TV 18 Broadcast Limited Alpha Invesco 2015 PDF

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TV 18 Broadcast Limited / October 2015
TV 18 Broadcast Limited
Initial Recommended Price 26 ( July 2014 )
Current Price 33.5
Present Recommendation Accumulate / Add More ( Oct 2015 )
Long Runway Ahead For Television Media Players

Estimated at 47000 crore in 2014, Indias television industry is expected to grow at a CAGR of 15.5 per
cent to reach 97000 crore in 2019.
Subscription revenue growth, at an annualized growth rate of 16 per cent, is expected to outpace the
growth of advertising revenue (14 per cent) on account of improving monetization due to digitization. With
the number of TV households in India increasing to 16.8 crores in 2014, TV penetration stands at 61 per
cent.
61% of all households in India are now equipped with a television making us the second largest TV
viewership market after China. With digitization, subscription revenues in urban and rural areas are
growing, resulting in a healthy impact on the industry. Subscription, digitization led growth is going to be
substantial.
Additional subscription revenues will accelerate
going forward, as phase III & phase IV digitization
is implemented. Channels with leadership & good
content quality will have the pricing power
as
there will be more transparency in viewership

data.
The new era of subscriber-based viewership on TV will ensure that only the most innovative and relevant
channels will find their place in the individual bouquet that the subscriber pays for. This will increase
competition and will lead to consolidation with strong content players gaining significant competitive
advantage.
Alpha Invesco Research
www.alphainvesco.com
Why TV 18
Present Across All Categories
TV 18 is has an established bouquet of channels with most of its channels close to maturing. And they
are present in each category;
National & Regional News CNN-IBN, IBN7, ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand,
ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV
Kannada News, ETV Oriya News & ETV Haryana / Himachal Pradesh, IBN Lokmat
Content Distribution Indiacast
Movies Viacom 18 Motion Pictures
Music MTV, VH1
Kids Entertainment Nick, Nick Jr.
Entertainment Channels Colors ( national & regional both ), Rishtey, Colors Infinity, Sonic,
Comedy Central,
Business Channels CNBC, CNBC Awaaz, CNBC Bajar ( Gujrati )
Company
Brands
Stake / Holding
AETN18 Media
History
100%
Indiacast Media
Distribution
Private
Limited*
Panorama
Television
Private Limited
Content Distribution & Monetization
50 : 50 Joint Venture with Viacom
ETV Rajasthan, ETV Urdu, ETV Bihar /

Jharkhand, ETV Uttar Pradesh / Uttarakhand,
ETV Madhya Pradesh / Chhattisgarh, ETV
Bangla News, ETV Kannada News, ETV Odia
News & ETV Haryana / Himachal Pradesh
100%
Prism TV
Private Limited
Colors Bangla, Colors Marathi, Colors

Kannada, Colors Odia & Colors Gujarati.
IBN Lokmat
News Private
Limited*
Viacom 18
Media Private
Limited*
IBN Lokmat
50% ( In august 2015, Viacom picked up the

remaining 50% stake from Reliance at 950
crores )
50 : 50 Joint Venture With Lokmat
MTV, Colors, Rishtey, MTV Indies, Nick , Nick

Jr., Sonic, VH1, Comedy Central, Colors Infinity,
Viacom 18 Motion Pictures ( movie production )
50 : 50 Joint Venture With Viacom
TV 18
Broadcast
CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn,

News18
100%. (Pays royalty to parent brands.)
5 ETV channels rebranded

as colors during Q1FY2016.
Prism TV with 340 crore

revenues & loss making
operations was valued at
1900 crores. The company is
expected to breakeven this
year.
Colors Infinity, an english

GEC was launched during
2015 & gaining traction
*50% revenue / financial performance is recorded into consolidated P&L account
One Of The Top 3 Players. Benefits From Scale.

Big channels with regional edge & scale are likely to do far better than small channels. TV 18 stands out
to be the 3rd largest national network in India post amalgamation of all its subsidiaries.
BARC Ratings
Broadcast Audience Research Council ( BARC ) and TAM, rating agencies for TV channels in India have
merged during 2015. Their ratings are going to be the only currency to measure viewership & ratings of
media networks; this will further put leading channels in a better position as they are able to negotiate
higher advertising rates.
Entry Barriers For New Players & Competitive Advantage For Existing Players
Media is a very high fixed cost business. The gestation period is extremely high. It will be extremely
difficult for newer channels to be launched & start competing against the big guys for gaining viewership.
Pricing power & Subscription Revenues To Ensure 18-20% CAGR growth.

