HMVL approves Rs 88.51 crore in new ad-for-equity deals

In Q2 FY27, HMVL approved Rs 88.51 crore in three new ad-for-equity investments and said its Rs 555 crore sundry-deposit liability cannot be paired directly with investments. Management said advances received, non-current investments and advertising settlement occur under separate arrangements and at different times.

What did HMVL approve in the latest board outcome?

HMVL approved three ad-for-equity, or AFE, investments totalling Rs 88.51 crore: Rs 25 crore, Rs 13.51 crore and Rs 50 crore. Management confirmed during the Q2 FY27 call that the three new investment items in the board-meeting outcome were all AFE transactions. It did not identify the investee companies, equity stakes or advertising commitments attached to the approvals.

The Rs 50 crore approval was the largest of the three disclosed items, followed by Rs 25 crore and Rs 13.51 crore. Management said HMVL brings such AFE investments to the board each quarter. It described the transactions as investments that can also establish the investee businesses as future advertisers.

The Rs 88.51 crore of fresh approvals is separate from the Rs 555 crore reported in other financial liabilities, mainly sundry deposits. Management said the liability is not a single entry that can be traced to one asset or one AFE investment. The differing timing of investment and advertising use prevents a one-for-one comparison.

How does HMVL say ad-for-equity supports advertising?

HMVL says its AFE model creates investment positions and potential future advertiser relationships. In answering a question on the Rs 25 crore, Rs 13.51 crore and Rs 50 crore approvals, management said the investee businesses are future advertisers as well as investment positions. The call did not provide an advertising-revenue target, holding period or expected return for the three transactions.

The Q2 FY27 call placed that rationale alongside advertising growth in HMVL's operating businesses. Management said advertising revenue rose 5% in English and 10% in Hindi, driven by volume gains from market-share consolidation and pricing impetus from the government advertising-rate increase received by the industry in the prior year. It said the Diwali period shifted by 20 days into the third quarter, which reduced growth in the quarter under review.

Circulation did not provide comparable growth in Q2 FY27. Management said consolidated print circulation revenue was flat year on year at Rs 54 crore, while HMVL's Hindi print circulation revenue was flat at Rs 39 crore. It said it would use circulation schemes where needed rather than add copies unnecessarily while newsprint prices remained significantly higher than the previous year.

Why can’t HMVL match Rs 555 crore of deposits to investments?

HMVL says the Rs 555 crore sundry-deposit balance cannot be matched one-for-one with investments because the liability and the asset-side investments are separate arrangements. Management said the balance sits in other financial liabilities and that the related asset-side position is in non-current assets, specifically investments. It did not describe a single Rs 555 crore investment asset.

Management said the financial liability is created from advances received, while investments are made under separate arrangements. Settlement of the liability depends on advertising and the pace at which the advertising is used, or burned. As investments can occur at different points from advances and advertising settlement, the balances will not be exact corresponding numbers.

That explanation means the Rs 555 crore figure should not be treated as a claim on one identified non-current investment. Management acknowledged that one part of the broader arrangement appears on the investment side and the other as a financial liability. However, it said an investor would not be able to identify a clear-cut Rs 555 crore asset because of the timing differences across arrangements.

What did HMVL say about future capital allocation?

HMVL said there were no further capital-allocation decisions under way at the Q2 FY27 call. Asked whether the end of OTTplay had changed its approach, management said “nothing as of now” and declined to give forward guidance. It said any decision, if made, would be brought to the earnings forum.

Management said most capital allocation is intended to create long-term sustainable value for shareholders, while acknowledging that OTTplay did not pan out well. It contrasted that result with investment in the Hindi print business following HMVL's 2011 initial public offering, which management said had borne fruit. The call did not announce a buyback, dividend change, disposal or new business investment beyond the Rs 88.51 crore AFE approvals.

Management also said it was in conversation with a substantial shareholder after an analyst referred to Matthew Cyriac's companies holding close to 10%. HMVL did not confirm or deny that shareholder's influence on capital allocation and said its board runs the company. It described the conversations as good but disclosed no request, proposal or board action arising from them.

What other Q2 FY27 financial context did HMVL provide?

HMVL said it was rationalising indirect costs across the group, including people costs. An analyst cited consolidated employee expense of Rs 95 crore, compared with Rs 99 crore in the preceding quarter and Rs 105 crore a year earlier. Management attributed the reduction to cost rationalisation, while noting that HMVL-level quarterly movements can reflect one-off variable-pay reversals or timing differences.

The call also addressed an unallocated loss of Rs 12.37 crore cited by an analyst. Management said this segment includes auditor fees, corporate costs, key managerial personnel remuneration and, at times, mark-to-market changes in investment values. It said costs that cannot be allocated directly to a segment are recorded as unallocated, while mark-to-market movements can alter the figure between quarters.

Conclusion

HMVL's Q2 FY27 discussion shows that Rs 88.51 crore of new approvals were AFE investments intended to combine equity positions with prospective advertiser relationships. It also clarifies that the Rs 555 crore sundry-deposit liability is connected to advances and later advertising settlement, not to a directly matching investment balance.

The next disclosure to watch is whether HMVL brings further AFE approvals or another capital-allocation decision to an earnings forum after saying none was under consideration in Q2 FY27. Management's explanation also makes the pace of advertising burn relevant to the eventual settlement of the Rs 555 crore liability, while advertising trends after the 20-day Diwali shift remain a separate operating factor.