Detailed Report | 21 July 2015
Sector: Media
Zee Entertainment
Also called the Habitable Zone or Life Zone, the Goldilocks Zone is an area of space in which a
planet is just the right distance from its home star so that its surface is neither too hot nor too
cold. The Earth, of course, fills that bill, while Venus roasts in a runaway greenhouse effect and
Mars exists as a frozen, arid world. In between, the conditions are just right so that liquid water
remains on the surface of the planet without freezing or evaporating out into space. In other
words, the conditions are such that life can thrive.
In the Goldilocks Zone…
Shobhit Khare
(Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428
Jay Gandhi
(Jay.Gandhi@MotilalOswal.com); +91 22 3089 6693

Zee Entertainment
Contents
Summary ............................................................................................................. 3
Story in charts ...................................................................................................... 4
All set to ride the ad tailwind ................................................................................ 9
24% domestic susbcription revenue CAGR........................................................... 13
Sharp margin rebound in FY17/18....................................................................... 16
Sports investments to continue .......................................................................... 18
Premium valuations to sustain............................................................................ 19
Financials and valuations .................................................................................... 26
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
21 July 2015
2

Zee
| Sector: Media
Detailed Report
Entertainment
Zee Entertainment
BSE Sensex
28,182
S&P CNX
8,529
CMP: INR387
TP: INR475 (+23%)
Buy
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Brokers Poll 2015 for India
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request your ballot.
In the Goldilocks Zone…
Perfect ad/subscription environment; earnings to double over FY15-18
Stock Info
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val (INRm)/Vol‘000
Free float (%)
Financial Snapshot (INR Billion)
Y/E MAR
Net Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
EPS (INR)*
RoE (%)
RoCE (%)
Valuations
P/E (x)
P/E (x)*
Div. Yield (%)
*ex-&TV
Z IN
960.4
371.7/5.8
402 / 265
10/0/19
914/2686
56.9
Zee Entertainment (ZEE) has entered the ‘Goldilocks Zone’—a zone of perfect
conducive conditions that will enable EBITDA and PAT to double over FY15–18E
We expect 22%/24% ad/domestic subscription revenue CAGR over FY15–18E,
driven by share gains in a rebounding advertising market and digitization-led
increase in the broadcaster’s share of subscription revenue
We believe EBITDA margin will rebound sharply in FY17/18 to reach ~30% by
FY18E. ZEE’s flat margin guidance for FY16 (+-100bp), despite it being one of its
biggest investment periods, lends confidence about strong revenue growth
visibility and opportunities to improve cost efficiencies
Our earnings estimates are 9-21% above consensus and imply 25% earnings CAGR
over FY15-18. Maintain Buy with a price target of INR475 (23% upside)
22% ad revenue CAGR led by market share gains:
Our genre-wise forecasts
indicate that ZEE is well placed to ride the expected advertising rebound and
gain market share to achieve ~22% ad revenue CAGR over FY15-18E compared
with ~14% CAGR expected for TV advertising as a whole (assuming a 1.7x GDP
multiplier, in line with the historical average). Excluding the recently launched
Hindi GEC
&TV,
we expect ad revenue CAGR of 17% for ZEE.
Uniquely positioned for phase III/IV digitization:
Phase IIII/IV digitization
(deadline of December 2015/December 2016) presents improved monetization
opportunity from ~80m households; this should increase the broadcasters’
share of domestic subscription revenue from ~INR75b–80b in FY15 to ~INR150b
by FY18E. ZEE is uniquely positioned as one of the only two networks having a
leading GEC across Hindi/major regional markets along with presence across all
relevant genres. Assuming ZEE largely maintains its share in subscription
revenue, we expect 24% domestic subscription revenue CAGR over FY15-18E.
2015 2016E 2017E 2018E
48.8 57.6 69.4 83.8
12.5 13.8 18.9 25.5
9.8 10.9 14.6 19.3
10.2 11.4 15.2 20.1
9.7 11.5 33.5 32.6
10.8 13.1 15.8 19.6
31.2 28.0 30.5 32.0
27.3 27.3 31.8 36.4
Sharp margin rebound in FY17/18; improved cash flows:
While FY16
EBITDA margin might decline to an 8-year low, primarily due to first year losses
for
&TV,
we expect margins to rebound sharply from 26%/24% in FY15/FY16E to
27%/30% in FY17E/FY18E – led by operating leverage in core business and
increasing profitability for
&TV
(expect break-even in FY18E). ZEE’s flat EBITDA
margin guidance for FY16 (+-100bp YoY) means that the worst of margin
uncertainty is already behind. Our industry interactions also indicate lower
competitive intensity for movie rights, which will lead to lower inventory
accumulation on the balance sheet and better FCF generation.
D. Payout (%) 22.1 18.5 14.8 12.4
38.0 34.1 25.5 19.2
35.8 29.4 24.5 19.7
0.6
0.5
0.6
0.6
EV/EBITDA (x) 29.6 26.6 19.2 13.8
We are significantly ahead of consensus; maintain Buy:
Adjusting for
&TV
and preference share liability, ZEE trades at ~31x FY16E EPS (~30% premium v/s
its average P/E of ~24x). Our earnings estimates are 9-21% ahead of consensus.
We expect rich valuations to sustain given 25% earnings CAGR and scarcity
premium. Maintain Buy with a price target of INR475, based on 30x FY17E EPS
(ex-&TV)
plus INR18/sh
&TV
DCF value less INR18/sh preference share liability.
21 July 2015
3

Zee Entertainment
Story in charts
Exhibit 1: Expect TV industry ad revenue CAGR of 14%
Real GDP growth (%)
Ad to GDP multiplier (x)
17
9
7
9
1.9
7
17
13
1.9
1.5
5
8
14
13
14
14
27
6
9
1.9 1.7
1.7
7
1.3
7
8
8
1.7
8
TV industry ad growth (%)
8
Exhibit 2: FY15–18E Incremental ad revenue analysis for ZEE
2.5
5
4
49
7
0.9
FY15 ad
revenue
Source: Company, MOSL
&TV
Regional Hindi GEC Others
ex-&TV
FY18E ad
revenue
Source: Company, MOSL
Exhibit 3: Estimated TV ad revenue market share of ZEE
network (%)
ZEE ad revenue (INRm)
ZEE ad share ex-&TV (%)
ZEE ad share (%)
21.5
18.9
Exhibit 4: Genre wise estimated TV ad revenue market share
of ZEE network (%)
Hindi
21.6
18.5
12.1
25.1
Regional
26.5
19.8
19.2
13.5
15.5
16.2
Others
27.7
20.5
13.7
15.7
17.5
17.2
19.2
17.6
20.7
18.4
16
FY12
20
FY13
24
FY14
27
FY15
34
FY16E
41
FY17E
49
FY18E
FY15E
FY16E
FY17E
FY18E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: ZEE: Estimated FY15 ad revenue break-up
Exhibit 6: Industry: Estimated FY15 ad revenue break-up
Others, 6.8,
26%
Hindi, 10.8,
40%
Others, 56,
36%
Hindi, 50,
32%
Regional,
9.1, 34%
Source: Company, MOSL
Regional,
49, 32%
Source: Company, MOSL
21 July 2015
4