As most of TV 18s channel are maturing, they can start monetizing viewerships & should be able to fetch
better advertisement rates. Matured channels like CNBC already doing well, while colors bouquet is
rapidly marching ahead.
12 Minutes Cap On Advertising & Pricing Power Game To Benefit Big Channels
In TV advertising industry monetization of viewership happens after a lag. Channels usually monetize
their inventory after leadership is established.
Advertising is capped at 12 minutes per hour by as per the new guidelines. This affects ability of media
channels to have flexibility in their inventory. Only those channels with strong viewership shall command
pricing power. Small channels with weak viewers will be squeezed out further. Whatever advertisement
growth comes going forward, will come in the form of increased pricing by established channels.
So now the game of pricing is the only thing that's left, there is no more room for inventory or significant
inventory growth at least in advertisement revenues. New advertisement growth is below 15%. This only
hurts smaller channels. And benefits big ones. How many number of channels will mature & start
monetizing, will decide the revenue growth going forward.
Regional TV To Drive Growth
Today, with TV going regional, language preferences have changed, giving birth to a range of regional
channels with local programming. Channels with strong regional presence are going to perform well over
the years. TV 18 has a significant presence in hindi speaking belt via ETV. It also has strong presence in
Maharashtra, Karnataka, Rajasthan & Gujrat.
Ecommerce, FMCG & Consumer Durables To Consume Most Advertising Inventory
E-commerce continues its growth path and these have been the dominant growth drivers for the industry
in 2014-15. FMCGs are cutting TV budgets & increasing share to online ad spends. Inefficient spend will
be cut & they will spend only on high quality TV content. This again hurts small channels with low
viewership.
Phase-I & Phase-II A Pricing Game, Phase-III & Phase-IV To Boost Subscription Revenues
Phase-I, Phase-II digitization has happened & its an inventory pricing game with subscription revenue
growth maturing. Phase III & Phase IV digitization where semi-urban & rural areas are going to be
covered, will drive the subscription revenues as more MSOs / Cable Operators come on board.
All Write-Offs Are Complete & Wont Occur Again
During the year 2014-15, the TV18 Group companies made one-time adjustment to the profit and loss
account to the tune of 233.3 Crores. This adjustment will not impact future operating profit and cash flows.
Bad debts & obsolete assets worth 180 crores were written off across the group. 53-54 crores was
accounted as accelerated depreciation & written off accordingly.
History : During 2012 to 14 period, Reliance group acquired ETV Channels & Network 18 ( parent
company of TV 18 broadcast limited by infusing close to 4000 crores ). These transactions were done via
subsidiaries namely, Equator Holding, Shinnao Retail & Independent Media Trust. As amalgamation of all
channels & balance sheet cleanup is underway, the company made onetime write-offs & adjustments
during last year. These are onetime write-offs that impacted profitability during 2014-15. Now the
company shall post normalized earnings.
Operational Performance Is Improving. Write-offs Had A One Time Impact On Earnings.

Total
Income
Operating
Profits
Net
Profits
WriteOffs
Operational Performance Of The Company & Subsidiaries ( excludes minority interest & associate companies )
Company
AETN18
Media
Indiacast &
others
Panorama
Television
Prism TV
Brands
2014
2015
2014
2015
2014
2015
2014
2015
History
27
51.87
2.8
8.5
-13.6
-6.29
NA
210
NA
9.95
NA
146
187
66.6
40
-1
-12.4
269
343
-120
-38
-126
-134
-95
Content Distribution &

Monetization
ETV Rajasthan, ETV Urdu, ETV
Bihar / Jharkhand, ETV Uttar
Pradesh / Uttarakhand, ETV
Madhya Pradesh /
Chhattisgarh, ETV Bangla News,
ETV Kannada News, ETV Oriya
News & ETV Haryana /
Himachal Pradesh
Colors Bangla, Colors
Marathi, Colors
Kannada, Colors Oriya & Colors
Gujarati
IBN Lokmat
IBN Lokmat
13
18.20
0.74
5.05
-0.5
3.8
-1.35
Viacom 18
MTV, Colors, Rishtey, MTV

