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MOSL: THEMATIC | Radio-Well tuned to flourish

​THEMATIC | Radio: Well tuned to flourish

• Over the past 18 months, the Indian radio industry has witnessed a 66% increase in the number of channels to reach 407, led by phase-III auctions and phase-II license renewals. The launch of these channels over the last six months is likely to drive radio industry revenue CAGR of 16% over CY16-21E, ~1.4x of traditional media (ex-digital).
• Despite the evolution of the digital medium, radio remains a stable advertising medium globally, backed by its localized and interactive content. Notably, radio operators have introduced digital radio to mitigate the risk of losing share to digital medium. We believe the radio listenership base in India is likely to increase going forward, driven by (i) wider footprint and (ii) phase-III-led content differentiation avenues.
• Entertainment Network India Limited (ENIL)/Music Broadcast’s (MBL) heavy upfront investment of INR7.1b/3.4b in phase-III auctions and phase II renewals led to single-digit return ratios in FY17. However, ENIL/MBL are expected to reach RoIC of 20%/25% by FY20, led by improving EBITDA margins and asset turns.
• Large operators like ENIL/MBL with market shares of 30%/14% have strong execution capabilities. Inventory addition should help ENIL/MBL to record revenue growth of 16%/15% and EBITDA CAGR of 30%/20% over FY17-20.