Hathway Cable and Datacom

Business Outlook

 For the Financial Year 2018-19, the company is planning to do similar CAPEX as was
done in the previous year which was INR 225 Crores for broadband business and INR 85
Crores for video business.
 The company majorly earns revenue from two verticals which are Broadband and Cable
TV.
 The company’s customer who are using 0 to 20 GB data have reduced from 23% of base
to 6% customer base. This was because these customers have switched to companies
offering low data packages. On the other hand the customer bases of customers who
are using more than 80 GB of data have increased from 24% to 54%. This realignment is
the reason why the company has shown decreased revenue.
 The company has planned to reduce its operating expenditure by 40 Crores and the
reduction will in fixed cost because of automation in processes and reduction in
bandwidth cost.
 The company is focusing on reducing Average revenue per user but is adding more
customers which are helping them maintain or increase EBITDA margins.
 The company is planning to reduce the ARPU by 1-3% in every quarter.
 As Jio has rolled out its fiber optic plan in the market the company will definitely face
aggressive competition from the new entrant.
 The company’s plan is to retain the customers who are using more than 80 GB of data
by any means because the company thinks that these are the customers who are meant
for wire line broadband services and they don’t think of ARPU. The company is proactive
in providing these customers with additional data at higher speed and at the same price
by reducing the customers who are using less than 80 GB of data.
 The company is going for increasing underground fiber to give consumers increasing
service levels.
  Looking at the CAPEX plans of the company it can be said that the company will be
seeing negative cash flows in the further quarters.
 To conclude it can be said the company is not done with the CAPEX but all the major
portion of CAPEX is done and the benefits can be seen in the next 3-5 years. The
company’s plans to do CAPEX in next year also can be a reason for losses in the next 1-2
years.
 Also, as Jio has came up with its fiber optic the company will face competition but as the
margins are high in broadband business company can tackle the competition from Jio.
Also in broadband customers don’t easily change the service providers as in case of
mobile networks. Therefore, entrance of Jio will not impact the company’s business
significantly. Also, company is targeting only those customers who are using more than
80 GB data and is concerned towards providing them with high quality service at low
cost. Therefore company has enough resources to provide these customers with
excellent service and retain these customers.
 Also, customers who like to binge watch will move from Mobile based broadband to
wired line broadband services which is a great opportunity for Hathway.
 But there are still chances that the growth which Hathway is witnessing in its customer
base will be taken away by Jio.
 In short-term Hathway will definitely go through a tough time because of the freebies
provided by Jio but in long term Hathway can survive.

Shareholding Pattern Analysis

 The company has risen around INR 100 Crores through allotting equity shares to the
promoters on the preferential basis.
 The money raised will not be used to CAPEX purposes as the CAPEX will be self funded.
 The money raised from promoters will be used over the period of time for repaying the
debt and moreover it will be used for the further strategies which the promoters are
thinking to adopt in order to achieve J curve growth.
  From the last quarter it can be seen that Akash Bhanshali’s name has appeared in the
shareholding pattern of the company. He has acquired more than 1% stake in the
company. He is a well known investor and his name in the shareholding can be a
positive sign.
 Also, L&T mutual fund has also entered in the shareholding of the company and has
acquired 3.37% shares in the company.
 Other than that Vantage equity fund is also appearing at 2.11% stake. This is managed
by Kenneth Andrade who is having 25 years of experience in capital market. This shows
that the company may perform well in future years.

Promoter Analysis

 The company is promoted by Raheja Group and the promoters of the company are Mr
Akshay Raheja and Mr Viren Raheja. They both are having good exposure to business
and have served as non-executive directors of various companies.
 The management mentioned in the report of Year 2015 that they will be focusing on
quality of services and it can be seen from the plans they have come up with that they
have worked towards improving the service quality.
 The management is continuously focusing on increasing the number of home passes
since last three years and has achieved what it wanted to.
 The management forecasted that they will earn higher ARPU and it increased in the year
2017. But in the year the ARPU has reduced because of cutting in operational cost and
reduction in no of customer who are using less than 20 GB data.
 The management has continuously promised that the EBITDA margins will improve over
the period of time and it can be seen from the margins which have increased from 12%
in FY 2016 to 22% in FY2018.
 There looking at the background of management it can be concluded that the
management has integrity and is continuously working towards expanding the business
and has maintained transparency with the shareholders.