Indies, Nick , Nick Jr., Sonic,
VH1, Comedy Central, Colors
Infinity, Viacom 18 Motion
Pictures ( movie production )
818
940.40
87.5
137.5
34.2
84.20
TV 18
CNBC, CNBC-Awaaz, CNBC

Bajar, CNN-IBN, Ibn, News18
531
620
130
175
59.5
14.6
-27.4
-121
2000
2370
243
303
85
-38
-27.4
-234
Total
Write-offs include bad debts,

movie copyrights & obsolete
assets worth 180 crores &
nearly 54 crores as
accelerated depreciation
Combination Of Revenue Growth & Margins Expansion Going Forward

Revenue
( Crores )
Company
Brands
AETN18
Media
Indiacast &
others
Panorama
Television
Prism TV
IBN Lokmat
Viacom 18
TV 18
History
Monetization
ETV Rajasthan, ETV Urdu,
ETV Bihar / Jharkhand, ETV
Uttar Pradesh /
Uttarakhand, ETV Madhya
Pradesh / Chhattisgarh,
ETV Bangla News, ETV
Kannada News, ETV Oriya
News & ETV Haryana /
Himachal Pradesh
Marathi, Colors
Kannada, Colors
Oriya & Colors Gujarati
IBN Lokmat
Indies, Nick , Nick Jr.,
Sonic, VH1, Comedy
Central, Colors Infinity,
Viacom 18 Motion Pictures
( movie production )
Bajar, CNN-IBN, Ibn,
News18
Total
Revenue
Growth
2014
2015
27
51.87
NA
Operating
Profits
( crores)
Operating
Margins
Margin
Growth
2014
2015
2014
2015
92%
2.8
8.5
10.37%
16.39%
58.02%
210
NA
NA
9.9
NA
2%
146
187
28%
66.6
45.62%
3.21%
-92.9%
269
343.00
27%
-120
-38
-44.61%
-11%
75.1%
13
18.20
40%
0.74
5.05
5.69%
27.75%
387.4%
818
940.40
16.2%
87.5
137.5
10.6%
14.40%
35.8%
531
620
16.7%
130
175
24.5%
28%
14%
2000
2370
18%
243
303
12.15%
12.78%
5.2%
Fixed cost component is over. As revenues grow, margins will expand disproportionately. We expect
operating margins to expand towards 20%+ levels on consolidated basis over the next 2 years.
Margin expansion is likely to be faster than the revenue growth, which shall result in accelerated earnings
growth.
History & Lokmat : History has gained 20% market share in factual entertainment space & margins have
improved significantly from 10.3% o 16.3%. Expect these margins to reach 25% range in a couple of
years as most of fixed cost part is over & depreciation rate goes down. Revenue growth should be around
30% going forward.
Lokmat has gained 27% market share & is at no 3 spot in Marathi news category. The business has
stabilized & operating margins have improved from 5% to 27%. Expect margins to expand further along
with revenue growth of 30%+.
CNBC & IBN : Impressive operating profit margins of around 28% & strengthening further. Expect
revenue growth to be around 16 to 18% on the back of strong pricing as financial markets continue to be
vibrant.
CNBC : 50% market share ( ET now is growing fast & eating into market share. It recently toppled CNBC as the
market leader in September 2015. )
CNBC Awaaz : 60% market share
CNBC Bajar Gujrati : Leader. Only player in the segment.
CNN-IBN : 25% market share ( need to watch out, its losing its market share to headlines today & ndtv )
IBN 7 : Not doing well. Is on 8 slot with less than 5% market share
th
rd
th
Panorama Television : Top market share in Rajasthan & Bihar / Jharkhand while on 3 & 4 position in
other markets. Total reach to 11 crore viewers.
During the year, more than 540 employees were transferred from Prism TV to Panorama. As a result,
employee cost went up from 30 crore to 61 crores. There is a new expense under of 40 crores under
