Balaji Telefilms

Balaji Telefilms - Indian Netflix in the making?
Hello everybody – See below my write up on Balaji Telefilms which I believe is at an inflexion point now.
Bit of history –
Run by ethical and able management, its traditional TV serials business has now turned around and is doing good. After severing the relationship and exclusivity with the Star channel in 2008, it took them a few years to stabilize this business and since 2013 the TV serials business is on an uptrend. (Accumulated cash - It was pre-2008 times that engagement with Star resulted in significant profits and cash in the books). They produce almost 1300 – 1400 hours of TV serial content every year. Of this almost 40% is hindi and remainder is in regional language.

Its movie business is not much to talk about and is still evolving and loss making. It is gorging on cash accumulated pre-2008. The movie quality is below par and only handful of movies have been successful such as Udta Punjab and a few others. You can see full list of movies here: Balaji Motion Pictures - Wikipedia
Management speak on latest quarter which clarifies that TV business is doing good. Moive business is a challenge: Hoping to have 10 shows on air by FY17 end: Balaji Telefilms

But Balaji seems to be in an inflexion point as it is launching its third business vertical –ALT Balaji (Over the top or OTT, new media platform).

ALT Balaji (OTT), A B2C play:
Launch timing - ALT Balaji launch anticipated in Jan 2017 after delay of almost 6 months.

Revenue stream – The business model that Balaji has chalked out for digital is subscription based ‘freemium’ approach as the primary source of revenue. Revenue from advertising, licensing and sponsorship will be the secondary source of revenue.

Competition landscapeAttached excel sheet Balaji v2.xlsx (1.1 MB)
provides details. Very few OTT players are providing original content. They are Netflix, EROS, VOOT, Hungama.

Market size – Initially Balaji is targeting 70 mn Indians who used net banking and have debit/credit card (no. to rise due to recent demonetization) + NRI/PIO abroad.
(FYI – India have 150 MN household with TV connection and 125 MN household with cable/satellite connection and 15 MN household with dish TV connection)

Investment – 150 cr raised from Atyant Capital and others in Mar 2016 and 65 cr is invested from internal accruals of Balaji. They have said that 150 cr more can probably be invested in FY 18/19.

ALT can be at an inflexion point for Balaji due to –

  • OTT is a sun rise industry
  • ALT will allow Balaji to focus on shorter format + different duration + genre
  • Changing the company structure from B2B to B2C and turning into realty, the Balaji dream of owning a channel (IP owner)
  • Only pure play listed OTT company
  • Small market cap and TV/Movie business means OTT success can significantly boost market cap and revenue and EBITDA quality
  • Low current market cap means OTT upside remains uncaptured by the market

The key question is will it be successful and value creative for shareholders? Below pros and cons, attempt to answer this question by balancing all viewpoints.
Pros of ALT –

  • Balaji is the leader in content creation since 1990s so they can be relied on creating original series and content with strong appeal
  • Balaji is targeting youth** + exclusive original series** (comedy, series, shows, drama etc. + Hindi, English, Tamil + regional) that can be viewed in multiple platforms anywhere anytime and no available anywhere else but in Balaji ALT entertainment app
  • Annually produce and air c. 300 hours of content annually – enough original content to attract users. Plan is to launch 8 to 10 shows initially in Jan 2017 and then one new show every fortnight. Balaji will outsource good part of this 300 hours of content from external production houses, diversifying content type plus leveraging external expertise. With so much content, chances are quite high of some of the content becoming a hit and attract end users to subscribe
    - First mover advantage in a sun rise industry where other players are focused on aggregating content/catch up TV with limited to no focus on creating exclusive original series (such as Game of Thrones, Breaking Bad, Better Call Saul or Netflix’s Narcos, Daredevil, Luke Cage, Stranger things etc.). First mover advantage is key here as by the time other players start focusing on creating originals, Balaji would have already created a library which should act as a strong competitive advantage to attract end users
  • Strong technology interface. Balaji Telefilms Selects Xstream and Diagnal to Power its Global OTT Entertainment service, ALT Balaji (the same is used by Netflix)
  • OTT is a proven model which has worked in the west and so should work in India. We love western stuff (iphone, western branded apparels …). This is why AMAZON is also investing 2000 cr cumulatively to produce original series for Indian viewers

