Sun NXT, the over-the-top (OTT) platform run by Sun TV Network has witnessed a “significant growth” in the recent years as the company has “entered into agreements with almost all the telcos.” The development was shared by the Sun TV management in the third quarter earnings call on Monday. The Sun TV management said that the company receives a “substantial fixed revenue” from the telecom operators on a month-on-month basis. Crucially, it was also said that the management was able to renew the agreements with the telecom operators at a “substantially higher number” upon the expiry of their existing agreements.
Analyst Says Sun TV DTH Business to Grow in Double Digits
Sun TV, one of the largest broadcasters in India operating satellite TV channels across multiple Indian languages on Monday announced its third quarter financial results with the company recording 19% increase in its revenues. The company said that the revenues in its third quarter of the current financial year hit Rs 972.34 crores as compared to Rs 814.97 crores in the prior year quarter. Sun TV also reported that its subscription revenues for the quarter ended December 31, 2020, touched Rs 424.05 crores, translating to an 3% year-over-year (YoY) increase.
V.C. Unnikrishnan, CFO of Sun TV said in the earnings call that the digital revenue hit Rs 200 crores in the quarter ended December 31, 2020. The company that also operates Sun Direct, the fourth largest Direct-to-Home (DTH) service in India highlighted that the subscription revenues from DTH touched Rs 224 crores in its third quarter, up 8% YoY.
SL Narayanan, group CFO of Sun TV Network said that the company is “seeing more traction from the DTH and cable digitization” in Tamil Nadu.
“While all other markets more or less reached its saturation in terms of digitization but Tamil Nadu, we have seen that there's a scope of 20% growth in the digital subscription,” Narayanan said in the earnings call on Monday.
Dolat Capital, a trading firm engaged in the financial markets said that DTH segment will “continue to grow healthy” driven by the “strong subscriber traction.”
Further, LKP Securities, a financial services firm highlighted that the Sun TV management “remained fairly optimistic on DTH” as the company was “observing rising demand for this business.”
“We believe DTH business will expand at double digit in the coming quarters,” LKP Securities said in a report on Monday.
Sun TV Set to Increase Investment in Sun NXT
Narayanan highlighted that the Sun NXT subscriber base continued to remain around 18 million and has not “moved up significantly” in the recent months. Crucially, it was said that the company is committed to its investment plan in the Sun NXT platform.
“Digital business (Sun NXT) is throwing back healthy cash flows for Sun TV,” Dolat Capital said in its report. “This is a structural positive and may warrant [a] higher multiple. Sun’s under-investment in future-proofing digital business had been a key investor concern.”
In the previous quarter earnings call, Narayanan said that the company will invest up to Rs 200 crore a year on “content exclusively for Sun NXT.” The group CFO on Monday said that the company’s plan to start investments into Sun NXT from the first half of the next financial year “stays.” Narayanan said that the company will “soon” make announcements on its investment plans as soon as it is ready.
“The management expects to continue with the current SVOD of the OTT app and continues to partner with telcos to scale the OTT business,” Motilal Oswal Financial Services said in its report.
Motilal Oswal highlighted that the company has a “healthy liquidity” with Rs 3600 crores in net cash in the first half of the current financial year. The financial services firm said that the liquidity “offers room to intensify investments in the linear as well as OTT space.”
Further, ICICI Direct, said that the company’s plan to “ramp-up” Sun NXT platform will be the “key monitorable” along with “planned movie releases and subsequent revenue growth.”
“Subscription revenue has been a key relief for Sun TV in a challenging year,” ICICI Direct said in its report on Tuesday. “Regaining viewership share for flagship channel and Sun NXT growth will also be key for monetisation.”
However, Dolat Capital said that “execution and delivery will be the key” for Sun NXT to continue its momentum.
“Management did highlight that theatricals are likely to survive and grow with significant pent-up demand,” Dolat Capital said. “Direct release of movies on OTT has seen tepid response with modest incremental subscriber additions.”