Annual Report Highlights FY 12-13 : SUN TV

Topline was almost flat  and slightly positive while the bottom line was flat and slight negative.  Dividend was maintained at last year levels of Rs9.50.  Company successfully bid for the IPL franchise and has been awarded the Hyderabad Franchise.   Kal and South Asia FM had revenues of Rs112 cr and 90cr.  After minority interest, the profit of two subsidiaries was around 10.85 cr and 6.5 cr.  Both the subsidiaries have turned profit this year and are likely to get better in the coming years.  As per company, it has managed to have dominant position in southern states and it is the only player with maximum reach in the area it operates. 

Primary source for revenue is advertisement followed by subscription.  Digitization of content and growth of subscription abroad are the key opportunities identified.  Company is very optimistic about the radio business contribution in the future as well.  Popular programs and dominant viewership share give the company the pricing power.  Move to DTH is expected to bring in the required revenues in future. 

Some concerns that come out of the AR are that the remuneration to the promoter director continues to be very high at around 56 cr each. First the company spent large amount in building its corporate office and now have bought again aircraft to replace the one that they bought few years back.  They spent around 295cr towards aircraft purchase and the previous aircraft was sold for 189 cr.  It has been bought to provide charter services.  Not sure why they would invest into businesses not connected.  It is more concerning especially given the fact that the Sun group has interest in Spice Jet.   For the amount they spent on aircraft, the revenue has only been 2.60 cr. Also, there seems to consistent amount of debt that is taken and paid in the year, which may mean taking debt and routing it for some other purpose during the year and paying it off during balance sheet date.  Amount involved is around 875 cr.

Subscription revenue is half of advertising revenue.   It looks like they completely got out of movie distribution business as there were no revenues.  Provision for doubtful debts has increased this year and was at around 24 cr.  Free Cash flow improved compared to last year due to reduced expenditure of intangible assets.  Subscription revenue from Sun direct is lower compared to last year which may mean that sun direct may be losing market share or the revenue was reduced for sun direct. Aircraft charter business got around 2.2cr from sun distribution pvt ltd.

There are lots of related party transactions between the group businesses.  Primarily transactions are between Sun Direct and the company.  There is also a loan of around 32 cr to associate company.

While the business seems to be okay with good outlook in the days to come due to digitization, growing advertising revenues, there are concerns in the corporate governance that have cropped up.