Zee Entertainment
Story in charts
Exhibit 7: India: Estimated C&S subscribers (m)
200
150
105
100
50
0
FY11
FY12
FY13
FY14
FY15 FY16E FY17E FY18E
Source: Industry, MOSL
FY11
FY12
FY13
FY14
FY15
130
139
149
158
166
174
Exhibit 8: India: Estimated C&S subscriber mix (%)
Analogue Cable (%)
DTH (%)
8
27
5
62
7
26
15
53
6
27
18
49
Digital Cable (%)
Other Digital HH (%)
6
30
25
38
5
36
33
26
5
41
41
13
119
7
26
5
62
7
27
19
47
FY16E FY17E FY18E
Source: Industry, MOSL
Exhibit 9: Estimated Pay-TV revenue split (distribution platform-wise)
Analogue Cable
Digital Cable
DTH
Other Digital
447
24
198
124
102
FY17E
Total Subscription Revenue
529
346
23
123
67
132
FY15E
389
24
151
86
128
FY16E
24
259
180
66
FY18E
Source: Company, MOSL
Exhibit 10: Analysis of Broadcasters’ share of Pay TV subscription revenue
FY15E
Pay TV subscription rev (INR b)
-Analog
-Digital
Total
Broadcaster's share (INR b)
-Analog
-Digital
Total
Broadcaster's share (%)
-Analog
-Digital
Total
132
213
346
13
65
79
FY18E
66
463
529
7
139
146
10
10
31
30
23
28
Source: Industry, MOSL
21 July 2015
5

Zee Entertainment
Story in charts
Exhibit 11: EBITDA to double from ~INR12.5b to ~INR25.5b
EBITDA (INRm)
26
26
27
26
EBITDA (%)
27
30
10.8
25.5
7.6
FY11
7.4
FY12
9.5
FY13
12.0
FY14
12.5
FY15
13.8
18.9
10.2
-0.6
13.1
11.4
-1.8
FY16E
-0.7
0.5
15.8
15.2
Exhibit 12: EPS impact of
&TV
launch
ZEE EPS excl '&TV'
ZEE EPS incl '&TV'
&TV EPS contribution
20.1
19.6
24
24
FY16E FY17E FY18E
FY15E*
FY17E
FY18E
Exhibit 13: EBITDA margin trajectory
Consolidated EBITDA margin
Non sports EBITDA margin (incl &TV)
Non sports EBITDA margin (excl &TV)
Exhibit 14: Content cost as a percentage of revenue
Content Cost (INRm)
39
37
38
39
41
As % of revenue
46
43
41
38.6
33.5
32.5
34.6
32.3
30.1
25.7
35.7
28.7
23.9
36.4
31.9
27.2
37.7
34.8
30.4
11
11
FY12
14
FY13
17
FY14
20
26
30
34
25.7
24.3
FY12
25.8
27.2
FY11
FY13
FY14
FY15
FY16E FY17E FY18E
FY11
FY15 FY16E FY17E FY18E
Exhibit 15: ZEE P/E Band
40
35
30
25
20
15
10
5
PE (x)
Peak(x)
Avg(x)
35.8
23.2
10.0
Min(x)
30.3
Exhibit 16: ZEE: Relative P/E v/s Sensex
150
100
50
0
-50
42.4
Zee Ent. PE Relative to Sensex PE (%)
LPA (%)
81.1
Exhibit 17: We are meaningfully ahead of consensus
FY16E
Revenue (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
EBITDA (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
13.8
14.3
-3.3
18.9
18.1
4.2
25.5
22.3
14.6
57.6
56.7
1.5
69.4
66.0
5.1
83.8
76.7
9.3
FY17E
FY18E
EBITDA margin (%)
MOSL
Consensus
MOSL vs Consensus (%)
EPS (INR)
MOSL
Consensus
MOSL vs Consensus (%)
11.4
10.4
9.4
15.2
13.2
20.1
16.6
23.9
25.1
-118bp
27.2
27.4
-24bp
30.4
29.0
140bp
FY16E
FY17E
FY18E
14.7
21.2
Source: Bloomberg, MOSL
21 July 2015
6

Zee Entertainment
EBITDA/EPS to double during FY15-18E
Advertising rebound and phase III/IV digitization to be the key catalysts
In the Goldilocks Zone:
We expect ZEE’s EBITDA/EPS to almost double by FY18E to
INR25.5b/INR19.3b, led by strong 20% revenue CAGR and inflection in EBITDA
margin post FY16.
Exhibit 17: EBITDA to double from ~INR12.5b to ~INR25.5b
EBITDA (INRm)
26
26
27
EBITDA (%)
27
30
Exhibit 18: EPS impact of
&TV
launch
ZEE EPS excl '&TV'
ZEE EPS incl '&TV'
&TV EPS contribution
20.1
19.6
15.2
10.2
-0.6
11.4
-1.8
FY16E
-0.7
0.5
24
26
24
10.8
25.5
7.6
FY11
7.4
FY12
9.5
FY13
12.0
FY14
12.5
13.8
18.9
13.1
15.8
FY15
FY16E FY17E FY18E
Source: Company, MOSL
FY15E*
FY17E
FY18E
Source: Company, MOSL
Large investments seeded:
ZEE launched ~12 new channels during the three-year
period ending FY15, thus taking its overall channel portfolio to 33 domestic/36
international channels. Having seeded several new investments during the
downturn, ZEE is well placed to ride the upcoming ad rebound as well as
subscription monetization, with several new properties getting established to drive
growth.
Exhibit 19: New channel launches during FY13–15
Source: Company, MOSL
Well positioned to benefit from ad rebound:
Indian TV advertising industry revenue
exhibited a CAGR of just ~10% over FY12-15 due to economic slowdown. However,
the number is expected to improve to 14% during FY15–18E based on ~8% real GDP
CAGR and an average multiplier of 1.7x. We believe the launch of Hindi GEC
&TV
will
increase ZEE’s ad market share and will drive ~22% ad revenue CAGR over FY15-18E
for ZEE. Advertising contributes ~54% of total revenue for ZEE.
21 July 2015
7

Zee Entertainment
Domestic subscription monetization remains a big theme:
Though high
investments have kept monetization for MSOs from phase I/II digitization sub-
optimal, broadcasters have been significantly increasing their subscription revenue
share. We estimate that broadcasters’ share of domestic subscription revenue
(cable and DTH combined) has almost doubled in the last three years to ~INR79b.
We expect a 23% CAGR in broadcasters’ share of domestic subscription revenue
during FY15-18E, largely driven by phase III/IV digitization. With one of the biggest
channels, ZEE’s domestic subscription revenue is likely to witness a 24% CAGR.
Margin inflection ahead:
ZEE’s non-sports EBITDA margin declined from 34.6% in
FY14 to 30.1% in FY15 owing to increased investments in new properties. While
FY16 non-sports margin is expected to remain under pressure at 28.7% (given the
first full year of losses toward
&TV),
we expect it to rebound to 34.8% by FY18E as
&TV
achieves scale. Sports losses (expected at INR0.8b-INR0.9b per annum going
forward) are likely to decline as a percentage of overall EBITDA, thus aiding a 27%
consolidated EBITDA CAGR for ZEE.
Please refer to our earlier reports on the Media sector
Report dated 24 March 2015
Report dated 24 November 2014
Report dated 21 May 2015
21 July 2015
8

