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Tag: Subhash Chandra

  • Zeel promoter stake sale gets confidence vote from SBICap and Edelweiss

    Zeel promoter stake sale gets confidence vote from SBICap and Edelweiss

    MUMBAI: There’s a sense of relief at Zee Entertainment Enterprises Ltd (Zeel). Chairman Subhash Chandra, and managing director & CEO Punit Goenka said they would go the whole hog to repay their obligations. Even if it meant dropping the promoter holding in the group to never-before-imagined levels. On the morning of 20 November, Chandra, Goenka and their team of hardworking financial men and number crunchers did exactly that. Their offer putting on sale 16.5 per cent of the Essel group’s pledged holding in Zeel, was quickly mopped up by existing and long term investors in Zeel at a price of Rs 304 per share.

    While news items pegged  the the sale proceeds Rs 4,343.18 crore, those in the know believe the figure is higher at Rs 4,560 crore. The money raised would help the Essel group pay back a majority of its debt. Following this, the promoter group still owes Rs 2,400 crore to its debtors.

    Two brokerage and investment advisory firms –  SBI Cap Securities and Edelweiss – expressed their confidence and continue to be bullish on the Zeel stock, in research reports sent out to investor clients. They have revised their target price estimate to Rs 400 and Rs 443 respectively. The Zeel share was trading at around Rs 340-350 level at the last closing.

    The SBI Cap Securities report says:  “We believe Zee remains well poised to continue with its market share gains. We expect the ad revenue growth to remain tepid in FY20 estimate, but pick up in FY21 estimate  (+13  per cent YoY), and subscription revenues to maintain their strong growth trajectory in FY20e (+27 per cent  YoY) and FY21e (+14 per cent YoY). We raise our (discounted cash flow) DCF based TP (target price)  to Rs 400 (from Rs 333 as we roll forward to FY21 estimates  and build for marginal improvement in working capital with better focus and execution.”

    “While FY20 suffered a slump in advertising, FY21 is likely to be better owing to the anticipated GDP revival and benefits from corporate tax cut. Given that a significant portion of the pledging has been now resolved, we are raising the target price earning multiple to 20x (from 18x), which yields a revised target price of Rs 443 (INR399 earlier). The stock is trading at 15x/13.5x on FY20/21E earning per share,” the Edelweiss report expounded.  

    Both did not give much weightage to the concerns around the promoter’s holding in ZEEL due to the sharp fall in shareholding. After this deal, the Essel group promoters will hold just 5 per cent stake in the company as against 42 per cent in December 2018 with Punit Goenka continuing to act in his current role as MD and CEO at ZEEL.

    Earlier, 96 per cent of the promoters’ stake was pledged in Zeel and the group had Rs 7000 crore worth of shares pledged. The brokerage firm Edelwieiss said the stake sale would remove the overhang related to promoter pledge—down from 96 per cent to 20 per cent (1.1 per cent of company stake).

    Analysts at Edelweiss further added:  “Despite multiple setbacks over the last 12 months such as group-level issues, new regulatory framework (NTO), liquidity crunch, and ad slowdown, ZEE sustained a strong business performance. In face of a sluggish advertising environment, the business managed to deliver better advertising growth than peers such as SunTV Network. We expect the advertising revenue growth to pick up in FY21 on the back of the anticipated GDP revival, increased product launches and strong market share position attained by ZEE’s channels portfolio.”

    SBI CAP Securities’ report says:  “We acknowledge that the existing promoter group has established a robust template of profitability and market share gains by establishing Zee as one of the most valuable franchises in the Indian media market. The management’s focus is expected to get clearer from hereon and reflect in better on the ground execution, in our view.”

    According to SBICAP Securities, divestments in other media or infra assets would gain more importance now in resolving promoters’ remaining debt issues. It has a deadline of April 2020 by which it has to clear its reaminder Rs 2,400 crore in debt.

    In November last year, Zeel had revealed the decision of its promoters to sell up to 50 per cent of their equity in the company to a strategic partner.

    Earlier in August, ZEEL reached an agreement with US-based Invesco-Oppenheimer Developing Markets Fund for 11 per cent (around Rs 400 per share) of the promoter stake for Rs 4,224 crore. At that time, ZEEL MD and CEO Punit Goenka did not rule out selling more stake in the company.

