Sun TV continues slow ad growth trend, but subscription fees jump

Chennai-based Sun TV continued to report decent overall growth in the July-September quarter as well, but advertising sales continued to lag behind peers such as Zee Entertainment.

The company has been ‘suffering from’ poor advertisement growth in the last couple of years, even as players like Zee Entertainment have reported double digit year-on-year improvements.

The primary reason has been Sun TV’s reluctance to launch several new channels so as to increase the overall advertising inventory that the channel has. However, in the current quarter, the introduction of the GST is also likely to have played a part.

For July-September, Sun TV’s operating revenues was up 8.06% at Rs 675.90 crore.

However, out of the total growth of around Rs 50, Rs 35 cr (or 70%) came in the form of increased subscription charges paid by other cable and DTH companies and by the consumers of its own cable and DTH ventures. Subscription revenues rose 14.32% to Rs.277.68 cr.

In other words, its non-subscription revenue — which is largely composed of advertisement income — rose only 3.9% compared to the last year.

Zee TV too reported a modest, 2.9% increase in advertising revenue. Zee had been successful in driving advertising growth by launching a large number of new channels under new brands such as Rishtey, &TV and so on, in the wake of a drop in ad rates.

In July-September, Sun TV continued to be one of the most profitable companies in India.

Against revenue of Rs 676 cr, the company reported net profit of Rs 285 cr, a net profit margin of 42.2%. In comparison, a company like Infosys — considered highly profitable — has net profit margin of 21%.

While companies like Infosys and TCS have operating margins in the range of 23-25%, Sun TV reported operating profit of 496 cr — up 7% year-on-year. This implies an operating profit margin of 73.4%.

The group is one of the largest Television Broadcasters in India and operates around 40 satellite television channels across four languages of Tamil, Telugu, Kannada and Malayalam. It also airs FM radio stations across India and owns the Sun Risers Hyderabad Cricket Franchise of the Indian Premier League.

The company also declared a dividend of Rs. 2.50 per share for the quarter.