Zee Entertainment
All set to ride the ad tailwind
22% ad revenue CAGR led by market share gains
Our genre-wise forecasts indicate that ZEE is well placed to ride the expected
advertising rebound and gain market share to achieve ~22% ad revenue CAGR over
FY15-18E.
Excluding the recently launched Hindi GEC
&TV,
we expect ad revenue CAGR of ~17%
for ZEE compared with ~14% CAGR expected for TV advertising as a whole (assuming a
1.7x GDP multiplier, in line with the historical average).
Ad growth rebound to sustain; FMCG category continues to dominate
Given the discretionary nature of advertising spends, the TV industry ad growth-to-
GDP growth multiple generally declines in a decelerating growth environment and
increases during periods of accelerating growth. The TV ad growth multiple was
0.9x–2.5x of real GDP growth during FY09–15, with an average of ~1.7x. With GDP
growth expected to accelerate to ~8%, we model TV ad revenue CAGR of ~14% over
FY15-18E (1.7x multiple). FMCG continues to contribute the lion’s share of
advertisement revenues (~est. 54%).
Exhibit 20: Expect TV industry ad revenue CAGR of 14%
Real GDP growth (%)
17
2.5
7
9
0.9
FY09
FY10
7
9
FY11
1.9
7
FY12
17
13
1.5
1.9
5
8
7
9
7
FY15
1.3
14
1.9
1.7
8
FY16E
13
14
1.7
8
FY17E
14
1.7
8
FY18E
TV industry ad growth (%)
Ad to GDP multiplier (x)
FY13
FY14
Source: Company, MOSL
Exhibit 21: Category-wise break-up of TV advertising in India (%)
Advertising Category
FMCG
E-comm
Telecom, Internet, DTH
Auto
HH Durables
BFSI
Clothing, Fashion & Jewellery
Retail Estate & Home Improvement
Others
Total
FY14
57
1
9
8
5
4
4
4
9
100
FY15
54
5
8
7
4
4
3
3
11
100
Source: Company, MOSL
22% ad revenue CAGR for ZEE; 17% CAGR (ex-&TV)
We expect ZEE’s ad revenue to increase from ~INR27b in FY15E to ~INR49b in FY18E
(~22% CAGR). Of the incremental INR22b revenue, ~INR6b would be contributed by
the new Hindi GEC
&TV,
~INR5b by the regional language channels (Marathi,
21 July 2015
9

Zee Entertainment
Bengali, Telugu, Kannada, Tamil), and ~INR4b by Hindi GECs other than
&TV.
The
balance would come from genres like English, Sports, Kids, and other categories.
Exhibit 22: Estimated ad revenue break-up for ZEE
&TV*
Sports**
Core Business
41
34
27
28
2.7
2.8
FY16E
34
3.0
4.4
FY17E
39
Total
49
24
2.5
0.2
FY15E
3.3
6.1
FY18E
Source: Company, MOSL
Exhibit 23: FY15-18E Incremental ad revenue analysis for ZEE
8
6
27
5
4
49
FY15 ad
revenue
&TV
Regional
Hindi GEC ex-
&TV
Others
FY18E ad
revenue
Source: Company, MOSL
ZEE set to gain ad market share
With strong viewership performance across most genres and launch of
&TV,
ZEE is
set to gain significant TV ad market share. We model ~430bp advertisement market
share expansion for ZEE over FY15-18E, of which ~270bp would be contributed by
&TV.
With several new channel launches and continued strong viewership
performance in most genres, we expect ZEE’s advertising market share to increase
across the three broad categories: Hindi GEC and movies, regional language, and
others— each accounts for almost one-third of the TV industry advertising revenue.
Exhibit 24: Estimated TV ad revenue market share of ZEE network (%)
ZEE ad revenue (INRm)
17.5
ZEE ad share (%)
17.2
19.2
17.6
ZEE ad share ex-&TV (%)
21.5
20.7
18.4
18.9
13.7
15.7
16
FY12
20
FY13
24
FY14
27
FY15
34
FY16E
41
FY17E
49
FY18E
Source: Company, MOSL
21 July 2015
10

Zee Entertainment
Exhibit 25: Genre-wise estimated TV ad revenue market share of ZEE network (%)
Hindi
21.6
18.5
12.1
25.1
Regional
26.5
19.8
19.2
13.5
15.5
16.2
Others
27.7
20.5
FY15E
FY16E
FY17E
FY18E
Source: Company, MOSL
Hindi GEC and Movies:
Hindi GEC and movies genre accounts for ~32% of the ad
revenue for the industry and ~40% for ZEE. Ad revenue market share for ZEE in this
genre is estimated at ~22%. During FY15, ZEE fortified its presence in the Hindi GEC
genre by launching two new channels: Zindagi (niche Hindi GEC) and
&TV
(mainstream Hindi GEC). Launch of
&TV
provides ZEE with an opportunity to
improve its competitive positioning v/s Star and Sony, which have two mainstream
GECs each that enjoy double-digit market share. While we do expect some
cannibalization of flagship channel Zee TV due to
&TV,
the launch of the latter is
expected to significantly improve ZEE’s overall ad revenue market share in the Hindi
genre (from ~22% in FY15E to ~28% in FY18E).
Regional language channels:
Regional language channels account for 32-34% of the
ad revenue for the industry and ZEE. Ad revenue market share for ZEE in this genre
is estimated at ~19%. Key regional markets include Tamil (~27% of the regional
market), Telugu (~17%), Marathi (~15%), Bangla (~10%), Kannada (~11%), and
Malayalam (~9%). ZEE has a strong presence in all these markets except Tamil and
Malayalam. The company has scope to improve its market share, especially in the
Tamil market where it has ~5% share. We expect ZEE’s overall ad market share in
the regional language genre to increase from ~18.5% in FY15E to ~20.5% in FY18E.
Others:
‘Others’ include genres like News (Zee entertainment Enterprises is not
present in this genre), Sports, English, Kids, Infotainment and several other niche
categories; these genres together account for ~26% of advertising revenue for ZEE
and ~36% for the industry. With several new channel launches from ZEE in sports,
education, food etc., we model ZEE’s market share in these genres to increase from
~12% in FY15E to ~16% by FY18E.
21 July 2015
11

Zee Entertainment
Exhibit 26: ZEE: Estimated FY15 ad revenue break-up
Others, 6.8,
26%
Exhibit 27: ZEE: Estimated FY18 ad revenue break-up
Others,
12.6, 26%
Hindi, 10.8,
40%
Hindi, 21.9,
45%
Regional,
9.1, 34%
Source: Industry, MOSL
Regional,
14.4, 29%
Source: Industry, MOSL
Exhibit 28: Industry: Estimated FY15 ad revenue break-up
Others, 56,
36%
Hindi, 50,
32%
Exhibit 29: Industry: Estimated FY18 ad revenue break-up
Others, 78,
34%
Hindi, 79,
35%
Regional,
49, 32%
Source: Industry, MOSL
Regional,
70, 31%
Source: Industry, MOSL
21 July 2015
12

Zee Entertainment
24% domestic susbcription revenue CAGR
Broadcasters’ rev share to increase from ~23% to ~28%, led by digitization
ZEE is uniquely positioned as one of the only two networks having a leading GEC
across Hindi/major regional markets along with presence across all relevant genres.
Phase III/IV digitization, which has a deadline of December 2015/December 2016,
presents improved monetization opportunity from ~80m households.
Indian Pay TV consumer revenue for FY15 is estimated at ~INR346b (~145m average
cable and satellite subscribers with a monthly ARPU of ~INR200). We expect all-India
Pay TV subscription revenue to rise to INR529b (~15% CAGR), led by ~5% CAGR in
subscriber base and ~9% CAGR in ARPU.
Broadcasters’ share of overall subscription revenue is estimated at ~23% in FY15
(~10% in analog and ~31% in digital). As phase III/IV digitization is achieved, we expect
broadcasters’ share to increase to ~28% by FY18E—driving broadcasters’ Pay TV
subscription revenue from ~INR79b in FY15 to ~INR146b by FY18E
(
23% CAGR).
Assuming ZEE largely maintains its share, we expect 24% domestic subscription
revenue CAGR over FY15-18E.
All-India Pay TV subscription revenue to witness 15% CAGR
India’s Cable & Satellite (C&S) subscriber base is estimated at ~150m—~100m cable,
~40m DTH, and ~10m other digital subscribers. While average pan-India Pay TV
ARPU is estimated at ~INR200 per month, it varies according to the platform (DTH
ARPU estimated at ~INR270; analog ARPU at ~INR160). With phase III/IV digitization
likely to be completed by December 2016, we expect the analog subscriber base to
decline from ~70m in FY15 to ~23m in FY18E. The mix shift to higher ARPU digital
platforms (digital cable and DTH) along with ability to control and increase pricing
should drive all-India Pay TV ARPU to ~INR259 by FY18E (9% CAGR). Assuming C&S
subscribers register a 5% CAGR and increase to ~174m, we estimate all-India Pay TV
subscription revenue to rise at a CAGR of 15%—from ~INR346b to ~INR529b.
Exhibit 30: Estimated Pay-TV revenue split (distribution platform-wise)
Analogue Cable
Digital Cable
389
24
151
86
128
FY16E
DTH
Other Digital
447
24
198
124
102
FY17E
259
Total Subscription Revenue
529
24
346
23
123
67
132
FY15E
180
66
FY18E
Source: Company, MOSL
21 July 2015
13

