22 January 2016

3QFY16 Results Update | Sector: Media

BSE SENSEX
24,436
Bloomberg

S&P CNX
7,422
SCNL IN

Equity Shares (m)

678.3

M.Cap. (INR b) / (USD b)

CMP: INR37

42 / 28

1, 6, 12 Rel. Per (%)

13/16/21

12M Avg Val (INR M)

22

Free float

34.0

Financials & Valuation (INR Billion)

Y/E MAR

2016E 2017E 2018E

Net Sales

12.6

15.2

20.2

EBITDA

3.7

3.4

6.3

EBITDA#

0.6

2.2

5.7

Adj. NP

0.6

0.0

2.3

Adj.EPS (INR)

0.9

0.1

3.4

Adj.EPS Gr (%) NM
BV/Sh (INR)
4.8

NM

NM

4.9

8.8

RoE (%)

21.2

1.1

49.3

RoCE (%)

13.2

6.0

22.5

40.7
EV/EBITDA(x)* 10.3

NM

10.9

11.6

5.9

P/E (x)

* Based on attributable EBITDA and subs

post minority stake; # (ex-activation)

Estimate change
TP change
Rating change

TP: INR48 (+30%)

Buy

Box seeding gains steam; Subscription in-line; recurring EBITDA stable

25.1/0.4

52-Week Range (INR)

SITI Cable Network

EBITDA (ex-activation) marginally miss estimates: SCNLs EBITDA (ex-activation)

marginally missed estimates at INR201m primarily due to the spike in content
cost. Content cost/carriage sharing expense increased 20% QoQ to INR1.49b (vs.
est: INR1.41b) as SCNL expanded its footprint into 100+ new markets this quarter.
Subscription growth at 5% QoQ largely in-line, Activation gains steam: SCNLs
subscription income grew 5% QoQ to INR1.46b (vs. est: INR1.44b). Broadband
revenue grew 99% YoY/49% QoQ to INR139m, albeit on a small base. The
company added ~15k broadband subscribers in 3Q taking its broadband
subscriber base to 107k. Activation revenue significantly exceeded expectations
at INR1.05b (vs. est: INR0.81b) as SCNL stepped up its set-top box deployment.
Phase I/II collections largely flat; content deals for Phase III tied up: Realizations
in Phase I/II have been largely flat at INR103/INR76; the management expects
improvement to INR110/INR85-90 by March 2016 and expects to clock a
realization of INR50 from April 2016 in Phase III. All major content deals for Phase
III/IV have been negotiated on a fixed-fee basis.
Box Seeding gains steam; exceeds expectations: SCNL seeded 1.1m set-top boxes
in 3Q (vs. est. 0.9m). The management expects to seed an additional 3-4m boxes
in 4Q. We believe SCNL would exit the fiscal with ~9m digital subscribers.
9MFY16 capex stands at INR3.38b; net debt at INR10.9b: Company incurred
capex of INR2.63b in 3Q (9MFY16 capex: INR3.38b). SCNL is targeting digital cable
subscriber addition of ~5m and broadband addition of 0.15m. On the broadband
front, for FY17, the company intends to add ~0.5m gross subscribers and has
guided for a broadband capex of ~INR3-4b. Current gross/net debt stands at
INR12.1b/INR10.9b.
95% underlying EBITDA CAGR over FY15-18; maintain Buy: We expect the digital
subscriber base to increase from 5.4m in FY15 to 11m in FY18. Increase in net
subscription income in the post-digitization scenario should drive ~95% recurring
EBITDA CAGR, with EBITDA (ex-activation) expected to improve from ~INR0.8b in
FY15 to ~INR5.7b in FY18. SCNL trades at EV/ EBITDA (ex-activation/ minorities) of
17.4x/6.3x FFY17E/FY18E. While we have upgraded our EBITDA est. for FY16 to
factor in higher activation revenue, our EBITDA FY17E/FY18E largely remain
unchanged. Maintain Buy with a DCF-based price target of INR48/sh.