cable TV charges & looks like a inter-group transaction towards Indiacast. There is a lack of clarity on
this front.
With revenue growth to be more than 20%, it should post operating margins of around 16-18% in
FY2016. And eventually move towards 25%.
Prism TV : Recently TV 18 rebranded 5 regional channels, erstwhile ETV as Colors channels. For this
same reason, higher expenses occurred during first quarter of FY2016, and results were flat. It was a
onetime expense.
Prism TV operational loss narrowed down from -120 crores to -38 crores. As revenue growth is expected
to continue to be more than 20%, it should breakeven or post marginal operation losses for the
current financial year, i.e. FY2016. Worst is behind for this particular division & we see speedy margin
recovery going forward.
Colors Marathi : Gained no 2 slot with more than 30% market share during 2015.
Colors Gujrati : Only gujrati GEC channel with more than 30% market share.
Colors Kannada : Gained top slot & is no 1 kannada channel with 35% market share during 2015.
Colors Bangla :At no 3 slot with around 8% market share in Bengal.
Colors Oriya : At no 4 slot with 14% market share in Orrisa.
Viacom 18 : Viacom 18 is a 50 : 50 joint venture between Viacom Inc. & TV 18. Revenue growth is
impressive at around 14-15%. During 2015, operating profit margins jumped from 10.7% to 14.4%.
Margins are expanding as fixed cost component is over & there are no major expenses apart from
programming expenses. We see margins going towards 22-24% range over the next 3 years &
improvement towards 18% during present financial year FY2016 along with conservative revenue growth
of 14-15%. Colors will be the main growth driver going forward.
Colors : Gained no 1 slot in September 2015. More than 20% market share. Successfully
dislodged Star & Zee from top spots.
Nick : A leader in its category of teen entertainment with a share of 18%.
Nick Jr : Struggling with a market share of 1%. At 10 position.
Comedy Central : 9% market share, 5 slot in English entertainment.
VH1 : No 1 in English music & lifestyle category with 22% share.
MTV : No 2 slot in hindi music with 14% market share.
Rishtey : 2% market share in free to air channels. 9 slot.
th
th
th
Emergence Of 4G, Smartphones & Broadband
The emergence of 4G play and the possibility of watching video content on Smartphone handsets is a
game changer that will trigger cross platform mobility of content viewing. It will give rise to the format of
short duration content that can be consumed effortlessly on mobile, and will open up yet another channel
for distribution of news, entertainment, as well as digital content.
It is very unlikely that the long form television content will have any threat in visible future from
Smartphones. Rather it will create an opportunity to monetize in terms of short form content.
Penetration of broadband opens up possibilities of pay per view model, which is again good for
entire industry as a whole.
Long-form content is still being consumed largely on television but Short-Form content like
watching a music video or short clips is what people can easily consume on their smart devices.
It is highly inconvenient to watch long-form content on a small device including the data cost itself
is very prohibitive.
Margin Expansion In Media Companies Happens As Channels Mature