Cons of ALT –

  • Rising competition + Incumbency of YouTube in the market
    o Amazon has ear market 2,000 cr for creating original and local content, unlike Netflix. Amazon is a big and real competitor for Balaji but its pricing will be close to what Netflix charges right now i.e. c. 500/month or 6000/yr. So Balaji can be competitive on the pricing front to manage international competition.
    o Mitigant – Rising competetion signifies the strength of this disruptive trend. Balaji is not a competition (to most of the OTT) but complimenting. Balaji’s ALT is positioned between English movie n soap (available on Netflix) and mass India entertainment (available on TV and every other OTT platform of the competitor)
  • ALT is not a one stop solution as ALT does not have movies, catch up TV, channels, etc.
    o Mitigant. But since they will air original exclusive series which are not available anywhere else, it should be able to draw end user
  • Inadequate bandwidth speeds
    o Mitigants - The 4G rollout will boost infra speed
  • Indians (like Chinese and unlike westerners) don’t want to pay
    o Mitigant – Balaji only needs 2 mn subscribers by 2020 to be able to create shareholder value from current low market cap base. Also even in China which is same as India there are users who have started paying for the content and now it is a billion dollar industry. Also the link shows research which says that 21% of Chinese are ready to pay for OTT OTT in China: Viewership grows more quickly than expected | Media | Campaign Asia
  • Piracy is a concern
    o Mitigant – Hopefully there will be enough users who would like to pay a nominal amount for good technology driven hassle free differentiated content experience which pirated content does not provide
  • Govt. regulation against OTT – unknown at this stage!
    Despite strong pros, cons are not weak. But given disruption capability of the OTT platform + promoter’s leadership position + large addressable market size + extremely cheap market capitalization: it looks like a very good opportunity.

Valuation -

Based on future OTT value – Attached excel sheet Balaji v2.xlsx (1.1 MB)
provides details. Assuming 2 mn OTT subscribers by 2020 each paying 2000/yr – The current valuation assuming 3x EV/Rev in 2020 and 10% dist rate is 820 cr rupees. As opposed to current market cap of 706 cr rupees.

The above Huawei sponsored research estimates that India OTT market will have revenue of 1.1 Bn USD by 2021. If we estimate Balaji will have 2 mn subscribers paying 2000 each/yr - it is 400 cr or c. 5% of 1.1 Bn. A 5% market share for Balaji, the OTT showing original series is definitely very conservative!
Assume we give 400 cr valuation to the existing business of TV serial and movie business, the total value is close to 1106 cr based on a very conservative valuations. (FYI - Existing business traded between 200 - 500 cr valuation between 2012 and 2015 June, before the OTT announcement.)
The business has 200 odd cr cash in books which I assume that will be lost in their loss making movie business and we should not attribute any value to it.

Based on star’s stake sale - Star India sells 26% stake in Balaji Telefilms for `108 crore in Aaug 2015 which means total value of 415 cr. Add to this the 150 of fund raising by equity dilution in Mar 2016 – the current value comes to 565 cr (20% below CMP or roughly 75 bucks. This is the price the share was quoting few days back). The Star stake was acquired by Radhakishan Damani, Bhanshalis and the promoter itself.
Based on recent fund raising - Atyant Capital/Rahul Sarogi bought shares in the company at 140 rupees/share in Mar 2016 when the company was raising 150 cr and Atyant also bought shares at c. 85/share in sept this year. (FYI - Atyant Capital/Rahul Sarogi is holding on to a big stake in Navin Fluorine since 2011 or 2012 i.e. he foresaw/spotted CRAMs trend very early on)
Lastly, promoter hiked stake in the Sept quarter (min price during that quarter was close to 85 bucks).

Key positives for the stock in the future: Good end user review of ALT original series; Rising subscriber numbers and ALT revenue; Exiting film making or turnaround of the same; ALT expanding its OTT platform to include movies and other non-exclusive TV channel content borrowed from other sources incl. such as broadcasters and say Shemaroo’s movie library.
For further reading please look at the attached sheet.
Lastly an interesting article from Swanand Kelkar - Executive Director at Morgan Stanley Asset Management

Do read with an open mind and let’s have a healthy discussion focused around pertinent issues and risks and anything else you may deem fit. At your disposal for a healthy debate. I know that there is already a balaji thread but given the nature of the transition, I thought it warrants a separate thread and discussion. thanks

Invested and biased. Please do your due diligence before investing as my data / analysis / logic / conclusion can be wrong.