Shobhit Khare ([email protected]); +91 22 3982 5428

Jay Gandhi ([email protected]); +91 22 3089 6693
Investors are advised to refer through disclosures made at the end of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

SITI Cable Network

Exhibit 1: Summary of estimate change (INR b)

Cable subscription revenue
Old
New
Change (%)
Revenue
Old
New
Change (%)
EBITDA
Old
New
Change (%)
EBITDA (ex-activation)
Old
New
Change (%)
Adjusted PAT
Old
New
Change (%)

FY16E

FY17E

FY18E

5.8
5.8
0.0

10.0
9.8
-2.0

15.0
14.7
-1.9

11.7
12.6
7.6

15.0
15.2
1.2

20.0
20.2
1.0

3.4
3.7
8.7

3.4
3.4
0.4

6.3
6.3
0.5

1.0
0.6
-32.7

2.2
2.2
0.6

5.7
5.7
0.5

0.4
0.6
43.6

0.0
2.2
0.0
2.3
-506.8
3.7
Source: Company, MOSL

3QFY16E
3,144
2,097
1,414
157
526
1,047
33.3
237
7.5
397
100
343
408
20
0
388
47
341

Exhibit 2: SITI Cable: Consolidated quarterly performance (INR m)

Revenue
Operating costs
-Carriage sharing/Pay channel
-Employee cost
-Other costs
EBITDA
EBITDA margin (%)
EBITDA ex-activation
EBITDA margin ex-activation (%)
Depreciation and amortization
Other income
Finance cost
PBT
Tax
Prior period items
PAT
Minority Interest
PAT after minority interest
Digital subs and revenue break-up
Digital Subs (m)
Subscription revenue
Carriage revenue
Activation revenue
Broadband revenue
Other operating revenue

22 January 2016

3QFY15
2,217
1,734
1,111
122
501
483
21.8
348
15.7
387
18
299
-185
-26
0
-160
45
-204

2QFY16
2,342
1,914
1,242
171
501
428
18.3
234
10.0
367
87
343
-195
35
0
-229
48
-277

3QFY16
3,699
2,449
1,487
129
833
1,251
33.8
201
5.4
391
48
346
562
2
0
560
170
390

YoY (%)
67
41
34
6
66
159
55
-42
-1025bps
1
168
16
-403
-108

QoQ (%)
58
28
20
-24
66
192
85
-14
-458bps
7
-44
1
-389
-94

-451
280
-291

-344
254
-241

4.9
1,357
550
135
70
105

5.9
1,385
603
194
93
67

6.8
1,458
605
1,050
139
447

40
7
10
678
99
328

15
5
0
441
49
567

vs est (%)
18
17
5
-18
58
19
50bps
-15
-211bps
-1.4
-51.7
0.8
38.0
-89.1
44.6
261
15

6.8
-0.1
1,440
1.2
627
-3.5
810
29.6
116
19.6
150
198.3
Source: Company, MOSL

SITI Cable Network

Story in charts
Exhibit 3: Platform-wise industry ARPU (FY15E-18E)
DTH ARPU (INR)
Analogue Cable ARPU (INR)
Digital Cable ARPU (INR)
Phase I
Phase II
Phase III/IV
Other Digital ARPU (INR)

FY15
267
160

FY16E
285
163

250
200
160
200

FY17E
305
165

263
210
165
210

289
231
181
231

Exhibit 4: India Pay TV subscription revenue split (INR b)

FY18E
327
166

Analogue Cable
DTH
Total Subscription Revenue

318
254
214
254
Source: MOSL

Digital Cable
Other Digital

389

346
23
123
67
132
FY15E

529

447

24

24

24
151

198

259

86

124

180

128

102

66

FY16E

FY17E

FY18E
Source: MOSL

Exhibit 5: India: TV and C&S households (m)

236
142

105

FY11

238
148

119

FY12

241

243

245

247

153

161

169

177

130

FY13

139

FY14

149

FY15

158

Exhibit 6: C&S connections mix: Analog v/s Digital (%)

249

251

185

193

166

174

FY16E FY17E FY18E

Analogue Cable (%)

DTH (%)

Digital Cable (%)

Other Digital HH (%)

27
5

26
5

26

27

27

30

36

41

15

18

19

62

62

53

FY11

FY12

FY13

49
FY14

47

25
38

DTH HH (m)
Cable HH (m)
Analogue Cable (m)
Digital Cable (m)
-Phase I
-Phase II
-Phase III/IV
Other Digital HH (m)
Digital HH

FY15E
40
99
70
29
8
14
7
10
79

FY16E
48
101
61
40
8
15
17
9
97

FY17E
60
98
43
56
9
15
32
8
124

26

41
13

FY15 FY16E FY17E FY18E

Source: MOSL

Exhibit 7: Phase wise subscribers (FY15-18E)

