Motilal Oswal Financial Services

Sun TV Network

CMP: INR344

IPL team buy unlikely to meaningfully impact earnings

We spoke with the management of Sun TV Network (SUNTV IN, Mkt Cap

USD2.6b, CMP INR344, Buy) to understand the rationale and potential impact of

its winning bid for India Premier League (IPL) Hyderabad franchise.

Sun TV has won the bid for IPL Hyderabad team for a consideration of

INR850m/year vs the reserve price of INR600m/year.

The annual payment will be made for a period of five years (2013-17) post which

it will have to pay 20% of franchisee income received.

Sun TV’s bid was at ~100% premium to Deccan Chargers (erstwhile franchisee

for IPL Hyderabad) and 23% premium to the next bid.

The company believes that IPL team can generate significant synergies with its

TV and Radio business which would be able to air exclusive content like game

shows and other formats.

Management is confident of achieving earnings break-even in Year 1 itself and

expects minimal EPS impact even in the worst case scenario.

While we expect earnings impact to be insignificant, relatively unrelated

diversification into IPL could be an additional overhang and impact valuation

multiple.

At CMP of INR344, the stock trades at a P/E of 18.9x FY13E and 17.1x FY14E. We

have a Buy rating on the stock.

25 Oct 2012

Update |Sector: Media

BUY

Sun TV: Financial and valuation summary (INR b)

Sun TV

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Sun TV

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03 July 2012