Stock Review: Dish TV

 

For the March 2011 quarter, Dish TV, one of the largest and early entrants in the direct-to-home (DTH) industry, reported losses. The company reported a loss of . 37 crore in the March 2011 quarter, against a loss of . 60 crore in the same period past year.

For the quarter, the company's net sales increased 43% to . 432 crore on a year-on-year comparison. For the whole FY11, its performance was negative. The next two quarters would be crucial for the company since it seems certain that it would post positive profit.

The rapid digitisation of the industry is the key factor for the company's future growth. Currently, it is estimated that in each quarter the industry is adding around 2.5 million subscribers. Dish TV itself added more than a million subscribers in the fourth quarter of FY11, taking its subscriber base to 10 million. Being the market leader with nearly one-third market share, the company is set to benefit from this. Besides this, the company is also benefiting from its new offering — HD format (around 36 channels). The contribution of the HD offering in the past few months has increased from less than 1% to around 7% of the company's revenues. The company would benefit immensely, considering the average revenue per user for HD services is more than . 400 per month, while for the plain vanilla DTH services it is . 150. In the last few years, the company has changed its business model to fixed-fee model, which will play a key role in improving its profitability, going ahead.

Under this, the company's content cost — the amount DTH companies pay for sourcing the content — has decreased as a percentage of subscription revenues to 39%, from 55% in FY09. As the increasing subscriber base increases revenues, the company's profitability would improve substantially.

In the past one year, the stock of Dish TV India has been on constant investor radar. The company's stock in the past one year has given more than 70% returns, against a meagre 10% of the benchmark Sensex.

This continued interest in the stock is due to increasing digital subscriber base in the past one year. Being the only listed player among the six DTH operators, it would continue to generate increasing investor interest in coming quarters as digitisation gains pace.