TV18 & IBN18 smothered under huge interest costs   

January 21, 2010

The December quarter results have thrown up a new reality show for two top television channels: large interest costs that are leading to relentless net losses. Here is the grim financial picture. IBN18 has reported a small operating profit of Rs4.98 crore for the three months ended December 2009. But net loss was Rs10.96 crore.

The reason: IBN18’s consolidated interest costs and other financial charges are up by a whopping 82%, an increase of Rs6.51crore to Rs14.5crore, from Rs7.98crore for the corresponding year-ago period. On a nine-month basis, interest costs and other financial charges are up by a massive 123% in December 2009, an increase of Rs18.08 crore to Rs32.77crore, from Rs14.69crore last year.

TV18 too has registered a huge net loss of Rs41.52 crore for the same quarter. For TV18, although December quarter interest costs have come down by 14%, the nine-monthly interest costs have registered a rise of 25% to Rs85.01 crore, from Rs67.94 crore for the same period last year. Clearly, unless the business turns cash-flow positive, continuous borrowing would lead these companies into a deadly spiral of more and more debt just to keep the operations going.

For over six quarters now, these companies are making losses, requiring them to borrow money to fund their operations. TV18 made a rights issue last year—but at the rate money is flowing out, it will again need additional capital. Will this mean further borrowings? If so, how will the increased debt be serviced with cash flows continuing to be negative? Analysts and experts have all along assumed that all this borrowing was temporary. But it now appears that TV18 has been forced to pile up debt in large quantities just to ensure business survival. With losses continuing even after a full year of economic revival, these interest costs—and net losses—will not disappear easily. High interest costs will feature as a permanent expenditure on their books, leaving almost nothing for shareholders of these cash-guzzling businesses.
— Sanket Dhanorkar and Ravi Samalad