Zee Entertainment
BSE SENSEX
35,082
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
10,789
Z IN
960.4
569.5/8.8
619/465
-1/0/-5
1087
56.9
2020E
87.7
29.7
20.2
21.0
19.3
112.2
28.3
5.3
18.1
6.1
20.3
20.3
17 January 2018
3QFY18 Results Update | Sector: Media
CMP: INR593
TP: INR705 (+19%)
Buy
Better growth to drive valuation
Financials & Valuations (INR b)
Y/E MARCH
2018E 2019E
Sales
66.1
76.5
EBITDA
21.0
25.3
NP
13.1
16.9
EPS (Rs)
13.7
17.6
EPS Growth (%)
2.1
28.7
BV/Share (Rs)
80.9
94.9
P/E (x)
43.4
33.7
P/BV (x)
7.3
6.3
EV/EBITDA (x)
26.5
21.8
EV/Sales (x)
8.4
7.2
RoE (%)
18.2
20.0
RoCE (%)
16.4
18.7
Estimate change
TP change
Rating change
Ex-sports revenue rebounds with 23% growth, EBITDA up 17%:
Ex-sports
revenue rebounded (+23% YoY) to INR18.4b on a low base (3QFY17 was
impacted by demonetization). Consolidated revenue grew 12% YoY (7.6% beat).
EBITDA expanded 15% YoY to INR5.9b (8% beat). Ex-sports EBITDA increased
17% YoY – lower than revenue growth due to higher SG&A related to a) an
increase in original number of hours of content, b) three movie releases and c)
INR400m of one-off expense related to Zee’s 25-year branding. EBITDA margin
improved 90bp YoY to 32.3% (in-line). PAT rose 29% YoY to INR3.2b. Investment
in secured NCD of INR1.67b is overdue, while Zee is pursuing recovery options.
Ad revenue propels growth; subscription revenue delayed:
Domestic ad
revenue jumped 26% YoY (adj. for sale of sports business and acquisition of
RBL), with healthy ad spends across categories. Ex-sports domestic subscription
revenue grew at a muted 7.5% due to longer time taken for contract renewal
negotiations on account of the TRAI’s tariff order.
Upbeat ad/subscription outlook:
Improving ad market outlook with broad-
based ad spends across sectors and healthy viewership should lead to steady
15% ad revenue growth in 4QFY18 and 16% CAGR over FY18-19E. Domestic
subscription revenue (ex-sports) led by closure of content contracts is expected
to grow 16% in 4QFY18 and at 14% CAGR over FY18-19E.
Maintain Buy with a revised TP of INR705:
We have revised up FY19-20E PAT
by 2% on better-than-expected results. Subsequently, our TP is revised up to
INR705 (v/s INR680 earlier) on 35x P/E on Dec’19 EPS. Premium valuation is
justified by steady 24% EPS CAGR over FY18-20E and improving RoIC above
30%. Our high EPS growth estimate is driven by 200bp EBITDA margin
expansion over FY18-20E to 33.9%, above the company’s guidance of 30%+. We
believe steady revenue growth (ex-sports) should offer buffer for higher
operating cost toward the upcoming re-launch of Zee’s digital platform – Z5.