Great indepth analysis ritesh. But I feel Amazon is the 800 pound gorilla in the field. And its not charging 500 per month but rather only 500 a year, which is effectively free cause it also entitles one to get free express home delivery of merchandise that you buy on amazon.

Also if the potential valuation is going to be just 820 cr from a current valuation of 700 cr there’s hardly any upside left.

I dont think Amazon has started making content for the Indian market yet. Balaji has been doing that and very successfully for a long time. They discovered the formula to keep the saas bahus of India engaged.

Although with their digital foray, they will have to come up with original content which appeals to the younger generation as well. They have not proven themselves in this space, and it will be interesting to see what they are able to achieve.

I feel the entertainment sector is still evolving and has a long runway of growth ahead of it. This is very interesting opportunity. It seems to be a good business run by people who know what they are doing. That is good.

I would like to know more about the track record of the management in terms of corporate governance. That to me is the key variable.

@prominnc - thanks! The valuation of 820 cr is only for the new business ALT Balaji segment. The existing business (tv, movie and cash in the books) itself is worth c. 700 cr i.e. the current m.cap. So market ignoring the ALT upside.

@kashif_1461 - I have not come across any corporate governance issue. Also family management has step aside from running the company and hired Sameer Nair as the CEO (He was the CEO of Star Entertainment India, the entertainment wing of the STAR India Network.[5] He is also the former CEO of Imagine TV.[6] In 2001, Rupert Murdoch hired Nair as programming chief for Star TV in India as part of a revamping to get the network to appeal more to a middle-class Indian audience). Sameer 2015 full pay was 4.35 cr rupees. That should be taken as a positive esp. under a family management company where the Jitendar family owns 42% stake.

Also Sameer in a recent interview mentioned that Balaji will do limited film business and only where they get funding partner. This should lower concerns of film business resulting in big losses in the future. Also TV business is doing good.

What I don’t like is Balaji took so long to launch ALT - Nevertheless, finally they will do a proper launch on the 15th April. Their pricing is cheap and storyline of original content looks catchy. Hope they do a good job of technology and marketing!

Ekta Kapoor seems to be very optimistic and confident about the opportunities that Alt provides

Few questions

  • How feasible is it for Balaji to be the fifth player in the market and competing with the likes of - Hotstar, Voot, Amazon and Netflix.

  • Would it not be better to concentrate on content and then think of distributing the same with other platforms

  • Team behind the application, there experience in UI/UX, Analytics, IT. Apart from the content business, it somewhere becomes how well the analytics or UX implementation is there to increase the customer stickiness.

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Hi @RohitMehta2017 -

Good questions - I tried to answer them:

  1. There are competitors - But none of them have enough Indian/Local content. What competitors have is movie library/catch up or mirror TV i.e. replicating what is already available in TV channels currently + Live sports. Live sports is a good thing which competitors have, though. Netflix and Amazon has original content not available any where else but they both have international content and not Indian youth tailored content. So we are not comparing apple to apples here. Yes Amazon and others are trying to make exclusive local indian content - so the question will be who will have the best Urban Indian content/series and thick library of that best content. I believe Balaji will have good content given their past experience! Also balaji has good strike rate of i.e. 50% plus of their TV shows get good rating. Balaji in its app will have a library of some 26 series in the first year. So very likely of these 26, some will be super hit like Game of Thrones or Breaking Bad in Netflix. And those very few super series is enough to draw subscribers in numbers.
    This is what interests me in this idea. Let time be the judge!

  2. No. Balaji currently is a B2B model. If it only concentrates on content it will still be a B2B model. Real money is in B2C. And earlier it was not possible for Balaji as that needed deep pockets to build a channel. But now with digital, going B2C is possible. Digital technology app does not cost a lot. So what is needed is an app + good content + marketing. And I believe if some of the series are super hit - that will itself result in good word of mouth marketing. Plus Balaji is a good brand name and that will help in marketing as well.