  • Murdoch survived & thrived, so will Chandra

    Murdoch survived & thrived, so will Chandra

    MUMBAI: There's alarm bells being sounded that Zee TV chairman Subhash Chandra and his dynamic sons Punit and Amit might be losing control of India's cable and satellite TV pioneering venture. Unconfirmed reports have been appearing about certain financial institutions selling promoter shares pledged with them. Are the concerns warranted? No! Absolutely not!

    More often than not, there have been canards floated around by vested interests that someone or the other is wanting out of the arrangement that Chandra’s elder son – Punit Goenka – has hammered out with the instituitions that have lent the family money on promoter shares pledged with them. These have appeared in a specific financial daily and have more often than not proved unfounded.

    Chandra and his family are finding themselves in a spot just like Rupert Murdoch did in the late eighties-early nineties. Murdoch had weighed his firm News Corp with some $7.6 billion in banking and institutional debt to fuel the massive rapid expansion of his media empire globally. He had bet that interest rates would drop; they rose instead. A banking crisis and an advertising market collapse hit global economies, pushing the company to the brink of bankruptcy. To add to his woes, the principal lenders had sold off parcels of debt to others making it a roster of 146 financial firms to which it owed the money and in 10 different currencies.

    The banks were getting a bout of nerves wondering whether they would be repaid ever. But Murdoch came up with an aggressive survival plan along with a Citibanker Anne Lane, who believed in his strategy. He began a roadshow to get the bankers’ approval for News Corp to continue to do business. Murdoch’s  first port of call was in Adelaide where at the Commonwealth Bank, he unabashedly told his other lenders that he would not be able to repay the debt in the form it was structured. The bankers howled and screamed, but Murdoch and Lane stood firm. The Ozzie at times got agitated about the fact that he had to placate his bankers and make them believe that he would come good. Three hours of harddselling and persuasion, and the bankers left without any commitment of extension.

    From there he flew to London and New York where the same pleading, cajoling and convincing continued with his lenders. A small bank in Pittsburgh was threatening to call in its $10 million loan; Murdoch along with Lane flew down to Pittsburgh and convinced its manager not to.

    The road show went on and Murdoch kept missing his repayment deadlines. From November 1990 to February 1991 he continued with his spiel non-stop. Until  he heard that all the banks had agreed to stand by him. They stated that they would freeze the nearly $8 billion in loans for the next three years. 

    The rest of course is history.  That  tough period helped Murdoch toughen himself up even further and he went on to further build his empire which Disney bought for about $72 billion, even as he retained control of the news business.

    There are parallels between Murdoch and Chandra. Both are first generation media entrepreneurs. While the former grew his media and entertainment empire, he failed at almost everything outside it. Ditto with Chandra and family who pledged their equity to fund his infrastructure projects, an area he was not very familiar with. Chandra and family are currently extracting his company from what some may call a finacial quagmire. Murdoch had his moment in the early nineties. Both were partners in the nineties in Zee TV's uplinking company and in cable TV arm Siticable, before deciding to part ways. Murdoch had relatively humble beginnings; he inherited a local publication in Australia; he swelled it to a global empire. Chandra’s origins too  were modest; he used to make massive food grain containers and toothpaste lamitubes. And then came his entertainment and media expansion, followed by a disastrous entry into infrastructure. Both Murdoch and Chandra read their respective markets wrong. Both suffered on account of market changes.

    Then, like Murdoch, Chandra and his sons are battling a crisis. They are facing it with their chins jutting out, that’s the degree of their confdience. And that's the mettle of their entrepreneurship. They have built a media company like no other in India with a clutch of channels and assets like Zee5.  A corporation  which has a reputation globally; one which is truly rooted in India, understands its audiences. but with a worldwide  presence. An organisation which is tightly run by a professional owner – Punit – with his father mentoring him-  and a team of managers cobbled togerther from the top most Indian and global  firms. They have been working on finding ways to reduce their costs: the daily newspaper DNA has shut down its print edition, retaining a digital presence.  Some of their infrastructure initiatives are on the block.

    Will they pull off a rescue of their battleship? Despite the so-called financial crisis, Zee Entertainment Enterprises Ltd has been turning out enviable financial results in the last two quarters. Which apparently is not reflected in the share price that has been relatively subdued.

