• JANUARY 25, 2001

Other Income powers Zee net

Zee TV has reported disappointing results for the third quarter ending December 2000 vis–a–vis the third quarter of the last year. On a consolidated basis the net profit is down 26% while the operating profit is down 18.5%. Operating margins are down from 32.8% to 25.1% in the current quarter.

Zee Network (Consolidated)
(Rs m) 3QFY00 3QFY01 Change
Sales 2,383 2,539 6.5%
Other Income 33 116 255.7%
Expenditure 1,602 1,902 18.7%
Operating Profit (EBDIT) 781 636 -18.5%
Operating Profit Margin (%) 32.8% 25.1%  
Interest 23 38 63.9%
Depreciation 23 112 377.8%
Profit before Tax 767 603 -21.4%
Other Adjustments   -  
Tax 129 129 0.4%
Profit after Tax/(Loss) 638 474 -25.8%
Net profit margin (%) 26.8% 18.7%  
Earnings per share* 6.2 4.6  

On a standalone basis, Zee's operating margins have taken only a slight dip while net profit has jumped 29.3%. The growth oin bottomline despite a fall in the margin is on the back of interest income which has increased by 3.5 times over the corresponding quarter of last year. Infact other income accounts for 25% for Zee TV's pre tax profit. The higher costs of programming seem to be the main cause for the pressure on the margins. The management has not given out the status of ad rates though we expect them to be relatively higher since the ad rates for their game show were more than double their normal ad rates. However, Zee has yanked off its game show and one is not in a position to comment as to whether it would have to return/pay damages to its sponsors. Zee has also hived of Buddha Films during the quarter which had a loss of approx. Rs 300 m in its books. (Buddha has however claimed damages of Rs 520 m from Doordarshan.)

Zee Telefilms (Standalone)
(Rs m) 3QFY00 3QFY01 Change
Sales 875 1,031 17.9%
Other Income 28 102 259.9%
Expenditure 557 666 19.5%
Operating Profit (EBDIT) 317 365 15.1%
Operating Profit Margin (%) 36.3% 35.4%  
Interest 22 29 30.5%
Depreciation 7 12 70.6%
Profit before Tax 317 426 34.7%
Other Adjustments - -  
Tax 68 105 54.4%
Profit after Tax/(Loss) 249 321 29.3%
Net profit margin (%) 28.4% 31.2%  
Earnings per share* 2.4 3.1  

The stock quotes at a price of Rs 276, which implies an earnings multiple of 60X 3QFY01 annualised earnings of the consolidated entity.

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