Company report reliance broadcast network 17th april 2012

C O M P A N Y R E P O R T

India
Reliance Broadcast Network Rs 53.45
16th April 2012

Sector: Media At an inflection point
Reliance Broadcast Network (RBN) is rapidly building a strong presence in
BSE Sensex 17,151
the Indian M&E industry. Within 6 years, BIG FM, with 45 stations, is
Nifty 5,226
largest by scale, second largest by revenues and EBIT positive. RBN has a
52 week high (Rs) 99.25
52 week low (Rs) 40.20 5 channel broadcasting portfolio within 18 months of first channel launch.
RBN is a potent play of TV + Radio that offers local audiences as well as
NSE RBN scale for national advertisers. Content initiatives BIG Productions and Live
BSE 533143 are creating a repute of their own besides in-house competencies.
Equity Shares 79.45
(mn) A high growth media play:
Face Value (Rs) 5
Market Cap (Rs 4,239
 Indian M&E industry is set for high growth of 15% over 2011-16, with
mn) Radio at 21% and television at 17% (FICCI-KPMG report 2012).
 RBN’s FY11 revenues grew 36% YoY, higher than industry and at par
with leaders to reach Rs 2.4bn. Radio had 71% share.
Share Price Performance
(%)  In 9mFY12, RBN’s revenues grew 30% to reach Rs 2.3bn. Radio was
RBN Sensex 67% and Production and TV began with 15% and 4% shares.
1 week -4.1 -0.4  RBN’s total revenues are set to grow at 51% over FY11-15 as it
1 month -3.3 -1.8 becomes 100-150 FM network and ~ 9 channel broadcasters by FY15.
3 month -3.5 5.9
Business game changers ahead in both radio and TV:
6 month -22.0 2.2
1 year -35.1 -11.5  Phase-III will increase radio reach ~3x to over 300 cities. Radio would
be a national media like TV, with improved ability to deliver targeted
local reach. Radio’s share in media ad-pie to increase from 3.8%
Shareholding Pattern
presently to 5% by 2016.
(Dec’11)
Promoters 65.2%  Digitalisation of cable TV will improve business economics for
FIIs/FVCIs 1.3% broadcasters.
MF/Banks 1.3% RBN well positioned to ride the change and turn profitable by FY14
Body Corporates 13.7%
Others 18.5%  RBN will be a 100-150 station network post Phase III with presence in
key cities missing in its portfolio. BIG FM is already EBIT positive.
 In TV, RBN will establish as a strong focused play in English GEC and
targeted regional belts with ~ 9 channel portfolio plus language and
HD feeds. Content will be a mix of cutting edge international, dubbed
and local through BIG Productions. TV to break-even by FY14.
RBN trades at a P/E of 7.4x and EV/EBITDA of 4.7x of our
projected FY14 numbers, at a significant discount to industry’s ttm
PE of 18x and EV/EBITDA of 11x.
With FM Phase III process to start in a few weeks time, RBN is an
attractive investment opportunity currently.
FY10* FY11 FY12p FY13e FY14e FY15e
Revenue (Rs. Mn) 1,807 2,454 3,134 5,045 8,936 12,807
EBITDA (Rs. Mn) -162 -64 -451 192 1,544 3,929
PAT (Rs. Mn) -761 -537 -1,018 -318 940 3,166
EBITDA margin (%) -9% -3% -14% 4% 17% 31%
ROaE (%) NA NA NA NA 22% 49%
P/E Ratio (x) NA NA NA NA 7.4 2.2
EV/Sales (x) 3.3 2.9 1.9 1.2 0.8 0.5
EV/EBITDA (x) NA NA NA 32.0 4.6 1.8
P/BV (x) NA 2.9 4.1 1.9 1.5 0.9
D/E (x) NA 0.5 1.4 0.1 0.1 0.0
* standalone

Four-S reports are available on BLOOMBERG, Reuters and Thomson Publishers

Company Report: RBN 30 Mar’12

Investment Rationale
One of the fastest growing media companies
36% FY11 growth, better than peer average
36% YoY growth RBN achieved a turnover of Rs 2,454mn in FY11 with a YoY growth
in FY11 - higher of 36%. This was at par with industry leaders and higher than peer
than industry average of 27%.
average
Revenue growth YoY FY11 9mFY12
Peer Average 27% 14%
RBN 36% 30%
Source: Four-S Research

RBN’s total revenues in FY11 were Rs 2,513mn.

Second highest growth in peer group in 9mFY12

RBN repeated the strong revenue performance in 9mFY12 with a YoY
growth of 30% to reach Rs 2,315 in revenues. This included a one-
time royalty write-back of Rs 209mn as other operating income.
Even if we exclude that, RBN’s revenue growth would be 19% YoY,
still second highest in the peer group.
While Radio grew at 21%, entry into new segments of production (Rs
358mn, or 15% share) and TV Broadcasting (Rs 90mn, or 4%
revenue share) resulted in the high growth of overall revenues.

Top play in private FM Radio segment
Number 1 by scale in FM Radio industry
Number 1 in 15 RBN has the largest private FM network in India with 45 stations
radio markets covering 1,200+ towns and 50,000+ villages reaching 42.6mn
listeners (IRS+RAM).
BIG FM is number 1 in 15 markets and a top 3 player in 15 others by
listenership. As per ADEX data for BIG FM markets, it has a
combined FCT consumption share of 23% in Q3FY12.

Number 2 by revenues in Radio industry

RBN has become number 2 by revenues within five years of
operations achieving revenues of Rs 1,750mn in FY11 with a YoY
growth of 16%.
Rs Mn # of 1st station Market
Radio Revenues stations launch FY10 FY11 Share**
hampered by ENIL 32 Oct-2001 2,297 2,722 27%
absence from 7 RBN Radio 45 Sep-2006 1,505 1,750 17%
key markets HT Radio 4 Oct-2006 431 704 7%
DB Corp Radio 17 May-2006 350 469 5%
* Segmental revenues for Radio not available for Sun, Jagran, Radio City (MBPL not
listed)

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**FY11 sales on FICCI-KPMG 2010 Radio Industry revenue of 10bn

RBN can be expected to reduce the revenue gap with the market
leader post Phase III auctions, when it will have presence in all key
cities.

Makes de-risked entry into TV Broadcasting
Enters via JV with RBN made a de-risked entry into TV broadcasting by targeting
international segments of English GEC and Regional. It avoided the already
broadcasters to cluttered segments of Hindi GEC, Movies, Sports and News.
start higher on
learning curve, RBN has a portfolio of 5 channels at present – 3 in English GEC, 1 in
content USP and Regional Hindi and 1 in Punjabi. It has optimized its costs by using
optimize costs the JV route for English channels. RBN also distributes Bloomberg
UTV in its portfolio.
RBN’s TV revenues were Rs 10.6mn in FY11 with four months of TV
broadcasting operations. In 9mFY12, its TV revenues achieved a
turnover of Rs 90mn, accounting for 5% share of RBN’s revenues.

RBN’s Regional play in Hindi Heartland – BIG MAGIC

RBN launched BIG MAGIC in Apr-11 to cater to Hindi heartland of UP,
MP and Bihar. This is RBN’s first play in Regional TV.
Within nine months of operations, the channel accounted for 12% Ad
spend share of the peer set in Dec-11.

Regional Hindi Channels – ADEX for Dec-11

Spend Rs.mn Duration (s)

50.0 500000
45.0
Second largest ad 40.0 400000
earner in HSM 35.0
within 9 months 30.0 300000
of launch 25.0
20.0 200000
15.0
10.0 100000
5.0
- 0

Source: Company Data – ADEX

Enters English GEC via 50:50 JVs with global leaders
RBN’s strong RBN has used the JV route to enter the English GEC segment. This
International tie- not only optimizes its costs, but gives it preferential right to top and
ups have the latest international content in SAARC region.
potential to make
More importantly, it has entered into JVs with two of the biggest

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it India’s largest names in global TV broadcasting: CBS, a leader in the US markets;
English GEC and RTL Group, part of European media powerhouse Bertelsmann
broadcaster AG, the largest in Europe, which also owns reality TV content leader
Freemantle Media.

