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TV18: Delivering performance - Views on News from Equitymaster
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  • Nov 2, 2004

    TV18: Delivering performance

    Performance Summary
    TV18, India’s premier business news broadcaster continued to record strong growth rates in both its topline as well as the bottomline. While the former increased by 82%, the bottomline showed a sharp surge of 286%. Strong topline growth coupled with adequate control over operating expenditure helped the company improve its operating margins from under 38% in 2QFY04 to near 51% during the September 2004 quarter. The company declared an interim dividend of Re 1 per share.

    Consolidated snapshot…
    (Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
    Net Sales 109 199 82.3% 197 368 86.9%
    Expenditure 68 98 43.7% 125 181 44.4%
    Operating Profit (EBDITA) 41 101 146.5% 72 187 161.0%
    EBITDA margin (%) 37.6% 50.8%   36.4% 50.9%  
    Other income - -   - -  
    Interest 2 4 103.7% 5 6 41.8%
    Depreciation 10 17 68.7% 17 29 71.6%
    Profit before tax 29 80 176.3% 50 152 202.0%
    Extraordinary items (11) (8)   (20) (14)  
    Tax - 2   - 5  
    Profit after Tax/(Loss) 18 70 286.0% 30 133 344.5%
    Net profit margin (%) 16.7% 35.4%   15.2% 36.1%  
    No. of Shares (m) 11.7 15.5   11.7 15.5  
    Diluted earnings per share* 6.2 18.1   5.1 17.1  
    Price to earnings ratio (x)   9.2     9.8  
    (* annualised)            

    The business news leader
    Television Eighteen (TV18) is India's premier business news broadcaster and a leading media content provider to the jointly branded channel - CNBC-TV 18. TV 18 holds a 90% stake in the channel with the balance with CNBC Asia, which is equally owned by NBC (owned by GE) and Dow Jones. TV 18 provides a variety of content for television programming with its primary focus on delivering capital market and financial news. It's tie-up with CNBC Asia led to the launch of CNBC India, a 24-hour business news and information channel. The company also owns a premier business news portal, moneycontrol.com.

    What has driven performance in 2QFY05?
    Topline show continues: TV18 derives its revenues primarily from the News segment, which contributed nearly 97% to the company’s topline in 2QFY05, the balance being chipped in by the Entertainment/Internet/Software. Thus, it is the revenues from broadcasting related activities that dictates the company’s performance. And it is the 81% growth in this segment that is reflected in the YoY 82% topline growth of the company.

    It must be noted that revenues consists of advertising as well as subscription revenues. While the company provides no break-up of this, as per an agreement with Zee, CNBC would be broadcasted as part of the Zee-Turner bouquet for which the former receives a pre-decided sum as ‘Minimum Guarantee’. This agreement would stay in effect till FY06. Thus, growth in advertising revenues owing to increased ad spending by corporates (to get a pie of the consumer spending) riding on the back of strong economic growth, has seemingly aided the September quarter topline growth of the company. Also, with state elections taking centre stage during the quarter, the scenario worked in favour of CNBC-TV18, which enjoys a near-monopoly status in the business news segment.

    Margins sustained at over 50%: Strong topline growth coupled with adequate control over operating expenditure helped the company improve its operating margins from 37.6% in 2QFY04 to 50.8% during the September 2004 quarter. The strong margins during the quarter were seemingly maintained owing to higher realisations on advertisement slots on the channel.

    Bottomline surge: The 286% bottomline growth, albeit on a smaller base, could have had been stronger but for the 104% increase in interest expense and a 69% increase in depreciation expenses. It must be noted that the company has set-up of a full-fledged broadcasting facility, which includes setup of an earth station and a facility for channel compilation and play-out capabilities.

    What to expect?

    Market share in the English programming genre on weekdays 7 am to midnight (2QFY05)
    Source: TV18 Investor Update release

    At Rs 167, the stock trades at a P/E multiple of 9.8x annualised 1HFY05 earnings. Over the last few quarters, the company has consistently improved its operating margins and has maintained it over 50% in recent times. Assured subscription revenues under minimum guarantee from Zee-Turner and a certain revenue stream from the sale of its content to CNBC India are big positives for the company. Further, the company has now announced the launch of its 24-hours Hindi business news channel, the first in the Indian market. It must be noted that currently Hindi business news forms only a segment of leading Hindi news channels like Aaj Tak, Zee News and NDTV India.

    Further, the group also has the international distribution rights for the new channel, which will be broadcasted from November in the US, UK and the Middle East, in order to take advantage of the Indian diaspora in these markets. Both these developments are likely to augur well for the company’s operational performance. It must be noted that CNBC-TV18 is one of the most watched business news channels in the country (see chart above). With the absence of another full-fledged business news broadcaster, CNBC-TV18 combine has the upper edge in the market.



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