    We, at indiantelevision.com, are betting that the family Chandra will come sailing out of the storm ; they will most likely emerge a little  bruised but not battered. They have five months to find buyers for their pleadged equity shares. Which they will. All they need is time. Just like Murdoch did. If it sounds too simplistic a reasoning; only time will tell us whether it will come true. So keep watching this space.

  • Zeel reports higher op revenue, PAT for Q2 2020

    Zeel reports higher op revenue, PAT for Q2 2020

    BENGALURU: The Subhash Chandra-led Zee Entertainment Enterprises Ltd (Zeel) reported 7.6 percent and 7.4 percent y-o-y growth in total and operating revenues for the quarter ended 30 September 2019 (Q2 2020, quarter or period under review) as compared to the corresponding year ago quarter Q2 2019. Profit after tax grew 6.7 percent y-o-y, while Total comprehensive income (TCI) declined 9.5 percent y-o-y. Operating profit (EBITDA) grew 2.5 percent y-o-y in Q2 2020 as compared to Q2 2019.

    Zeel reported total revenues of Rs 2,190.13 crore and Rs 2,034.79 crore for Q2 2020 and Q1 2019 respectively. Operating revenue for the period under review was Rs 2,122.01 crore and Rs 1,975.86 crore respectively. PAT for Q2 2020 was Rs 412.09 crore, while it was Rs 386.10 crore for the corresponding year ago quarter. TCI for Q1 2020 and Q1 2019 were Rs 471.77 crore and 521.43 crore respectively. Simple operating EBITDA for the quarter under review was Rs 692.93 crore (32.65 percent margin) and for Q2 2019 it was 675.72 crore (34.20 percent margin of operating revenue.

    Growth in revenue in Q2 2020 was driven by 1.2 percent and 19 percent y-o-y growths in advertisement and subscription revenue respectively. Zeel reported ad revenue of Rs 1,224.66 crore in Q2 2020 and Rs 1,210.60 crore in Q1 2019. The company reported subscription revenue of Rs 723.50 crore in Q2 2020 and Rs 608.16 crore in Q1 2019.

    Zeel managing director and CEO Punit Goenka said through an earnings release: “I am pleased with the performance we have exhibited during the quarter. Our entertainment portfolio continues to grow from strength to strength across all formats and maintained its leading position. Our television network has emerged stronger post the implementation of tariff order on the back of a strong customer connect and brand pull of its channels. ZEE5 continued to gain traction across audience segments and markets, driven by its compelling content library and expanding of partnerships across the digital eco-system. This strong operating performance allowed us to deliver industry leading growth in both advertising and subscription despite the tough macro-economic environment. Domestic subscription growth of 27 percent has reaffirmed the value proposition our television network has built over the years. The impact of tariff order has now largely settled down and has brought increased transparency along with improved monetisation. Our domestic advertising revenue growth, though significantly lower than historical trend, is higher than the industry growth. We have witnessed an improvement in ad spends through the quarter and we believe that the onset of festive season along with measures taken by the government will help revive the consumption growth."

    Let us look at the other numbers reported by Zeel

    Total Expenditure for Q2 2020 grew 9.2 percent y-o-y to Rs 1,514.13 crore from Rs 1,386.45 crore in Q2 2019. Operating costs in Q2 2020 grew 23.4 percent y-o-y to Rs 896.25 crore from Rs 726.34 crore. Other expenses during the quarter under review declined 18.6 percent y-o-y to Rs 195.31 crore from Rs 240.03 crore. Employee benefits expense in Q2 2020 grew 25.8 percent y-o-y to Rs  212.26 crore from Rs 168.72 crore. Ad and publicity expensed in Q2 2020 declined 24.1 percent y-o-y to Rs 125.26 crore from Rs 165.05 crore finance costs in Q2 2020 more than tripled (3.3 times) y-o-y in Q2 2020 to Rs 17.97 crore from Rs 5.45 crore.