  3. Yes definitely. Balaji has tied up with the technology guys who launched Netflix app. So I hope balaji app will be ok - 16 April is the launch and we will see how good the technology is!. Link -

On 16 april launch - if content is good and technology is seamless - and I believe it will be - then balaji should go places - otherwise DUMP! :slight_smile:


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Alt Balaji ties up with ACT Fibernet broadband for bundling of service and billing together to the broadband.

@rdhoot With the official announcement of subscription price, I guess you need to lower your revenue estimates. Also their aim of reaching 4 million paid subscriber by 2020 would mean, a revenue of close to Rs 300 cr in 2020 (assuming Subscription price rising to Rs 720 per year (From current Rs 300 per year/ Rs 60 per month after discounts)


Also its interesting to see that there can be a big difference between number of subscribers and actual customers who pay as seen from the Netflix numbers. There is a rough ratio that people use of 10:1 of subscriber to paid subscriber that people often use in industry.

Netflix claims to have 4.6mn subscribers but if you look at actual customers who pay, it will be way lower. The LTU (large taxpayer unit) responded that Netflix paid Rs2.20 crore in taxes for January 2017. We divided this number from the service tax rate that Netflix charges for their most expensive plan, and the rate they charge on their least expensive plan. With this, we arrived at a range of subscribers, between 211,500 and 337,300. Since there are three separate plans, it is unlikely that either extreme in the range is close to the number of subscribers that Netflix has in India, so we are assuming that the number is somewhere between 2 and 3 lakh.


Disclosure - No Investments

@Rokrdude - Thanks for the question and info on Netflix.

Referring to the link -

CEO clearly says that he breaks even at 4 mn subscriber by 2020. He does not say he aims 4 mn. He did say that he may also get 10 - 20 mn subscriber in 2020 at 720/yr pricing.

So I would not like to readjust my revenue numbers. Beauty is in the eye of the beholder. Similarly Balaji’s valuation can have a large range depending on how confident you are of two things - 1) webseries business model in India + 2) Balaji gaining top slot in consistently churning on top webseries. As of now my belief in both the above points have remained same as they were when I first started this thread.

As the full pricing is now on 720/yr - I believe there is a high chance Balaji may get more than 4 mn subscribers by 2020. Comparison with Netflix is not very accurate - It gives first month free so many people just subscribe for first month but would not continue as it is expensive and in first month they can watch all series they wanted to. In case of Balaji - they give only first 5 episodes free - and to see the remaining (which people would like to as otherwise the story remains incomplete) subscriber will have to pay. So Balaji should have higher % of conversion. NETFLIX charges 6,000/yr. Balaji will be at 720/yr. So a low pricing will mean higher conversion esp. for someone who has already subscribed to it.

Also post Balaji 16th launch - their shows are encouraging and it is the only platform which is generating huge quantity of actual story content - and not just comedy which most of the other players are doing.

In the next six months - I am monitoring if they release one new series every fortnight / alt balaji app downloads, each webseries you tube views / reviews. I am personally seeing those shows / reviewing them / comparing them with everything else out there to see if balaji can rule the roost. As of now I am positive and believe how these monitorables evolve is more important to chalk the future and not what number management says as no one can pin down a future revenue number in such new industry as future may surprise exp. for the company who has the best content.

Disclaimer - Invested


I agree the pricing is different so its not a fair comparison. My reason for bringing in netflix was to show that to reach paid subscribers of 4mn you might need to reach somewhere between 20-30 mn total subscribers which is not as easy task, given the live OTT apps like Hotstar (which definitely has more market) still has hardly 4-5 mn paid subscribers with total subscriber base of 63 mn (read it somewhere cant seem to find the source) .

Also the option to use the same id in multiple device at same time would mean that actual paying subscribers will be even lower and people may share the service among their friends (Indian has a habit of sharing even daily groceries so I don’t see that habit changing)

Also copying what I posted in another thread to look at potential overall market size in India

One data point could be too see the market size from ecommerce market potential because there is a high co relation between people who buy online and consume online media

