Zee Telefims (Zee TV) announced good results post takeover of its broadcasting venture Asia Today (ATL). has placed 2% of its equity with Goldman Sachs at a price of Rs 1000.
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The company has reported a 54% jump in earnings on the back of a 41% growth in income from operations. The gross advertisement bookings reported a 46% growth in the third quarter. This is obviously due to the fact that the advertisement revenue accruing to the broadcasting company also forms part of the revenue stream of the company. Earlier, Zee TV only enjoyed revenues of around 25% of the gross advertisement revenues since the company was only a software provider to the channel owner viz. ATL which took the balance revenues.
This is the primary reason for the spurt in revenues and the re–rating that the company’s stock has undergone over the last year. (The cable business is still in the investment phase.) The operating margins have also improved during the year. What will be most important for the full year performance is to see how much of the 46% growth in ad booking materialises in the current year itself. If the ad revenue is on the basis of the long term sponsorships of the programmes themselves then only a part of the growth would accrue in the current year.
The company has also announced that the Rs 8 billion so mobilised is to be used for its Internet foray. Zee has already set up a portal ZeeNext.com and plans to offer Internet via its cable venture Siticable. The laying down of the infrastructure for this foray is expected to be completed within the next six months.
The agreement with News Corp required Zee to pay off half of the $ 286.51 m consideration in cash with the balance being paid through a 4% equity stake at price of Rs.400/-. Thus the company will require to borrow money for paying of News Corp for its 50% stake in ATL.
With the stock having undergone a massive upward re-rating and the media business in the limelight Zee TV remains a buy on most analysts reports.
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