FY17
2Q
3Q
4Q
16,954 16,391 15,280
23.0
3.4
0.4
12,062 11,233 10,593
4,892 5,158 4,688
28.9 31.5
30.7
336
249
316
86
90 1,122
432
525
549
-829
4,074
0
4,074
1,634
40.1
56
2,383
2,383
-9.9
-714
470
4,630 4,269
0 -12,234
4,630 16,504
2,081 1,464
44.9
8.9
41 -116
2,508 15,156
2,508 4,006
-6.1 180.1
FY18
FY17
2Q
3Q
4QE
15,821 18,381 16,462 64,342
-6.7 12.1
7.7
10.7
10,909 12,437 11,118 45,073
4,912 5,944 5,343 19,269
31.0 32.3
32.5
29.9
411
505
453 1,152
3
24 1,089 1,372
2,031
480
123 2,240
-148
6,381
-1,346
7,727
1,832
23.7
-16
5,912
4,885
104.9
-419
5,477
0
5,477
2,260
41.3
-4
3,222
3,222
28.5
0
3,925
0
3,925
1,592
40.6
0
2,333
2,333
-41.8
-2,205
16,780
-12,234
29,014
6,805
23.5
-7
22,216
12,851
52.3
(INR m)
v/s est
FY18E 3QFY18E
(%)
66,065 17,085
7.6
2.7
0.8
45,023 11,593
7.3
21,042
5,492
8.2
31.9
32.1 19bp
1,679
376
34.1
1,262
556
-95.8
3,646
302
59.2
-1,099
20,647
-1,346
21,993
8,028
36.5
-16
13,982
13,127
2.1
0
4,862
0
4,862
1,653
34.0
0
3,209
3,209
34.6
12.7
12.7
36.7
0.4
0.4
Consolidated - Quarterly Earning Model
Y/E March
Total Revenue from Operations
YoY Change (%)
Total Expenditure
EBITDA
Margins (%)
Depreciation
Interest
Other Income
Fair Value through P&L
gain/(loss)
PBT before EO expense
Extra-Ord expense
PBT
Tax
Rate (%)
MI & P/L of Asso. Cos.
Reported PAT
Adj PAT
YoY Change (%)
1Q
15,717
18.5
11,185
4,532
28.8
251
75
734
-1,132
3,808
0
3,808
1,626
42.7
13
2,169
2,169
-9.0
1Q
15,402
-2.0
10,559
4,844
31.4
311
147
1,011
-532
4,864
0
4,864
2,344
48.2
4
2,516
2,516
16.0
Aliasgar Shakir – Research analyst
(Aliasgar.Shakir@motilaloswal.com); +91 22 6129 1565
Hafeez Patel – Research analyst
(Hafeez.Patel@motilaloswal.com); +91 22 6129 1568
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.

Zee Entertainment
Valuation and view
Ad revenue growth:
Our FY18-21E ad revenue growth for Zee remains at 16.5%.
This is marginally above FICCI-KPMG’s TV ad industry growth estimates of 15%
over the similar period. Zee’s wide channel bouquet and focus to increase target
market through entry in new genres should support higher growth.
Subscription revenue growth:
Subscription revenue growth in the next three
years should remain healthy, as digitization is expected to help garner better
subscription revenue driven by ARPUs.
EBITDA margin:
We have built in steady EBITDA margin improvement of 270bp
over FY18-21E on the back of sale of loss-making sports business and operating
leverage. Management has guided north of 30% EBITDA margin; however, we
believe the company has enough margin headroom to support fresh
investments (even at 200-300bp higher margin from the current 31-32% EBITDA
margin). Subsequently, the company has the potential to drive secular 22% EPS
growth over FY18-21E.
Exhibit 1: ZEEL – Business Construct
Particulars
Advertisement revenue growth (%)
Subscription revenue growth
-Domestic revenue growth (%)
-International revenue growth (%)
Total Subscription revenue growth (%)
Total Revenue growth (%)
EBITDA margin (%)
EPS growth (%)
26.3
14.0
22.6
21.7
25.8
22.8
13.2
5.5
11.0
19.5
27.2
21.9
8.0
-23.5
-0.4
10.4
25.7
-3.1
14.5
15.4
14.7
19.0
26.0
-1.6
11.8
3.0
10.0
10.7
29.9
52.5
-10.0
-12.5
-10.5
2.7
31.9
2.1
16.5
4.0
14.1
15.8
33.0
28.7
16.5
2.0
14.0
14.7
33.9
19.3
16.5
2.0
14.3
14.8
34.6
19.3
FY13
24.0
FY14
21.2
FY15
11.8
FY16
26.5
FY17
9.2
FY18E
12.3
FY19E
17.3
FY20E
15.5
FY21E
15.5
Source: MOSL, Company
What it means for the target price
3-year view:
Given the steady 22% EPS growth estimate over FY18-21, healthy
RoIC of 30% and strong FCF generation, we maintain 35x P/E (3-year average).
This values the company at INR 876, offering 50% upside.