RBN’s BIG-CBS JV

RBN has a 50:50 JV with CBS Studios International, a division of CBS
Corporation USA. The JV is called BIG CBS Networks Pvt. Ltd. CBS
Studios International is the leading supplier of programming to the
international television marketplace.
The JV has rights to and has launched 3 English GEC channels in
Nov’10, Mar’11 and Apr’11 respectively named BIG CBS Prime, BIG
CBS LOVE, and BIG CBS Spark. Through these channels, Indian
audiences will have access to latest international content, a strong
USP against English GEC Peers, which tend to play re-runs. CBS’s
popular shows include Survivor, America’s next top model, Sex and
the City and Ringer.

BIG CBS, # 1 English Entertainment Network in India

BIG CBS has established itself as Number 1 English Entertainment
network in India with a combined relative market share of 51%
(TAM: CS 15-44, SEC A, MF, Wk 40, 2011, 7 Metros All Day).

Source: Company TAM Data - 15-44, SEC A, MF, Wk 40, 2011, 7 Metros All Day

English GEC channels – ADEX for Dec-11


45.0 500000

40.0

35.0 400000
BIG-CBS Prime, at
30.0
par with AXN’s 300000
25.0
disc spends
20.0
within a year of 200000
15.0
launch
10.0 100000
5.0

0.0 0
Zee Café Star world AXN BIG CBS NW

Source: Company – ADEX Data

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BIG CBS Networks has launched three English channels in less than
a year of operations. For the month of December 2011, the
combined ADEX of the BIG CBS NW was ~60% more than AXN. In
terms of Ad Durations, BIG CBS Network is ahead of Zee Café and
AXN and lags only 21% behind Star World.
The first channel of the bouquet, BIG CBS Prime (launched 29th
Nov-11) garnered a Discretionary Spend of Rs 11.86mn in Dec-11,
higher than AXN’s Rs 11.54mn.

Entry into Punjabi Market with Spark Punjabi
Spark Punjabi, RBN has launched its first dubbed channel out of BIG-CBS JV to
first international make an entry in the Punjabi market. This is RBN’s second Regional
Punjabi channel, TV play after BIG MAGIC.
becomes a leader
within a month of Spark Punjabi, within a month of its launch in Jan’12, became the
launch leader in the region with relative market share of 32% (TAM India:
CS4+ Males, Punjab 1 Mn+, 7PM – 12AM, Week 10’2012). With BIG
FM reaching 8 cities in the region and BIG Street’s 3000+ ambient
media options across the markets, BIG CBS Spark Punjabi offers
marketers an integrated media opportunity like none other in the
region.

RBN’s RTL Group JV

RBN entered into a 50:50JV with RTL Group SA to launch two theme-
based channels – extreme action genre and the other in reality
genre.
RTL Group is part of Europe’s largest media firm, Bertelsmann AG.
RBN will get access to RTL’s library of content produced by its group
production house, Fremantle Media Ltd, including shows such as The
X Factor, American Idol and America’s Got Talent, and their various
regional franchises.
The first channel is ready to be rolled out in July - August 2012.

Strong programming skills to help TV foray

BIG Productions, more than in-house content USP
Has one of the RBN has entered content production with an eye on in-house
most reputed competency. Its division BIG Productions is a reputed TV production
production house house in its own right, with two of its shows completing 500 episodes
and largest
milestone and a total of 950 hours of programming till date. RBN
portfolio of
acquired BIG Productions from group company Reliance BIG
televised IPs
Entertainment Private Limited effective from 1st of April 2011.
BIG Productions already has 25 shows to its credit in 8 languages. In
9mFY12, the segment had revenues of Rs 358mn and an EBIT of Rs

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5mn.

BIG LIVE, makes a mark in live TV shows

BIG LIVE gives RBN the largest portfolio of televised IPs in India,
with 23 IPs in FY11. RBN has discontinued its activation business
with intent to turn the segment profitable. BIG LIVE develops
national IPs like BIG Star Entertainment awards, local IPs like
Regional Music industry awards and in-house IPs. RBN is in process
of developing sports IPs.
In 9mFY12, BIG LIVE had revenues of Rs 178mn and an EBIT loss of
Rs 75mn.

Set to turn profitable in FY14

While RBN has made losses in its brief history, this is due to initial
investments in setting up the businesses.
While radio business is now profitable, OOH and TV will take a few
more quarters to breakeven after which RBN should be strongly
profitable.
We expect RBN to have EBITDA margin of 31%, marginally lower
than current peer average EBITDA of 33%. We expect RBN’s PAT
margins to reach 25% by FY15.

Radio achieves turnaround, is EBIT positive

RBN has managed a fast turnaround of FM radio, becoming EBIT
positive in Q3 FY11 – within five years of launch of first station and 3
Radio business
years of launch of 45th station. In H2FY11, Radio had a positive EBIT
EBIT positive with of Rs 23mn, limiting the annual loss to Rs 74mn.
15% margins in In 9mFY12, Radio posted an EBIT of Rs 238mn with an EBIT Margin
9mFY12 of 15.4% and ROCE of 10%.
EBIT Margins FY10 FY11 9mFY12
ENIL Radio 8% 16% 23%*
RBN Radio -20% -6% 15%
*ENIL does not report quarterly segmental numbers. In 9mFY12, it is in Radio and
Events only, having sold its OOH business in FY11, so the margin can be considered a
close approximation of Radio margin.

With a healthier FY11 balance-sheet
RBN’s D/E was 0.5 in FY11, having reduced its debt from Rs 3bn in
FY10 to Rs 1.4bn in FY11.
RBN had raised Rs 2,832.5mn of equity by preferential issue of over
33.3mn shares to potential investors and promoters of the company
in Sep-2010 at Rs 85 per share. This was at 25% premium to
preceding 26 weeks average market price. A part of the fund raised
was used to repay Rs 2bn of debt.

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FY11 BS Ratios D/E Total Asset Working Capital
Turnover Turnover
Peer Set Average 0.2 0.8 3.1
RBN 0.5 0.6 2.4

Source: Four-S Research, Company Data

The entire debt as on March 31, 2011 is ICD from the promoters –
primarily Reliance Capital Limited and Reliance MediaWorks Limited.
RBN, the youngest media company in the peer set, has turnover
ratios only marginally lower than Peer set.

EBITDA to break-even in FY13, EBIT by FY14

RBN’s Radio business is already EBIT positive. We expect the main
TV channels launched in FY11-12 to break-even by FY14. The
dubbed channels will have a quicker break-even due to lower
operational costs. We expect TV segment to be overall EBIT positive
by FY14.

Radio to achieve EBIT margins of 26% by FY15

Radio to achieve RBN’s Radio has an EBIT margin of 15% in 9mFY12 at blended
26% EBIT margins utilization of 65% and blended Effective Rate of Rs 8,100 per 10
by FY15, driven by seconds for 45 stations. India has one of the lowest ad-spends on
increased
Radio, leading to enormous potential for growth.
utilization, higher
rates, reduced We expect utilizations of existing stations to improve to ~75%
royalties. Phase levels. Post-phase III, radio will become a PAN India Media, hence
III stations to we expect the blended ERs to improve from Rs 8,100 per 10 seconds
have quicker to Rs 11,200 per 10 seconds for the existing 45 stations. The Phase
break-evens.
III stations have been assumed to generate slightly lower ER of Rs
11,500 per 10 seconds for additional 50-100 stations.
This would be comparable to the ER of market leader which is in the
range of Rs 9 to 10,000 for 32 stations currently.
The recent royalty reduction to 2% of revenues, though still under
contest, will further boost the bottom-line. We have taken, 4% for
our projections, in tune with international standards.
Phase III will allow ownership of multiple frequencies and networking
of operations, which will result in lower operational costs per station.
We expect Radio business to achieve an EBITDA margin of 39% by
FY15 and an EBIT margin of 26%.
Market leader ENIL has already achieved an EBITDA of 41% in
Q3FY11. ENIL had launched its first FM station in 2001.

