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India loses Rs 2500 crore if the auctions are not held: Vineet Singh Hukmani

India loses Rs 2500 crore if the auctions are not held: Vineet Singh Hukmani

Author | Priyanka Mehra | Wednesday, Nov 26,2014 9:30 AM

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India loses Rs 2500 crore if the auctions are not held: Vineet Singh Hukmani

Vineet Singh Hukmani, MD and CEO, Radio One talks about the significance of the upcoming auctions for the radio industry and the government, advertisers’ renewed faith in radio, Radio One’s growing profitability, and radio being the forgotten precursor of digital.

For the FM radio industry, the auctions under Phase III and the renewal of Phase II licenses, are crucial at this point, are you seeing government action taking place at the pace it is required?

Finally, if they have put something on the Finance Minister’s lap and they seem to be very serious about it, we just hope that they see this through. This window of opportunity is not going to come again where a whole lot of people are looking positively at radio. This is a once in a lifetime opportunity. All the stars are aligned towards the fact that this is a thing that is ready to boom. If they don’t press the button now, they are losing a huge opportunity. For three years the industry has waited, players have become profitable, they have become more confident. The Phase III policy has been ready for many years. TRAI has already given its approval for the migration; all that is waiting cabinet approval. We’re just hoping that the government now starts acting, stops discussing, sending things back and forth, does a successful auction. If this doesn’t happen there is a loss for the government because they have not taken advantage of an opportunity. And India loses Rs 2500 crore, the taxpayer loses that money.  We are very hopeful that once Mr. Jaitley has come in, things will move.

What has been the revenue growth for Radio One in 2014?

We have grown 20% in our profit from last FY, from H1 of last year. 20% in our EBIDTA, and on our PBT we’ve grown 165%. We are a company which has been funded primarily by a private equity investor. We had also raised a lot of debt initially to fund the company. Our success is all that we are doing right now is helping us pay back the debt, and we are almost debt-free now. Once you pay back your debts your promoters or your main investors become very happy. They are very confident specially after the H1’s performance and they are going to support Radio One’s growth through the next phase III and therefore put in more money to get in more cities. At a very operational level, our revenue has grown only 6 and a half-7 per cent. But since our cost hasn’t grown, our profit has grown by 20%. Since our loans are being paid, that means our interest cost is coming down, our overall profit is growing by something like 165% Y-o-Y.

From a very slow start and advertiser budgets being withheld in Quarter 1, how much of the positive sentiment has been beneficial post the Modi government?

If you look at the industry, everybody’s Q1 was pretty bad. Everybody’s projections went haywire. Once the Modi government was settling down, they took their time with advertising. I think a whole lot of people that are affected by the policy changes like the car industry, construction industry, real estate, all of them were waiting that interest rates will come down so they held back their spends. In Q2 they all slowly started coming back and said they have to continue their businesses and they can’t just keep waiting for the government to do something. Automatically client sentiment changed in Q2 and we also benefitted from that. Q3 has been fantastic, for radio because of two reasons. One is things have opened up overall, because of huge amount of money government spending has gone into radio people have realised that radio is a very powerful medium, Even advertisers have started thinking, ‘Can I actually increase my advertising spends on radio and do something more?’ All of that has come to us together in the festival season. Not only election advertising but also advertisers with new found faith saying I should spend a little more on radio than what I have been spending. Add to that print has possibly suffered the maximum because print is very expensive. With a small change in your print budget you can do a whole year’s radio campaign. In radio you can measure response. Q3 business has also improved, the government has also started giving some stimuli in the market which helps people feel there is going to be some development. Festivals being early helped us. It was like a bonanza because we grew 45% from September to October. Our innovations also sold during that time.

What are the learnings from digital that Radio One is applying on Radio?

People have forgotten that radio is actually the first social media. Everywhere in the world the best interactions before digital came because radio was live.  It is digital which has learned from radio and not the other way around. However, digital has done a far better job of upscaling it, getting every single guy onto Facebook and Twitter. What we realised is that we need to get some of that magic, some of that dynamics of social media back into radio. What we measure on Radio One is the Monthly Interactivity Score and we make sure that month on month our interactivity is only increasing. Because of digital, the kind of interaction that is happening is changed. First people liked to talk, now they like to text. We have allowed both. All of our hosts are simultaneously on air and on Facebook and Twitter. Their screens are open and they are talking at the same time. People can SMS, tweet or call and talk to the host. We have covered all the interaction avenues. In digital media, there is no central body control. It is the listeners or viewers themselves who control the medium. Earlier it used to be just related to the audio medium. Radio plus digital has added audio plus visual. But both live. We have learned to combine live radio with live digital and create a one plus one which is eleven,  and not two. The strengths of radio are what all these people in digital who have started social media will tell you that at some point in time their inspiration was the radio. Even today see Mann Ki Baat on radio. That’s still the old way of doing it. Where is the interaction? Why doesn’t Mr. Modi let people ask him questions. That’s the real power of the medium. When we did the Modi Mann KI Baat, we did the first one on Gandhi Jayanti, Swacch Bharat Abhiyan launch. We put up a Facebok post, saying this is what Modi is saying. How many of you feel that you would like to be a part of this conversation? It was filled. 21,000 + likes on one post, 2,50,000 people reached. All of them were saying something positive. Mr Modi has nothing to worry about. He should have opened up the lines and talked to people. Radio has the fabric of social media, and connects digital live with it, this can only become 1+1=11. Even now after having realised the power of radio, our PM considers a one way dialogue where the two way dialogue is the big story on radio. I think he is a quick learner and he being so powerful on social media, he understands the power of it. All he has to do is close the loop in his head that radio and social media are meant to be together.

Which cities among the seven are the money spinners and leading the pack for Radio One?

It’s difficult to say. Delhi, Mumbai, Bangalore and Pune are almost at the same place. These four lead the pack. After that comes Kolkata, after that Ahmedabad and last will be Chennai. In Chennai we have a highly commoditised industry. There are already 10 players. As much as we are differentiated in the other cities, we’d like to be more differentiated in Chennai and we’re trying. But Chennai has an overdependence on Tamil music. There are English music stations which are not doing well. Nobody has experimented with Bollywood in Chennai, we are better than before but not as good as we’d like to be. It continues to be a Red Herring for us but there is no giving up. We will find a solution.

What are your expansion plans and targets for 2015?

We would like to definitely participate in the auctions now that our investors are very buoyed by the performance of the company. They are willing to invest funds, our bankers are very happy with us saying that please go ahead and expand. I cannot compromise on the profitability of the company. I will only expand if that city makes sense to me. I have to go where my audience is. If my audience is an upscale educated Indian, I have to go to those cities that are currently not in my scheme. For example we know that there is a good sign of upscale educated Indian in Hyderabad, Chandigarh. We already have large 7 metro cities, we would probably like to add 4. Take to a maximum 11-12 cities. But we will not compromise on the framework we have already built. We are not going to blindly go to 30-45 cities. It’s going to be calculated expansion. We will choose the cities that allow us the quickest break- even.  Now we are not going to wait five years to break even a city. We want to break even in a year or two. We will choose a city with a sizeable audience and advertiser interest. Earlier everybody went into this industry blind. Now we have data for each of the industry. They know which cities are doing well and how much of the advertising revenues are in each market. Plus the auctions will be transparent now. You can see what the other guy is bidding. It’s all going to be electronic auctions. You can know who is bidding high and low, you can put in a bid, pull out a bid.  Earlier it was a closed tender. 

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