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Zee Q2 FY17 revenue up 23% at Rs 16,954 mn on back of strong growth

Zee Entertainment Enterprises Limited has reported 23 per cent growth in its consolidated revenues to Rs 16,954 million for the second quarter ended September 30, 2016. This is driven by strong growth in all revenue streams. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for the quarter was Rs 4,892 million, while EBITDA margins stood at 28.9 per cent, respectively. Zee recorded profit after tax of Rs 2,440 million in Q2 FY17 and PAT margin stood at 14.4 per cent.

Zee has three sources of revenues – advertising sales, subscription and Other Sales and Services. Other sales and services include revenue from the movie production business, content syndication, music label and commission on sales, amongst others. The sharp increase in other sales and services in Q2 FY17 is due to higher revenues from the movie business on account of release of Hindi movie ‘Rustom’ and syndication revenues from several cricket series played during the quarter.

Zee’s consolidated advertising revenues grew by 15.7 per cent in Q2 FY17, ahead of the industry. This strong growth is despite the high base created by 34.7 per cent y-o-y growth in Q2 FY16. We have been able to deliver strong growth even though there was moderation in ad spends, especially, from the e-commerce segment and slight drop in ratings of flagship GEC in the previous quarter. This reflects the strength of Zee’s diversified portfolio.

Total subscription revenues in Q2 grew by 21.7 per cent to Rs 5,833 million. The strong growth in domestic subscription revenue is attributable to early closure of content deals this year as compared to the previous years. It also includes catch-up revenues for the previous quarter. Unlike earlier years, the growth in domestic subscription revenues in FY17 will be skewed towards H1. The outlook for full year growth in domestic subscription revenue remains unaltered.

Dr Subhash Chandra, Chairman, Zee, stated, “Initial signs of uptick in the Indian economy are already visible and we should see improvement in economic growth in quarters ahead. Normal monsoon in 2016 after a gap of two years should spur the rural growth. The passage of GST Bill is a positive step and would help the Indian economy.”

Commenting on the results of the company, Dr Chandra added, “Zee reported well-rounded strong growth in revenues during the first half of fiscal 2017. While we continue to add new channels to our domestic and international broadcasting businesses our new initiatives in movies, music, events and digital are taking shape and have started contributing to growth.”

Punit Goenka, Managing Director & Chief Executive Officer, Zee, commented, “At Zee, we are pleased to deliver yet another quarter of satisfying business and financial performance. Our advertising revenues continue to grow ahead of market on the back of improving viewership share and better monetisation of our bouquet. Growth in domestic subscription revenue was aided by catch up revenue in Q2.”

He further said, “The first half of fiscal 2017 has been strong for us. Growth in advertisement spends has held up so far. Moderation in FMCG and e-commerce spends might have some impact on industry growth in the coming quarters. On the positive side, increasing competition in telecom business would help ad spend growth. GST rollout in the coming year could boost advertising spends as a part of potential savings in tax outgo might be reinvested.”

Speaking about the Telecom Regulatory Authority of India’s (TRAI) draft regulations for broadcasting services and interconnection arrangement to increase transparency in content pricing and payment of carriage and to allow consumers to choose channels, Goenka noted, “These draft regulations are steps in the right direction and propose a host of changes to the existing system. Although it still remains to be seen what form the final regulation will take, we hope that improved transparency will enable various stakeholders to get their rightful share in subscription revenues.”

Broadcasting Business

During Q2 FY17 Zee Network’s viewership share, excluding sports, increased by 0.9 per cent, compared to Q1 FY17. The company launched three new channels in the domestic market – Zee Anmol Cinema, a Hindi movie channel for the FTA audience; Zee Yuva, a youth-focused Marathi GEC; and Zee Cinemalu, a Telugu movie channel. In the month of October, Zee refreshed the content of Hindi GEC Zindagi. With increasing uptake of HD, the network is in the process of launching HD versions of its regional channels.

The quarter saw an improvement in Zee’s ranking and viewership share in the Hindi GEC genre. The two national GECs – Zee TV and &TV – had a combined share of 24 per cent in the genre. Flagship channel, Zee TV, was the second ranked Hindi GEC for the quarter.

In Hindi movie genre, Zee continued to retain its leadership position through its seven channels.

The network retained its strong position in the regional entertainment space. Zee Marathi continues to dominate the Marathi market with 55 per cent viewership share. Zee Bangla increased its viewership share to 40 per cent in the Bangla genre. In the Telugu market, Zee Telugu was ranked third most viewed channel. Zee Kannada retained its No. 2 position in the Karnataka market. Zee Tamil made rapid strides in the Tamil market and was the second ranked channel in the months of August and September. Sarthak TV continued to be the market leader in the Oriya market.

Zee’s English cluster continues to perform well, airing entertainment content and movies from around the world.

The network’s sports business reported revenues of Rs 2,125 million and costs of Rs 2,293 million in the second quarter.

 

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