TV Broadcasting to be EBIT positive in FY14

TV to break-even RBN already has 3 main channels on its portfolio in the cost range of
by FY14 as Rs 250-300mn. The channels will break-even within three years of
existing channels operations, driven by increase utilization and ad-rate improvements.
break-even and
broadcasting With digitization rollout, broadcasters will gain with increase in
profitability per se subscription revenue share along-with a decrease in carriage costs
increases driven as digital cable will have much higher bandwidths.
by digitization
Driven by industry and RBN’s operational improvement, we expect

Four-S Research 7


TV segment to break-even by FY14. The EBIT margin in FY14 would
be 2%, and will reach 30% in FY15 as more channels break-even.

Production already EBIT positive, BIG LIVE to break-even in
FY13

BIG Productions posted a positive EBIT of Rs 5mn in 9mFY12 in first
year of its operations. It will achieve EBITDA margins of 21% by
FY15.
BIG Live, with improved monetization per IP will break-even in FY13
with an EBITDA margin of 5% that will further improve to 14% by
FY15. RBN has discontinued its activation business in FY12.
OOH, will break-even by FY14 as trading takes traction, will achieve
EBITDA margins of 18% by FY15.

While maintaining a healthy balance-sheet, new growth
from equity
RBN will use As on Sep-11, RBN’s D/E stood at 1.0x, with Rs 1.7bn of debt on its
equity route for books. Out of this, Rs 1.2bn was ICD from promoters.
funding TV
operations and We expect FY12 Debt level to be similar.
Radio Phase III RBN plans to be a low debt company and it will finance its growth –
auctions
Phase III auctions and channel launches mainly from equity.
RBN is already in talks with players to raise Rs 3-4bn of fresh equity
without diluting promoter’s stake.

Positive sector triggers ahead

Indian M&E set to grow at CAGR of 15% in 2011-16
Industry growth India’s advertising to GDP ratio at 0.34% is almost half of the world’s
drivers – current average of 0.75% and one-third of North America (~1%). Media
level of low ad reach is also less than developed countries with TV households only
spends, rural
57% of total households.
media
consumption, Under-penetration, low ad-spends coupled with India’s demographics
Digitization, FM - rising disposable incomes, youngest population, mobile penetration
Phase III and position Indian ME industry for good growth ahead.
Digital media
penetration Indian M&E is expected to grow at CAGR of 15% in 2011-16 to reach
revenues of Rs 1.46tn by 2016. The growth drivers would be
increasing consumption in tier II and tier III cities, Digitization, FM
Phase III and growth of digital media.

Royalty ruling to benefit FM radio industry margins
The royalty ruling at 2% of revenue sharing, as against the earlier
fixed fee model, will result in higher operating margins and hence
quicker break-evens for Phase III stations.

Phase III to transform FM Radio a PAN India media
Phase III will FM Phase III will extend industry’s reach to 294 cities and increase
transform FM into the frequencies 2.4x. The reach will hence increase to more than
a mass media 90% of population from the 30% at present.
option on

Four-S Research 8


advertiser’s media According to FICCI – KPMG report, the ad-spends on radio which are
plan at 3.8% of media ad spend as of today, will increase to 5% of media
ad-spends by 2016. This will be the key industry growth driver
making Radio grow at 21% till 2016.
RBN has the potential to combine its Broadcasting and FM portfolio
to emerge as the player with maximum reach. RBN also has the
opportunity to create presence on the key 7 cities that create its
revenue differential with ENIL.
Phase III will allow networking of operations, that will lead to
substantial reduction in costs, especially for new stations and result
in faster break-evens.

Digitization, a reality now, to favour Broadcasters
Top-lines to be The Indian Government is actively pursuing Digitization of Cable and
boosted by higher Satellite with first phase of metros to be implemented by June 2012
ARPU share and and the entire country to be digitized by end of 2014.
bottom-line by
reduced carriage Phase Deadline
costs I – 4 metros 30-Jun-12
II – Cities with population> 1mn 31-Mar-13
III – All urban areas 30-Sep-14
IV – Rest of India 31-Dec-14

This move will bring many benefits to the broadcasting industry:
 Increase bandwidth as digital signal will be able to carry over
500 channels compared to Analog’s capability of 100+
channels
 Correct reporting of subscription base will lead to increase in
subscription revenues
 MSOs will gain traction over LCOs leading. The ARPU revenue
share to MSO’s, as well as broadcaster, will increase.
Broadcaster’s revenue share is expected to increase from the
current 10-15% to 30-35%.
 As bandwidth increases, carriage cost per channel will go
down, leading to margin improvement for broadcasters.
Essentially, TV channels post-digitization will achieve break-even
faster. FICCI-KPMG estimates share of subscription revenues in TV
industry to increase to 69% by 2016.

As a new broadcaster, RBN stands to gain with quicker break-evens
courtesy top-line increase from subscription and bottom-line increase
from reduced carriage.

Regional Broadcasting gets significant
Regional TV now Regional Broadcasting has gained traction over past years driven by
accounts for more increased media consumption in tier II and III cities. According to
than half-of TV
advertising industry estimates, Regional advertising grew faster in 2011 at 15%
volumes than national advertising.

Increasing share of Regional TV in Overall ad volumes.

Four-S Research 9


Source: ADEX India

Trading at attractive valuations
RBN is trading at a discount of 29% on EV/Sales multiple and 24%
on Price to Book multiple with respect to peer average.
Significant EV/ Sales EV/EBITDA P/E P/BV
discount of over Peer Average 2.7 11.7 18.1 3.2
25% w.r.t. peer RBN 1.9 PL PL 2.5
average Discount -29% -24%
PL = Posted Loss
ttm multiples, taken on quarter ending 31st Dec 2011, CMP 30th Mar 2012, NSE Prices

RBN is also trading lower than its historical multiples of EV/Sales and
Price to Book ratios.

31Mar’10 31 Mar’11 30 Mar’12
EV/ Sales (x) 3.3 2.9 1.9
P/B (x) NM 2.7 2.5
NM = Non Meaningful, as Networth was negative.
Source: NSE, Four-S Research

Led by professional management team
Board an eclectic mix of Financial and Media veterans
RBN’s board consists of reputed Chartered Account and Finance
Industry’s professionals – Gautam Doshi, Anil Sekhri, Pradeep Shah
and D.J. Kakalia and Media veterans, Rajesh Sawhney and Prasoon
Joshi.

An able management team
Tarun Katial, CEO

RBN is led by Tarun Katial with over 15 years of experience in media
industry, with previous stints at Star TV and SET.
Tarun Katial has led RBN to grow from a pure radio company to a

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multi-media conglomerate. Tarun is the NewsCorp Achiever for Asia
and another for being included amongst the best in the India Today
30 under 30 list.

Asheesh Chatterjee, CFO

Asheesh Chatterjee is a Chartered Accountant and Cost Accountant
with 15+ years of experience including stints at Moser Baer, Sony
Entertainment Television, ICICI Prudential Asset Management &
Ernst & Young. He leads the Finance and Legal aspects including
fund raising, M&A and JVs whilst strengthening credibility and
reputation of the Company within the investor community.

