Media may remain below pre-Covid levels in Q2 FY22

Hyderabad The performance of the media sector is likely to remain below pre-Covid levels again in July-September (Q2) of financial year 2021-22. While broadcasters on a depressed base are likely to see sharp ad growth, ad revenues are likely to remain below pre-Covid levels as per the recent analysis of ICICI Direct Research.

Multiplexes would have another quarter of washout performance. However, with strong content line up amid festive season and reopening of theatre, Q3 could herald a strong move towards normalisation of operation. While multiplexes had reopened in a phased manner from August onwards, lack of big releases and limited releases likely to result in continued losses.

The key market of Maharashtra was shut for entire Q2 and will reopen from October 22, 2021. The analysts estimate EBITDA (earnings before interest, taxes, depreciation, and amortisation) loss at Rs 100 crore and Rs 69 crore for PVR and Inox respectively based on former Indian Accounting Standards (ex-Ind AS). This will translate to net losses at bottomline for both firms.

With strong Bollywood, Hollywood and regional line up and festive quarter ahead, Q3FY22 will be the key for overall recovery of multiplexes. Another positive comfort is adequate fund raise by both multiplex chains, which will ensure their survival amid cash burn. The quantum of rental waivers that the multiplexes manage to get will be one of the determinants of cash burn.

Pankaj Pandey, Head – Research at ICICI Direct, highlights that Q2FY22 will be on a benign base of Q2FY21 wherein Zee, Sun TV saw ad decline of 26 per cent and 27 per cent respectively. "While we expect strong ad growth, compared to Q2FY20 (pre-Covid levels), ad is likely to be still lower. This is due to relatively slower recovery in overall advertisement.

Subscription revenues will see modest growth on the back of over-the-top (OTT) media revenues momentum, with TV subscription largely flat due to deadlock over new tariff order (NTO) 2.0. Going ahead, festive recovery will be key for ad growth. Zee's ad revenue is expected to witness 21 per cent growth on a depressed base of Q2FY21.

The reported subscription growth is expected at 3.2 per cent, largely owing to OTT revenues traction. ICICI Direct research team expects EBITDA margins at 22 per cent, up 380 bps aided by operating leverage but still much lower than historical levels. Sun TV's ad revenues are likely to increase 22 per cent on a depressed base.

Subscription revenues are expected to be up 3.3 per cent driven by SunNxt. The ICICI Direct expects EBITDA margins at 63.5 per cent, down 290 bps, owing to higher content cost. For TV Today, the research team expects11 per cent growth in TV revenues and 25 per cent growth in digital revenues.