2011
2012
2013
2014
2015
Comments
As channels breakeven,
operating margins shot up
from 3% to 28%.
Sri Adhikari Brothers : Breakeven Phase

Operating Profit Margin (%)
3.02
5.89
24.45
26.86
28.01
Adjusted Net Profit Margin (%)
-23.18
-17.18
0.73
3.06
3.77
Return On Capital Employed (%)
6.37
8.67
10.34
Return On Equity (%)
0.83
3.08
4.36
TV Today : Growth Phase Post Breakeven period

12.07
10.34
13.42
31.07
32.4
4.23
3.41
3.91
15.75
17
5.87
5.27
5.32
23.98
28.32
4.4
3.64
3.8
17.43
19.55
Zee Entertainment : Stable High Margin Business Post Growth Period

39.83
34.29
38.24
39.54
37.13
26.56
22.22
24.97
25.11
24.28
28.91
24.76
29.84
32.06
28.14
20.14
16.6
20.19
28.8
31.45
TV 18 Broadcast : Mix Of Matured & High Growth Period

6.85
1.67
9.17
12.35
12.08
-2.15
-6.82
-2.49
4.35
-1.66
-4.22
-14.3
-2.14
2.56
-1.12
3.66
2.03
4.16
4.14
0.78
As channels stabilized,
operating margins improved
from 12% to 32%. Net profit
margins & return on equity
saw substantial growth.
Zees entire channels profile

is mature & growth comes
mainly via advertising rates
i.e. pricing power.
CNBC channels have

matured. Viacom / History /
Lokmat / ETV are in high
growth phase. Regional
colors channels are
breaking even in FY2016 &
are ready to grow now.
We are essentially betting on

margin expansion towards
30% over the next 3 to 5 year
time frame. And then settle
into 30+ kind of range as that
of Zee.
Approximate Estimates Of Present Channel Portfolio For FY2015-16
Revenue
Brands
AETN18 Media
History
Monetization
ETV Rajasthan, ETV Urdu, ETV
Bihar / Jharkhand, ETV Uttar
Pradesh / Uttarakhand, ETV
Madhya Pradesh / Chhattisgarh,
ETV Bangla News, ETV Kannada
News, ETV Odia News & ETV
Haryana / Himachal Pradesh
Marathi, Colors Kannada, Colors
Odia & Colors Gujarati.
IBN Lokmat
Indies, Nick , Nick Jr., Sonic,
VH1, Comedy Central, Colors
Infinity, Viacom 18 Motion
Pictures ( movie production )
Bajar, CNN-IBN, Ibn, News18
Panorama
Television
Prism TV
IBN Lokmat
Viacom 18
TV 18 Broadcast
Total
Operating
Margins
2014-15
Company
Indiacast & others
Operating
Profits
( crores )
Revenue
Operating
Profits
( crores )
Operating
Margins
2015-16
51.9
8.5
16.4%
72
~14
20%
210.0
20.5
9.7%
260
~25
10%
187.0
6.0
3.2%
220
~10
5%
343.0
-38.0
-11.1%
270
~-25
-10%
18.2
5.1
27.7%
22
~6
30%
940.4
142.0
15.1%
1100
170
15.5%
620.0
159.0
28.1%
670
130
19%
2370.0
303.0
12.8%
~2620
~330
~12.5%
Approximate Estimates On Consolidated Level Considering Todays Channel Portfolio

Projections
2018
2020
2620-2650
3500-3600
4700-4800
Operating Profits
310-330
870-900
1400-1500
Operating Margins
12 to 13%
24 to 25%
29 to 31%
Profit After Tax
160 to 180
540 to580
1000 to 1050
14 to 16%
19 to 20%
Revenue
PAT Margins
EPS*
2016
6.5%~
1 to 1.1~
3.1 to 3.4~
6 to 7~
6000~
Networth
3700~
4600~
Book Value
21.5~
27~
Can the stock trade at 10

times book or 30 times+
earnings when operations
stabilize, operating margins
are at 30%+, net profit
margins at 20%+ & return on
capital employed at 25%+ ?
34~
EPS estimates do not include

minority interest or profit / loss
arising out of associate
companies.
Company holds 24.5% stake
in Eenadu TV. And its profits
are shown as profits from
associate companies.
10
First half has been a disappointment for standalone
Half Yearly Results For 2015-16
operations. There is a revenue de-growth & operating

margins too have gone down from 20% + to 10.5%.
Standalone
Apr-Sept 2014
Apr-Sept 2015
Revenue
279
259
Other Income
6.4
13.87
Total Income
285.4
272.87
Expenses
226
245
Operating Profit
59.4
27.87
Finance Cost
11.6
9.2
Exceptional Item
-127
-79.7
18.7
Apr-Sept 2014
Apr-Sept 2015
Revenue
1081
1205
Other Income
18.6
21
Total Income
1099.6
1226
Expenses
1017
1178
Operating Profit
82.5
47.5
Finance Cost
26.8
25.5
Exceptional Item
-223
Taxes
11.1
19.4
Net Profit
-111
20.2
Taxes
Net Profit
Consolidated
We were hoping for a strong second quarter on the

back of advertising growth & margin expansion.
Margins have taken a hit on account of higher
employee expense & programming expenses. We
need to see the next quarter performance closely for
any comeback on standalone basis.
On consolidated front, revenue has grown at 11.5% as