  • Ad revenue growth drives Zee Media numbers up in Q1 FY20

    Ad revenue growth drives Zee Media numbers up in Q1 FY20

    BENGALURU: The Essel group’s Zee Media Corporation Ltd (ZMCL) reported 29.7 per cent growth in consolidated operating revenue for the quarter ended 30 June 2019 (Q1 2020, quarter or period under review) at Rs 200.66 crore as compared to Rs 154.69 crore for the corresponding year ago quarter Q1 2019 (y-o-y). Growth in numbers was led by 35.7 per cent y-o-y growth in advertising revenue in Q1 2020 at Rs 185.90 crore as compared to Rs 136.97 crore in Q1 2019. Subscription revenue for Q1 2020 increased 1.6 per cent y-o-y to Rs 11.28 crore from Rs 11.10 crore. Other sales and services declined 47.5 per cent y-o-y to Rs 3.47 crore during the period under review from Rs 6.62 crore.

    However, the company’s consolidated profit after tax (PAT) for Q1 2020 declined 52.9 per cent to Rs 26.07 crore from Rs 55.38 crore in Q1 2019. It must be noted that ZMCL had sold off its entire equity stake in Ez-Mall Online to a related party effective 30 June 2018 and the company has arranged for impairment as per Ind-AS-109 for its investments in Diligent Media Corporation Ltd. For further details please refer to the company’s financial statements. Consolidated operating EBITDA for the quarter under review increased 83.6 per cent y-o-y in Q1 2020 to Rs 65.88 crore from Rs 35.88 crore.

    Let us look at the other numbers reported by the company

    Consolidated total expenditure for Q1 2020 increased 13.4 per cent y-o-y to Rs 134.78 crore from Rs 130.45 crore. Operating costs increased 41.7 per cent y-o-y in Q 2020 to Rs 36.12 crore from Rs 25.49 crore. Employee Benefits Expense in Q1 2020 increased 21.8 per cent y-o-y to Rs 42.40 crore from Rs 34.81 crore. Marketing, distribution and business promotion expenses in Q1 2020 increased 7 per cent y-o-y in Q1 2020 to Rs 22.23 crore from Rs 20.77 crore. Other expenses during the quarter under review declined 9.8 per cent y-o-y to Rs 34.03 crore from Rs 37.74 crore.

  • ZEEL’s Punit Goenka on Oppenheimer transaction, strategic investor, additional stake sale

    ZEEL’s Punit Goenka on Oppenheimer transaction, strategic investor, additional stake sale

    MUMBAI: Zee Entertainment Enterprises Ltd (ZEEL) on Wednesday announced what much of the media and entertainment as well as the investor ecosystem had been waiting to hear for a while. ZEEL reached an agreement with US-based Invesco Oppenheimer Developing Markets Fund for 11 per cent (around Rs 400 per share) of the promoter stake for Rs 4,224 crore. This essentially means the fund will intensify its shareholding to 18.7 per cent in the company.

    This is the second round of good news for the Essel Group promoter family after acing Q1 of FY20 with a 40 per cent jump in its profit at Rs 512 crore on a revenue of Rs 1,789 crore, capping off a 14.5 per cent year-on-year growth.

    The infusion of Rs 4,224 crore will give some relief to the group as it races to meet the 30 September deadline to pay off loans to the tune of Rs 11,000 crore to mutual funds, NBFCs and banks.  

    ZEEL MD & CEO Punit Goenka expects the Invesco Oppenheimer transaction to get completed by 31 August. He added that the deal will be done through an escrow mechanism wherein “the lenders will have to pool their shares and once the escrow agent confirms that the requisite number of shares have been placed, they will tell Oppenheimer to wire the funds and therefore on that day, the transfer of both will happen.”

    Goenka is confident that the promoters will be able to raise the remainder Rs 6,800-odd crore it needs to repay lenders by selling off some of its non-media assets in which it has invested like roads, infrastructure and solar energy. He was speaking to investment analysts late in the evening of 31 July.

    Invesco Oppenheimer, which until now owned 7.74 percent stake in ZEEL, is a pure equity shareholder and won’t have a seat on the board, he pointed out.

    “There’s no such agreement but I am pretty confident once investor like Invesco Oppenheimer is buying 11 per cent stake at certain price that validates our value. Therefore anybody else who may look at ZEE can’t really question it and that price should be very easily selling through,” said Goenka responding to whether ZEEL would sell rest of the stake below Rs 400 per share.

    Notably, Goenka did not rule out selling more promoter stake in the company. He also added that the Essel Group has zeroed in on buyers for some of its non-media assets. However, should the sale of these assets disrupt the repayment timelines, then the company will “step it up with the Zee stake sale,” Goenka revealed.