33

Source: MOSL

Exhibit 8: 24% digital subscriber CAGR from 79m to 151m

FY18E
72
94
23
71
9
15
47
8
151
Source: MOSL

47
25
79
FY15E Digital

151

72m net susbcriber adds

Market growth Analog phaseoff

FY18E Digital

Source: MOSL

22 January 2016

SITI Cable Network

Story in charts
Exhibit 9: FY15 revenue break-up

Exhibit 10: FY18 revenue break-up

Others
7%
Carriage
27%

Susbcription
73%

Others
12%
Susbcription
59%
Carriage
12%

Activation
7%

Activation
3%

Source: Company, MOSL

Exhibit 11: Net subscription revenue (INR b)

Source: Company, MOSL

Exhibit 12: EBITDA ex-activation/one-offs (INR b)

5.7

12.9

8.0

2.8

2.2

4.1

3.8

0.3
FY14

FY15

FY16E

FY17E

FY18E

FY14

0.8

0.6

FY15

FY16E

FY17E

Source: Company, MOSL

Exhibit 13: Capex and Capex/sales (INR b, %)

Capex
33

47

FY18E

Source: Company, MOSL

Exhibit 14: FCFF (INR b)

Capex/Sales (%)
3.8

4.0

FY18E

FY19E

4.4

32
26
12

2.3

2.9

6.0

3.9

2.4

-1.1

FY14

FY15

FY16E

FY17E

FY18E

FY15

Source: Company, MOSL

22 January 2016

-0.4
-1.3
FY16E

FY17E

FY20E

Source: Company, MOSL

SITI Cable Network

Exhibit 15: SCNL - Key Operating Metrics
Phase wise subscriber base (m)
Phase I
Phase II
Phase III/IV
Digital
Analog
Total Universe
Phase wise gross ARPU (INR)
Phase I
Phase II
Phase III/IV
Analog
Total Universe
YoY (%)
Phase wise net ARPU (INR)
Phase I
Phase II
Phase III/IV
Analog
Total Universe
YoY (%)
Per susbcriber carriage and content cost (INR)
Content cost/subscriber/month
C& P revenue/sub/month
Net content cost/sub/month
Net content cost/net ARPU
Per susbcriber monthly metrics
Gross revenue
LCO share
Net revenue
Net content cost
Other cost
Total operating cost
EBITDA

22 January 2016

FY14

FY15

FY16E

FY17E

FY18E

2.2
1.5
0.3
4.0
6.0
10.0

2.3
1.6
1.5
5.4
5.1
10.5

2.4
1.6
5.0
9.0
1.5
10.5

2.4
1.7
6.5
10.6
0.2
10.8

2.5
1.8
6.8
11.0
0.0
11.0

193
175
160
150
165

199
184
160
161
172
4

198
184
160
172
176
2

222
206
179
185
193
10

246
228
199
198
214
11

63
40
16
8
23

76
55
16
8
31
32

75
55
16
8
33
6

90
95
50
8
63
92

132
103
86
8
98
56

20
19
1
3

24
20
3
10

29
21
8
25

45
19
26
41

55
19
36
37

165
142
23
1
20
21
2

172
142
31
3
22
25
6

176
143
33
8
20
29
4

193
214
131
116
63
98
26
36
22
21
47
58
16
40
Source: Company, MOSL

SITI Cable Network

Exhibit 16: SCNL - Key Financial Metrics

Key Financials (INR b)
Revenue
YoY (%)
EBITDA
YoY (%)
EBITDA margin (%)
EBITDA ex activation/one-offs
YoY (%)
EBITDA margin ex activation (%)
Capex analysis (INR b)
Capex
Capex/Sales (%)
Gross STB adds (m)
Net STB adds (m)
STB Capex/gross add (INR)
Revenue break-up (INR b)
Gross subscription revenue (incl LCO share)
Net subscription revenue (excl LCO share)
Reported subscription revenue (post gross billing)
Activation revenue
Carriage and placement revenue
Other revenue (incl broadband)
Total revenue

22 January 2016

FY14
7.0
48
1.1
56
16.2
0.3
NA
4.6

FY15
9.1
30
1.4
22
15.2
0.8
143
8.5

FY16E
12.6
39
3.7
173
29.7
0.6
-16
5.1

FY17E
15.2
20
3.4
-8
22.7
2.2
242
14.6

FY18E
20.2
33
6.3
83
31.2
5.7
156
28.2

2.3
33
1.6
1.6
1,200

2.9
32
1.5
1.4
1,300

6.0
47
3.9
3.6
1,250

3.9
26
2.0
1.6
1,250

2.4
12
0.9
0.4
1,250

19.9
2.8
3.4
0.8
2.3
0.5
7.0

21.2
3.8
5.4
0.6
2.5
0.6
9.1

22.1
4.1
5.8
3.1
2.6
1.1
12.6

24.7
28.1
8.0
12.9
9.8
14.7
1.2
0.6
2.5
2.4
1.7
2.4
15.2
20.2
Source: Company, MOSL

