Why Zee Entertainment Share Price is Falling

The media industry had a rough year in 2022. Rising costs, debt-ridden balance sheets, and a renewed focus on profitability weighed on the embattled sector.

As streaming service competition is at an all-time high and customers are becoming more selective about the subscriptions they choose, the media industry has reached a tipping point.

Due to this, companies have lost billions of dollars in market value in 2022 with this slowing streaming subscriber growth and deteriorating advertising environment.

In line with experiencing this brutal beating in the market, one of the leading media and entertainment companies in India, the shares of Zee Entertainment, have declined 12% in a month.

Here's why the shares of the company have showed this sharp decline.

Consecutive royalty defaults

The operational creditor, Indian Performing Right Society (IPRS), filed an insolvency case against Zee Entertainment, as per the regulatory filing by Zee Entertainment on 2 January 2023.

The petition has been filed for the initiation of the corporate insolvency resolution process against the company, claiming a debt and default of Rs 2.1 billion (bn).

IPRS authorises the use of copyrighted music for users by issuing them licenses and collects royalties on behalf of its members, including authors, composers, and publishers of music. After deducting its administrative costs, the society distributes royalty among its members.

This claim relates to royalties due to the company's usage of the mentioned literary and musical works.

The company is in talks to submit a rejecting claim against the plea on the grounds of a pre-existing dispute between the parties on the claimed amount.

In addition to IPRS claims, in December 2022, IDBI Bank, a financial creditor of the company, moved to NCLT (National Company Law Tribunal) against Zee Entertainment to recover an amount of Rs 1.5 bn.

The bank's claim arises under a debt service reserve agreement entered into by the Bank and the company for the financial facility availed by Siti Networks.

Zee Entertainment has retaliated against the bank by vehemently challenging its supposed debts.

These back-to-back insolvency allegations against the company have dented the company's reputation, driving the stock down.

Poor quarterly result

For the September 2022 quarter, the company reported a 2.5% YoY increase in revenue to Rs 20.3 bn. The rise was due to 28% YoY growth in revenue from Zee App to Rs 16.7 bn backed by the highest-ever DAUs (Daily average Users).

However, due to Zee Anmol FTA withdrawal and challenging macroeconomic conditions, the net profit of the company declined by 57% to Rs 1.1 bn.

Earnings before tax depreciation and amortization (EBIDTA) also went down 28% YoY to Rs 2.9 bn on the back of slower growth in revenue and more expense in marketing, content, and technology.

For the upcoming quarter, the company has a strong pipeline of movies under various stages of production. The company is planning to focus on growth revival in the upcoming quarter on the back of the festive seasons.

How Zee Entertainment shares have performed recently

Zee Entertainment shares have declined by more than 12% in a month. Over a year, the stock is down more than 25% due to pressure on streaming subscriber growth.

The company touched its 52-week high of Rs 332.2 on 11 January 2022 and its 52-week low of Rs 200.5 on 20 June 2022.

At the current price, the stock is trading at a PE multiple of 20.2 and a price-to-book value multiple of 2.3.

FIIs have steadily decreased their exposure to the stock since March 2021. FII stake stood at 39.1% in June 2022 quarter. It now stands at 38.7%.

About Zee Entertainment

Zee Entertainment Enterprises Limited is a media and entertainment company engaged in providing broadcasting services. It is one of India's leading media and entertainment companies.

The company operates through content and broadcasting segment.

In the year 1992, the company launched their flagship television channel Zee TV. Since then, they have transformed itself into an integrated media conglomerate with operations spanning the entire media spectrum.

It isy involved in the broadcasting of satellite television channels, the space selling agent for other satellite television channels, and the sale of media content.

The company has a library housing over 260,000 hours of television content. The company holds rights to approximately 4,800 movie titles.

The company's brands include Zee TV, Zee Cinema, Zee Action, and many more.

To know more about Zee Entertainment, check out its factsheet and its latest quarterly results.

You can also compare Zee with its peers:

Zee Entertainment vs Zee Media Corp

Zee Entertainment vs Network18 Media

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...