Zee consolidated net up 27% on back of good subscription showing

MUMBAI: Subhash Chandra must be smiling at the man in the mirror. The Zee numbers are in and the media major has come out with flying colours. Hefty revenue increments in the third quarter of the 2003-04 fiscal have sent the group's profits soaring.


The Zee group (comprising Zee Telefilms, Padmalaya Telefilms and ETC Networks) has reported consolidated revenues of Rs 3.746 billion, which is a 21.8 per cent growth over the corresponding quarter in the previous fiscal. The consolidated operating profit for the group has gone up17.8 per cent to Rs 1.268 billion vis-a-vis last fiscal's third quarter. Third quarter net profit for the group has increased 27.2 per cent year on year (YoY) and stands at Rs 901.9 million.

Consolidated Group Numbers

Revenues up 21.8 per cent YoY to Rs 3.746 bn

Operating profit up 17.8 per cent YoY to Rs 1.268 bn

Net Profit up 27.2 per cent YoY to Rs 902 mn

A look at the financial statements reveals that the growth in inflows stems largely from an increase in subscription revenues. Overall subscription revenues, including domestic and international inflows clocked a growth of 20.9 per cent YoY and stand at Rs 1.502 billion for the third quarter ended 31 December 2003. Out of this, subscription revenue from domestic markets accounts for Rs 539 million for the quarter ended 31 December 2003.

A buoyant advertising market also helped Zee's ad revenues to pace up 7.7 per cent YoY to Rs 1.842 billion for the third quarter ended December 2003. According to a company statement, paid connectivity of the Zee bouquet is pegged at 4.6 million homes.

Chairman and MD Subhash Chandra has been quoted in the statement saying, "The improving economic environment augurs well for all our domestic businesses. Though traditional sectors of advertising economy including FMCG have not yet shown signs of growing their ad spends, new sectors like telecom, autos and insurance have started using television media to build brands. We believe that the Company's long-term growth potential remains very positive and our unique combination of attributes and initiatives will make Zee an attractive investment option."

Consolidated Group Revenues

Subscription revenue up 20.9 per cent YoY to Rs 1.502 bn

Domestic subscription revenue up 42.5 per cent YoY to Rs 539 mn

International subscription revenue up 23.6 per cent YoY

Advertisement revenue up 7.7 per cent YoY to Rs 1.842 bn

"The third quarter witnessed recovery in advertising business, growing 7.7 per cent from Rs 1,710 million in 3Q FY2003 to Rs 1,842 million. This is in line with our expectations. Our subscription based businesses also continued to grow, despite uncertainties on CAS. Zee is by far the No. 1 South Asian television network in every single market of the world and is further consolidating its position," Chandra said.

The statement also highlighted that the recent organisational restructuring is expected to result in greater operating and cost efficiencies.

The management has recently gone through an extensive portfolio reshuffle. Also, earlier in a meeting held on 15 December 2003, the Zee Telefilms Ltd (ZTL) board had approved the merger of group companies ETC Networks and Econnect India Ltd as part of a larger corporate restructuring plan.

The ZTL board had also approved the merger of five Mauritius based operating entities viz. Software Suppliers International Ltd, Zee Telefilms International Ltd, Zee MGM, Expand Fast Holding Ltd, BVI (provides satellite services to group broadcasting companies) and Asia TV Africa Ltd (markets and distributes the Zee Network in Africa) with Asia Today Ltd, Mauritius (broadcasts Zee TV and Zee Cinema).

Group results apart, Zee Telefilms also has clocked healthier than expected numbers on stand alone basis. Zee Telefilms Ltd has posted a net profit of Rs 367.50 million for the quarter ended 31 December 2003 vis-a-vis Rs 221.90 million for the corresponding quarter in the previous fiscal.

Total income for the company has increased from Rs 1.411 billion in Q3 2002 to Rs 1.792 billion in the quarter ended 31 December 2003.

On the new initiatives front, Zee is adding a religious channel to its existing stable of 15 channel brands. The proposed religious channel, Jaagaran, is slated for a launch some time this month via Asiasat 3S and INSAT satellites.

Add to that the fact that Zee's television channels are being marketed on the DTH platform that was soft launched by ASC Enterprises Ltd on 2 October 2003.

Zee Telefilms results

Net Profit shoots up 65.6 per cent YoY to Rs 367.50 mn

Total Income up 26.97 per cent YoY to Rs 1.792 bn

The positive report card has also lent some colour to the Zee stock, which closed today's session at Rs 159.70 at a gain of 2.4 per cent after trading in a range of Rs 151.60-161.80 on the BSE. Over 3.36 million Zee shares were traded on the BSE alone.

Clearly, with the ongoing restructuring as well as the new marketing and distribution initiatives, the media conglomerate is doing what it takes to keep its books clean and the investors happy. Nonetheless, while many market people believe in the Zee story, there are, however, a few who are adding a welcome dose of skepticism to the flying numbers. For now, though, the numbers speak for themselves.

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