1-year view:
We have revised up FY19-20 PAT by 2% on better-than-expected
results. Subsequently, our TP is revised up to INR705 (v/s INR680 earlier) on 35x
(3-year average) P/E on Dec’19 EPS. Premium valuation is justified on Zee’s
steady 24% EPS CAGR over FY18-20E and improving RoIC above 30%. Our high
EPS growth estimate is driven by 200bp EBITDA margin expansion over FY18-20E
reaching 33.9%, above the company’s guidance of 30%+.
17 January 2018
2

Zee Entertainment
Exhibit 2: ZEEL: 1-year forward P/E band
53.0
41.0
29.0
17.0
5.0
10.0
P/E (x)
Avg (x)
Max (x)
43.3
25.9
Min (x)
35.0
Source: MOSL, Bloomberg
Key Triggers
Sustainable ad revenue growth led by steady industry growth and healthy
viewership market share.
Digitization led healthy subscription revenues growth over the next 2-3 years.
Key risk factors
Intense competition across genres leading to lower viewership and
subsequently impacting yields.
Heavy investment in the digital – OTT application, movie production and
aggressive ramp-up in movie library.
3QFY18 Concall highlights
Key takeaways
ZEEL had a viewership share of 18.3% for non-sports entertainment category
(v/s 16.3% last qtr).
Ad growth is broad-based, and all sectors are growing well. Although
management didn’t guide for ad revenue growth, it expects to outperform
market growth.
For subscription, management expects low teens growth. However, as
negotiations with the distributor close out, there should be some bump up in
business.
Margins to be at 30%+ going forward, on annualized basis (including Zee5
investments).
Content cost guidance of 32hours for 4QFY18 stays intact. Programming hours
for regional channels are expected to go up, specifically for Tamil in FY19.
Zee5 is scheduled to be launched in February-18 and will be a combination of
subscription and free based platform.
Investment in NCD of SGGD Projects Development Private Limited worth
INR1.67b is secured and also guaranteed. Though the money is overdue,
management expects the same to come in due time.
3QFY18 performance
Advertising
Consolidated advertising revenue grew by 25.8% YoY to INR12,020m.
17 January 2018
3

Zee Entertainment
Domestic ad revenue of INR11,373m is up 30.4% YoY, while International ad
revenue stood at INR647m. On a comparable basis (excluding sports, RBNL and
IWPL), domestic advertising revenue grew by 25.7%.
Registered strong volume growth of ~11%+ YoY led by recovery across all
sectors, national and regional advertisers. Sectorial mix for the ad spend has
largely remained same.
Subscription
Consolidated subscription revenue declined 15.5% YoY to INR5,017m.
Domestic/international subscription revenues for the quarter declined by
16.2/12.1% to INR4.0/INR1.0b. On a like-to-like basis, domestic subscription
revenue grew by 7.5%.
Decline in domestic subscription revenue was on account of the longer time
taken to conclude negotiations with distributors (due to litigations regarding the
TRAI tariff regulation).
Two HD channels, Zee Telugu HD and Zee Cinemalu HD were launched during
the quarter, taking the count of HD channels to 13.
Zee Studios released two Hindi and one Marathi movie during the quarter.
ZEE had viewership share of 18.3% for non-sports entertainment category (v/s
16.3% last qtr).
Zee TV was leader in Pay Hindi GEC, while Zee Anmol was leader in FTA.
Zee maintained its leadership in Marathi and Oriya genre, and second in Bangla
and Kannada. In Telugu, Zee stood first in urban market, while in Tamil it stood
third.
Programming cost for the quarter declined by 4.3% YoY.
SGA expenses increased by 50% YoY on account of re-branding and 25-year
celebration-related events (totaling to INR400m) and promotion cost associated
with three movies released during the quarter.
Depreciation for the quarter increased significantly due to realignment of the
life of assets.
No cost pertaining to Zee5 is accounted in P/L statement till date. However, the
same will be accounted post launch.
Other income includes forex impact of ~4% of International revenue.
Industry
FTA ad revenue market is ~INR20b, and accounts for 5-6% of overall ad TV pie.
The growth of FTA market is more than the average growth for Pay TV.
TV consumption increased from 158 min to 161 min during the quarter.
Outlook
Advertisement growth
Recent cut in GST rates should aid growth. Though management gave no
guidance for ad revenue growth, it expects to outperform ad market growth.
For &TV, management is of the view that there is further need to differentiate
content to get the positioning of the channel.