Key Business Heads

Rabe Iyer: Business Head, 92.7 BIG FM
15 years+ experience including previous stints at DB, Saatchi
& Saatchi, Zenith Optimedia, Starcom MediaVest.
Anand Chakravarthy: EVP Marketing & Business Head, BIG Magic
12 years+ experience including previous stints at Lowe India
Simmi Karna, Business Head, BIG Productions
15 years+ experience, earlier Chief Revenue Office at Balaji
Telefilms
Praveen Malhotra: Executive VP, Sales
19 years+ experience including previous stints at Star TV,
Times of India, Radio City
Soumen Choudhury: Business Head, Technology
15 years+ experience including previous stints at Radio City
Meenakshi Roy: Sr. VP, HR
20 years+ experience including previous stints at L’Oreal
India, ABP Limited, Ties of India (NIE) & TATA Special Steels
Gururaja Rao: VP (Legal), Company Secretary
12 years+ experience including previous stints at TCIL, UTV,
McDonalds, Glaxo Pharmaceuticals & People Group

RBN, India’s youngest media company has a team with average age
of 27 years.

Four-S Research 11


Risk factors

Internal Factors

Delay in launch of channels, expansion

The company plans to expand its broadcasting portfolio with 2 JV
channels with RTL planned for FY13 and also has plans for SAARC
distribution and International distribution for MAGIC channel.

We expect RBN to have at least 9 main channels in its broadcasting
portfolio by FY15, up from the current 5.

Any delay in launch of these initiatives will result in loss of revenue
and profitability.

Mitigant:

RBN, till date, has demonstrated timely execution capabilities. Its
distribution agreement for RTL channels with Reliance Digital TV are
already in place. SAARC distribution has taken off with Sri Lanka.

Music royalties appeal still pending

RBN has stopped provisioning for royalties according to historical
agreements and is accounting on a revenue share basis as per the
recent ruling of Copyright Board. However, appeal filed against the
Copyright Board by PPL and some music Labels is still pending. An
adverse ruling could have negative impact on bottom-line.

Mitigant:

The revenue sharing arrangement for royalties is in line with
international norms. The company is acting in tandem with other
radio broadcasters to solve this issue.

External Factors

Regulatory risk

RBN is in a business where operational licenses are issued by the
Government. If for some reason the licenses or contracts are
cancelled, there could be loss of business.

Company’s revenue projections are based on FM Phase III bidding
happening in FY13 and rollouts by FY14. Any delay from Government
in auction of frequencies and/ or providing of infrastructure could
delay the future operations.

Four-S Research 12


Advertisement revenues depend on economic factors

RBN’s revenues are Advertisement dependant. Any economic
slowdown or event that causes advertisers to reduce radio spends,
may adversely impact future revenues and profits.

Mitigant:

RBN has started de-risking its broadcasting model through increased
focus on subscription revenues. It gets its revenues out of local
market, which is less prone to recessionary meltdowns. On the other
hand, it is continuously innovating into new inventories and new
markets to keep the top-line growing.

Four-S Research 13


Peer Benchmarking
Defining peer set
We have benchmarked RBN with listed Media players classified as
follows:
a) Print/ Radio presence: ENIL, HT, Jagran Prakashan, DB Corp
b) Broadcasting/TV production/ Radio presence: Zee TV, Sun TV
Network, TV 18 Broadcast
Vertical Broadcasting Production Publishing Radio
Zee N+R N+R

RBN has presence Sun TV NW R R R N
across TV 18 Brdcst N+R
Broadcasting DB Corp R R
spectrum
HT N R
JPL R R
ENIL N
RBN N+R N+R N
N = National, R= Regional

Among the group listed above, Entertainment Network (India)
Limited or (ENIL) and RBN are the only radio-heavy players. For
others, radio is a small portion of their overall business.
By FY15, when RBN is a 100-150 FM network and a ~ 9 channels
broadcaster with a pan-India presence, RBN will be able to match
the overall value proposition of its peers. Its competitive advantage
would derive from being able to offer targeted regional campaigns to
advertisers across India. It will also have a pan-Indian footprint to
appeal to the advertisers for national campaigns.

Growing faster than peers
Above peer average in FY11, encores in 9mFY12
RBN grew at par Youngest media player, RBN is in the high growing segments – Radio
with industry (15% growth in 2011) and TV (10.8% growth in 2011).
leaders in FY11,
and grew better in Revenue Growth in FY11, 9mFY12
9mFY12 FY11 Revenue YoY 9mFY12 Revenue YoY
Zee 30,136 37% 21,715 -2%
Sun TV NW 20,135 39% 13,304 -9%
DB Corp 12,600 19% 11,032 16%
HT 17,674 25% 15,143 15%
JPL 12,211 30% 9,341 12%
TV 18 7,998 33% 9,107 52%
ENIL 4,542 8% 2,156 *
Peer Average 27% 14%*
RBN 2,454 36% 2,315 30%

Four-S Research 14


Note:
1. 9mFY12 average excludes ENIL.
2. Sun TV and Jagran Prakashan’s 9mFY12 figures are standalone

The strategy has paid off with RBN growing at par with industry
leaders in FY11, and second highest in 9mFY12. It has performed
higher than peer average in both the periods.
9mFY12 revenues include a one-time royalty write-back of Rs 209mn
as other operating income. Even if we exclude that, RBN’s revenue
growth would be 19% YoY, still second highest in the peer group.

RBN is number 2 by revenues in Radio industry

RBN is a strong number 2 by revenues as well as listenership.

Annual revenues (Rs mn) 9mFY12 revenues (Rs mn)

Source: Company reports
Note: ENIL’s YTD FY12 revenues are income from operations as ENIL does not
disclose segmental numbers. However since, ENIL has sold its outdoor business to
BCCL, the revenues comprise mostly of radio operations. YTD FY11 revenues will
include OOH revenues hence not comparable to YTD FY12

BIG Productions leaves a mark in its segment

Production RBN’s BIG Productions has become one-third of the segment leader
revenues are one- (listed), Balaji Telefilms revenues in 9mFY12.
third of listed
9m Fy12 Revenues Rs mn
leader’s
Balaji Telefilms 991
BIG Productions 358
% of BT 36%

Source: Company reports

Four-S Research 15


Profitability lower than peers currently, to catch up
RBN currently in losses as it sets up its broadcasting
business
Losses mainly on RBN’s EBITDA is a negative of Rs 4.6mn in FY11 and Rs 42.4mn in
account of new 9mFY12 as it is still setting up operations.
segment of
broadcasting in FY10 FY11 9mFY11 9mFY12
9mFY12 EBITDA
Margins
Peer Average 32% 33% 35% 34%
RBN -7% 0% 3% -19%

PAT Margins
Peer Average 22% 18% 22% 19%
RBN -42% -22% -19% -36%
Note: Negative margins and TV18Broadcast excluded in average calculations.

FY11 losses reduced as Radio Business turned EBIT positive. 9mFY12
margins were impacted as RBN expanded its broadcasting operations
with new channel launches and increased distribution.
Going forward, TV Broadcasting will break-even by FY14, as
Channels launched in FY11-12 break-even. The new channels will
have relatively lower operational expenses, quicker Go-to-markets
and revenue traction as existing broadcasting set-up moves up the
learning curve. IP breaks-even in its second year of operations led
by increased monetization. OOH will turn EBITDA positive by FY14,
led by trading revenues traction.
Radio and Production are already EBITDA positive, hence we expect,
the company on the whole to be EBITDA positive by FY14.

Radio business turns a strong EBIT positive
RBN’s radio business turned EBIT positive with YTD FY12 margin of
15%, compared to a loss posted in FY10 and FY11, leading to a
positive ROCE of 10%.

EBIT margins of Radio peers

The oldest player, FY10 FY11 9mFY12
ENIL has margins ENIL Radio 8% 16% 23%**
of ~23%, RBN RBN Radio -20% -6% 15%
Radio profitability HT Radio -8% 17% -5%
will move up the DB Corp Radio -5% -7% -2%
learning curve to * Segmental revenues for Radio not available for Sun, Jagran, Radio City (MBPL not
the same levels listed)
**ENIL does not disclose quarterly segmental numbers. However, after OOH sale in
FY11, the 9mFY12 revenues would predominantly be radio revenues. Hence, total
EBIT margin will be a close approximation to radio margin.