colors & other regional channels continue to grow fast.
However operating profits are down as new channel
Infinity was launched & it has posted operational loss of
19 cr. Also there were one time expense provisions for
colors re-branding (10 cr) & new etv news channels ( 19
cr).
Result Update :
1. From 1st Aug 2015, Prism TV numbers are recorded as Joint Venture & not as subsidiary ( viacom picked
up remaining 50% stake in Prism ). That means only 50% of earnings will be reported under TV 18 profit &
loss account.
2. We have revised projections & estimates for 2015-16 in accordance with the changed accounting policy &
poor half yearly results.
3. Long term view remains favorable, however looks like 2015-16 will not be a real comeback year. Earnings
will be better in second half, but EPS is not likely to cross 1.2 to 1.4 in best case scenario. Any decline
towards 28-30 will be a good opportunity to add more.
11
Additional Notes :
TV 18 holds 24.5% in Eenadu Television which owns ETV Telugu channels based out of Andhra
& Telangana. The original investment made for this acquisition was 450~ approximately & it is
being carried out in balance sheet at 471 crores as on date. TV 18 can either monetize this
investment by selling out in future or even acquire more stake and expand its footprint in Andhra
Pradesh going forward. There is no clarity or guidance given by the management on this front.
Indiacast, the distribution & content division is breaking even since last 2 years. Revenue is
growing rapidly at around 40%+. There is no earnings visibility in Indicast as of now, however this
division will benefit the group overall as it keeps carriage & distribution costs low for its assets.
Viacom 18 is a 50 : 50 joint venture between Viacom Inc, USA & TV 18. Numbers mentioned in
all reported numbers are 50% of what Viacom 18 numbers are.
Viacom 18
2013-14
2014-15
% Change
Revenue
1623.5
1887.8
16.27%
Other Income
12.5
4.2
-66%
Total Income
1636
1892
15.6%
Expenses
1550
1684
8.6%
Debt
545
303
-44%
Finance Cost
74.6
49.8
-33%
Operating Profit
174
275
58.4%
10.6%
14.4%
35.8%
69
168.4
144%
Net Profit Margin
4.2%
8.87%
111%
Equity
718
887
23.5%
ROCE%
8.8%
13%
47.7%
ROE%
9.7%
18.9%
94.8%
Operating Profit Margin

