STB duties reduction key to CAS rollout: Merrill Lynch

MUMBAI: A Merrill Lynch report titled "Pre Budget Views - A Balancing Act" dated 24 February 2003 says that reduction in the duties of set top boxes (STBs) will be a key to the implementation of CAS (conditional access system) in the country.

The report states that a 60 per cent reduction in customs duty and halving of excise duty on set top boxes (STB) would be the key benefits that the Indian media sector are looking forward to in the forthcoming Union Budget.


To implement the conditional access system (CAS) legislation, it would be necessary to import STBs, states the report.

According to industry sources, the ministry of information and broadcasting has recommended 10 per cent customs duty and five per cent excise levy for all components of the CAS system for a period of two years.

As STBs are not made in India, the report expects the finance minister to lower the customs levy only on STBs to 10 per cent (down 60 per cent) but not on all the CAS components. This is because, should the levies be reduced on all components of the CAS equipment as proposed by the ministry of I&B, industry might end up importing standard headend equipment (such as modulators and amplifiers) currently made in India as well. This could impact domestic industry adversely.

The report expects the FM to levy eight per cent excise levy (down from 16 per cent), as the five per cent rate slab for excise levy does not exist.

Duty structure on STBs





Merrill Lynch esimates


Merrill Lynch estimates

Finished goods/STBs

25 + 4 per cent

10+ 4 percent

16 per cent

8 per cent

Impact and recommendations of the Merrill Lynch report:

The report says that the cut in duties would be the key to success of the CAS rollout. Price of the STB will be a key determinant of STB penetration. The price of STBs will depend on the rate of the customs duty, as there is no facility available domestically to manufacture STBs.

Given the current incidence of over 50 per cent tax on STBs, significant reduction in duties would make STBs far more affordable. Further, the duty structure would also influence capex requirements of cable operators and cost to consumers.

o Cut in duties could also influence selection of CAS technology. Digital STBs which are prohibitively expensive (Rs7K) at the current duty rate, might become more affordable (Rs4-5K) with duty reduction.

Removal of the 5 per cent surcharge in corporate tax rates. This would benefit both media companies as they pay tax at a high rate - Zee Tele (29 per cent) and Balaji Tele (>35 per cent).

Removal of tax on dividends may benefit Balaji's stock. Balaji with its large free cash, may be tempted to increase the payout. Also Balaji currently offers 4.2 per cent yield, which would be attractive in the zero dividend tax scenario.

Impact on Zee Telefilms:

The report has allotted its overweight rating to the Zee Telefilms scrip at a price level of around Rs 89.3.

The report states that it expects the peak custom duties to be reduced by five per cent. In excise, it expects rationalization of slabs with the reduction in excise duties in some products being accompanied by an increase in others.

The report also expects the government to reiterate its commitment to VAT. Overall, indirect tax changes will be marginally negative for corporate profitability.

The sensitivity analysis for removal of various tax deductions shows the following:

Additions to tax if deductions are removed

Backward area


Aligning of book and IT dept


Effective tax rate

Rs (mln)

EPS change

Rs (mln)

EPS change

Rs (mln)

EPS change

28.5 per cent




1.2 per cent


0.8 per cent

Effect of removal of surcharge on corporate tax:

Price as of 21 February 2003



Effective tax rate

Tax saving

EPS gain




28.5 per cent


1.9 per cent

Based on the 21 February 2003 price of Rs 85.80, the report states that the dividend yield would be around 0.70 and the dividend payout would be 12.7 per cent. 

Latest Reads
Watch Rani Mukerji’s ‘Dadasaheb Phalke Excellence Award’ winning performance in ‘Hichki’ only on Sony MAX

After garnering success at the box office and a heart-warming response from the audience, the Rani Mukerji starrer ‘Hichki’ is all set for its Worldwide Television Premiere only on Sony Pictures Networks’ number 1 Hindi movie channel, Sony MAX on Saturday, 26th March at 9pm. Directed by Siddharth...

Television TV Channels Movie Channels
World Television Premiere of Raid on Star Gold

This May, Star Gold to bring the World Television Premiere of Raid. Touted as first Bollywood project to be based on an Income Tax raid, this Ajay Devgn starrer hit will be showcased on 27th May 2018, Sunday at 1 PM on Star Gold.

Television TV Channels Movie Channels
Travelxp explores Nagaland this month; Strictly Street, Krazee Foodie return for second seasons

Travelxp, the world’s leading travel channel, continues to excite its viewers with its popular show ‘Xplore Nagaland’ and new seasons of ‘Strictly Street’ and ‘Krazee Foodie’ as it continues to bring an experience of new places, diverse cultures and exotic cuisine straight to viewers’ living rooms...

Television TV Channels Factual & Documentary
BBC StoryWorks expands into India

BBC StoryWorks, the global content marketing team within BBC Global News Ltd, has expanded into India with staff now based in the country for the first time as part of wider growth across the Asia Pacific region.

Television TV Channels Factual & Documentary
Firstpost turns 7: a look back at the milestones

MUMBAI: India’s leading digital news platform known for its path breaking content and remarkable journalism, celebrates 7 years in the industry. The platform was launched in 2011 by Network18 as an exclusive online news and views website and app accessible across platforms and...

Television TV Channels News Broadcasting
Star to telecast IPL finale on 17 channels, adds Marathi Malayalam feeds

On the evening of 27 May, Star India wants to ensure you see nothing but IPL on your TV screens, no matter where you are or what language you speak. It has roped in Star Pravah and Asianet movies to add two new language feeds for better reach of the IPL 2018 in Marathi and Malayalam respectively.

Television TV Channels Sports
Sunil Lulla joins Balaji Telefilms as group CEO

MUMBAI: Indian production company Balaji Telefilms has appointed Sunil Lulla as its new group chief executive officer. His new role will be effective from 25 May 2018. He will replace Sameer Nair who quit the company to join Applause Entertainment.

Television TV Channels People
Nielsen on changing landscape of global sports

MUMBAI: The global sports industry is undergoing more disruption than ever as a result of ongoing shifts in media consumption, the emergence of new technologies and a rapidly evolving sponsorship market.

Television TV Channels Sports
ITW Consulting appoints Navneet Sharma as president, international strategy, sales & IP development

ITW Consulting, a global sports commerce specialising in crafting and executing multi-faceted brand management solutions across sports, entertainment and media, has appointed Navneet Sharma as president international strategy sales and IP development w.e.f. from May 2018.

Television TV Channels Sports

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories