Hungama Digital Media FY20 net loss widens due to increased content cost
The content creation cost for the fiscal under review has jumped to Rs 23.68 crore compared to Rs 5 crore in FY19
Neeraj Roy-led Hungama Digital Media Entertainment's net loss for the fiscal ended 31st March 2020 has ballooned to Rs 51.25 crore on account of the increased content acquisition cost, additional investment in video entertainment content coupled with the provision of Rs 3.5 crore for writing off investment in JV Aalap Digital Music.
In the previous fiscal, the company's net loss stood at Rs 12.86 crore. The losses continue to be funded by infusion from shareholders led by Rakesh Jhunjhunwala, Ashish Kacholia besides strategic shareholders like Xiaomi Singapore, Intel Capital Corporation, and Bessemer Venture Partners Trusts.
The content creation cost for the fiscal under review has jumped to Rs 23.68 crore compared to Rs 5 crore in FY19. Total operating income decreased by around 3% to Rs 249.32 crore in FY20, led by a decline in B2B business and B2C business, which was partially offset by an increase in ad revenues.
The company refused to comment on the story. The financial data is based on the CARE Ratings report reaffirming the ratings assigned to Hungama's bank facilities.
Hungama derives 48% of its revenue from telecom companies compared to 65% in FY19. The SC order on pending License Fee and Spectrum Usage Charges has created large immediate liabilities on telecom players. These liquidity pressures on telecom players could create subsequent stress on their various vendor eco-system which includes players like Hungama.
The company continued to report cash losses in FY20 and H1FY21, however, the cash flow from operations during FY20 was Rs 29 crore. The company’s cash & cash equivalent was Rs 0.34 crore as of March 31, 2020.
Hungama is a full-service digital agency, with capabilities in digital ideation, production, and social media. Hungama offers creative and promo marketing services, viral marketing campaigns, social media marketing and mobile marketing, applications, managing websites, and video services.
The company owns and operates platforms including music streaming app Hungama Music, video streaming platform Hungama Play, Hungama Artist Aloud – a platform for independent artists and Hungama Games – a developer, publisher, distributor, and marketer of mobile games.
Hungama has over two and half million pieces of digital content rights tie-up across genres and languages, in the form of music tracks, music videos, and dialogues. It also has digital content rights tie-up for over 5000 Bollywood, Hollywood, Regional Indian Movies and Television Series.
In August 2020, the company expanded to new markets like Switzerland, Poland, Saudi Arabia, Palestine, Batelco, and Nepal through telco partnerships. These operators include the three largest telecom providers in Switzerland – Swisscom, Sunrise, and Salt Mobile, T-Mobile Polska and Plus – two of the leading telecom operators in Poland, and STC, Zain, and Virgin Mobile – three of the primary telecom providers in Saudi Arabia. In addition to these, Hungama has also partnered with Ooredoo in Palestine, Batelco in Bahrain, and Ncell in Nepal.
Apart from this, the company has entered into a deal with other OTT players where Hungama Music will be integrated into their OTT platform. Technical integration for the services is in process and is expected to be completed by FY21. All these initiatives are expected to have a positive impact on the revenue and profitability going forward.
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