17 January 2018
4

Zee Entertainment
Subscription growth
Management has guided for low teens growth. However, as the negotiations
with the distributor close out, there should be some bump up in business.
Growth is linked to uncertainty of the outcome of the TRAI order. As of now, the
company is entering into fixed fee deals and expects lower growth compared to
phase 1 and 2 monetization.
Content cost guidance of 32hours for 4QFY18 stays intact. Programming hours
for regional channels are expected to go up, specifically for Tamil in FY19.
Miniscule amount of re-branding is expected to spill over in 4QFY18.
Music business is expected to become profitable next year. However, the
contribution to overall revenues is small.
Margins to be at 30%+ going forward on annualized basis (including Zee5
investments).
Tax rate is expected to come in at 40-41% for FY18.
Acquisition of Fox studios by Disney should not have impact on revenues,
according to management.
Digital
Zee5 is scheduled to be launched in February-18 and will be a combination of
subscription and free-based platform.
Company plans to have Zee5 purely content (differentiated and original) driven.
Balance sheet/acquisitions
Investment in NCD of SGGD Projects Development Private Limited worth
INR1.67b is secured and also guaranteed. Though the money is overdue,
management expects the same to come in due time.
20% of preference shares would be redeemed in 4QFY18. Further, management
is still working on taxation and regulatory matters for pre-payment of the
balance.
Cash and cash equivalents stood at INR32.6b as on Dec-17.
17 January 2018
5

Zee Entertainment
Exhibit 3: Quarterly performance (INR m)
Advertising revenue
Subscription revenue
Other sales and services
Total revenue
Total operating expenses
EBITDA
EBITDA margin (%)
Depreciation
Finance Cost
Other income
Fair Value through P&L
PBT
Exceptional item
Reported PBT
Tax
Effective Tax Rate (%)
PAT
Associates/Minority Interest
Reported PAT after minorities
Adjusted PAT
Advertisement revenue (INR m)
Domestic
International
Total advertisement revenue
Subscription revenue (INR m)
Domestic
International
Total subscription revenue
Operating costs (INR m)
Prog, Transmission & Direct Exp
Staff Cost
Selling and Other Exp
Total operating costs
Ex-sports business (INR m)
Revenue
Operating cost
EBITDA
EBITDA margin (%)
3QFY17
9,554
5,935
902
16,391
11,233
5,158
31.5
249
90
525
-714
4,630
0
4,630
2,081
44.9
2,549
41
2,508
2,508
2QFY18
9,867
5,014
939
15,821
10,909
4,912
31.0
411
3
2,031
-148
6,381
1,346
7,727
1,832
23.7
5,896
-16
5,912
4,885
3QFY18
12,020
5,017
1,344
18,381
12,437
5,944
32.3
505
24
480
-419
5,477
0
5,477
2,260
41.3
3,218
-4
3,222
3,222
YoY%
25.8
-15.5
48.9
12.1
10.7
15.2
87.2
102.6
-73.8
-8.4
-41.2
18.3
NA
18.3
8.6
-369.3
26.2
-110.5
28.5
28.5
QoQ%
21.8
0.1
43.1
16.2
14.0
21.0
129bp
22.7
742.9
-76.4
183.6
-14.2
NA
-29.1
23.4
1,755
-45.4
-73.0
-45.5
-34.0
3QFY18E
10,922
5,249
915
17,085
11,593
5,492
32.1
376
556
302
0
4,862
0
4,862
1,653
34.0
3,209
0
3,209
3,209
v/s est (%)
10.1
-4.4
46.8
7.6
7.3
8.2
19bp
34.1
-95.8
59.2
12.7
NA
12.7
36.7
725bps
0.3
0.4
0.4
8,737
817
9,554
4,818
1,117
5,935
7035
1,419
2,780
11,233
3QFY17
14,980
9,899
5,081
33.9