The market leader ENIL, is into operations since last 11 years,
having launched its first station in Oct-2001.
RBN and the rest of the peers (listed) launched their first stations
post Phase II in 2006. Being one of the youngest Radio as well as
Media company, being EBIT positive in 9mFY12 is quite
commendable.

Four-S Research 16


Balance sheet ratios will improve over FY12-14
Leverage higher than peers
Traditionally M&E sector has very low leverage, being a cash rich
industry. RBN is the youngest peer set company. Presently, its
leverage is higher than peer set.
D/E FY11 Sep-11
Zee 0.0 0.0
Sun TV 0.0 0.1
DB Corp 0.3 0.3
HT 0.2 0.3
JPL* 0.3 0.4
TV18 0.8 1.0
ENIL - -
Average 0.2 0.3
RBN* 0.5 1.0
*FY10 standalone

RBN will use the equity route to raise funding for future initiatives.
RBN’s Board approved issue of equity shares to Qualified
Institutional Buyers upto Rs 10bn in Sep’11.

Turnover ratios
Youngest media RBN’s average asset turnover ratios are marginally lower than the
player’s turnover peer group. As RBN’s broadcasting business is completely rolled out,
ratios are only the ratios would improve.
marginally lower
than peer average
Average Average
Total Working
Asset Cap
FY11 Turnover Turnover
Zee 0.7 1.9
Sun TV Network 0.7 2.7
DB Corp 0.8 3.5
HT 0.8 14.3
JPL* 0.9 5.6
TV 18 0.6 1.4
ENIL 0.9 3.3
Average 0.8 3.1

RBN 0.6 2.4

Publishing players have higher turnover ratios than Broadcasters.
RBN’s TA turnover is comparable to TV18 and slightly lower than Zee
and Sun TV.
RBN’s Working Capital turnover is better than TV18 and Zee and
marginally lower than Sun TV.

Four-S Research 17


9mFY’12 peer comparison

Revenue growth higher than industry peers
Revenue Growth EBITDA Margin PAT Margin
9mFY12 YoY 9mFY11 9mFY12 9mFY11 9mFY12
Zee 21,715 -2% 27% 27% 19% 20%
Sun TV
RBN has grown NW 13,304 -9% 82% 81% 39% 40%
second-highest in DB Corp 11,032 16% 34% 25% 23% 14%
the peer group. HT 15,143 15% 19% 16% 10% 9%
In losses, as TV JPL 9,341 12% 33% 26% 20% 15%
operations are
TV18 9,107 52% PL PL PL PL
being set up.
ENIL 2,156 * 18% 31% PL 17%
Average 14% 35% 34% 22% 19%

RBN 2,315 30% 3% PL PL PL
Source: NSE, Company data, Four-S Research

Revenue growth average excludes ENIL, Margins average excludes
SUN TV NW

RBN achieved revenue growth of 30% YoY in nine months ending
Dec-11. RBN’s growth was second highest in peer group.
This includes royalty write-back revenue of Rs 209mn in other
operating income. Excluding that YTD growth is 19% YoY, still second
highest in the peer group.
RBN’s YTD losses were Rs 821mn mainly due to Rs 673mn loss in TV
segment as the company is in the phase of launching new channel
operations.
Its Radio segment had a positive EBIT of Rs 238mn at a margin of
15% and Production has a positive EBIT of Rs 5mn at a margin of
1%.

Four-S Research 18


Valuation Comparison
Trading at Attractive Multiples

EV/ Sales EV/EBITDA P/E P/BV
Zee Ent 4.0 14.9 19.7 3.7
RBN is trading at Sun TV NW 6.4 8.0 16.1 4.5
attractive DB Corp 2.9 11.5 19.9 4.2
valuations, on HT 1.8 11.2 16.2 2.4
threshold of new JPL 2.8 11.7 17.8 4.0
growth as Phase TV18 Broadcast 1.5 474.9 PL 1.3
III unfolds in few ENIL 3.3 12.5 18.7 2.6
weeks time Average 2.7 11.7 18.1 3.2

RBN 1.9 PL PL 2.5
*Valuation is based on TTM financials as of December 2011 and CMP of 30th Mar
2012; Consolidated results taken wherever available.
Source: NSE, Company data, Four-S Research

RBN is trading at a discount of 29% on EV/Sales multiple and 24%
on Price to Book multiple with respect to peer average.

RBN is also trading lower than its historical multiples of EV/Sales
and Price to Book ratios.
31Mar’10 31 Mar’11 30 Mar’12
EV/ Sales (x) 3.3 2.9 1.9
P/B (x) NM 2.7 2.5
Source: NSE, Four-S Research

Four-S Research 19


Valuation and Price Target
RBN will get RBN plans to use equity route for funding to the tune of Rs 3-4bn in
valuations at par FY13, while maintaining promoter’s stake. RBN will require funds for
with industry as it launching more channels and Phase III auctions.
evolves as 100+
FM stations and We have assumed Shareholder Funds to increase by Rs 3bn, half
9+ channels from external investment and half from Promoter - ICD conversion
broadcaster and plus additional investment, if any.
breaks-even

We have taken the conversion price of Rs 60 per share, at a nominal
premium to current market price for the equity dilution in FY13. For
a total amount of increase in Shareholder’s funds by Rs 3bn,
outstanding shares will increase from 79.45mn to 129.45mn.

March 2013 target price – Rs 84
Over 50% upside Building the above dilution into projects, we arrive at a target price
to the stock price of Rs 84 by Mar’13. This is based on an EV/sales multiple of 2x, and
in next 12 months FY13 turnover of Rs 3.1bn. We have used the EV/sales metric as till
FY13, EBITDA will still be much below stable values, while PAT would
be negative.

It is possible to apply more valuation metrics based on FY14
projections. The calculation below suggests a target price of Rs 114
for Mar’14.
Method Multiple Price Target
EV/ Sales (x) 2.0 136
EV/EBITDA 11.0 129
P/E 18.0 131
Average Price 132

Sensitivity to FY13 conversion price of Rs 60 per share
FY13 Conversion 60 70 80 85
Price
Price Mar’13 84 89 93 95
Price Mar’14 132 140 146 149

If the conversion happens at the historical allotment price (Sep-
2010) of Rs 85 per share, the price target for Mar’13 would be Rs 95
and for Mar’14 it would be Rs 149 per share.

Four-S Research 20


RBN’s Business
India’s largest private FM network, now adding new
verticals
A comprehensive Part of the Reliance Group, RBN is a emerging as a diversified
play in entertainment business with play across radio, television, intellectual
Broadcasting properties (IP), out of home (OOH) and television production. RBN’s
(Radio, TV) and
media brands are:
Content
 92.7 BIG FM – India's largest FM Network with 45 stations,
reaching over 42 mn Indians each week.
 BIG CBS – 50:50 joint venture with CBS Studios
International, USA's No.1 TV broadcaster.
 BIG MAGIC – India's first entertainment channel for Hindi
Speaking Belt
 BIG RTL – 50:50 joint venture with the leading European
entertainment network RTL Group
 BIG LIVE –Intellectual Properties
 BIG PRODUCTIONS – Television content production house
 BIG STREET – OOH properties

One of the fastest growing media companies
Second-highest RBN achieved a revenue growth of 36% YoY to reach a turnover of
revenue growth in Rs 2,454mn in FY11.
peer set
Revenue FY10 FY11 FY11 Growth 9mFY12 YoY
Zee 21,998 30,136 37% 21,715 -2%
Sun TV NW 14,258 20,134 39% 13,304 -9%
DB Corp 10,578 12,600 19% 11,032 16%
HT 14,129 17,674 25% 15,143 15%
JPL* 9,419 12,211 30% 9,341 12%
TV18 6,035 7,998 33% 9,107 52%
ENIL 4,221 4,542 8% 2,156 **
Average 27% 13%*
RBN* 1,807 2,454 36% 2,315 30%
* FY10 standalone, (Rs Mn)
*Excludes ENIL, as 9m revenues not comparable YoY due to its OOH business sale.

