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Zee’s restructuring. Will it work? - Views on News from Equitymaster
 
 
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  • Aug 29, 2001

    Zee’s restructuring. Will it work?

    Zee is getting a new look. The company is planning to invest Rs 150 m to promote its channels with new programming and rebuild viewership. It has already announced thelaunch of 24 new programmes and a new logo.

    The new look has begun with the launch of new interactive programme, ‘Aap Jo Bolein Haan To Haan, Aap Jo Bole Naa to Naa’ on August 27, ’01. The programme allows the viewers to decide the ending of a story and has already drawn a good initial response. The company claims to have received 50,000 online votes on the first day of its launch. Nevertheless, it remains to be seen whether the channel is able to retain this kind of viewership after the proposed complete overhaul. Also, considering the fact that it has been broadcast on prime time, it faces strong competition from hits like ‘Kyunki… ‘ and ‘Kahani Ghar….” from the Star stable.

    The revamp of Zee is not limited to the main channel. It will be extended to other channels in its bouquet, including the Alpha brand channels. Next in the line are Zee Music and Zee English, followed by Zee News. Zee Music channel would be given an identity of its own by October ‘01. This attempt to restructure could help Zee increase advertisement revenues, which are growing at dismal rates. It could also help in boosting subscription fees, as Zee MGM and Zee Music are currently not part of its pay bouquet of 13 channels.

    Meanwhile, the channel ‘Zee TV’ has managed to inch up its viewership in August ’01 and now stands at second place. The rating has improved for the first time in the last five months. Zee has now two of its programmes rated in the top 20 serials. However, whether the company is able to maintain this position depends a lot on its new programmes.

    On the corporate governance part, the promoters have yet to come out clean. They have already paid Rs 1.4 bn of the total Rs 2.2 bn that is due and aim to repay the remaining by the September end. Zee is hunting for a strategic partner who would not only help repaying the sum due to the company but would also increase the channel’s presence in the international markets. It has already made presentations to some of the media-entertainment conglomerates like Viacom, Vivendi Universal and AOL-Time Warner, which are reportedly interested for a stake in the company.

    At the current market price of Rs 116, the stock is trading at a P/E of 33x on 1QFY02 annualised earnings. The company's decision to induct a strategic partner and success of the pay TV strategy will determine its future valuations. Also, any positive change in TRP rating would lead to better valuation for the stock. However, the management issue will continue to have its impact on the valuations of the company.

     

     

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