    ZEEL opted against a deal with a strategic partner for it would have taken longer to close the transaction thereby delaying the repayment process. 

    “Strategic investor is off the table for now,” Goenka remarked.

    He, however, briefly touched upon the possibility of ZEEL partnering some of its other media assets with like-minded strategic partners.

    Having consistently delivered profits and maintained a good growth trajectory, ZEEL’s prospect of finding a financial investor or strategic partner was doubted by few. This was despite mutual funds having witnessed their investments in the group turn illiquid of late.

    The sentiment was echoed by Invesco-Oppenheimer Developing Markets Fund portfolio manager Justin Leverenz who described the transaction as “highly compelling” for investors in the fund due to the “sound fundamentals of Zee.”

    The latest development is bound to cheer investors and lenders like mutual funds and insurance companies that had lent considerably to ZEEL’s promoters against collateral.

    “After this entire episode, promoters will be left with enough stake in ZEE for them to get motivated and excited to continue running the company with the legacy it has done so far,” Goenka remarked.

    With the ZEEL promoters now set to repay the debt to lenders and investors from the proceeds of the stake sale, some of the debt funds that have been under the pump will now also be able to fulfill commitments to their investors.

    It has taken ZEEL extended deadlines to get to this point. In a sense, the entire process from taking the tough call to sell promoter stake to striking the right deal amidst back-to-the-wall negotiations has been synonymous with what founder and chairman Subhash Chandra has embodied all his life – living to fight another day.

  • Sony, ZEEL deal scrapped over valuation differences: report

    Sony, ZEEL deal scrapped over valuation differences: report

    MUMBAI: Discussion between Japan’s Sony Corporation buying 20 to 25 per cent stake in the Subhash Chandra-led Zee Entertainment Enterprises Ltd (ZEEL) has been scrapped due to valuation differences, according to a report by Economic Times.

    The development has cleared the way for a consortium of US telecom conglomerate Comcast along with its partner investment firm Atairos to take over the talks.

    ET had stated earlier that Chandra has been looking to sell a stake in the company in order to repay promoter debt worth Rs 13,000 crore.

    ZEE’s spokesperson said, “ZEE’s stake sale process is in steady progress and in line with the previously communicated timelines. The company is in a steady dialogue with all potential prospective partners. Any additional details cannot be shared at this stage, due to the confidentiality agreements.” 

    Besides Sony and Comcast-Atairos, iPhone maker Apple was also in talks with Chandra for a bid, but Zee has not shown as much interest in the Tim Cook-led company and hasn’t responded with an offer, the report added.

    Sony had made a bid to merge its existing operations with ZEEL and had also offered a cash buyout option. Comcast, on the other hand, is open to promoters staying on as junior partners and will consider buying them out fully at a later date, the ET report stated.

  • ZEEL likely to sell 20% to Sony Corp

    ZEEL likely to sell 20% to Sony Corp

    MUMBAI: Japanese multinational conglomerate Sony Corp is in advanced talks with Subhash Chandra-promoted Zee Entertainment Enterprises Ltd (ZEEL) to buy a stake in the firm. As the company has been struggling to raise funds to pay huge debt, Chandra is looking to sell 20-25 per cent stake.

    According to a report by Mint, the entire amount raised through the stake sale would be used to repay promoter debt worth Rs 13,000 crore. The report also added that the talks have reached the valuation stage wherein Subhash Chandra wants to sell the stake at a premium of about 30 per cent. But the total stake that promoter Subhash Chandra wants to retain in Zee may be a concern for the deal.

    Essel Group holds 41.62 percent stake in ZEEL and more than half of the stake is pledged with lenders, as per latest data. Sony wanted to pick up at least 25 per cent, which would also allow it to have promoter rights, the report said.

    The deal with ZEEL will be a great boost for Sony to strengthen its foothold in India. Along with a strong television business, the firm’s OTT platform ZEE5 also gained good traction in a short span.

    Earlier too, analysts predicted that that it would command a huge premium by virtue of being the most profitable media company. However, the current crisis may not allow it to do so giving potential buyers chances for negotiation.

  • Comcast, Sony in the running for ZEEL stake?