Net Profit
Revenues grew at 16%, while

expenses at 8.6%. Boost to
operational profits & net
profits.
TV 18 reports 50% of above numbers in its consolidated PL account.
Viacom 18 is emerging as a growth driver for the company going forward. Here is an interesting
article
on
why
Viacom
is
increasingly
betting
on
India
&
regional
channels
http://www.wsj.com/articles/why-viacom-is-looking-to-india-for-a-new-tv-audience-1421724781
Viacom acquired 50% stake in Prism TV from reliance in August 2015 & paid 950 crores. The
deal values Prism TV at around 1850-1900 crores. That gives it a valuation of approximately 5.6
times its 2014-15 sales. Prism TV is loss making & shall breakeven during present financial year.
12
There is a possibility that, Prism will be eventually merged with Viacom 18 to consolidate all
colors channels under one umbrella.
If we apply same valuation metric i.e. sales to market cap for other profit making entities, Viacom
18 should be valued at 10500 crores ( effectively valuing TV 18s stake in Viacom 18 at around
5300 crores ) & TV 18s standalone operations should be valued at 3500 crores. Where in market
cap of TV 18 as on date is around 6000 crores.
There is a lot of buzz around Reliance Jio, and its synergies with TV 18. We are not very
optimistic about it yet, as actual monetization of content via smart phones is not likely to happen
in the next 3 years at least. It may impact short form content like music, short videos etc. But can
not impact long form content. It will take considerable amount of time for TV 18 to benefit from 4G
& start earning additional revenues from there.
The newly started English GEC Colors Infinity will add to Viacom18s distribution arm, IndiaCasts
muscle-power, when it comes to negotiating content deals with distribution platforms such as
multi-system operators and DTH players. It lacked the wider English entertainment spread that
some competing networks have had so far. While quite a few of Viacom18s channels carry a
Hindi-English mix of programming such as MTV and Nick, it had only two under its only-English
category.
Why Buy At Present Valuations
At 1.7 price to book, TV 18 is the most attractively valued electronic media company. As margin
profile increases along with group restructuring by way of amalgamation, write-offs & clean ups,
there will be more clarity going forward.
Channels making losses, i.e. Prism TV channels are breaking even during current financial year.
As their earning starts contributing, EPS will move up rapidly.
Recently Viacom 18 acquired 50% stake in Prism TV at valuations of 5.6 times sales even when
the company is yet to breakeven. By same valuation metric, TV18s stake in Viacom 18 JV is
worth more than 5000 crores, while the entire company trades at 6000 crore market cap. In short
you are getting all other channels including CNBC for less than 1000 crores.
In FY2016, the company is liley to post an EPS of 1.5 rs based on conservative estimates. The
stock trades at roughly 21 times FY2016 earnings. There is higher margin of safety here as stock
is fairly valued at this point of time.
As earnings go up from present year, re-rating shall happen. It is next to impossible for any new
network to come in & set up from scratch. There are very high entry barriers. TV 18 has already
secured its place in top 3 national players along with Zee & Star. The business has the scalability
& potential to keep on growing for the next 5 to 7 years without spending heavy capital.
13
To sum it in one sentence we like TV 18 because it has;
High fixed cost business + Scalable business model + Entry barriers + Maturing Channels +
Viacoms international scale & management.
And all of this available at 6000 crore market cap in a 2 trillion $ economy with ever growing
content consumption demand.
How Far It Can Go
Zee which has national presence & enjoys mature margin profile, trades at 11 times book & 35
times earnings.
TV 18 which has similar national presence as that of zee, & has the visibility to reach similar
scale, size & margin profile by 2020.
Business model is such that it can continue to grow at 15 to 18% for next 5-7 years in a row. That
itself shall give it a large runway & can easily touch around 5000 crore revenue by 2020.
The stock has the potential to trade at 8 to 10 times book value on normalized earnings. This
translates into a 50000 crore market cap company in another 5 to 7 years timeframe.
This implies at least 5x upside in the stock over medium to long run. And even 10x upside if the
horizon is bigger.
What Can Go Wrong
External technology disruption that will change the way we consume television media. Even if
disruption comes, the devices or medium will change. But basic demand for content will always
be there.
The company slips into another financial stress cycle due to mis-management. With Viacom as a
50 : 50 JV partner, and Colors bouquet being the growth driver, there are less chances of this
happening.
TV 18 channels are not able to withstand competition & go down to the bottom in terms of ratings
/ viewership etc.
14
Financial Performance :
2009
2010
2011
2012
2013
2014
2015
Earnings Per Share (Rs)
-5.14
-6.03
-0.73
-2.04
-0.15
0.61
0.26
Adjusted EPS (Rs.)
-4.35
-5.2
-0.63
-1.76
-0.15
0.61
0.26
Book Value (Rs)
14.13
8.82
27.93
18.81
19.1
19.9
20.11
PBIDTM (%)
-24.03
-7.16
6.85
1.67
9.17
12.35
13.11
EBITM (%)
-33.63
-10.25
4.68
2.08
6.71
8.13
1.32
Pre Tax Margin(%)
-44.86
-18.14
-1.62
-6.41
-1.75
5.05
-0.75
PATM (%)
-45.78
-18.15
-2.15
-6.82
-2.49
4.35
-1.66
CPM(%)
-36.19
-15.07
0.02
-4.45
-0.02
7.18
0.07
ROA (%)
-21.88
-13.86
-1.34
-5.36
-1.3
1.86
-0.8
ROE (%)
-46.12
-53
-4.22
-14.3
-2.14
2.56
-1.12
ROCE (%)
-19
-9.97
3.66
2.03
4.16
4.14
0.78
39.29
230.29
34.08
74.23
20.52
15.83
17.8
Total Debt/Equity(x)
0.52
2.59
0.8
1.42
0.17
0.14
0.15
Current Ratio(x)
1.93
2.54
0.98
1.11
1.58
1.61
1.73
Interest Cover(x)
-3
-1.3
0.74
0.24
0.79
2.64
0.64
Cash Flow from Operations
-14.99
-70.40
-185.02
-66.72
101.32
193.83
-109.98
Cash Flow from Investing activities
-235.7
-174.13
-246.47
-16.87
-2040
-41.39
23.88
Cash Flow from Finance activities
243.9
457.73
367.96
-61.93
2109.8
-221.1
-39.306
Free Cash flow
-34.55
-141.55
-221.51
-156.4
-19.65
139.38
-322.85
Operational & Financial Ratios
Dividend Pay Out Ratio(%)

Margin Ratios
Performance Ratios
Net Sales Growth(%)

