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TV18 Vs NDTV: Clash of the titans - Views on News from Equitymaster

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TV18 Vs NDTV: Clash of the titans
Sep 8, 2006

The entertainment and media industry is in growth phase, as opportunities and growth embrace all its segments. In an era where television channels are multiplying each year, the need for quality content is on the rise and we see tremendous opportunities for such companies in the long-term. At the forefront are industry leaders like NDTV and Television Eighteen. In this article, we compare these two major players and ascertain what lies ahead. About TV18
Television Eighteen (TV18) is India's premier business and consumer news broadcaster and a leading media content provider. The channel is a joint venture between CNBC Asia-Pacific and Television Eighteen India, with TV18 holding 90% stake. It has a tie-up with CNBC Asia for its business news channels. Further, the company-launched India’s first ever Hindi language consumer channel – Awaaz – in January 2005 and the more recent English general news channel, CNN-IBN (in partnership with Turner International), in December 2005. Internet is another major focus area for the company and has expanded its presence by acquiring properties in the last six years.

About NDTV
NDTV, founded in 1988, is the India’s first and largest private producer of news, current affairs and entertainment television. Originally the content producer for Star TV’s general news channels in India, it decided to venture on its own in the early 2003 and launched two news channels - NDTV 24X7 (English) and NDTV India (Hindi) in April 2003, which was later followed by the launch of NDTV Profit - a business news channel - in January 2005.

The comparison…

Dominance in business broadcasting: TV 18 is the leading player in the financial and business-news broadcasting segment. The company broadcasts round-the-clock news channels and deploys content across multiple platforms like television, Internet, mobile and voice, which offer the company a strong leverage. As per the graph below, CNBC TV18 clearly leads rival channels like NDTV and Headlines Today (3QFY06) in terms of market share in the business news segment.

On the other hand, NDTV, which started as a content provider and presenter of news and current affair based programmes, is also expanding its business news segment. Moving in this direction, the company has undergone a change in its business model after the launch of its two news channels. It is now primarily focused on broadcasting news through its two channels. But in the long run, it will take some time for NDTV to beat TV18 and emerge as a leader in the business news segment.

Business mix: Both the companies earn their revenues from three major sources viz. advertisement revenue, programme revenue and subscription revenue. However, contribution of these segments to the topline of each company is in varying proportions. TV18’s major revenues come from business news, which accounted for 90% of total revenues during FY06, while NDTV’s major revenues come from advertising revenues, which accounted for almost 95% of the company’s total revenues in FY06. Moreover, if we compare revenue growth of both the companies, we will observe that those of TV18 are growing at a faster clip as compared to NDTV. During the period FY03 to FY06, while total revenues of TV18 grew at a CAGR of 72%, NDTV grew at a CAGR of 27%.

Even on profitability parameters, TV18 scores over NDTV. As seen from the adjacent chart, while EBIDTA margins for TV18 have gradually improved over a period of time, the same for NDTV have been pretty volatile. The scenario on the net profit margins front is no different with TV18 margins at 25% far better than the net loss reported by NDTV during FY06.

Financial snapshot
(FY06) TV18 NDTV
Net sales (Rs m) 1,520 2,210
CAGR - 3 Years 72.0% 27.0%
EBDITA margin 46.0% 19.0%
Net margin 25.0% -1.0%
Return Ratios    
RONW 21.2% NA
ROIC 11.6% NA
ROA 10.1% NA
Valuation ratios (x)    
Price to earnings 34.1 NA
Price to book value 5.3 6.6
Price to sales 6.0 7.1
Note: NDTV reported losses in FY06

Comparative valuations
At their respective current prices of Rs 605 and Rs 212, TV18 and NDTV are trading at multiples of 6.1 times and 7.1 times their FY06 sales respectively. Going forward, while we remain positive on the growth prospects of the media sector in general and these companies in particular, investors need to consider the intensifying competition for viewership and mindshare (through advertising) that these companies are facing. In these times, thus, ability to maintain profitability while growing across the genres (business news, general news and entertainment) will separate winners from the also-rans.

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