. As economic situation is normalizing, ad spends have already started moving up from December levels”…”I think if we look at apples to apples the impact is similar. But for our portfolio what offsets that overall impact is the channel performance. So, for example, our Tamil channel has been doing very well and therefore, that more than offsets, for example, the demonetization impact.” (source)
4. Dainik Bhaskar: reported a “big impact” of demonetization in November and December, where ad volumes declined, saying that its ad revenue growth of 6.5% ad could have been “stronger in double digits without the impact of demonetization”…”I am sure this is a temporary phenomenon and should get over in couple of weeks, maybe a month’s more time”. The company was taken unawares by demonetization after “October growth”…”but let us see how the overall economy of India performs because the Automobile or Real Estate and all that they all need to start performing, they need to sell for us to help us advertising, so I think it all depends, but barring Real Estate all other category we feel are improving”…”the impact on national market is comparatively much lower because the companies are still launching brands, companies are still looking at overall brand equity to be still continued in the market, but a retailer who does not do any brand advertising who do more of a sales, he releases an Ad in the morning and he get the response by evening, that category has gone down very slow, so I think national is still comparably okay, but Retail is bad right now, that needs to come back faster.” (source)
Part 5: Payments
1. Money on Mobile: Ever since the demonetization of Rs 500 and Rs 1000 currency notes in November, MoneyOnMobile reported an 119% growth in transaction volumes on a weekly basis. The company claimed to process Rs 30.7 crore worth of transaction during the week that demonetization kicked in; this increased significantly to Rs 67.4 crore as of February. (More on its results here)
2. Kotak Mahindra Bank: Mobile transactions worth Rs 4800 crore; During the period of demonetization (comparing numbers from October 2016 to December 2016), the bank saw a 108% increase in first time logins on their mobile banking app. For net banking, it saw a 52% growth in first-time logins. There was a 183% growth in 90-day dormant activation cards. It also saw an 86% growth in unique active cards. The number of debit card transactions grew 188% and the value of transactions increased 140%. For credit cards, the number of transactions increased 48% and the value of the transactions increased 31%. Much more here.
3. ICICI Bank: debit card usage at POS machines shot up 128% during the quarter. Transaction volume for October was 20.46 million, November was 30.6 million and December was 46.6 million. The value of transactions increased by 100%. Credit card transaction count on POS terminals increased by 36%1 and the value increased by 5%. Transaction volume was 11.69 million in October, 13.6 million in November and 15.9 million in December.
iMobile, saw its activation rate increased by 118%. The transaction value increased by 34% during the quarter. The number of transactions (volume) was 11.48 million in October, 13.3 million in November and 17.42 million in December. More here.
4. Axis Bank: Card spends by Axis Bank customers shot up to Rs 15,750 crore for the quarter ended December 31 (Q3 FY17), growing 82% from Rs 8,635 crore from the same quarter last year. Debit card spends stood at Rs 4,203 crore at the end of December and grew 136.8% from Rs 1,755 crore at the end of October. Credit card spends were at Rs 2,637 crore at December end growing more modestly from Rs 6.07% and the end of October.
The number of UPI transactions also grew exponentially during the demonetization period from 22,000 transactions in October to 285,000 transactions in December. The value of transactions stood at Rs 12 crore in October to Rs 126 crore. More here
Part 6: Devices
1. Apple: No impact of demonetization on Apple’s sales in India. Apple CEO Tim Cook: “Despite the demonetization move in India that created lots of economic pressure there last quarter, despite that, we had all-time record revenue results, and so we were very happy about that”…“The demonetization impact has not worked its way through yet. It’s still definitely having some overhang. But I think in the longer term, it’s a great move, and I feel really good about how we’re doing there. We are in discussions on a number of things, including retail stores, and fully intend to invest significantly in the country and believe it’s a great place to be.” [source]
(As an aside: In addition, IDC says that demonization impacted both online and offline retails sales in Q3 2016. IDC had cut down sales forecast by 3-5% during the last quarter. Additionally, PC shipments in the consumer segment were expected to drop 33% in Q4 2016).