9,346
521
9,867
4,043
971
5,014
5789
1,814
3,306
10,909
2QFY18
15,805
10,893
4,912
31.1
11,373
647
12,020
4,036
981
5,017
6730
1,535
4,171
12,437
3QFY18
18,381
12,437
5,944
32.3
30.2
-20.8
25.8
-16.2
-12.2
-15.5
-4.3
8.2
50.1
10.7
YoY%
22.7
25.6
17.0
-157.8
21.7
24.2
21.8
-0.2
1.0
0.1
16.3
-15.4
26.2
14.0
QoQ%
16.3
14.2
21.0
126bp
10,048
874
10,922
4,288
961
5,249
6718
1,703
3,172
11,593
13.2
-26.0
10.1
-5.9
2.1
-4.4
0.2
-9.8
31.5
7.3
3QFY18E v/s est (%)
17,085
7.6
11,593
7.3
5,492
8.2
32.1
19bp
Source: Company, MOSL
17 January 2018
6

Zee Entertainment
Story in charts
Exhibit 4: Consol. revenue and EBITDA margin (INR b, %)
Total revenue (INR b)
34.9
39.6
28.7
24.5
11.9
26.9
11.6
31.2
29.3
10.6
34.6
34.1
20.9
25.9
13.6
20.1
13.5
26.4
23.7
13.3
EBITDA margin (%)
EBITDA margin (ex-sports) (%)
34.1
33.9
31.5
32.9
30.7
28.5
26.0
13.8
31.9
27.1
15.9
31.9
27.0
15.2
31.1
28.8
15.7
31.9
31.4
31.1
31.0
32.3
32.3
28.2
11.0
28.7
11.2
28.9
17.0
16.4
15.3
15.4
15.8
18.4
Source: Company, MOSL
Exhibit 5: Ad revenue and YoY growth (INR b, %)
34.3
21.5
10.5
Advertising revenue (INR b)
32.4
23.0
17.4
7.3
8.5
15.0
24.4
26.5
19.2
15.7
3.4
6.7
7.7
8.3
9.2
8.5
9.1
9.6
9.6
6.0
0.0
8.5
9.7
2.9
9.9
12.0
25.8
YoY growth (%)
5.8
6.8
5.8
6.2
6.3
7.4
Source: Company, MOSL
Exhibit 6: Domestic and International ad revenue (INR b)
Domestic ad revenue (INR b)
8.6
8.8
International ad revenue (INR b)
11.4
7.7
7.5
8.4
8.7
7.9
8.7
9.3
Exhibit 7: Domestic and International ad revenue growth (%)
Domestic ad revenue growth (%)
International ad revenue growth (%)
40
15
-10
0.7
0.8
0.9
0.7
0.8
0.8
0.5
1.0
0.5
0.6
-35
-60
Source: MOSL, Company
Source: MOSL, Company
17 January 2018
7

Zee Entertainment
Exhibit 8: Subscription revenue and YoY growth (INR b, %)
Subscription revenue (INR b)
16.0
11.4
2.0
-2.8
-2.3
YoY growth (%)
10.2
-7.3
12.2 12.9
17.0
16.4
14.2
21.7
13.7
-6.1
-9.3
4.8
-14.0
5.0
-15.5
5.0
4.6
4.6
4.6
4.1
4.2
4.5
5.1
4.6
4.8
5.2
5.9
5.3
5.8
5.9
5.6
Source: Company, MOSL
Exhibit 9: Domestic and International subscription revenue
(INR b)
Domestic subscription revenue (INR b)
International subscription revenue (INR b)
4.2
3.7 3.8
4.2
4.7
4.2
4.7 4.8 4.6
3.8 4.0 4.0
Exhibit 10: Domestic and International subscription revenue
growth (%)
Domestic subscription revenue growth (%)
International subscription revenue growth (%)
52
34
16
-2
-20
-38
3.4 3.5
1.3 1.1 1.2 1.1 1.0 1.0 1.0 1.0
0.9 1.0 0.9 0.9 1.0 1.0
Source: MOSL, Company
Source: MOSL, Company
Exhibit 11: Summary of estimate change (INR b)
FY18E
Total revenue
Old
New
Change (%)
EBITDA
Old
New
Change (%)
EBITDA margin (%)
Old
New
Change (bp)
PAT
Old
New
Change (%)
EPS (INR)
Old
New
Change (%)
64.6
66.1
2.3
20.6
21.0
2.3
31.9
31.9
-2.2
14.8
14.0
-5.3
14.4
13.7
-5.4
FY19E
74.7
76.5
2.4
24.7
25.3
2.4
33.0
33.0
0.7
16.6
16.9
1.5
FY20E
85.7
87.7
2.4
29.0
29.7
2.5
33.8
33.9
4.5
19.8
20.2
1.7
17.3
20.6
17.6
21.0
1.5
1.7
Source: Company, MOSL
17 January 2018
8

Zee Entertainment
Exhibit 12: Zee Entertainment: A Snapshot (INR b)
Advertisement Revenue
YoY (%)
Subscription Revenue
YoY (%)
- Domestic
YoY (%)
- International
YoY (%)
Other Sales & Services
YoY (%)
Total Revenue
YoY (%)
Operating expenses
YoY (%)
EBITDA
YoY (%)
EBITDA margin (%)