The market that vanished

The little known truth about India’s e-commerce market was uttered at a conference in Delhi a few weeks ago. Flipkart’s chief executive Kalyan Krishnamurthy said that there are only 10 million monthly active buyers on e-commerce in India. This confirms what I have been saying for two years now—the market is simply too small.
The fallacy is that we compare per capita incomes with other markets. That is, we are a billion consumers, a $2.25 trillion economy, have 450 million internet users, and we take our smartphone penetration (300 million and growing) as a proxy for spending power.
In an earlier piece titled “How India’s digital economy can rediscover its mojo” I had talked about how India needs to be seen not as one country but three. Simplifying it even more—I call it the 1T, 2T and Zero economy.
• The top 15% (India One) constitutes a $1 trillion economy that has disposable income and ability to spend. The desire and charm of online shopping appeals only to the India One audience, and that’s where it will be viable to service them. They are the perfect audiences to sell convenience and selection to—the real promise of online commerce. They are comfortable using English, and are time-starved, well-paid, confident-of-their-future Indians.
• Another $1 trillion is spread across the next 40% of the population (India Two), which supplies and services the India One economy. The India Two customers will take longer to cotton on to online shopping—and they will shop for basic needs and deals. Flipkart and Amazon will both find that expanding in this market will prove to be a drain on their resources with little payback. It will be unviable to service them unless they start leveraging the power of the existing traditional networks (kirana shops, wholesale trade routes and the neighbourhood entrepreneurs).
• The final half of our nation barely gets by. They live on the periphery of our economy—calling them consumers itself is a travesty. They have negligible disposable income. Any growth in their incomes goes entirely towards sustaining their lives—roti, kapda and makaan. The India Three customers are serviced poorly even by our traditional networks—tiny hole-in-the-wall shops with limited supplies service the poorer villages. Their lot will improve only once the nation uses digital tools to leapfrog the chasm created by lack of physical infrastructure and decades of neglect,

How this changes Amazon’s and Flipkart’s plans
Clearly, they both realise the waste has been colossal. The math is staggering. The players have pumped in over $15 billion so far to woo a customer base of 10 million regular monthly transacting users. And most of these consumers simply “substituted” e-commerce for traditional retail because of the massive discounts on offer. Many of them will remain unprofitable customers—and their cost of acquisition may pay back only over a decade. I can wager that there is no other market in India that has absorbed so much capital and yielded so little by way of value.

To spend wantonly on penetrating India Two will be foolhardy. It will be an expensive exercise. So while it is crucial to win that market, you will have to calibrate your ambitions and grow it slowly. Else this market can keep absorbing billions and give no returns.
The consumption basket for India Two will be markedly different. The first spending after any growth in their incomes will be on kids’ education, on better food and groceries before they graduate to buying into the choice and conveniences that modern e-commerce offers. They require a different mindset to service—one that is focused on language, use of video to help them make choices and helping them discover ways of creating a better life for themselves. It would do well for Amazon and Flipkart to both think like home-shopping networks for this market—education, discovery and sales all rolled into an easy-to-consume offering

Source - Ecommerce market size Welcome to Tencent’s Flipkart, Amazon’s new adversary | Founding Fuel

Lastly I think the company will require further funding as they plan to spend around Rs 100 cr annually on content creation and they wont break even until they reach 4-5mn paid subscribers. We should also built in some dilution while trying to value the company.


Few data point to access market size –

Media market size -
150 mn tv connection, 125 mn have cable or satellite connection, 15 mn have dish tv connection
(Balaji is tying up with telecom companies for billing purposes to tap into customers who don’t buy things online)

Online users market size -
Currently we have 70 mn people who have “debit/credit card and buy things online currently”
Flipkart’s 10 mn active monthly users – means 30 – 40 mn users annually assuming on an average users buy 3 – 4 times on an average annually.
Hotstar subscribers

And the Online users market size is as of today and should grow significantly by 2020 (as it did in the last 5 years).

In one of the recent interview – CEO said that annual capex for ALT Balaji is 120 cr till 2020. And they don’t need any equity raise for next 1 year as they are well funded. Post that, 60 cr will come from internal acquisition, and so roughly 180 cr ({120 cr – 60cr} times 3) of equity dilution by 2020 can be expected. And I did build in my original calculation 150 cr of more equity dilution. Please look at the first sheet of Balaji v2.xls in the first post.

Disclaimer - Invested.