Zee Entertainment
Exhibit 31: India: Estimated C&S subscribers (m)
200
150
105
100
50
0
FY11
FY12
FY13
FY14
FY15 FY16E FY17E FY18E
Source: Industry, MOSL
FY11
FY12
FY13
FY14
FY15
130
139
149
158
166
174
Exhibit 32: India: Estimated C&S subscriber mix (%)
Analogue Cable (%)
DTH (%)
8
27
5
62
7
26
15
53
6
27
18
49
Digital Cable (%)
Other Digital HH (%)
6
30
25
38
5
36
33
26
5
41
41
13
119
7
26
5
62
7
27
19
47
FY16E FY17E FY18E
Source: Industry, MOSL
24% domestic subscription revenue CAGR for ZEE
Currently, ~40% of the Pay TV subscription revenue for the industry comes from
analog cable where broadcasters’ revenue share is typically ~10% compared with
~31% for digital platforms (DTH and digital cable). With bulk of the subscriber base
expected to migrate to addressable platforms, the broadcasters’ share of Pay TV
subscription revenue is set to increase from ~23% to ~28%. This would drive
broadcaster Pay TV subscription revenue from ~INR79b in FY15E to ~INR146b in
FY18E (~23% CAGR). With strong bouquet of channels in place, we expect ZEE to
largely maintain its share of industry subscription revenue and record ~24%
domestic subscription revenue CAGR.
Exhibit 33: Analysis of broadcasters’ share of Pay TV subscription revenue
FY15E
Pay TV subscription rev (INR b)
-Analog
-Digital
Total
Broadcaster's share (INR b)
-Analog
-Digital
Total
Broadcaster's share (%)
-Analog
-Digital
Total
132
213
346
13
65
79
FY18E
66
463
529
7
139
146
10
10
31
30
23
28
Source: Industry, MOSL
Strong channel portfolio to drive superior monetization
ZEE is uniquely positioned as one of the only two networks having a leading GECs
across Hindi/major regional markets along with presence across all relevant genres.
While leading GEC properties across languages would enable ZEE to extract fair
share of subscription revenue in all markets, presence in most non-GEC genres
allows for incremental upside from segmentation and packaging implementation
from digitized universe.
21 July 2015
14

Zee Entertainment
Exhibit 34: Group Offerings
Networks
Hindi GEC
Zee Group
Zee TV
&TV
Zindagi
Zee Smile
Zee Anmol
Star Group
Star Plus
Life Ok
Star Utsav
Viacom18 GroupMSM Group
Colors
SET
Rishtey
SAB
Sony Pal
Regional GEC
Marathi
Bengali
Bengali
Telugu
Kannada
Tamil
Malayalam
Gujarati
Odia
Hindi Movie
Sports
Zee Marathi, Zee Talkies
Star Pravah
Colors Marathi
Zee Bangla
Star Jalsha
Colors Bangla
Zee Bangla Cinema
Jalsha Movies
Zee Telugu
MAA TV, MAA movies, MAA Music, MAA Gold
Zee Kannada
Asianet Suvarna, Suvarna Plus
Colors Kannada
Zee Tamizh
Star Vijay
NA
Asianet, Asianet Plus, Asianet Movies
Colors Gujarati
Sarthak
Colors Odia
Zee Cinema
Star Gold
Zee Action
Movies OK
Zee Classic
&Pictures
Ten Sports
Star Sports 1
Ten Action
Star Sports 2
Ten Cricket
Star Sports 3
Ten Golf
Star Sports 4
Z café
Z Studio
Star World
Star Movies
Star World Premiere
Star Movies Action
FX
Baby TV
Comedy Central
AATH
MAX
MAX2
SIX
KIX
English Entertainment & Movies
AXN
PIX
Kids
ZeeQ
Nickelodeon
NICK
Sonic
M TV
Vh1
ANIMAX
Music
Zing
Z etc Bollywood
Zee Aflam (MENA region)
Zee Alwan (MENA region)
Zee Variasi (Malaysia)
Zee Bioskop (Indonesia)
Zee Nung (Thailand)
Zee World
Zee Hiburan
Zee Bollyworld
Zee Khana Khazana
Zee Salaam
Channel V India
MIX
International business
Asianet Middle-East
Syndication
Niche, Alternate lifestyle etc
National Geographic Channel
Net Geo Music
Nat Geo People
Nat Geo Wild
Fox India
Fox Crime
Fox Life
Fox Sports News
Source: Company, MOSL
21 July 2015
15

Zee Entertainment
Sharp margin rebound in FY17/18
FCF generation to improve
While FY16 EBITDA margin might decline to an eight-year low, primarily due to first
year losses for
&TV,
we expect margins to rebound sharply from 26%/24% in
FY15/FY16E to 27%/30% in FY17E/FY18E—led by operating leverage in core business
and increasing profitability for
&TV
(expect break-even in FY18E).
ZEE’s flat EBITDA margin guidance for FY16 (+-100bp YoY) implies that worst of margin
uncertainty is already behind.
Our industry interactions also indicate lower competitive intensity for movie rights,
which will lead to lower inventory accumulation on the balance sheet and better FCF
generation.
FY15/16 margin impacted by investments, but expected to rebound
With two new Hindi GEC launches (Zindagi,
&TV)
in FY15, ZEE’s FY15 non-sports
EBITDA margin declined ~450bp YoY to 30.1% (down ~230bp excluding
&TV
impact).
However, consolidated EBITDA margin (including sports business) declined ~150bp
to 25.7% due to lower sports loss. With FY16 being the first full year of operations
for
&TV
(an incremental ~290bp EBITDA margin impact YoY) and sports loss
expected to expand due to higher days of India Cricket, we model EBITDA margin to
decline ~175bp to 23.9% during FY16.
While reported margin might continue to tread lower due to impact of
&TV,
core
margin (excluding sports and
&TV)
has already bottomed-out. With major
investments behind and strong advertising/subscription growth ahead, we expect
core margin to expand ~540bp over FY15–18E.
Exhibit 34: EBITDA margin trajectory
Consolidated EBITDA margin (%)
-Non-sports (excl &TV)
38.6
38.6
33.5
33.5
25.7
FY11
24.3
FY12
34.6
32.5
32.5
25.8
FY13
34.6
27.2
FY14
25.7
FY15
32.3
30.1
28.7
35.7
36.4
31.9
37.7
34.8
30.4
27.2
FY17E
FY18E
-Non-sports (incl &TV)
23.9
FY16E
Source: Company, MOSL
Content costs rise on new programming additions
New channel investments have increased content cost as a percentage of revenue
(from ~38% in FY13 to ~41% in FY15). FY16 would be the first full year of content
costs being incurred for the new channel
&TV
(launched in March 2015). As a result,
content cost is expected to increase ~32% YoY in FY16 (of which
&TV
would account
for ~20% increase). Content cost as a percentage of revenue is expected to increase
from 41% in FY15 to 46% in FY16. However, with content investment through in
FY16, it will be a source of margin expansion in FY17/18.
21 July 2015
16

