Subhash Chandra, chairman of Zee Entertainment Enterprises Ltd., pauses during an interview in New York, U.S. (Photographer: Scott Eells/Bloomberg) 

Q3 Earnings: Zee Entertainment’s Profit Beats Estimates

Zee Entertainment Enterprises Ltd.’s profit rose the most in five quarters for the three months ended December, led by strong growth across all its segments.

Net profit of India’s largest broadcaster rose 50.3 percent year-on-year to Rs 562.4 crore in the October-December period, according to its exchange filing. That’s higher than the Bloomberg consensus estimate of Rs 412 crore. The Mumbai-based media company’s revenue rose 17.9 percent on a yearly basis to Rs 2,166.8 crore, in line with Rs 2,085-crore estimate.

On the operational front, earnings before interest, tax, depreciation and amortisation jumped 43.3 percent year-on-year to Rs 792 crore in the quarter ended December. That’s against Rs 679-crore estimate. The operating margin expanded to 36.6 percent from 30.1 percent a year ago—higher than analysts’ forecast of 32.6 percent.

The decline in crude oil prices and rationalisation of goods and services tax rates will boost India’s economy and will help maintain the growth momentum in consumption, Chairman Subhash Chandra said.

Zee Entertainment’s numbers come at a time the Telecom Regulatory Authority of India launched a new tariff regime to allow users to create their own bouquet of channels. The company, however, had said it won’t hurt its subscription revenue.

Zee Entertainment’s Managing Director and Chief Executive Officer Punit Goenka said that this transition is a “big change” for the industry, with some disruption in the short term. “As we have seen in the past, when the Digital Addressable Systems was implemented, the consumer doesn't really make the transition until the switch really happens. I expect the transition to happen much faster post Feb. 1 once it is implemented.”

He said they were hopeful of a successful transition in as short a period as possible so that the industry overall can benefit from this new tariff.

Zee’s Digital Business

  • The company’s monthly active users surged 36 percent to 56.3 million, on a quarterly basis.
  • ZEE5 also crossed 50 million gross downloads on Android play store, with the average user spending 31 minutes per day on the platform.
  • OTT platform creating content in six Indian languages.
  • The company saw a gathered subscription momentum in its south market after introducing customised subscription packs.

Also read: Zee Says TRAI’s New Tariff Regime Won’t Affect Its Subscription Revenue

Segment Revenue

  • Advertising revenue of the broadcaster rose 21.7 percent year-on-year to Rs 1,462.6 crore during the December quarter.
  • Overall subscription revenue increased 23.3 percent on a yearly basis to Rs 618.5 crore.
  • Domestic advertising revenue rose 20.6 percent, while domestic subscription revenue grew 28.6 percent in the three months ended December.

The growth stems from an increase in Zee Entertainment’s market share from 18 percent to 19 percent last year, Tushar Jain, research analyst at IIFL, said. This, according to him, may have provided an “additional pricing power” to the company. A sharp increase in monthly active user enrollment may also have contributed to the growth, Jain said.

Content consumption, according to Chandra, is growing at a brisk pace across mediums in the media and entertainment space. “This trend along with macroeconomic tailwinds will drive growth in both advertising and subscription revenues.”

With 2019 general elections fast approaching, garnering viewers becomes a litmus test for any channel. Goenka, however, said the Zee network isn't impacted by elections. “Election spending on Zee entertainment channels is very, very small and that doesn't move the needle for us in a big way and we don't factor that in.”

Goenka said that the promoters’ plan to sell up to half of their 41 percent holding in the company is making good process. “We have met prospective strategic partners and I am happy with the progress.” He said they were open to any strategic partner, domestic or international, with willingness to engage with all those interested.

Watch the interview here

Shares of Zee Entertainment rose as much as 4.2 percent, the most in 20 percent to Rs 475.90 intraday.