Alluding to my above points - pls see below Samer (CEO) interview where he mentioned -

- On market size: “We believe ALTBalaji to be bigger than both our TV and movies businesses in the next few years. This is because about 25 million cable and satellite audiences (of the 165 million India C&S homes) have lapsed with the already available content on television.” + "According to a Frost Sullivan report, active video subscribers are going to increase to 105 million by 2020, from the current 66 million
- On content: “We will introduce 32 web series a year, each comprising 10 to 15 episodes, running anywhere between 20 and 40 minutes each. This will make us the largest provider of original exclusive content on digital by volume. Out of 32 shows, six will be regional web shows. With such interesting content lined up, we are confident that ALTBalaji will emerge as the preferred original content viewing platform of the youth.”
- On tying up with Fortumo and Airtel (telecom companies): “While there are already more than 250 million smartphone owners in India, less than 25 million people in the country have a credit card. This gives players like us a 10-time bigger payment reach in India and overseas.”

I have been closely watching the development here. Many things are going in favour of this biz. I stopped watching TV almost a decade back but looks like I would do so here :slight_smile: I am very sure there are many like me about whom Ekta Kapoor mentioned. Web also provides creative freedom to design the content for individual watchers rather than for entire family. The point is there are many who do not relate to the original content on Netflix due to cultural differences. Moreover amount of original content is still limited at netflix.

I do have disposable income to subscribe but why would I do that when I can watch movies/serials on so many channels. I do not see huge value for myself. Coming to economics, if Alt Balaji could get 10m committed subscriber in a year and collect 500rs in a year, the biz makes enough money to get noticed. The key question is will they get this level of subscribers, I think yes but time frame is not defined. The key risk in this biz is not IF but when break even happens. With rapid advances in tech and ongoing disruption only original content providers owning IP will make money in long run. I will be closely watching subscriber no. and their ability to price more than Rs 300 that they are charging currently.

Disc: Not invested but on watchlist


Could piracy be a concern for Bala Ji?

This is a nightmare for any original content creator. With very limited technical knowledge, I could crack the download URLs for their free videos. Anyone with paid account can easly download all, and sell dvds or share on torrents.

I think it is a concern - but I guess if the annual pricing is kept low enough i.e. 700/yr for viewing it in any platform - then it beats the hassle of downloading content on the laptop and then viewing it. So for 700 bucks you get content + convenience. This should be true for people who are not tech savvy and who would view the content enough that they are better off just sticking to the app then repeated download etc. And Balaji by targeting 32 orignial series annually is creating enough to content to justify 700/yr payment to watch them.

What do you guys think?

Disc - Invested.

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I feel the mainstream(whatever that means) media still does leave out a vast population (regional, different sexual orientations, niche viewers). This is where likes of Balaji can pitch in. I saw a bit of this in the ALTBalaji promo. It is too early to talk about the attractiveness of the content and if it can keep subscribers hooked. Does one takes the leap of faith and trust the creative guts of Ekta Kapoor? These questions will be answered in months to come.

Right, Balaji’s content does look good at least for the time being. I am pretty much hooked up with one of the series :slight_smile:

But creativity is abound in India. Balaji will have a tough competition coming from new media companies like TVF! YouTube has given the necessary infrastructure for free. Now anyone and everyone can compete with Balaji. I think we need to wait and watch here.

Disc- watching, not invested.


tldr …

I have consulted a company in India in this very space and thus have a few insights to share.

  • Content: Audience which is “online” and has ability to pay INR 300+ per month typically watches English TV series, English movies, TVF and sports. Not saas bahu soap operas which is the forte of Balaji. Additionally, other production houses want their full pound of flesh when it comes to licensing to an OTT in India. People expect upfront payments irrespective of monetization over the OTT.

  • Advertising - Advertising can be done but it requires excellent targeting to audience and I doubt Balaji has it. Please read about how Hulu innovated in US on this front. Indian publishers as well as advertisers are really behind here. Additionally, it works best when you have lots of audience.

  • Subscription - Indians don’t pay … forget about 500, you won’t be able to extract 200. Amazon Prime has been successful because of the added advantages in delivery. Don’t forget when most people had subscribed, Prime video was not even launched. While Amazon Prime has less content as of now, please do check the top movies and tv shows there which will give you an idea what people watch.

  • Broadly speaking conversion in freemium model tends to be around 3-5%. Hotstar has 10mn users which means at best 300-500k can be paid subscribers. If 300k subscribers are paying 300 per month, you get annual revenues of INR 108crores.

I am short of time but I would say avoid this place.