Can Zee Entertainment Enterprises turn things around?

Zee Entertainment Companies: India’s media and entertainment industry is a dynamic and fast-growing sector that has seen significant growth in recent years. This includes a wide range of categories including television, film, outdoor advertising, radio, animation, visual effects, music, gaming, digital advertising, live events and print media. India’s media and entertainment businesses contribute significantly to the country’s economic stability and cultural identity.

Company Overview of Zee Entertainment Enterprises

G Entertainment Enterprise It was founded in 1991 and its founder was Subhash Chandra. It is a prominent Indian media company that has established itself as a major player in the entertainment industry. The company has operated in a variety of sectors, including television, printing, internet, film, and mobile content industries.

Zee Entertainment Enterprises is partly owned by the Essel Group, operates in more than 170 countries and has a global audience of 1.3 billion. Zee Entertainment Enterprises has been operating in four segments – Broadcasting, Digital, Film, Music and Sports. Domestic broadcasting has 50 channels in 11 languages, and the network share is 16.8%.

It has over 5000 movies and 572 million viewers every week. The company offers 40 channels in 120 countries around the world, with ZEEL having a 19.1% audience share in South Asian countries. It was the #1 Hindi film in the UK and #1 Hindi GEC in MENA.

segment analysis

The digital segment generated ZEE5 total revenue of $22 million in FY23 through its massive content library that includes over 350 movies, 1750 TV shows, 230 originals and 500,000 hours of on-demand content. Film business revenue was $4.171 billion in FY23.

The music segment is available in 22 languages ​​in India and reaches 10 billion monthly YouTube views. The company sponsored the UAE-based international league T20 in FY23 and broadcast it across 10 channels in three languages.

finance Zee Entertainment Enterprises

The company’s profits have fluctuated over the past five years. It increased by 6.79% from ₹8,087.9Cr in FY23 to ₹8,637.2Cr in FY24. In FY24, compared to FY23, the company saw a 10% increase in subscriptions and a 32% increase in other sales and services. The company has recorded revenue growth of 1.52% CAGR over the past four years. Zee Entertainment Enterprises’ revenue grew at a CAGR of 1.5% from FY20 to FY24.

In the 2023 fiscal year, net profit decreased significantly by 76.42% compared to the previous year due to a 10.56% decrease in operating expenses, a decrease in sales including special items and deferred tax, and a 9.1% increase in costs. Net profit declined from ₹251.4 Cr. ₹199.3 Cr in FY23. This is because expenditures increased by 10.6% in FY24.

The company’s operating margin will decline from 10.8% to 8.46% in FY24 and its net profit margin will be 1.63%. It is a debt-free company. The company’s ROE and ROCE are 1.3% and 6.52%, respectively.

Failed merger with Sony Pictures Networks India

Zee Entertainment Enterprises is run by Subhash Chandra and Sony is owned by Sony Corporation, a Japanese company. Both companies are large media networks in India. On September 21, 2021, ZEEL announced a merger with the India media division of Sony Group Corporation (Culver Max Entertainment) to create a new entity called Sony Pictures Networks India (SPNI).

ZEEL and Sony have decided to merge to create India’s largest media company worth $10 billion. Zee Entertainment Enterprises plans to expand its presence in India and globally as Zee Entertainment Enterprises has a strong media network in the Indian market and Sony has a strong global presence that will create unique synergies for the company’s growth.

Their goal was to compete with top streaming players like Netflix. Amazon Prime Video. This merger will help us deliver multilingual content to diverse audiences and streamline operations while reducing costs. Sony holds a majority stake of 50.86% in the new company, while Zee Entertainment Enterprises founders hold 3.99% and other ZEEL shareholders hold 45.15%.

The founder has the option to increase his stake in the company to 20%. On September 14, 2021, Rakesh Jhunjhunwala purchased 5 million shares of ZEEL that day, causing the stock price to surge by 40%. When news of the merger came out on September 21, 2021, G Entertainment Enterprise’s stock price rose 31.72% like a rocket.

The founder had to sell his stake to pay off debt. At that time, the lender was asked for money from Subhash Chandra and his family. Because they had one chance to get their money back and then finally repay some suppliers (IndusInd Bank).

The National Company Law Appellate Tribunal (NCLAT) has issued a notice to Zee Entertainment Enterprises to appeal the insolvency of the company to IDBI. They served notice and were unable to recover nearly $150 million in dues from ZEEL. Sony sought a review after Goenka came under regulatory scrutiny from the Securities and Exchange Board of India (SEBI) for alleged misuse of funds.

SEBI had in June 2023 banned Goenka and Essel Group Chairman Subhash Chandra from holding key management roles in any listed company, but Goenka’s ban was later reversed by the Securities Appellate Tribunal. Concerned about the regulatory burden, Sony may have asked India MD and CEO NP Singh to manage the merged business. This was rejected by Goenka.

On January 22, 2024, Sony terminated its merger with Zee Entertainment Enterprises due to a leadership dispute, another reason being that lenders and the company itself did not want the headache of dealing with someone accused of theft. Sony demanded $90 million in termination fees from ZEEL.

Future plans of Zee Entertainment Enterprises

• The company’s board plans to raise Rs 2,000 crore through private placement. Qualified Agency Placement And first of all, the problem. This will be used for future growth of the evolving media landscape.
• Zee Entertainment Enterprises is the second largest media and entertainment company in India with a market share of 18-20%. Management expects ZEE5 and TV viewership to improve by around 5% year-on-year.
• Zee Entertainment Enterprises aims to maintain CAGR revenue and EBITDA margins of 8-10% and 18-20% respectively in FY26.
• ZEEL plans to reduce its workforce by 15% in its broadcasting, digital, film and music divisions. It helps companies reduce costs.
• We plan to implement interventions to offset underlying operating performance improvements and improve margins.

Financial Metrics of Zee Entertainment Enterprises

Zee Entertainment Enterprises’ key financial indicators are as follows:

conclusion

Zee Entertainment Enterprises is well-positioned for a turnaround with growing advertising and subscription revenues, cost-cutting plans, revenue growth at 8-10% CAGR, maintaining EBITDA margins of 18-20%, and recovering margins in Q2 FY25. The quality of its content strategy improved in FY24, and the company experienced some bumps in revenue and net income growth in FY24.

The company has solid fundamentals, and management’s recovery strategy suggests an excellent forecast for the future that will allow the company to grow. What do you think about this article and the stock? Let us know in the comments section below.

Written by Nikhil Naik

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