    Comcast, Sony in the running for ZEEL stake?

    MUMBAI: In the latest financial results, Zee Entertainment Enterprises Ltd (ZEEL) MD and CEO Punit Goenka mentioned that the company has narrowed down its search for a partner to divest up to 50 per cent stake in the company, an announcement it made in November 2018. Now, according to an unconfirmed news report by CNBC TV18, the ZEEL promoters  are in the US reportedly negotiating with  Comcast and Sony  for a stake sale.

    Both the companies have given bids in the range of Rs 540-560 per share, says the CNBCTV18 report, which is 24 per cent higher than the closing price of Thursday, 15 February. The agreement is likely to be concluded this week.

    As of 31 December, ZEEL promoters hold 41.62 per cent share in the company. It seems that ZEEL promoters are now willing to share more than 50 per cent stake.

    The report also says that Alibaba, Tencent and Amazon were also in the race for ZEEL’s OTT platform ZEE5.

    The Subhash Chandra-led ZEEL reported 17.9 percent year-on year (y-o-y) growth with operating revenue at Rs 2,166.77 crore for the quarter ended 31 December 2018 (Q3 2019, quarter or period under review) as compared to the Rs 1,838.07 crore for the corresponding year ago quarter Q3 2018. EBITDA for the quarter under review increased 26.9 percent y-o-y to Rs 754.29 crore from Rs 594.42 crore.

  • Dish TV reiterates its optimism on future outlook as Essel Group arrives at an understanding with lenders

    Dish TV reiterates its optimism on future outlook as Essel Group arrives at an understanding with lenders

    MUMBAI: Multi-faceted business conglomerate Essel Group’s management has successfully arrived at an understanding with lenders which are having pledge on shares held by the promoters.

    In view of the sensitive situation triggered due to the steep fall of the stock price of Zee Entertainment Enterprises Limited and Dish TV India Limited, a detailed meeting of the Essel Group Promoters with the lending entities comprising of Mutual Funds, NBFCs and Banks was conducted.

    Speaking on the development, Essel Group chairman Subhash Chandra said, “I am pleased to share that we have achieved an understanding with lenders. We have always valued their immense trust and faith shown in us and today’s positive and progressive outcome of the meeting, is a true example of the same. I am very positive, that we will continue to take such positive steps in rising up from the current challenging times, with support of all stakeholders.”

    In the meeting, the lenders further showcased their belief in the intrinsic value of Zee Entertainment and Dish TV India Limited, resulting into the following aspects:

    · There will not be any event of default declared due to the steep fall in price.

    · As a result of the above, there will be synergy and co-operation, amongst lenders leading to a unified approach.

    · Lenders drew comfort from reiteration by the promoters for a speedy resolution through a strategic sale in a time bound manner.

    Aditya Birla Sun Life AMC CEO A. Balasubramanian said, “We have always believed in the intrinsic value of Zee Entertainment and most above, the sheer value system with which its promoters function. I am very glad with the outcome of the meeting, which enabled us to arrive at a consensus in the interest of all stakeholders.”

    Dish TV India CMD Jawahar Goel said, “I would like to reiterate that the merger of Videocon D2H with Dish TV has provided immense opportunity and is a great strategic fit. The synergies derived out of the merged business will significantly strengthen the results of our business. This is despite the fact that the merger transaction has been financially stretching for the promoters.”

  • Punit Goenka on ZEE5’s content play, TRAI tariff order and ZEEL’s search for a strategic partner

    Punit Goenka on ZEE5’s content play, TRAI tariff order and ZEEL’s search for a strategic partner

    MUMBAI: The Subhash Chandra-owned media conglomerate Zee Entertainment Enterprises Limited (ZEEL) reported robust growth in the third quarter of FY 19, beating analysts’ expectations. Apart from the stellar growth in both domestic and international advertising revenue, ZEEL’s over-the-top (OTT) platform ZEE5 maintained its forward march posting healthy monthly active subscriber numbers. Buoyed by the response to the streamer, ZEEL now intends to increase its investment in ZEE5.

    The company’s growth was up 21.7 per cent and 23.3 per cent y-o-y in  terms of advertisement and subscription revenues respectively. The reported ad revenue for Q3 2019 stood at Rs 1,462.57 crore as compared to Rs 1,202.02 crore in Q2 2018. Subscription revenue for the period under review was Rs 618.48 crore as compared to Rs 501.69 crore in the corresponding year ago quarter.