Zee Entertainment
Exhibit 35: Content cost as percentage of revenue
Content Cost (INRm)
39
37
38
39
41
As % of revenue
46
43
41
11
FY11
11
FY12
14
FY13
17
FY14
20
FY15
26
FY16E
30
FY17E
34
FY18E
Source: Company, MOSL
Rationalizing movie costs to drive better FCF generation
ZEE underwent significant inventory increase during FY13/14, led by increased
competitive intensity for movie purchases; as a result, inventory as a percentage of
content costs increased to 69% in FY14. With competitive intensity coming down,
inventory as a percentage of content costs declined to ~59% in FY15. Movie
acquisition costs are expected to remain relatively soft, driving better FCF
generation for the company going forward.
Exhibit 36: Inventory as a percentage of content cost
Content Cost (INR b)
Inventory as % of COGS (%)
64
47
63
69
59
20.1
11.4
11.4
14.0
17.1
FY11
FY12
FY13
FY14
FY15
Source: Company, MOSL
Exhibit 37: FCF generation (INR b)
INR b
CFO
Capex
FCF
FY12
1.5
0.6
0.8
FY13
3.8
0.9
2.9
FY14
8.9
0.7
8.2
FY15
5.1
0.5
4.6
FY16E
FY17E
FY18E
7.5
8.4
12.1
0.5
0.6
0.7
7.0
7.8
11.4
Source: Company, MOSL
21 July 2015
17

Zee Entertainment
Sports investments to continue
Consolidation, digitization, non-cricket sports key to profitability
ZEE is among the three major sports broadcasters in India (besides Star and Sony).
India remains a predominantly cricket-viewing nation. However, non-cricket sports
such as football, tennis, badminton and Kabaddi are picking up.
Sports business is currently loss-making, given the lack of subscription monetization.
However, phase III/IV digitization is expected to be a catalyst.
For ZEE, FY16 would have more India cricket v/s FY15; hence, losses from sports are
expected to increase. We model sports losses of INR0.8b-0.9b each in FY16/17/18 as
we expect investments to continue in the medium term.
Star dominates the sports segment
The estimated INR27b sports segment is led by Star, which has broadcast rights for
all major ICC events and matches of India, Australia and England. It also has a good
mix of non-cricket sports. Sony has IPL rights, which it mixes up with non-cricket
sports like football, basketball and fight sports. ZEE hasn’t been very aggressive in
sports and currently holds broadcasting rights for five cricket boards—South Africa,
Sri Lanka, Pakistan, West Indies and Zimbabwe—along with non-cricket sports.
Sports profitability to improve in the long term
TV revenue for sports channels in India is largely advertising led and cricket heavy
(Cricket constitutes 80-85% of the sports media revenue). With high competition for
broadcast rights, cricket is currently a loss-making sport for channels. Three key
trends will improve long-term profitability: 1) Consolidation, 2) Better subscriber
monetization, led by digitization, and 3) Increased popularity of non-cricket sports,
which have lower cost.
…however sports losses for ZEE to increase in FY16
Sports Losses for Zee in FY15 reduced significantly due to lower number of matches
involving India. FY16 is expected to have more matches involving India (~85 days v/s
~9 days in FY15); hence, sports losses are expected to increase. We have factored in
sports losses of INR0.8b for FY16 v/s INR0.26b in FY15 and INR0.97b in FY14 .
Exhibit 38: ZEE: Yearly sports loss (INR m)
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
-266
-870
-1,480
-2,078
Source: Company, MOSL
-976
-811
-892
-815
21 July 2015
18

Zee Entertainment
Premium valuations to sustain
25% earnings CAGR, scarcity premium to support valuations
Adjusting for &TV and preference share liability, ZEE trades at ~31x FY16E EPS (~30%
premium v/s its average P/E of ~24x and ~15% discount v/s MOSL consumer
universe). Given strong earnings CAGR of ~25% and scarcity premium, we expect rich
valuations to sustain.
Since March 2015, we have upgraded our earnings estimates 23%/13% for FY16/FY17.
Maintain Buy with a price target of INR475, based on 30x FY17E EPS (ex-&TV). We add
INR18/sh toward our DCF-based valuation for
&TV
and deduct INR18/sh towards NPV
of the preference share liability.
Exhibit 40: ZEE: Relative P/E v/s Sensex
Exhibit 39: ZEE P/E Band
40
35
30
25
20
15
10
5
PE (x)
Peak(x)
Avg(x)
35.8
Min(x)
30.3
23.2
150
100
50
0
-50
Zee Ent. PE Relative to Sensex PE (%)
LPA (%)
81.1
42.4
10.0
Source: Company, MOSL
Source: Company, MOSL
Exhibit 41: Media universe valuation
Mkt
CMP RECO
(USD B) (INR)
D B Corp
1.0
321 Buy
Den Networks
0.4
155 Neutral
Dish TV
1.8
115 Buy
Hathway Cable
0.6
48 Buy
Hindustan Media
0.2
243 Buy
HT Media
0.3
91 Neutral
Jagran Prakashan
0.6
135 Buy
PVR
0.5
816 Buy
Siti Cable
0.4
35 Buy
Sun TV
1.7
263 Not
Zee Entertainment
5.5
387 Buy
Media Sector Aggregate 13.1
11
Sector / Companies
EPS (INR)
PE (x)
FY15 FY16 FY17 FY15 FY16 FY17
17.2 19.3 23.6 18.6 16.6 13.6
-8.1 4.5 1.3 -19.1 34.0 120.2
0.0 2.2 6.5
- 51.8 17.8
-2.9 -0.6 2.1 -16.5 -81.0 22.5
19.2 21.7 25.1 12.7 11.2 9.7
8.5 7.2 8.7 10.7 12.7 10.5
7.2 8.3 9.3 18.6 16.2 14.5
3.3 6.1 18.4 244.2 134.2 44.2
-1.6 0.2 0.3 -21.8 146.5 140.5
18.7 21.9 25.8 14.0 12.0 10.2
10.2 11.4 15.2 38.0 34.0 25.4
39.4 25.9 18.2
EV/EBIDTA (x)
FY15 FY16 FY17
12.0 9.6 7.9
25.1 7.2 7.9
13.2 12.6 8.0
21.0 11.4 6.6
6.8 4.3 3.0
6.4 3.0 1.9
9.4 7.7 6.9
16.6 13.7 9.3
25.0 11.2 9.5
10.2 5.5 4.7
24.5 23.7 17.0
14.8 11.3 8.7
ROE (%)
FY15 FY16 FY17
26.0 25.9 28.0
-7.4 4.2 1.1
NA NA NA
-17.4 -3.4 11.7
20.9 19.4 18.6
9.9 7.5 8.3
21.7 22.0 21.8
3.4 4.8 10.6
-55.9 6.3 6.1
21.8 23.7 25.5
31.3 28.1 30.7
13.9 18.5 22.3
EPS Gr (%)
FY15 FY16 FY17
8.4 12.1 22.1
PL
LP -71.7
Loss
LP 191.0
Loss Loss LP
26.7 12.9 15.8
14.9 -15.8 21.8
12.8 15.0 11.5
-77.7 81.9 203.3
Loss
LP 4.2
4.7 17.2 17.8
9.7 11.6 33.7
-1.9 51.9 42.6
Source: Company, MOSL
21 July 2015
19

