A. During FY22, we delivered a robust financial performance despite a fairly unpredictable operating backdrop. Our operating revenues grew 5.9% YoY. FY22 started on a soft note, with the first quarter witnessing the onslaught of the second wave of COVID-19, leading to the reimposition of restrictions on mobility and assembly.
The industry faced disruptions in production schedules with shoots being halted, theatres being shut, and on-ground live events being cancelled or moving to the digital medium. The fourth quarter saw the emergence of the third wave, albeit much benign, in terms of severity and impact. This was reflected in our muted advertisement revenues, despite an increase in viewership, as the uncertainty in the external environment prompted consumers to curtail discretionary expenses and brands to defer new launches and limit ad spend.
As restrictions eased through the second and third quarters, and with the festive season kicking in, ad spend and consumption demand started to recover. However, rising inflationary pressures continued to dampen sentiments. During the year, the movie business contributed significantly to the top line and the digital business reported all-round sustained growth across all parameters—MAUs, DAUs, Watch Time, and number of consumers, among others. Our music business performed well too, with Zee Music Company acquiring music rights across 22 languages, cementing its status as a truly pan-India music label.
The strong set of numbers is also attributable to ZEE’s position as we continued to be among India’s leading TV entertainment networks, with a strong foothold across the language markets. We remain among the leading TV entertainment networks in 7 out of the 9 language markets where we are present. Further, our continuous investments to transform ZEE into a formidable player in the digital entertainment through ZEE5 are delivering good results.
The challenges in the external environment notwithstanding, we are extremely pleased with our ability to deliver healthy growth, profitability and returns to our stakeholders.
A. As mentioned earlier, FY22 was a volatile year, and as we tried to recover from the impact, the market faced more upheavals in the form of macroeconomic headwinds and inflationary pressures. These factors had an adverse effect on industry-wide ad revenue growth and outlook. We saw a downtrend in TV subscription revenue for the second consecutive year, despite continuing growth in TV penetration. However, the growth in TV penetration was largely driven by the DD FreeDish platform, which impacted the pay TV ecosystem. Another factor that impacted subscription revenue growth is the ongoing delay in the implementation of the New Tariff Order (NTO 2.0), which remained an impediment to subscription revenue growth.
Having said that, we see significant potential to grow TV subscription revenues, once the embargo on channel pricing is lifted, given ZEE’s comprehensive bouquet of TV channels and India having about 90 million households that are yet to get their first TV set.
The M&E industry is at a nascent stage in India, relatively speaking. It has huge growth potential and has attracted the interests of global players and spurred M&A activity among Indian peers as well. Further, we have seen the sector receive investments to aid long-term growth. The Indian digital ecosystem is constantly evolving, and this drives all the industry players to stay committed to reinventing their digital business models.
At ZEE, we have always welcomed competition, as we believe competition bodes well for consumers and expands the landscape leading to several opportunities for growth. We are thus recalibrating our strategy, streamlining our investments based on focus areas, and transforming ourselves for the digital-first world. This is key to staying ahead of the curve and capitalising on existing and emerging opportunities in the M&E space.
A. ZEE5 is consistently displaying strong traction, which is reflective of higher usage, better engagement, and appeal of the content. Our strategy for ZEE5 is progressing well, as seen in our operating as well as financial metrics. MAUs and DAUs in March 2022 were at 104.8 million and 10.5 million, respectively, with a watch time of 214 minutes. Despite production being impacted due to the pandemic during the first half of the year, ZEE5 released over 45 originals during the year. For FY22, revenue growth was at 33% year-on-year—a sign of healthy production and adoption.
We view ZEE5 as our future growth engine and accordingly are investing in content, technology, and marketing to drive its appeal and reach further. We aspire to be a leader in the digital business, not just in India but also among the South Asian diaspora across the world. We launched ZEE5 in the U.S. in June 2021, and the response has been encouraging. It went on to become the leading South Asian OTT player in the U.S. market within a short period of time.
A. ZEE has focused on ramping up movie production to drive synergies between the television, digital, movie distribution and music publishing businesses. This would reduce the need for us to acquire rights, especially on the digital side, which has seen a rapid increase in acquisition cost due to intensifying competition.
We are excited with how the music and movie businesses have scaled up and are now an extremely important and strategic part of our overall portfolio. ZEE is focused on accelerating the growth of these businesses. The reopening of cinemas across the country has augured well for the sector and theatrical revenues continue to be a significant source of earnings for our studio business. For us, ‘The Kashmir Files’ proved to be an outperformer. It grossed over ₹250+ crore at the box office and was one of the few films to have recorded this kind of success post the pandemic. We are looking at scaling up the business and have a strong pipeline of movies across languages that are in various stages of production.
Commercial success of any creative efforts is difficult to predict with certainty, and it is more so in case of movies where success is determined by content appeal across multiple customer cohorts, whose taste and preferences evolve quite frequently. At ZEE, our team continuously adapts to cater to these shifts and strives to deliver compelling cinematic content. We approach our movie investments with a portfolio approach, building projects across genres, languages, and budgets, which allows us to generate good returns for our shareholders over the life cycle of the projects. This approach allows us to ring fence our investments with balanced risk assessment and a diversified content slate.
A. We are making significant investments in content and technology across linear and digital businesses and in the language markets. We believe this is the only way to win in a market where consumers are spoilt for choice as the quality of content and viewing experience are redefined every day. Our investments have started delivering results, especially on the digital side, with ZEE5 posting a strong set of numbers.
Taking strategic steps in the digital transformation journey of ZEE 4.0, we have further expanded our digital footprint by setting up a cutting-edge technology and innovation centre in Bengaluru which would drive innovation and enable exponential growth for our integrated platforms.
Further on the investments, we recently acquired the global media rights of UAE’s T20 league for a period of 10 years, marking our re-entry in the sports genre. This league is expected to hold its inaugural edition in the UAE in FY23. Going forward, we will continue to evaluate all investment opportunities that come our way and capitalise on the ones that have the potential of creating or enhancing shareholder value, from a prism of fiscal prudence.
In the coming year, we will see increased investments across the business. While the increase in investment across the linear business will be inflationary in nature, we do have a strong outlook on the digital space which will see higher investments. Lastly, for the studios business, our investment would follow a portfolio-based approach.
A. ZEE is a debt-free company with strong operating metrics and free cash flow generation. This provides adequate headroom to deploy growth capital to tap the emerging opportunities. For FY22, we generated operating cash of ₹ 2.8 billion and free cash of ₹0.4 billion. We redeemed our entire outstanding preference share worth 4.0 billion from our internal accruals. We reported a current ratio of 5.0 which demonstrates our strong ability to discharge our current liabilities. We made good progress towards recovering sticky receivables, which has further helped in our cash generation. The DSO days improved by 15 days and came in at 77 days. Our ROCE for the year came in at 13.4%.
Our meticulous execution and financial prudence have led to us building a strong, debt-free, and liquid Balance Sheet which enables us to be well poised for our strategic investments and ongoing business needs.