    Satisfied with his organisation’s performance, ZEEL MD and CEO Punit Goenka, during an earnings call, covered a wide range of subjects including the content strategy for ZEE5, the much-debated TRAI tariff order, and the broadcaster’s foray into regional language markets.

    Ambitious plans for ZEE5

    Within one year of its launch, ZEE5 has quickly climbed up the ladder, competing with the best in the business. Outlining the content strategy for the OTT, Goenka said ZEE5 would target 72 shows for the upcoming fiscal year. The plan is to release six web-series each month in the six languages. The platform will be focusing on more tentpole shows rather than releasing one every quarter. Besides original content, ZEE5 will ramp up content sourcing from Hollywood and other segments of the international market.

    Goenka stated that the company made course corrections based on learnings from consumptions trends by dropping some shows that were under process. Having set out to produce 90 shows combining multiple formats by March 2019 (and delivering 31 until 31 December), ZEE5 has now repositioned its content play.

    In the second quarter, ZEE5 struck deals with telcos, the most notable being an exclusive three-year tie-up with the Gopal Vittal-led Airtel. According to Goenka, the platform has already begun booking revenues through these deals. It must be noted that ZEE5 contributed to the 21 per cent domestic advertising revenue growth.

    While ZEE5 works on a freemium model, its subscription service was launched back in July. When asked about the pricing strategy, Goenka argued that it is too early to evaluate.

    “I think it is too early for me to start questioning whether it is the right price point or not. The feedback from consumers helped us in launching this regional pack strategy and that also is aiding the growth of subscription take-up in the market. So we will track it for another two quarters before coming to that discussion, internally also,” he remarked.

     While subscription revenue has started trickling in, Goenka believes substantial traction needs to be delivered on that front over the next few years.

    “I think there is a long way to go for us to drive that to a significant number for the company over the next three to five years that I have guided for. But having said that, we will be investing back all of the revenues as well as more cash flows behind the ZEE5 content and marketing,” he added.

    The media conglomerate has big plans for ZEE5 globally as well. After a soft international launch, the OTT’s first commercial foray will take place within the fourth quarter in the Asia Pacific region. Post that, the streaming service will enter other markets, except the US, in Q1 of FY 20.

    According to Goenka, a combination of subscription and advertising revenue will lead to profitability of OTT platforms. With digital not matching the reach of television anytime soon, it isn’t possible to build an OTT on the back of advertising revenue, he opined.

    Optimistic about new regulatory framework

    In stark contrast to the approach of several broadcasters, who expressed reservations about the Telecom Regulatory Authority of India’s (TRAI) new tariff order, ZEEL has been an early backer of the regulator and its new framework. Commenting on ZEEL’s readiness to adapt to the new norms, Goenka said the broadcaster is closely working with all the distribution platform operators (DPOs). He agreed with the industry experts’ view about there being some hiccups for the next three to six months due to the radical change. However, he was quick to point out that cable and DTH operators have accelerated their efforts to put together channels bouquets and packs.

    When several stakeholders losing sleep over how the migration to a new framework will play out, Goenka is of the view that the real picture will only emerge on 31 January midnight or 1 February morning. He recalled how consumers had swung into action only after the blackout of channels during the DAS implementation. There could be a repeat in that pattern of consumer behaviour, he said.

    “I do expect that large conversion to happen only post switch-off, and that's in-line with our DAS strategy also that we had gone with,” Goenka highlighted.

    The veteran executive, however, is optimistic about ARPU growth due to the new regime.

    ZEEL’s potential strategic partner

    In November 2018, the promoter group of ZEEL announced the decision to sell or divest up to 50 per cent of its equity stake in the company to a strategic partner, aiming for a stronger global media-tech play. According to Goenka, the negotiations for the deal are being conducted with a few players and not a large set. In line with the earlier announcement, Goenka is confident that a concrete arrangement would be arrived at by March- April.

    “We do have significant production capabilities within the ecosystem. And while we do leverage it on our own platform, but it will be available, even for the strategic partner if they wanted us to create content for them, which necessarily does not go on our platform, it goes on their platform. We will be happy to do it for them,” he pointed out.