Zee Entertainment
Exhibit 42: Consumer universe valuation
Sector / Companies
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
Mkt
(USD
11.4
5.2
4.3
7.7
4.1
6.6
4.1
31.1
39.4
0.8
4.6
9.6
4.4
0.2
7.7
141.3
CMP
(INR)
817
2,874
2,052
301
1,160
1,223
6,335
891
314
310
429
6,085
546
85
3,530
15
EPS (INR)
FY15 FY16 FY17 FY15
Buy 14.8 18.9 24.0 55.1
Buy 47.8 66.0 77.9 60.2
Neutral 41.1 48.6 59.1 49.9
Neutral 6.1 7.5 8.7 49.3
Buy 21.6 24.4 32.3 53.7
Neutral 25.9 36.0 43.8 47.2
Neutral 138. 171.0 206.0 45.7
Neutral 17.5 20.6 24.4 50.9
Neutral 12.1 13.5 15.3 25.9
Buy
4.4 9.1 8.2 71.0
Neutral 8.9 10.8 13.4 48.3
Neutral 130. 116.0 145.3 46.7
Neutral 10.2 13.6 15.8 53.7
Buy
5.7 6.2 7.5 14.9
-
Buy -47.2 41.4 62.3
43.1
Reco
PE (x)
FY16
43.2
43.6
42.2
40.1
47.5
34.0
37.0
43.3
23.2
34.1
39.8
52.5
40.2
13.7
85.3
35.0
FY17
34.0
36.9
34.7
34.5
35.9
27.9
30.7
36.5
20.5
37.7
32.0
41.9
34.5
11.3
56.6
29.6
EV/EBIDTA (x)
ROE (%)
EPS Gr. (%)
FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17
37.0 26.9 20.9 32.4 35.2 37.5 15.8 27.5 27.2
32.7 28.6 23.8 61.9 62.4 54.0 44.8 38.1 18.2
32.8 27.2 21.7 88.0 92.8 99.9 13.9 18.3 21.5
35.3 30.0 25.5 35.9 35.7 33.8 16.5 22.9 16.2
40.8 35.5 27.7 45.3 41.5 45.8 21.7 13.2 32.2
27.5 24.0 19.7 20.4 24.2 24.8 19.6 38.9 21.6
- 23.2 20.5
33.6 26.1 21.4 29.6 31.0 31.6
35.9 31.7 26.0 108. 116.6 133.4 6.4 17.6 18.5
18.3 15.7 13.8 34.8 34.9 35.6 9.8 11.3 13.4
35.1 25.6 21.3 16.6 26.4 22.4 -7.5 108.0 -9.6
28.6 27.0 21.6 33.5 31.0 32.6 18.1 21.2 24.4
31.9 31.5 25.7 48.2 40.1 51.8 6.8 -11.0 25.3
39.1 26.3 22.4 23.1 25.9 26.0 9.9 33.3 16.7
- 8.6 21.8
10.9 8.7 7.2 8.6 8.9 10.1
74.2 44.5 33.6 -21.7 16.8 20.9 LP
LP 50.8
28.2 24.0 20.1 33.2 36.0 37.3 7.8 23.0 18.4
Source: Company, MOSL
Exhibit 43: MOSL estimates vs Consensus
FY16E
Revenue (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
EBITDA (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
EBITDA margin (%)
MOSL
Consensus
MOSL vs Consensus (bp)
PAT (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
EPS (INR)
MOSL
Consensus
MOSL vs Consensus (%)
57.6
56.7
1.5
13.8
14.3
-3.3
23.9
25.1
-118bp
10.9
10.2
7.1
11.4
10.4
9.4
FY17E
69.4
66.0
5.1
18.9
18.1
4.2
27.2
27.4
-24bp
14.6
13.0
12.3
FY18E
83.8
76.7
9.3
25.5
22.3
14.6
30.4
29.0
140bp
19.3
16.3
18.2
15.2
20.1
13.2
16.6
14.7
21.2
Source: Bloomberg, MOSL
21 July 2015
20

Zee Entertainment
Exhibit 44: Annexure 1: &TV DCF calculation
INRb
Industry ad revenue
Hindi GEC share (%)
Hindi GEC Industry ad revenue
& TV share of Hindi GEC (%)
& TV ad revenue
& TV subscription revenue
Total revenue
YoY (%)
Total content cost
Other cost (incl launch expenses in
Total cost
EBITDA
YoY (%)
EBITDA margin (%)
Capex
Capex/Sales (%)
Increase in working capital
Tax
FCF
YoY (%)
Terminal Value
Mar' 16E
PV of FCF
Net Debt (Mar-16E)
PV-Explicit Period
PV-Terminal Value
Equity Value (INR b)
Equity value per share of ZEE
Terminal value assumptions
EBITDA margin
Capex/Sales
Cash tax rate
FCF margin
FCF growth
FCF multiple
EBITDA multiple
WACC
FY15E*
155
27
42
NA
0.2
0.0
0.2
0.3
0.8
1.1
-0.9
-481
0.2
110
-0.4
-0.7
FY16E
175
29
51
6
2.8
0.0
2.8
1453
4.1
1.3
5.4
-2.5
NA
-90
0.2
7
0.4
-0.9
-2.2
NA
FY17E
199
30
59
8
4.4
0.8
5.2
86
4.5
1.6
6.2
-0.9
NA
-18
0.2
4
0.3
-0.4
-1.1
NA
FY18E
227
30
68
9
6.1
1.5
7.6
46
5.1
1.9
6.9
0.7
NA
9
0.2
3
0.3
0.2
0.0
NA
FY19E
258
30
77
9
7.0
2.0
9.0
18
5.5
2.1
7.7
1.3
90
14
0.2
2
0.2
0.4
0.5
NA
FY20E
295
30
88
9
7.9
2.3
10.2
14
6.0
2.4
8.5
1.8
40
17
0.2
2
0.2
0.5
0.9
65
FY21E
336
30
101
9
9.0
2.6
11.7
14
6.6
2.7
9.3
2.4
34
21
0.2
2
0.2
0.7
1.2
42
FY22E
376
30
113
9
10.1
3.0
13.1
12
7.2
3.0
10.2
2.9
20
22
0.3
2
0.2
0.9
1.5
25
FY23E
421
30
126
9
11.3
3.3
14.7
12
7.9
3.4
11.2
3.4
19
23
0.3
2
0.2
1.1
1.9
21
FY24E
463
30
139
9
12.5
3.7
16.2
10
8.6
3.8
12.4
3.8
12
24
0.3
2
0.2
1.2
2.1
14
FY25E
510
30
153
9
13.7
4.1
17.8
10
9.2
4.2
13.4
4.4
15
25
0.4
2
0.2
1.4
2.4
16
42
0.9
-1.0
3
4
16
18
18
25%
2%
34%
15%
5.0%
16.3x
9.9x
11.1%
0.0
0.4
0.6
0.7
0.8
0.9
0.9
WACC
Equity
Debt
WACC
Wt (%)
0.60
0.40
Cost
13.4%
7.8%
11.1%
Rf
7.5
ERP
6.5
Beta
0.9
Source: Company, MOSL
21 July 2015
21

Zee Entertainment
Exhibit 45: Sports broadcasting contracts in India
Star group
Cricket
ICC World Twenty20 2016
ICC Champions Tropy 2017 and 2021
ICC cricket World Cup 2019 and 2023
ICC World Twenty20 2020
Zee group
MSM group
Broadcast rights with cricket board of
IPL
South Africa
Broadcasr rights with cricket board of
Pakistan
Broadcast rights with cricket board of
West Indies
Broadcast rights with cricket board of
Sri Lanka
Broadcast rights with cricket board of
Zimbabwe
Neo
Football
ICC U19 Cricket World Cup 2016, 2018,
2020, 2022
ICC Women’s World Cup 2017, 2021
ICC Women’s World Twenty20 2018, 2022
Broadcast rights with cricket board of India
(2012-18)
Broadcasr rights with cricket board of
England (2013-19)
Broadcast rights with cricket board of
Australia (2013-17)
Big Bash league
AFC Champions League
UEFA Champions League
AFC Cup
UEFA Europa League
Series A
UEFA Super League
Bundesliga
Major League Soccer
Premier League
Indian Super League
Supercopa de Espana
Ligue 1
Copa del Rey
German FA Cup
Italian Cup
English League Cup
Brazilian League Cup
Dutch League Eredivisie
I-League
FFA Cup
A-League
U.S. Open
PGA Tour
UEFA Euro 2016
UEFA Euro 2016 Qualifiers
FIFA World Cup
Scottish Professional
Football league
Copa America 2015
FA Cup
Golf
Hockey
Tennis
Hockey India League
U.S. Open
Wimbledon
ATP World Tour/WTA Tour
U.S. Open
Australian Open
French
Open
Kabaddi
Badminton
Motor Racing
Basketball
Wrestling
Pro-Kabaddi League
Indian Badminton League
MotoGP
World Kabbadi league
Italian Series A
NBA
WWE RAW, Smackdown
TNA
Wrestling
Others
Tour De France
Multi-discipline
Summer Olympics
events
Source: Media Articles, ESPN CricInfo, MOSL
21 July 2015
22