SITI Cable Network

Financials and valuations (Consolidated)

Income Statement
Y/E March
Revenues
Change (%)

2012
3,428

2013
4,696
37.0

2014
6,972
48.5

2015
9,059
29.9

2016E
12,624
39.4

2017E
15,177
20.2

(INR Million)
2018E
20,168
32.9

Total Expenses

3,691

3,973

5,844

7,685

8,880

11,739

13,882

EBITDA
% of Revenue
Change (%)
Depn. & Amortization
EBIT
Net finance cost
Other Income
PBT
Tax
Rate (%)

-263
-7.7

724
15.4
-375.6
563
161
864
140
-563
46
-8.2

1,128
16.2
55.8
838
290
1,191
131
-770
64
-8.3

1,374
15.2
21.8
1,328
46
1,209
311
-852
167
-19.6

3,744
29.7
172.6
1,727
2,018
1,347
199
870
67
7.7

3,438
22.7
-8.2
2,253
1,185
1,182
108
111
70
63.1

6,286
31.2
82.8
2,573
3,713
1,116
108
2,705
73
2.7

Reported PAT
Minority interest
Reported Net profit
Adjusted Net profit
Change (%)

-949
-35
-913
-913

-609
32
-641
-641
NA

-834
107
-941
-941
NA

-1,019
72
-1,091
-1,091
NA

803
187
616
616
NA

41
5
36
36
-94.2

2,632
342
2,290
2,290
6,340.5

2012
453
4,200
-5,480
-827
100
4,480
28
2
3,784

2013
453
4,200
-5,313
-660
132
9,094
861
29
9,456

2014
521
5,502
-4,900
1,123
271
12,673
405
23
14,495

2015
678
9,426
-8,275
1,829
678
13,470
837
101
16,914

2016E
678
9,426
-7,681
2,423
865
12,188
909
101
16,485

2017E
678
9,426
-7,646
2,459
870
13,256
1,774
101
18,460

(INR Million)
2018E
678
9,426
-5,356
4,748
1,212
10,584
2,848
101
19,493

Gross Block
Less : Depreciation
CWIP
Fixed Assets
Investments

4,025
2,182
123
1,966
18

7,253
2,741
691
5,204
16

12,059
4,380
1,702
9,381
16

14,990
5,708
1,661
10,942
16

20,975
7,435
825
14,364
16

24,855
9,688
330
15,497
16

27,274
12,261
330
15,343
16

Curr. Assets
Debtors
Cash & Bank Balance
Other Current Assets

3,655
778
1,483
1,395

6,737
968
1,294
4,475

8,832
1,954
3,529
3,350

11,405
3,283
4,337
3,785

8,968
3,292
1,337
4,339

10,413
4,046
1,337
5,029

12,936
5,529
1,337
6,070

Curr. Liab. & Prov.

Creditors
Other Current Liabilities
Net Curr. Assets

1,855
1,357
498
1,800

2,500
1,984
516
4,236

3,735
2,449
1,286
5,098

5,449
2,614
2,835
5,956

6,864
3,605
3,258
2,105

7,466
3,690
3,776
2,946

8,803
4,427
4,375
4,134

Appl. of Funds

3,784

9,456

14,495

16,914

16,485

18,460

19,493

304
-567
566
214
-919
30
-3.3

Balance Sheet
Y/E March
Share Capital
Add. Paid up Capital
Reserves
Net Worth
Minority Interest
Loans
Other Liabilities
Deferred Tax Liability
Capital Employed

22 January 2016

SITI Cable Network

Financials and valuations (Consolidated)

Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout %(Incl.Div.Taxes)

