Abhishek,

The 14-16% margin was on solar parks which Ujaas constructs as an end to end service. Going forward, the revenues and profit will surely decrease on an absolute basis as cost of solar panels is decreasing. The margins also face downward pressure due to increasing competition, but not a lot since the demand could be really huge. In the coming 12 months, in particular for the recently bagged orders I expect margin to be lower as the orders are more like EPC.

In May or June RBI announced that solar projects of upto 15 cr would qualify for priority sector lending. This was well known in the market, but I am just reiterating as I saw the same across couple of channels and in an interview by Vikalp Mundra. In particular, what this means is that for new home buyers, they can get a roof top solar loan as part of the house loan package at lower interest rate. For the household rooftop panels margins would be higher, but if they go with franchisee model, the margins could be less. I prefer the franchisee model. Hope they come up with a product where a professional comes to your home and assembles modular off-the-shelf components according to your requirement - in this case your terrace and budget/KW. As mentioned in concall, If they can get the installation time down to 1 day (concall said 1-2 days), it could be a huge hit.

If Ujaas implements about 26 MW in next 12 months then on a very conservative basis they would get 15 cr profit. With the O&M and a few small orders, 20+ cr. is surely on the cards. At 360 cr, on a 12 month forward basis, this does not seem expensive. However, while buying, I always tend to look at the MoS and downside. Bought more in the last week. Call me greedy.

Also some of these companies are carrying forward their earlier losses, and getting tax benefits. So one needs to take into account how long these tax benefits can be enjoyed.

Hiteshbhai,

On competitive landscape, I feel, there is hardly any new major player in the Phase-III. Most of the players have been in existence since phase-II barring some regional players in Orissa and Kerala. In the existing cities that ENIL has operations, I do not see any impact of competitive intensity impacting its realizations primarily because, theyare far ahead of it's competition in many of these cities in terms of listenership and revenue share. Moreover, in many of it's strong markets, it has acquired second frequency for itself and hence the real challenge is not to canniabalize it's existing product in those cities. From the concall updates, it is very clear that they are targeting to monetize the second frequency with differentiated product and probably different brand. In nutshell, for it's existing cities, I feel they will be able to sustain their rates. In fact, from March 2015, they had selectively started improving yields/increasing rates and management has indicated that they are boradbasing this increased rate to all existing stations and they want to continue this process going forward as well.

For new cities, I feel, it will be a challenge for ENIL to compete with incumbents and hence they may have to start with much lower rates than the market leaders. Thereafter, how well they perform and get listenership will decide the trajectory of their rates in new markets. So, ENIL is yet to taste waters here. However, this is true for all player who are entering in new market and not specific to ENIL.

On Profitability, according to management, inspite of rollout of new stations, higher roll out cost and negative operating leverage in new stations, the impact on EBIDTA margin is going to be only 1% on blended basis. Thus, on EBIDTA level, there is likely to be decent improvement in absolute terms if management walks the talk. One of the reasons why the impact at EBIDTA level may be minimal is because, the completely new frequencies are only 7 out of total 52 frequencies. Rest of them are either second frequencies or are acquired ones (TV Today). So, I do not see any negative impact on EBIDTA.

At the same time, there is going to be a significant Amortization charge coming from One time fee for new licenses and renewal fee of existing licenses (yearly 40-45 Crore). Plus, there is interest on short term borrowing kicking in and other income from 500 Crore cash going out. Thus, for a year, the PAT may decline from current levels. So, from business operations perspective one may see positive movement but on accounting front, the numbers may look subdued.

This may present a good opportunity to build position, if market ignores the operating performance and weighs the accounting earning disproportionately.

Radhakishan Damani backs Sterling Holiday Resorts, Professor Sanjay Bakshi backs Thomas cook. Few years back there were big hype about cox and kings but these stocks never picked up. This is one sector where I have found experts go wrong so terribly . What can be the cause ?

Excellent effort dhwanil.

Two queries:

First is with a lot of new frequencies being auctioned and new players coming up and existing players ramping up, do you foresee any stiff competition?

Secondly would the profits be impacted in the shorter term bcos the working of new stations would take some time to settle down and start generating optimum revenues/profits and till that time overheads and license feeds would remain as revenues?

regards
hitesh.