Zee Entertainment
Exhibit 46: Annexure 3: Zee FY16 cricket calendar
FY15
Tests
Ireland vs Sri lanka
England vs Sri Lanka
West Indies vs New Zealand
Sri lanka vs South Africa
Zimbabwe vs Afghanistan
Sri Lanka vs Pakistan
Zimbabwe vs South Africa
West Indies vs Bangladesh
Pakistan vs Australia
India vs West indies
New Zealand vs South Africa
Bangladesh vs Zimbabwe
India vs Sri Lanka
Australia vs South Africa
Pakistan vs New Zealand
Sri lanka vs England
South Africa vs West Indies
New Zealand vs Sri Lanka
New Zealand vs Pakistan
West indies vs England
Bangladesh vs Pakistan
Total
India-centric Cricket Days
0
2
3
2
0
2
1
2
2
0
0
3
0
0
3
0
3
2
0
3
2
30
0
ODIs
2
5
0
3
4
3
3
3
3
4
3
5
5
5
5
7
5
7
2
0
3
77
9
T20s
0
1
2
0
0
1
0
1
1
0
0
0
0
3
2
0
3
0
0
0
1
15
0
Total
India-centric Cricket Days
34
65
43
13
24
7
Zimbabwe vs Pakistan
West Indies vs Australia
Sri Lanka vs Pakistan
South Africa vs
Zimbabwe vs India
Zimbabwe vs New Zealand
South Africa vs New
Sri Lanka vs India
India vs South Africa
Pakistan vs England
Sri Lanka vs West Indies
Australia vs West Indies
South Africa vs England
Pakistan vs India
New Zealand vs Sri Lanka
India vs Sri Lanka
South Africa vs Australia
Tests
0
2
3
2
0
0
0
3
4
3
2
3
4
3
2
3
0
FY16
ODIs
3
0
5
3
3
3
3
0
5
5
3
0
5
5
0
0
0
T20s
2
0
2
2
2
1
2
0
3
1
2
0
2
2
0
0
3
Source: Media articles, ESPN Cricinfo, MOSL
21 July 2015
23

Zee Entertainment
Exhibit 47: ZEE Rate Card for MSO/DTH/HITS/IPTV per subscriber in DAS and non-DAS areas (INR)
Name of the Channel
Zee TV
Zee Cinema
Zee Marathi
Zee Café
Zee Studio
Zee Bangla
Zee Salaam
Zee ETC
Zing
Zee Talkies
Zee Khana Khazana
Zee Smile
Zee Kannada
Zee Telugu
Zee Classic
Zee Action
Zee Bangla Cinema
Zee Q
& Pictures
Zee Anmol
Zindagi
Zee News
Zee Punjab Haryana Himachal
Zee Business
Zee Sangam
24 Ghanta
Zee 24 Taas
Zee Tamizh
Zee Kalinga
Zee MP/Chattisgarh
&TV
Zee Marudhara
Ten Sports
Ten Cricket
Ten Action
Ten Golf
Genre
Hindi GEC
Hindi Movies
Marathi GEC
English GEC
English Movies
Bangla GEC
Urdu Infotainment
General Entertainment
Music/Youth GEC
Marathi Movies
Hindi Lifestyle
General Entertainment
Kannada Regional General Entertainment
Telugu GEC
Hindi Movies
Hindi Movies
Bangla Movies
Educational
Hindi Movies
Hindi GEC
Hindi GEC
Hindi News
Regional News
Hindi Business News
Regional News
Bangla Regional
Marathi News
Tamil GEC
Regional Odia Infotainment
Hindi Regional
Hindi GEC
Hindi /Rajasthani Regional
Sports
Sports
Sports
Sports
Rate payable per month
7.44
7.44
4.59
4.59
4.01
4.65
8.04
1.72
2.87
8.89
16.08
3.52
4.28
5.97
5.73
5.73
8.68
53.61
9.65
FTA
11.75
4.3
0.86
2.75
FTA
3.44
4.87
FTA
5.96
4.87
10.58
5.9
8.61
19.01
18.76
19.3
Rate payable per month
17.71
17.71
10.92
10.92
9.56
11.07
19.15
4.09
6.83
21.17
38.29
8.39
10.19
14.21
13.65
13.65
20.68
127.65
22.98
FTA
27.97
10.23
2.04
6.56
FTA
8.19
11.6
FTA
14.2
11.6
25.2
14.04
20.49
45.25
44.68
45.95
Source: Company, MOSL
21 July 2015
24

Zee Entertainment
Exhibit 48: Zee Entertainment: A snapshot
INR b
Advertisement Revenue
YoY (%)
Subscription Revenue
YoY (%)
- Domestic
YoY (%)
- International
YoY (%)
Other Sales & Sevices
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 (incl &TV)
-&TV
-Non-sports (excl &TV)
EBITDA
-Sports
-Non-sports (incl &TV)
-&TV
-Non-sports (excl &TV)
EBITDA margin (%)
-Sports
-Non-sports (incl &TV)
-Non-sports (excl &TV)
FY09
10.6
14
9.0
22
4.5
29
4.5
15
2.1
33
21.8
19
16.3
26
5.5
1
25.2
49
42
21
21
10
21.8
3.9
17.9
FY10
10.7
1
9.8
9
5.7
25
4.2
-8
1.5
-32
22.0
1
15.9
-3
6.1
11
27.7
49
45
26
19
7
22.0
3.2
18.8
FY11 *
17.1
60
11.3
15
7.2
27
4.1
-2
1.1
-28
29.4
34
21.8
38
7.6
24
25.7
58
38
24
14
4
29.4
4.4
25.0
FY12
15.8
-7
13.2
17
9.2
28
4.0
-2
1.3
25
30.4
3
23.0
5
7.4
-2
24.3
52
44
30
13
4
30.4
3.9
26.5
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
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
FY15
26.6
12
17.9
0
13.9
6
4.0
-17
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
0.2
42.4
12.5
-0.3
12.8
-0.9
13.7
25.7
-4.2
30.1
32.3
FY16E
33.7
27
19.7
10
15.8
14
3.9
-3
4.1
-5
57.6
18
43.8
21
13.8
10
23.9
59
34
28
7
7
57.6
6.8
50.8
2.8
48.0
13.8
-0.8
14.6
-2.5
17.1
23.9
-12.0
28.7
35.7
FY17E
41.2
22
24.1
22
20.1
27
4.0
3
4.1
0
69.4
21
50.6
16
18.9
37
27.2
59
35
29
6
6
69.4
7.4
62.0
5.2
56.8
18.9
-0.9
19.7
-0.9
20.7
27.2
-12.0
31.9
36.4
FY18E
48.9
19
30.9
28
26.7
33
4.1
3
4.1
0
83.8
21
58.3
15
25.5
35
30.4
58
37
32
5
5
83.8
8.2
75.6
7.6
68.0
25.5
-0.8
26.3
0.7
25.6
30.4
-10.0
34.8
37.7
5.5
0.4
5.1
5.1
25.2
10.0
28.5
28.5
6.1
-0.6
6.7
6.7
27.7
-18.3
35.4
35.4
7.6
-2.1
9.6
9.6
25.7
-47.1
38.6
38.6
7.4
-1.5
8.9
8.9
24.3
-37.6
33.5
33.5
9.5
-0.9
10.4
10.4
25.8
-17.5
32.5
32.5
12.0
-1.0
13.0
13.0
27.2
-14.8
34.6
34.6
* Includes merger of Regional General Entertainment Channels
Source: Company, MOSL
21 July 2015
25

