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TV broadcasting: Who's been the best

Nov 14, 2007

The Indian Media and Entertainment sector is witnessing robust growth due to increase in disposable incomes, surge in ad spends, liberalization of investment norms in media and entertainment companies and the rollout of CAS and DTH .The television sector, which is the largest sub segment of the Indian media and entertainment industry is expected to grow at a CAGR of 22% from 2006 to 2011 as per the FICCI PWC report on the Indian Entertainment and Media industry. Although stocks from the television sector did not participate in the current rally that is being witnessed on the bourses, they were one of the most sought after stocks for a brief period of time before the current rally took off. In this context, let us see how some of the top names in this space viz. Zee, Balaji, NDTV, TV18 and UTV have performed on the bourses over a three year period between 1st Nov 2004 and 1st Nov 2007 and likely reasons behind the same.

The above graph shows that if Rs 100 was invested on 1st Nov 2004 in the BSE-Sensex and various media companies namely Zee Entertainment, Balaji Telefilms, TV 18, NDTV, UTV (UTV got listed on the bourses in March 2005) how much that amount would be worth on 1st Nov 2007.

The graph clearly shows that most of the media stocks have performed better than the benchmark index during this period. The Indian economy has broken fresh grounds in the past few years, registering growth rates in the range of 9%. Since the media and entertainment sector grows faster than the overall economy in buoyant times, it has resulted into buoyant growth in adspends and some well-entrenched players have been able to capitalise on the opportunity.

The table below shows the growth in the television and media sector from 2004 to 2007.

(Rs bn)2004200520062007CAGR (%)
Television Sector129 159 191 220 19.5%
Media Sector312 364 437 501 17.1%

TV18 The runaway winner:
The best performing stock has been TV 18.Its stock price has appreciated close to nine times in the last 3 years, significantly higher than the Sensex, where gains stood at around 3.5x. In the last three years, the stock markets surged and the interest of the Indian retail investors in the stock markets increased. This helped in increasing the viewership ratings of the flagship channel CNBC TV 18. Besides this, CNBC TV 18 is the clear market leader in the business news and the stock market news segment. It is expected to be the biggest beneficiary of the rollout of CAS and DTH. The expenditure of retail investors on monthly subscription of financial newspapers is much more than the subscription charges of TV 18. Bridging this gap would help TV 18 to increase its subscription revenues substantially going forward.

Balaji The laggard:
Though the stock of Balaji Telefilms has appreciated 3 times in the last 3 years, it is the only one in our pack that has underperformed the BSE Sensex, albeit marginally. This is despite the fact that the company's programmes account for more than 40 of the top 100 programmes in the Hindi mass entertainment genre. However the TRP's of its best performing serials, 'Kyunki Saas Bhi Kabhi Bahu Thi',' Kahaani Ghar Ghar Kii' have been declining in the last three years. The programming hours of the company are stagnating though it has been able to increase its realizations per hour. The entry of more channels in the Hindi GEC space would help Balaji in increasing its programming hours and its realizations per hour. Its entry into new businesses of movie production and distribution, regional broadcasting in a JV with Star and overseas programming would help in diversifying its revenue streams and reduce its dependence on the Hindi general entertainment space.

Finally, a word on Zee. Although the stock has managed to outperform the Sensex marginally, it should be borne in mind that the company underwent a restructuring whereby it was spun off into four different entities. Therefore if one considers the market value of the spun off entities, then the magnitude of outperformance vis-a-vis the Sensex will definitely rise.

We remain positive on the overall media and entertainment sector. However, only those companies, which are able to adapt quickly to the changing times and are not subject to irrational competition would continue to do well.

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