RBN’s revenue growth was higher than peer set average of 27% and
at par with industry leaders Zee Entertainment and Sun Network. In
9mFY12, its growth was higher than the peer average and second
highest in the group.

RBN began its journey in 2006 with BIG FM
RBN started operations in 2006, after successfully bidding for 45
licenses in FM Phase II rollout.
A part of AdLabs, company now known as Reliance Mediaworks, it
demerged in FY09.

BIG FM – the largest private FM network in India

Four-S Research 21


RBN is the largest private FM player in India with 45 stations. RBN is
number 1 in 15 markets and a top3 player in 15 others. It has a
reach of 42.6mn listeners (IRS+RAM).

Top 5 private FM players

45.0
RBN is the largest
private FM 40.0
network in India 35.0
with 45 stations
in operations. 30.0

25.0

20.0

15.0

10.0

5.0

-
Radio Mirchi Big FM Red FM Radio City Suryan FM

Source: Listenership in millions, IRS Q4, 2011

RBN’s BIG FM, started operations in 2006, whereas Radio Mirchi
(ENIL),Red FM and Radio City have been in operations 2001-02
onwards, being Phase I entrants.
Moreover, as FM becomes a PAN India medium post Phase III,
measurement vehicles will have an extensive reach in tier II and tier
III cities. This will better reflect BIG FM’s performance. At present,
the measurement vehicles are more oriented towards Metros and
some Key cities.

BIG FM’s performance in key markets

RBN’s absence in RBN is a leader in key markets of Bangalore, Kolkata and in Hindi
7 key cities has Speaking Markets. It has made significant progress in Mumbai
led to revenue market.
gap with market
leader, a situation Company # of stations
that maybe A+ A B C D Tota
rectified with l
Phase III ENIL (Radio Mirchi) 4 9 1 7 1 32
1
RBNL (BIG FM) 4 4 1 2 3 45
0 4

The market leader by revenues, ENIL has one-third or 33-35% of
market share by revenues. ENIL, though has lower number of
stations, it has maximum presence in A and A+cities.
RBN is number 1 private FM in 15 cities, which are, Agra, Aligarh,
Allahabad, Amritsar, Asansol, Bareily, Bikaner, Chandigarh,
Guwahati, Gwalior, Jammu, Jodhpur, Mysore, Solapur and Goa.
In phase II FM auctions, RBN missed out 7 key cities of Pune,
Ahmedabad, Nagpur, Jaipur, Lucknow and Patna. RBN will rectify the
situation in Phase III bidding. While Pune and Ahmedabad will help
close the revenue gap with ENIL, Patna, Lucknow, Jaipur and Nagpur
will help the lead in the Hindi Speaking Belt.

Four-S Research 22


RBN’s Radio business has turned EBIT positive with Rs 238mn of
EBIT in 9mFY12, a margin of 15% and ROCE of 10%.

BIG FM Advertiser’s profile

A well-diversified
advertiser’s
profile

RBN had 1,936 advertisers as on Q3 FY12. The advertisers are
equally spread among national, local and regional advertisers.

Building a niche TV broadcasting business
RBN enters into Broadcasting in FY11
De-risked entry in RBN entered into TV Broadcasting in Nov-2010, with the launch of
TV broadcasting BIG CBS channel, the first out of its 50:50 JV with USA’s top
through JVs and broadcaster CBS Studios International.
acquisition
RBN has strategically targeted segments where it has potential to
emerge as a segment leader with low capital expenditure targeting
quick break-evens.

RBN is a 5 channel broadcaster currently

Within 14 months of first channel launch, RBN now operates a 5
channel bouquet of – BIG CBS Prime, BIG CBS Love, BIG CBS Spark,
Spark Punjabi and BIG Magic. RBN recently entered into distribution
of Bloomberg UTV, India's premier business news channel.
BIG CBS channels – Prime Love and Spark cater to audience with
urban sensibilities, while Spark Punjabi and BIG Magic cater to
Punjabi and Hindi speaking markets respectively.

RBN-CBS JV – BIG CBS Networks Ltd.
JV with US’s CBS RBN entered into a 50:50JV in Aug 2010 with CBS Studio
Studios gives an International, a division of America’s top broadcasting house CBS
edge in English Corporation. The JV marks CBS’s entry into Indian subcontinent.
content
CBS Corporation is a mass media company present across US and in
key international markets. Its 2011 revenues were $14.25bn, with
net earnings of $1.32bn. CBS Broadcasting was #1 in US with
12.1mn viewers and 14 out of top 20 watched programs.
With this JV, RBN will offer viewers 25 hours of fresh programming
each week per channel, a strong USP in the English entertainment
segment.

BIG CBS channels perform well in short span of time

Four-S Research 23


RBN has targeted the top end of the SEC pyramid through its BIG
CBS and BIG RTL JVs for Tier 1 or Tier 2 cities. It targets urban
audiences or audiences with urban sensibilities who demand latest
international content. With BIG CBS JV, RBN has access to over
70,000 hours of content from CBS's vast program library.
 BIG CBS Prime, a premium GEC targeting urban male
audiences
 BIG CBS Love, India's first and only international Women's
entertainment channel
 BIG CBS Spark, India's first international Youth entertainment
channel with music as central theme
 BIG CBS Spark Punjabi, India’s first international Punjabi
channel
The first three channels are in Top 8 metros while Spark Punjabi
targets the high GDP rich states of Punjab, Haryana, HP and
Chandigarh.

Relative Market Share of BIG – CBS channels
BIG CBS Prime BIG CBS Love
Launch – Nov-10, TAM week10’12 Launch – Mar-11, TAM Wk13-14, 2012
(CS 15-24 SEC A – MALE, 7 metros) (CS 15+ SECA – Female, 5Metros)
Prime and Love 56%
are doing well in 50%
their audiences in
a short span of 27% 23%
23% 21%
time

BIG CBS Star Zee Café BIG CBS Star Zee Café
Prime World Love World

Source: TAM Data, Week on Week GRP

BIG CBS Prime and BIG CBS Love channels are distributed to 42.5mn
households having recently inked a deal with Dish TV.

BIG CBS Spark
Launch - Apr-11, (CS 4 - 24 AB – MF, 5 metros)

Source: TAM, Week 13-14 2012, 8pm-midnight

BIG CBS Spark is a lower cost category channel compared to Prime
and Spark. This entertainment channel has music as its central
theme and its closest competitor is VH1.

Four-S Research 24


ADEX Data for English GEC for the month of Dec-11


45.0 500000

40.0

35.0 400000
Prime at par with
30.0
AXN, within over 300000
25.0
a year of launch
20.0
200000
15.0

10.0 100000
5.0

0.0 0
Zee Café Star world AXN BIG CBS NW

Source: Company data - ADEX

In the month of Dec-11, BIG CBS Prime, within 12 months of
operations, was at par with AXN by discretionary ad spends.
BIG CBS Prime’s has already launched international content like
Survivor, NCIS, CSI, The Defenders. It also has in-house produced
content like India’s Sexiest Bachelor, ‘BIG Wheels’ taking advantage
of its in-house division – LIVE.
BIG CBS Love has in-house produced content like ‘I Love Style’,
‘India’s Glam Diva’ and international shows like Ringer, Excused,
Next Top Model, Oprah Winfrey Show, Rules of Engagement,
Everybody loves Raymond.
BIG CBS Spark has content like Spark Livewire, Non Stop Pop, Hip Hop
Mcs and Power Chords in its stable.

