Zee expects subscription revenues to cushion ad sales fall; puts search for foreign partner for Siti Cable on hold

(Posted on 27 September 2001, 11:50 pm)

Zee Telefilms chairman Subhash Chandra today warned investors that the overall negative market scenario prevailing was going to impact on financials as companies cut back on advertising. It was also clarified later that efforts to bring on board an international player as strategic partner for its cable arm Siti Cable had been put on the cold burner for the present.

Zee's Nineteenth Annual General Meeting, which took place at the Nehru Auditorium in Worli in Central Mumbai today, started at 12 o'clock sharp with a short speech by Chandra. 'There will be a dip in total revenues as well as net profit of the company as industry is going through a rough patch," Chandra said. He later explained while answering shareholders' questions that though overall growth would be there, the earlier rates of growth which had stood at 45 per cent and 60 per cent far the last few years would not happen.

On the positive side he said there would be an increase in revenues of around 20 to 25 per cent from subscription during this financial year. The Zee bouquet having gone pay on 10 June this year had proved a success with higher than anticipated revenue collections.

Chandra referred to the AT Kearney report which suggests that operations within the group be streamlined by merging the many companies under the Zee umbrella into fewer entities. Chandra said that the present 22 companies which make up the group would be reduced to 12 under three broad operations of access, content and education.

Cable arm Siti Cable and Patco (company set up to handle marketing for DTO) come under access for which there will be investment worth Rs 1300 million while RS 200 million had been set aside for content in this financial year, Chandra said.

As far as the education business was concerned the growth prospects were not that positive, he said.

Seeking to reassure investors over Zee's links to cornered bull operator Ketan Parekh and the subsequent fallout, he said that there was no investigation on against the company. Out of a total of Rs 2,200 million that was transferred from Zee Telefilms to investment companies of Chandra's Essel group meant to help bail out Parekh, Rs 1300 million had already been paid and the remaining amount would be paid within a short period, he said. Chandra further clarified that henceforth, as a matter of company policy no Zee group company would have any financial transactions with Zee telefilms. In his speech, he also mentioned the tax liability of the company as a foreign broadcasting channel.

"Also, the investment in Buddha Films which is Rs 102 Crores (Rs 1020 million) would be returned to Zee as part of divestment within this financial year along with interest of 15 per cent," he said.

Clarifying on some other investment issues raised by the shareholders, Chandra said that there was no investment in Agee Gold (there as an agreement between Zee and Agee Gold Refineries that Agee will use the Zee brand name for selling their products for which they will pay 20 per cent of their net profit as royalty). 'There is also advertising tie-up under which they have to advertise on the network," Chandra said.

Replying to a question as to how far discussions to bring on board an international media player as a strategic partner had proceeded, Chandra said the search had been put on hold for the time being.

However, RK Singh, corporate affairs CEO, Zee Telefilms, subsequently clarified that what Chandra meant to say was that the search for a strategic partner for group cable arm Siti Cable had been shelved.

Chandra was reluctant to disclose the profits made on the recent mega hit Gadar. "Films are not new for us. Before Gadar happened, in the last seven years there were something like 12 films that we made which were low budget but all were cash positive," he said. Talking about the future plans on the film front, he said this financial year Zee would doing one more film. The investment would be close to Rs 10 to 20 million and if further finances are required, the film will finance itself through the sale of various rights in advance as well as with the advertising partnerships.

To one investor who raised the issue of the sharp increase in salary expenses, he explained that earlier there were only four channel while that number now stood at 13, which needs strong backend to support which adds to the cost. "But if you see the overall operating costs of the company you will see it is well under control," he said.

On the programming front he expressed optimism. "We have 32 per cent of overall eyeballs despite the fall in ratings. Our next rival has 20 per cent which is far behind," Chandra said. The media and entertainment industry will grow at the rate of 30 per cent this year, he said.

PRAISES SHOWERED ON CHANDRA

If one didn't know better it could have seemed that all was well in the Zee camp. At least that was what could be made out purely going by the kind of feedback that investors offered at the AGM.

The main concern among the shareholders present appeared to be to get some free screening of Zee's mega hit film Gadar, a request that was partially accepted by the board. Most of the shareholders who spoke at the AGM started their speech with praises for Chandra and his caliber in having managed such fantastic results despite the bad market conditions.

Some went so far as to say they wished Chandra would soon be on top of the heap as far as Indian billionaires were concerned.

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