Revenue mix (%)
Ad and broadcast revenue
Subscription revenue
-Domestic
- International
Other sales and services
Sports/Non-sports break-up
Revenue
-Sports
-Non-sports
EBITDA
-Sports
-Non-sports
EBITDA margin (%)
-Sports
-Non-sports
FY13
19.6
24
16.2
23
11.6
26
4.6
14
1.1
-15
37.0
22
27.5
19
9.5
29
25.8
53
44
31
12
3
37.0
5.0
32.0
9.5
-0.9
10.4
25.8
-17.5
32.5
FY14
23.8
21
18.0
11
13.2
13
4.8
6
2.4
113
44.2
20
32.2
17
12.0
26
27.2
54
41
30
11
5
44.2
6.6
37.6
12.0
-1.0
13.0
27.2
-14.8
34.6
FY15
26.6
12
17.9
0
14.2
8
3.7
-23
4.3
80
48.8
10
36.3
13
12.5
4
25.7
54
37
29
8
9
48.8
6.3
42.5
12.5
-0.3
12.8
25.7
-4.2
30.1
FY16
33.7
26
20.6
15
16.3
14
4.3
15
3.9
-9
58.1
19
43.0
18
15.1
21
26.0
58
35
28
7
7
58.1
6.3
51.8
15.1
-0.3
15.5
26.0
-5.5
29.8
FY17
36.7
9
22.6
10
18.2
12
4.4
3
5.0
28
64.3
11
45.1
5
19.3
27
29.9
57
35
28
7
8
64.3
6.3
58.0
19.3
0.1
19.2
29.9
1.5
33.0
FY18E
41.3
12
20.3
-10
16.4
-10
3.9
-13
4.6
-9
66.1
3
45.0
0
21.0
9
31.9
62
31
25
6
7
66.1
0.2
65.8
21.0
0.0
21.0
31.9
0.0
31.9
FY19E
48.4
17
23.1
14
19.1
17
4.0
4
5.0
10
76.5
16
51.2
14
25.3
20
33.0
63
30
25
5
7
FY20E
55.9
15
26.4
14
22.3
17
4.1
2
5.5
10
87.7
15
58.0
13
29.7
18
33.9
64
30
25
5
6
76.5
87.7
0.0
0.0
76.5
87.7
25.3
29.7
0.0
0.0
25.3
29.7
33.0
33.9
0.0
0.0
33.0
33.9
Source: Company, MOSL
17 January 2018
9

Zee Entertainment
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Programming/Production expenses
Employees Cost
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
Fair Value through P&L gain/(loss)
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest/Associate
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY13
36,997
21.7
13,962
3,491
9,999
27,452
74.2
9,545
25.8
399
9,146
86
1,461
0
10,521
0
10,521
3,337
31.7
-14
7,198
7,198
22.2
19.5
FY14
44,217
19.5
17,056
3,905
11,214
32,175
72.8
12,042
27.2
501
11,541
158
1,807
0
13,191
0
13,191
4,291
32.5
-21
8,921
8,921
23.9
20.2
FY15
48,837
10.4
20,135
4,498
11,666
36,299
74.3
12,538
25.7
673
11,865
103
2,278
0
14,040
0
14,040
4,284
30.5
-20
9,776
9,776
9.6
20.0
FY16
58,125
19.0
25,984
4,986
12,019
42,989
74.0
15,136
26.0
777
14,359
1,598
1,951
-673
14,039
-331
13,708
5,491
40.1
-14
8,231
8,429
58,125
19.0
FY17
64,342
10.7
27,825
6,043
11,205
45,073
70.1
19,269
29.9
1,152
18,117
1,372
2,240
-2,205
16,780
12,234
29,014
6,805
23.5
-8
22,217
12,852
64,342
10.7
FY18E
66,065
2.7
25,118
6,617
13,287
45,023
68.1
21,042
31.9
1,679
19,363
1,262
3,646
-1,099
20,647
1,346
21,993
8,028
36.5
-16
13,982
13,127
2.1
19.9
FY19E
76,510
15.8
28,664
7,527
15,052
51,243
67.0
25,266
33.0
1,766
23,500
506
2,602
0
25,596
0
25,596
8,703
34.0
0
16,893
16,893
28.7
22.1
(INR m)
FY20E
87,724
14.7
32,522
8,656
16,819
57,997
66.1
29,727
33.9
1,958
27,768
2
2,766
0
30,532
0
30,532
10,381
34.0
0
20,151
20,151
19.3
23.0
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
FY13
954
38,161
39,115
33
28
-288
38,888
5,179
2,400
2,779
7,127
69
8,435
32,045
8,745
9,890
5,316
8,094
11,567
5,172
3,608
2,787
20,478
38,888
FY14
960
26,247
27,207
61
20,199
-298
47,169
5,921
2,813
3,108
7,625
997
12,597
35,692
11,736
10,281
5,644
8,031
12,850
5,050
4,154
3,646
22,842
47,169
FY15
960
34,346
35,306
4
20,214
-531
54,993
6,415
2,925
3,490
7,886
878
14,579
42,694
11,878