Spark Punjabi launch in 2012, marks entry into Punjabi
market
First Punjabi The first regional channel out of the BIG CBS JV, Spark Punjabi was
channel from launched on 14th Jan, 2012. It targets the GDP rich markets of
RBN, becomes a Punjab, Haryana, Chandigarh, and Himachal Pradesh. It is presently
category leader
distributed to over 6mn households in the region.
within a month of
launch Spark Punjabi, within a couple of months since its launch, has
garnered 32% market share in Prime Time among Males in the
region.
Relative Market Share: TAM India: CS4+, Males, Punjab, 1mn+,
7PM-12AM, Week 10, 2012

Four-S Research 25


35% 32%
30%
30%

25% 22%

20%
16%
15%

10%

5%

0%
Spark Punjabi 9xTashan Mh1 PTC Chakde

Launched Jan’12 Aug’11 Jun’07 Aug’08

With BIG FM, reaching 8 cities in the region and BIG Street’s 3000+
ambient media options across the markets, BIG CBS Spark Punjabi
offers marketers an integrated media opportunity like none other in
the region.

BIG RTL
With RTL JV, RBN With a market capitalization of $15.5bn, RTL Group is number one in
will target the TV and Broadcasting in Europe. It operates 40 TV channels and 31
lucrative market radio stations across 10 countries. RTL is also the global leader in
for Realty and
content production with 9,500 hours of TV programming per year
Action content
across 54 countries with more than 300 programs on air world-wide.
With its BIG –RTL 50:50 JV, RBN will launch two channels in 2012:
 An action & thrill genre based content for men (CS 15+ SEC
ABC Males) with both Hindi & English language audiences.
 A full-fledged reality based channel in English language
The market potential can be judged from the fact that while there are
a number of Reality and Action programmes on TV, not a single
channel focuses solely on the same.
Channel Programming ADEX Disc Spend
CY 2011(Rs mn)
UTV Action Dubbed Hollywood movies 732
MTV Music + reality 252
Channel V Music + reality 398
UTV Bindaas Reality + Music 1371

BIG RTL has already signed a distribution deal with Reliance Digital
TV.

English GEC Content USP
RBN’s Access to CBS and RTL libraries with first right of refusal. Can also
international JVs leverage relationships that CBS and RTL have with other
will give it an International content providers for access to content. The Company
unmatched
may launch local formats of the popular international content of CBS
programming
and RTL Group (including Freemantle)
edge
While the benefits are the not immediately visible, as CBS content
contracts with other channels (for programs like Indian Idol, etc)
expire, RBN will have the opportunity to become an English (non-
movie) Genre market leader with cutting edge, latest and unique

Four-S Research 26


programming. RBN will also develop local programming for this
audience segment.
All CBS and RTL content is HD ready – can be leveraged to launch HD
channels going forward.

BIG MAGIC, #1 in Hindi Speaking Markets
BIG Magic is RBN’s entry into the Regional GEC space targeting the
underserviced market of UP + MP + Bihar +Jharkhand, featuring
locally relevant content across humour, movies, music, reality shows,
Bollywood, action, non-fictional local connect programs and dubbed
programs.
It is a leader in the category, with highest GRP and share among all
Regional channels in Hindi Speaking Markets, as per TAM results. The
channel has a distribution of ~10mn households in the HSM.
BIG MAGIC delivered a 4 week unduplicated average reach of
12.5mn in Dec-11, 27% higher than Mahuaa and 17% higher than
Dabangg.
Relative Market Share of BIG MAGIC – Week 50’11 – CS 4+
(TAM)

BIG Magic is 50% cost-effective than regional print, hence will gain
at regional print’s cost.
Adex of Regional Hindi channels for Dec-11

Within 9 months of launch, BIG MAGIC has managed second highest
discretionary spend among Hindi regional peers in Dec, 2011. The
duration of Ads is lower than peer average, indicating that it has
commanded a premium price in the market and the potential growth
from increasing inventory fills.

BIG MAGIC + BIG FM, advantage RBN for HSM

Four-S Research 27


Regional TV + FM As BIG FM is a market leader in HSM cities of Agra, Aligarh,
+ OOH make RBN Allahabad, Moradabad and Ranchi, BIG Magic + BIG FM becomes a
an attractive compelling propositions for advertisers, seeking to target HSM
proposition for
without literacy as a pre-condition. RBN aims to make the most out
regional and local
of it by focussing on Phase III frequencies in the region, especially
advertisers
the missed out stations – Patna, Lucknow and Nagpur.

Distribution of Bloomberg UTV
RBN has included India’s premier Business News channel –
Bloomberg UTV in its Distribution portfolio. RBN will gain with having
a de-risked option into news segment with this deal.
With BIG RTL’s first channel launch on cards in July - August 2012,
RBN will be a 7 channel portfolio.

International distribution
International RBN has the rights to CBS and RTL channels across SAARC region. It
distribution a has already started broadcasting the three CBS channels in Sri Lanka
good addition to since Feb 2012. The distribution is through region’s largest cable
top-line
operator – Lanka Broadband Network. The model is fixed license fee
model and will ensure regular revenues. RBN has plans to distribute
across the entire SAARC region including Bangladesh, Nepal, Bhutan,
Maldives, Pakistan and Afghanistan.
RBN also plans to distribute BIG MAGIC and local Indian
programming globally.

RBN’s plays in TV production, IPs and OOH
BIG Productions
BIG Productions BIG Productions has created over 950 hours of programming in a
and LIVE, cater to short span of eighteen months since its launch right across genres
top broadcasters and for both National and Regional channels.
in India apart
from in-house This includes, 'Sa Re Ga Ma Lil Champs' for Zee TV, 'Badmash
synergies Company' for Colours, 'Comedy Ka Maha Muqabala' for Star Plus,
'Star One Horror Nights' for Star One, 'Pardes Mein Mila Koi Apna' for
Imagine, ‘Super Woman’ for ETV, 'Swapnachya Palikadle' for Star
Pravah, 'Moti Baa' for ETV Gujarati, 'Halla Bol' for ETV Marathi,
'Money Money' for Maa TV and more. Two shows have reached 500
episodes milestone – Motibaa and 'Swapnachya Palikadle.
BIG Productions will attract more third party programming as
international media houses start outsourcing programming to India.

BIG LIVE
RBN is India’s largest owner of televised IPs, over 30 IPs within two
years of inception. RBN has a multiyear contract with leading Hindi
GEC channel to produce industry award show.
In Dec-11, it announced second edition of BIG Star Entertainment
Awards, with leading Bollywood actors as performers. The first show
had ratings of 5.78 TVR, one of the highest ratings for a televised IP.

BIG Street – OOH
BIG Street, one of RBN’s OOH division BIG Street is a complementary and tactical play
the largest OOH

Four-S Research 28


plays in regulated to complete an advertiser’s bouquet. RBN operates in the regulated
space, is a market space and leverages Group’s assets as inventory.
leader in Delhi
With a presence in 75 cities, 5000+ Media vehicles, 25 Million – Pan-
India reach, BIG Street is the largest OOH player in the country.
RBN has over 45% market share in key market of Delhi with key
properties of Delhi Metro Rail Corporation (DMRC), Delhi Airport
Metro Express (DAME) Line, DMRC LineII, DMRC Line III and DTTDC
(Delhi Tourism and Transportation Development Corporation) Street
Furniture Makeover project.
RBN has launched innovative Digital Pods to further increase
inventory in premium spaces like malls etc.

Four-S Research 29


Financial Analysis and Growth Outlook
Inventory increase led growth
PHASE III One of the youngest media companies, RBN will transform into 100-
stations, 150 network FM station and, ~9 channel broadcaster and a top
Broadcasting content house in an industry that is growing twice the country’s GDP.
channels will add
We expect RBN’s revenues to grow at a CAGR of 51% over FY11-15
inventory
to reach Rs 12.8bn.

