Full Transcript of Rediff’s 3Q05 Conference Call — Q&A (REDF)

Here’s the entire text of the Q&A from Rediff’s (ticker: REDF) Q3 2005 conference call. The prepared remarks are in a separate article. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Executives:

Debash Gosh, Investor Relations and Public Affairs
Ajit Balakrishnan, Chairman and CEO
Joy Basu, Chief Financial Officer

Questions and Answers (remember, the prepared remarks are in a separate article).

[Jason Jones]

Hi. This is actually _____ from J _____, congratulations Ajit, and Joy. Did you go through a series of numerical type of questions that I may have. The headcount at the end of the quarter and then also the number of advertisers that you had in the quarter?

[Ajit Balakrishnan]

One minute, let me get the answer sheet.

[Jason Jones]

And by the way maybe you can give us an update on what _____ are. Thank you for doing this call and enlighten all those constraints?

[Ajit Balakrishnan]

The headcounts number end of June is 253 and the second questions, the number of advertisers.

[Jason Jones]

Yeah.

[Ajit Balakrishnan]

The number of advertisers in this quarter end, the number of advertisers during the quarter is 122.

[Jason Jones]

122?

[Ajit Balakrishnan]

Exact.

[Jason Jones]

Okay Can you also give some commentary on what you were seeing with regards to the price of access both narrowband and broadband, what that is on an average right now, what might it have been a year ago?

[Ajit Balakrishnan]

Okay. First of all we remember that roughly 60% of access in this country like China comes through Internet café. When you talk access that’s a very important element now. The typically cost of Internet access in Internet café is roughly between Rs.16 and Rs.25 per hour. It is you can say Rs.45 is a dollar roughly approximately. So about $0.30 or may be something like that. One of the interesting things is many of these Internet café, which there are about 65000 in India now approximately. Many of them at least the top 10% to 20% have become broadband, this been the major development of the last 12 months to 14 months.

[Jason Jones]

10% to 20% is that right?

[Ajit Balakrishnan]

About we are between 10% and 20% are broadband. Reason why it’s an approximation is some have both narrowband and broadband with in the same café so basically about 10% to 20% have it. As far as home use is concerned typically it accounts for about 15% to 20% is from homes and the home use can be either be at the moment is predominantly dial-up and dial-up cost something in the order of magnitude of about Rs.500 for a 12 month connection roughly. Thats $10 for a year for a dial up connection with certain restrictions in terms of number of hours and so on. Recently there has been a push by the state owned telecom providers, BSNL to expand the broadband connection and broadband they define that is 256 Kbps lines, and they are currently attempting to marketed at roughly Rs.400 a month which is about $9 a month. This launched a campaign in the last three four month and they are getting some degree of traction for that. These are the three elements of which access from offices comes through the employees, so there is price attached to that, and the balance 25% to 30% with some multiple types of access going now.

[Jason Jones]

Okay and then lastly could you comment on the India Abroad, there was a pick up there, is that sustainable, is that can you comment on what made you drive in that?

[Ajit Balakrishnan]

Well, It’s more accurate to say that some portion in the last quarter, some portion it is a seasonal dip, January, February, March quarter typically is a low quarter for all US publishing enterprises but some of it is there. But I think as we’ve mentioned in the last call If I recall correctly and we have in the good time to mentioned that our push is towards taking India Abroad Online in the much more aggressive way than we’ve done so far. None of that revenue has got reflected in the quarter at all. We expect that the project is underway and during this present quarter we should launch that and we think that is the way future attraction will come for that. So we are quite optimistic about it, it’s a profitable business and I think growth in the print media was very tough, as you know in the US. But I think it has the life of it’s own in the online world and we have early versions of the prototype will really look quite nice.

[Jason Jones]

And then lastly, is there a way to think about incremental margins for how much of your revenue that you generate should be resulting in the incremental operating expenses?

[Ajit Balakrishnan]

I think we don’t have a business model there but internally what we like to do is, generally speaking more than half to two third of the increment gross margin should drop to the bottom line as the internal goal, now I must severely unconditioned it by one statement which is that the Indian internet market today is in the stage where it’s looking, when last quarter over the same quarter the last year has shown a sizable growth. And for any reason the market takes off into hyperbook period, which we can’t predict at this stage we would then not take all 60% to the bottom line but probably reinvest some portion of the two to increase the WAN visibility. But in the absence of that it’s a good way, mentally we think of it making sure more than half gross margin that you intermittently earned should fall to the bottom line.

[Operator]

Your next question comes from George from Gilford Securities.

[George]

Good evening gentlemen congratulation on very nice quarter. I was hoping if you can give us break up between e-commerce and advertising for your online business?

[Ajit Balakrishnan]

Okay I think with the break up that we have, here Joy will able to give you the breakup that we have fee based business versus online advertising business for that he is going to give the break up.

[Joy Basu]

Okay George, Roughly two thirds of my India online business 67% is advertising 33% is what we call fee-based revenues which includes e-commerce and mobile lender subscriptions.

[George]

Okay thank you and what are the growth trends, you see along those two lines, advertising versus fee based?

[Joy Basu]

In number terms if you note they have both grown quarter on quarter but the same thing, lying also the same mix over the last few quarters because that it is that what we’ve seen, advertising Ajit will tell you is going very strong. And we believe going forward the mix will remain roughly at two thirds and one thirds.

[George]

Okay. Fair enough. I was hoping if you can perhaps quantify the contribution from the pay-per-click initiative, both in terms of what it provided in terms of revenue, how many advertisers are presently using it?

[Ajit Balakrishnan]

George unfortunately we don’t break it down, but at this stage it is strategic initiative, it’s very important for us for the future, it is strategic and it’s in a stage where that kind of business if you probably know requires a reseller operations throughout geography to make sure that, …reach out to us. We are in the process of establishing the reseller network unfortunately we do not presently break the advertising part, in to constituent. But it’s the minority part of the total, let me tell you that.

[George]

And just one question, which is can you provide us with your cash flow from operations in capital expenditures during the quarter?

[Ajit Balakrishnan]

Yes. We should be able to do that. George.

[Joy Basu]

Okay George, we spent something like little more than $800,000 in capital expenditure. Right and as you know my _____ was _____. And the total cash flow from operations was, it was a slightly positive figure but didn’t get capital expenditure.

[George]

Okay that’s great and thank you once again and congratulations for the quarter.

[Operator]

If you would like to ask a question please press “*