10,692
7,365
12,759
14,534
4,204
5,258
5,072
28,160
54,993
FY16
960
47,079
48,039
22
17,159
-648
64,573
9,221
3,792
5,429
8,843
1,104
10,501
53,135
13,180
13,482
9,631
16,842
14,439
4,768
9,060
611
38,696
64,573
FY17
960
65,608
66,568
10
19,096
-903
84,772
11,181
4,542
6,639
2,676
1,558
13,433
75,160
16,844
13,059
26,133
19,124
14,694
4,891
8,947
856
60,467
84,772
FY18E
960
76,708
77,669
0
15,281
-903
92,047
12,808
6,143
6,664
2,676
1,558
13,431
83,309
20,782
14,842
26,870
20,815
15,591
5,261
9,470
860
67,718
92,047
FY19E
960
90,144
91,105
0
19
-903
90,221
14,358
7,909
6,449
2,676
1,558
13,431
82,564
24,345
16,350
19,021
22,848
16,457
5,390
10,180
886
66,107
90,221
FY20E
960
1,06,838
1,07,799
0
19
-903
1,06,915
15,768
9,867
5,901
2,676
1,558
13,431
1,00,992
25,840
18,025
32,132
24,995
17,643
5,948
10,814
880
83,349
1,06,915
(INR m)
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans & Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
17 January 2018
10

Zee Entertainment
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Adj. EPS
Adj. Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
Adj. P/E
Adj. Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Net Debt/Equity
FY13
7.5
7.9
40.7
2.0
31.0
FY14
9.2
9.7
49.3
2.0
25.2
FY15
8.9
9.6
57.8
2.3
26.6
FY16
8.8
8.1
50.0
2.3
31.7
67.6
73.5
11.9
9.9
38.1
0.4
20.2
16.2
22.8
0.9
83
85
30
-0.1
FY17
13.4
13.3
69.3
2.5
13.0
44.3
44.5
8.6
8.7
29.2
0.4
22.4
20.7
31.9
0.8
96
74
28
-0.3
FY18E
13.7
14.1
80.9
2.5
20.6
43.4
42.0
7.3
8.4
26.5
0.4
18.2
16.4
26.2
0.7
115
82
29
-0.3
FY19E
17.6
18.9
94.9
3.0
20.5
33.7
31.4
6.3
7.2
21.8
0.5
20.0
18.7
29.2
0.8
116
78
26
-0.4
FY20E
21.0
23.0
112.2
3.0
17.2
28.3
25.8
5.3
6.1
18.1
0.5
20.3
20.3
31.6
0.8
108
75
25
-0.4
0.4
19.6
19.7
26.5
1.0
86
98
51
-0.4
0.4
20.6
20.8
47.1
0.9
97
85
42
-0.4
0.4
19.0
19.1
75.0
0.9
89
80
31
-0.4
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Equity / Pref Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY13
10,519
399
30
-3,669
-2,348
4,931
-1,068
3,863
-709
3,154
328
847
466
-601
7
-30
-1,663
0
-2,287
2,042
3,274
5,316
FY14
13,191
501
76
-4,242
-4,904
4,622
-793
3,829
-1,465
2,364
-19
-563
-2,047
778
1
-26
-2,244
47
-1,444
338
5,306
5,644
FY15
14,040
673
22
-4,164
-2,236
8,335
-1,526
6,809
-1,091
5,718
-954
396
-1,649
0
-1,008
-71
-2,348
0
-3,427
1,733
5,632
7,365
FY16
14,040
777
28
-5,827
-2,497
6,521
788
7,309
-2,716
4,593
-611
4,524
1,197
59
-4
-28
-4,051
-22
-4,046
4,460
5,171
9,631
FY17
16,780
1,152
73
-6,810
-5,670
5,525
1,165
6,690
-2,704
3,986
-2,975
20,664
14,985
0
0
-73
-4,065
0
-4,138
17,537
8,596
26,133
FY18E
21,993
1,679
1,262
-8,028
-6,515
10,392
-3,630
6,763
-1,705
5,058
2
3,646
1,942
0
-3,815
-1,262
-2,881
-10
-7,969
737
26,133
26,870
FY19E
25,596
1,766
506
-8,703
-6,238
12,927
-2,602
10,325
-1,551
8,775
0
2,602
1,051
0
-15,262
-506
-3,457
0
-19,225
-7,849
26,870
19,021
(INR m)
FY20E
30,532
1,958
2
-10,381
-4,131
17,980
-2,766
15,215
-1,410
13,804
0
2,766
1,356
0
0
-2
-3,457
0
-3,459
13,111
19,021
32,132
17 January 2018
11

Zee Entertainment
Corporate profile
Company description
ZEEL is the leading player in television broadcasting
and syndication of content overseas with a bouquet
of 40 TV channels. Zee has well-established reach of