2012

2013

2014

2015

2016E

2017E

2018E

-2.0
-1.3
-1.6
0.0
0.0

-1.4
-0.2
-1.2
0.0
0.0

-1.8
-0.2
2.7
0.0
0.0

-1.6
0.3
3.7
0.0
0.0

0.9
3.5
4.8
0.0
0.0

0.1
3.4
4.9
0.0
0.0

3.4
7.2
8.8
0.0
0.0

-20.4
32.8
116.3
5.3
6.0
13.8
3,698

-23.0
105.8
26.9
47.9
4.1
4.4
10.0
3,537

40.7
10.7
10.3
59.7
3.1
4.1
7.6
3,691

705.0
11.0
11.6
17.9
2.6
2.8
7.5
3,675

10.9
5.2
5.9
6.5
1.8
1.9
4.2
3,358

Valuation (x)
P/E
Cash P/E
EV/EBITDA*
EV/EBITDA ex-activation *
EV/Sales*
EV/sales ex-activation*
Price/Book Value
EV/Sub (INR)*
Profitability Ratios (%)
RoE
RoCE

-50.2

-1.1

-0.7

-55.9
-2.0

21.2
13.2

1.1
6.0

49.3
22.5

Turnover Ratios
Debtors (Days)
Asset Turnover (x)

83
3.46

75
1.08

102
0.83

132
0.85

95
1.03

97
1.09

100
1.42

Leverage Ratio
Net Debt/Equity (x)

-4.1

-14.8

6.6

3.6

3.3

3.6

1.6

Cash Flow Statement

2013
724
140
-864
-20
-1,793

2014
1,128
131
-1,191
-70
918

2015
1,374
311
-1,209
-89
382

2016E
3,744
199
-1,347
-67
923

2017E
3,438
108
-1,182
-70
23

(INR Million)
2018E
6,286
108
-1,116
-73
-113

CF from Op.Activity

-1,812

916

768

3,453

2,317

5,091

(inc)/Dec in FA + CWIP
(Pur)/Sale of Investments
Other investing activity/adj
CF from Inv.Activity

-3,801
2
0
-3,799

-5,016
0
-20
-5,036

-2,889
0
-99
-2,988

-5,149
0
0
-5,149

-3,386
0
0
-3,386

-2,419
0
0
-2,419

Issue of Shares
Inc/(Dec) in Debt
Others
CF from Fin.Activity

808
4,614
0
5,422

2,745
3,578
32
6,355

2,212
797
19
3,028

0
-1,282
0
-1,282

0
1,069
0
1,069

0
-2,672
0
-2,672

Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance

-189
1,483
1,294

2,236
1,294
3,529

808
3,529
4,337

-2,978
4,337
1,359

0
1,337
1,337

0
1,337
1,337

Y/E March
Op.Profit/(Loss) bef Tax
Other Inc/excep. items
Interest Paid
Direct Taxes Paid
(Inc)/Dec in Wkg. Cap.

22 January 2016

2012

SITI Cable Network

Corporate profile: SITI Cable Network

Company description

Exhibit 17: Sensex rebased

SITI Cable Network Limited (SCNL) is one of India's

leading Multi System Operator (MSO). With 61
analog and 15 digital head ends and a network of
more than 14,600 Kms of optical fibre and coaxial
cable, it provides its cable services in India's 130
key cities and the adjoining areas, reaching out to
over 10.5 million cable universe. SCNL is a part of
the Essel Group, which is one of India's leading
business houses with a diverse portfolio of assets
in media, packaging, entertainment, technologyenabled services, infrastructure development and
education.
Exhibit 18: Shareholding pattern (%)

Exhibit 19: Top holders

Sep-15

Jun-15

Sep-14

Promoter

66.0

66.0

72.8

DII

7.6

7.8

2.3

FII

13.9

12.7

7.9

Others

12.5

13.4

17.0

Note: FII Includes depository receipts

Exhibit 20: Top management

Holder Name

% Holding

HDFC Trustee Company Ltd A/c HDFC Equity Fund

Morgan Stanley Asia (Singapore) Pte
Polus Global Fund
Swiss Finance Corporation (Mauritius) Ltd
DSP Blackrock Micro Cap Fund
Citigroup Global Markets Mauritius Pvt Ltd

5.1
3.6
2.2
1.9
1.7
1.1

Exhibit 21: Directors

Name

Designation

Name

Name

V D Wadhwa

CEO

B K Syngal

Subodh Kumar

Vinay Chandok

COO Operations

Vinod Kumar Bakshi

Kavita Kapahi

Anil Jham

CTO

Suresh Kumar Agarwal

*Independent

Exhibit 22: Auditors

Name
Walker Chandiok & Co LLP

22 January 2016

Exhibit 23: MOSL forecast v/s consensus

Type
Statutory

EPS
(INR)
FY16
FY17
FY18

MOSL
forecast
0.9
0.1
3.4

Consensus
forecast
-

Variation
(%)
-

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10