Zee Entertainment
Financials and valuations
Income Statement
Y/E March
Advertisement Revenues
Subscription Revenues
Other Sales & Sevices
Net Sales
Change (%)
Total Income
Total Expenses
EBITDA
Change (%)
% of Net Sales
Depreciation
EBIT
Other Income
Interest & Finance Charges
PBT
Tax
Effective Rate (%)
PAT
Minority Interest
Adj. PAT
Change (%)
2012
15,841
13,245
1,320
30,406
3.4
30,406
23,010
7,396
-2.3
24.3
323
7,073
1,384
50
8,407
2,500
29.7
5,907
-15
5,892
-7.5
2013
19,639
16,234
1,123
36,997
21.7
36,997
27,452
9,545
29.0
25.8
399
9,146
1,461
86
10,521
3,337
31.7
7,184
14
7,198
22.2
2014
23,800
18,022
2,395
44,217
19.5
44,217
32,175
12,042
26.2
27.2
501
11,541
1,807
158
13,191
4,291
32.5
8,900
21
8,921
23.9
2015
26,603
17,944
4,299
48,846
10.5
48,846
36,299
12,547
4.2
25.7
673
11,874
2,278
103
14,049
4,284
30.5
9,765
20
9,785
9.7
2016E
33,737
19,741
4,084
57,561
17.8
57,561
43,778
13,783
9.9
23.9
730
13,054
3,189
113
16,130
5,242
32.5
10,888
20
10,908
11.5
(INR Million)
2017E
41,188
24,148
4,089
69,425
20.6
69,425
50,572
18,854
36.8
27.2
792
18,062
3,597
113
21,545
7,002
32.5
14,543
20
14,563
33.5
2018E
48,857
30,867
4,094
83,817
20.7
83,817
58,318
25,499
35.2
30.4
860
24,639
4,069
123
28,585
9,290
32.5
19,295
20
19,315
32.6
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Preference capital
Minority Interest
Loans
Other non-current liabilities
Capital Employed
Net Fixed Assets
Goodwill
Capital WIP
Investments
Deferred tax assets (net)
Other non-current assets
Curr. Assets, Loans&Adv.
Program Films
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Other Current assets
Current Liab. & Prov.
Sundry Creditors
Other Current Liabilities
Provisions
Net Current Assets
Appl.of Funds
E: MOSL Estimates
21 July 2015
2012
959
33,349
34,308
0
14
21
0
34,343
2,305
6,894
201
675
337
314
32,428
7,339
8,660
11,100
4,975
354
8,820
3,872
3,015
1,933
23,608
34,343
2013
954
38,161
39,115
0
33
28
174
39,350
2,779
7,127
69
651
288
329
39,500
8,745
9,890
13,100
7,430
335
11,404
5,172
3,445
2,787
28,096
39,350
2014
960
26,247
27,207
20,170
61
29
324
47,791
3,108
7,625
997
2,941
298
361
44,987
11,736
10,281
15,300
6,788
882
12,538
5,050
3,842
3,646
32,449
47,791
2015
960
34,449
35,410
20,170
4
22
288
55,894
3,490
7,887
878
1,464
531
378
55,431
11,878
10,692
20,480
11,053
1,328
14,256
4,204
4,980
5,072
41,153
55,790
2016E
960
41,465
42,426
20,170
4
22
288
62,910
3,295
7,887
828
1,464
531
378
64,519
15,266
12,358
25,081
10,512
1,302
15,993
5,591
5,330
5,072
48,527
62,910
(INR Million)
2017E
960
51,962
52,923
20,170
4
22
288
73,407
3,086
7,887
778
1,464
531
378
76,953
17,451
14,905
30,348
12,679
1,571
17,669
6,449
6,148
5,072
59,284
73,407
2017E
960
66,920
67,881
16,136
4
22
288
84,331
2,858
7,887
728
1,464
531
378
89,988
19,835
17,994
34,955
15,307
1,896
19,502
7,388
7,043
5,072
70,485
84,331
26

Zee Entertainment
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
EPS (excl '&TV' loss)
Book Value per Share
DPS
Payout (Incl. Div. Tax) %
Valuation
P/E
P/E (excl '&TV' loss)
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2012
6.1
6.4
6.1
35.4
1.5
24.4
2013
7.5
7.9
7.5
40.9
2.0
26.5
2014
9.3
9.8
9.3
28.5
2.0
21.5
2015
10.2
10.9
10.8
36.9
2.3
22.1
2016E
11.4
12.1
13.1
44.2
2.1
18.5
2017E
15.2
16.0
15.8
55.1
2.3
14.8
2018E
20.1
21.0
19.6
70.7
2.5
12.4
63.0
60.3
40.4
9.8
9.3
0.5
51.3
48.7
30.9
8.0
8.1
0.6
38.0
35.8
29.6
7.6
10.5
0.6
34.1
29.4
26.6
6.4
8.8
0.5
25.5
24.5
19.2
5.2
7.0
0.6
19.2
19.7
13.8
4.2
5.5
0.6
18.0
25.8
19.6
28.8
26.9
30.6
31.2
27.3
28.0
27.3
30.5
31.8
32.0
36.4
104
162
78
0.9
98
169
69
1.0
85
181
66
1.0
80
201
53
0.9
78
201
53
1.0
78
201
53
1.0
78
201
53
1.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Cash Flow Statement
Y/E March
EBITDA
Other Inc/excep. items
Interest paid
Direct Taxes Paid
(Inc)/Dec in Wkg. Capital
Preference dividend paid
CF from Oper. Activity
(Inc)/Dec in FA + CWIP
(Pur)/Sale of Invest.
CF from Invest. Activity
Issue of Shares
Inc/(Dec) in Debt
Dividends Paid
Others
CF from Finan. Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2012
7,396
1,384
-50.0
-2,645.0
-4,622.2
1,463
-1,617
-52
-1,669
606
4
-1,683
-120
-1,193
-1,399
12,500
11,100
2013
9,545
1,461
-85.5
-3,288.0
-3,837.9
3,794
-974
24
-950
1,348
7
-2,232
33
-844
2,000
11,100
13,100
2014
12,042
1,807
-157.8
-4,301.0
-462.0
8,929
-2,256
-2,290
-4,546
-20,159
20,171
-2,244
49
-2,183
2,200
13,100
15,300
2015
12,547
2,278
-102.6
-4,517.0
-5,132.4
5,072
-1,198
1,477
279
2,472
-7
-2,601
-37
-173
5,179
15,300
20,480
2016E
13,783
3,189
-112.6
-5242.3
-4114.2
7,504
-485
0
-485
0
0
-2,439
20
-2,419
4,600
20,480
25,081
(INR Million)
2017E
18,854
3,597
-112.6
-7002.3
-6944.4
8,391
-532
0
-532
0
0
-2,613
20
-2,593
5,266
25,081
30,348
2018E
25,499
4,069
-122.6
-9290.1
-8049.2
12,106
-583
0
-583
0
-4,034
-2,903
20
-6,917
4,606
30,348
34,955
21 July 2015
27

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