over 730m+ viewers across 169 countries. ZEEL has
channels encompassing all major genres like Hindi
GEC, Hindi Movies, Regional GECs and Sports.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Dec-17
Promoter
DII
FII
Others
43.1
8.4
42.3
6.3
Sep-17
43.1
6.7
43.9
6.4
Dec-16
43.1
4.3
46.6
6.0
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Oppenheimer Developing Markets Fund
Vanguard international Growth Fund
Government of Singapore
Vanguard Emerging Markets Stock Index
Fund, A Series Of Vanguard International
Equity Index Fund
% Holding
6.8
1.6
1.3
1.0
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Subhash Chandra
Punit Goenka
M Lakshminarayanan
Designation
Chairman
Managing Director & CEO
Executive VP & CS
Exhibit 5: Directors
Name
Ashok Kurien
Neharika Vohra
Subodh Kumar
Name
Manish Chokhani
Sunil Sharma
Adesh Kumar Gupta
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells LLP
MGB & Co LLP
Vaibhav P Joshi & Associates
Vinod Kothari & Co
Type
Statutory
Statutory
Cost Auditor
Secretarial Audit
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
13.7
17.6
21.0
Consensus
forecast
14.9
18.0
20.8
Variation
(%)
-8.1
-2.1
0.9
Source: Bloomberg
17 January 2018
12

Zee Entertainment
NOTES
17 January 2018
13

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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inquiry and adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice. The matter is currently
pending.
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the subject company at the end of the month immediately preceding the date of publication of the Research Report.
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from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and
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Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in
the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
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b)
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c)
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d)
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MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure
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disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Zee Entertainment
Disclosure of Interest Statement
Analyst ownership of the stock
Zee Entertainment
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary
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subject company for which Research Team have expressed their views.
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interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following
representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations
as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative
products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this
information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MSE); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS
(Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal
Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private
Equity products
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