Looking at decent topline growth this quarter results, analysed the business with a certain interest considering:-
- High promoter pedigree and skin in the game (Times group), decent management team
- Scope for operating leverage to play out being mainly.a fixed costs business if top line continues to grow
- Interesting new launches. Decent traction in digital channels, good UI/UX for new app and international markets seem promising
But there seems to be a structural problem here which still looks like a major overhang. Since 2014-2016, the business has seen severe deterioration of margins. This is even before COVID. For the core FCT business this seems structural. The only reasons I could think of this were:-
- Radio is losing preference amongst top notch marketing teams as a channel of interest. Hence they drop prices to fill inventory – which is quite apparent in the quality of advertisers
- Even though the ad slots fill up, there is hardly marquee brands spending media budgets here, just more hyper local business getting a mass medium for a low price
This quarter saw 76% recovery to pre Covid levels inspite of no effect of COVID – again seems like a sequential recovery and YOY increase but actually in the long term the business is structurally declining
The above 2 negatives were much stronger in the long term and decided not to invest.
Discl : Not invested
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