Projected Revenues

Revenue (Rs. Mn)
14,000 12,807

12,000

10,000 8,936

8,000

6,000 5,045

4,000 3,134
2,454
1,807
2,000

0
FY10 (S) FY11 FY12p FY13e FY14e FY15e

Youngest media RBN has reached revenues of Rs 2,454mn in FY11. In FY12, it is
company will see expected to grow 27% YoY to reach Rs 3,106mn. It has already
improvement in achieved a turnover of Rs 2,315mn in 9mFY12.
Ad Rates as
businesses gain The FY12 growth will be driven by 20% growth in Radio revenues,
traction 53% growth in OOH, as DMRC properties go to market and trading.
IP revenue has seen a decline, as RBN has discontinued its activation
business is now focused only on televised IPs. The new segments of
TV Broadcasting and Production are estimated to generate 5% and
14% of revenue share respectively, led by 3 new channels and
demand for TV content.

Changing revenue mix
FY11 revenue mix FY15e revenue mix

New segments, TV
and Production, to
account for 30%
and 12% revenue
share by FY15.
Radio remains the
biggest segment

Four-S Research 30


Radio to grow at 34% CAGR, triggered by Phase III
auctions
Phase III, a RBN’s Radio business will transform itself from 45 stations to be 100-
transformational 150 FM station network, post FM phase III auctions. The Government
trigger for Radio plans to start the bidding process as soon as June 2012. We expect
the entire process to be over in FY13 itself, with revenue generation
of new stations starting in early FY14.
Hence, we expect Radio segment to generate revenues of Rs
5,578mn by FY15. Out of this, 54% will come from Phase II stations
(45) and rest from Phase III stations. We have assumed RBN to bid
and win 2A+ frequencies, 5 A category frequencies, 10B category
frequencies and a minimum of 50 C and D category frequencies.

Key metrics/ assumptions FY12P FY15e

Blended Utilization Phase II stations 65% 75%

Blended Rate for 45 Phase II stations Rs8,100 Rs 11,200

Blended Utilization Phase III stations 52%

Blended Rate for 50-100 Phase III Rs 11,500
Stations

Rate in Rs per 10 second

Radio will account for 44% of revenues in FY15, down from 71%
share in FY11.

RBN will be a ~9 channel broadcaster by FY15
Broadcasting RBN will launch two channels through its JV with Europe’s top
portfolio to double broadcaster RTL Group. RBN will also launch more MAGIC-like
channels with own programming to cater to other regional belts –
like Gujarati, Marathi, Punjabi, Bengali etc. Hence, the main channel
portfolio of RBN will increase from 5 at present to ~9 by FY15.
Additionally RBN will maximize regional advertising potential by
launching feeds of the main channels. It will launch dubbed versions
of its Main English channels as well as launch HD feeds.

TV Broadcasting to gain traction, 30% of revenue share
RBN plans to As RBN launches 2 BIG RTL channels, 3 additional BIG MAGIC
emerge as a channels and at least 8 more dubbed/ HD feeds of its Main English
leading regional GEC channels by FY15, it will garner a bigger share of the revenue
as well as English
pie.
GEC Play with 9
main channels by We expect TV Broadcasting to generate revenues of Rs 3,843mn by
FY15. FY15, accounting for 30% of RBN’s revenues.
FY 15 metrics # of channels + feeds
BIG MAGIC 4
BIG CBS (50% JV) 3+9
BIG RTL JV 2

Spark Punjabi is the first regional feed from BIG CBS Network.

Four-S Research 31


BIG Productions to account for 12% FY15 revenue pie
Increase in As number of broadcasting channels increase post digitization and
broadcasting India gets recognized as an outsourcing destination for TV
channels post programming, we expect BIG Productions to reach revenues of Rs
digitization will
1,568mn in FY15. It will account for 12% of RBN’s revenues.
help this business

BIG LIVE or IP to account for 8% FY15 revenue pie
RBN already has developed ~30 televised IPs in a short time, a mix
of National, Local and In-house IPs. Its national IP like Star BIG
Entertainment received revenues of ~Rs 70mn in FY12. We expect
BIG LIVE to develop and own ~60 televised IPs by FY15 and witness
increased monetization per IP.
The IP segment will achieve Rs 1,080mn in revenues by FY15 and
account for 8% revenue share.

BIG Street to grow at 36% CAGR
As RBN’s DMRC property gets monetized in FY13 onwards, and RBN
starts marketing of external properties, we expect OOH to generate
Rs 727mn in revenues by FY15. Most of RBN’s DMRC contracts
extend beyond FY15.
Trading revenues will account for 30% of OOH revenues.

PAT turnaround in FY14, margins of 25% by FY15
Radio profitability, TV break-even to turn RBN PAT
positive by FY15
RBN to be PAT The radio business is already PAT positive. We expect TV and other
positive by FY14 segments to become profitable by FY14, making the company PAT
positive.

FY11 FY12e FY13e FY14e FY15e

60% 49% 49%

40% 31%
26%
22% 19%
17%
20% 10%
4%
0%
-3% -4% -6%
-20% -14% -12% -13%
-17%
-27% -27%
-40%

-60% -50%
-59%
-80%
EBITDA margin EBIT margin ROAE ROACE

Radio business is already PAT positive
Radio will achieve RBN’s Radio business is already EBIT positive with margins of 15% in
EBIT of 28% by 9mFY12. The recent royalty reduction to 2% of revenues, though still
FY15 under contest, will further boost the bottom-line. We have taken, 4%
for our projections, in tune with international standards.
Phase III will allow ownership of multiple frequencies and networking
of operations, which will result in lower operational costs per station.

Four-S Research 32


We expect Radio business to achieve an EBITDA margin of 39% by
FY15 and an EBIT margin of 26%. Market leader ENIL has already
achieved an EBITDA of 41% in Q3FY11.

RBN’s Radio rates will grow closer to market leader
With FM emerging as PAN India medium with 1085 frequencies, it
will get re-invented as mass media vehicle. Hence, the ad rates for
the whole industry will also witness an increase. FICCI KPMG predicts
Radio’s share in total advertising pie increase from 3.8% in 2011 to
5% in 2016.
In particular, RBN’s Radio rates could close the gap as RBN
establishes presence in all key stations.

We expect utilizations of existing stations to improve to ~75% levels.
Post-phase III, radio will become a PAN India Media, hence we
expect the blended ERs of existing stations to improve from Rs 8,100
per 10 seconds for 45 stations to ~ Rs 11,200 per 10 seconds. The
current market leader gets range of Rs 9 to 10,000 for 32 stations
presently.

TV Broadcasting to be EBIT positive in FY14.
RBN already has 3 main channels on its portfolio in the cost range of
Rs 250-300mn. The channels will break-even within three years of
operations, driven by increase utilization and ad-rate improvements.
With digitization rollout, broadcasters will gain with increase in
subscription revenue share (~30% of monthly ARPU from 15% at
present) along with a decrease in carriage costs as digital cable will
have much higher bandwidths.
Driven by industry and RBN’s operational improvement, we expect
TV segment to break-even by FY14. The EBIT margin in FY14 would
be 2%, and will reach 30% in FY15 as more channels break-even.

Production already EBIT positive, BIG LIVE to break-
even in FY13
BIG Productions posted a positive EBIT of Rs 5mn in 9mFY12 in first
year of its operations. It will achieve EBITDA margins of 21% by
FY15.
BIG Live, with improved monetization per IP will break-even in FY13
with an EBITDA margin of 5% that will improve to 14% by FY15.
OOH, will break-even by FY14 as trading takes traction, will achieve
EBITDA margins of 18% by FY15.

Four-S Research 33

Company report reliance broadcast network 17th april 2012

Company report reliance broadcast network 17th april 2012

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