Financial Stability Ratios
Cash Flow
15
Profit & Loss / Balancesheet

P&L / Balancesheet Highlights
2009
2010
2011
2012
2013
2014
2015
Sales
182.72
603.50
809.20
1409.86
1699.13
1968.13
2318.39
Total Income
195.71
658.87
822.73
1495.66
1742.99
2000.54
2369.74
Total Expenditure
239.63
702.08
767.30
1472.16
1587.14
1757.40
2065.87
PBIDT
-43.92
-43.21
55.43
23.50
155.85
243.15
303.86
PBIT
-61.45
-61.84
37.83
29.30
113.95
159.95
30.57
PBT
-81.96
-109.49
-13.07
-90.41
-29.65
99.42
-17.28
PAT
-83.66
-109.56
-17.40
-96.22
-42.24
85.59
-38.47
Cash Profit
-66.13
-90.93
0.19
-62.69
-0.33
141.38
1.53
Equity Paid Up
35.83
36.33
47.56
72.42
342.33
342.33
342.87
Reserves and Surplus
217.39
132.83
616.64
608.68
2926.67
3064.27
3104.95
Net Worth
253.22
160.23
664.20
681.10
3269.00
3406.60
3447.83
Total Debt
130.85
471.95
550.73
964.63
550.40
490.33
501.18
Capital Employed
412.53
827.86
1239.13
1650.21
3822.89
3900.19
3949.02
Gross Block
136.25
518.94
570.22
833.17
839.64
2794.97
2512.18
Investments
236.00
0.36
5.86
6.15
82.40
499.58
514.46
Cash and Bank balance
13.93
256.87
204.26
81.95
269.37
288.38
167.68
Net Current Assets
79.60
379.00
-13.81
119.70
564.08
670.76
810.72
Total Current Liabilities
85.31
246.43
653.51
1081.67
967.19
1091.55
1110.23
Total Assets
497.85
1083.22
1505.60
2082.93
4434.11
4792.83
4862.02
Inc / Exp Performance
Sources of Funds
Application of Funds
Stock trading in a range of 2o to 40 over the last 4 years. Any price between 30 to 36 is an
excellent price range to accumulate the stock.
16
17
Disclaimer :
The information herein is used as per the available sources of bseindia.com, companys annual reports &
other public database sources. Alpha Invesco is not responsible for any discrepancy in the above
mentioned data.
Future estimates mentioned herein are personal opinions & views of the author.
This report was prepared by Chetan Phalke of Alpha Invesco Research Services Limited
support@alphainvesco.com or call our support desk at 020-65108952.
SEBI registration No : INA000003106
Readers are responsible for all outcomes arising of buying / selling of particular scrip / scrips mentioned
here in. This report indicates opinion of the author & is not a recommendation to buy or sell securities.
This report is published for promotional purpose of alpha invesco & shall not be treated as an investment
advice to buy / sell any securities based on this document. Investors shall consult with their independent
investment advisers before taking any decision.
Alpha Invesco & its representatives including the author have vested interest in above mentioned
securities & are invested in the same with their individual capacities & may do transactions in above
mentioned securiets.
Alpha Invesco has not received any compensation & has not been associated with above mentioned
securities at any point of time.
18

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TV 18 Broadcast Limited / October 2015

Long Runway Ahead For Television Media Players

there will be more transparency in viewership

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Content Distribution Indiacast

Movies Viacom 18 Motion Pictures

Music MTV, VH1

Kids Entertainment Nick, Nick Jr.

Business Channels CNBC, CNBC Awaaz, CNBC Bajar ( Gujrati )

Content Distribution & Monetization

50 : 50 Joint Venture with Viacom

ETV Rajasthan, ETV Urdu, ETV Bihar /

Colors Bangla, Colors Marathi, Colors

50% ( In august 2015, Viacom picked up the

MTV, Colors, Rishtey, MTV Indies, Nick , Nick

50 : 50 Joint Venture With Viacom

CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn,

100%. (Pays royalty to parent brands.)

5 ETV channels rebranded

Prism TV with 340 crore

Colors Infinity, an english

*50% revenue / financial performance is recorded into consolidated P&L account

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

One Of The Top 3 Players. Benefits From Scale.

Pricing power & Subscription Revenues To Ensure 18-20% CAGR growth.

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Regional TV To Drive Growth

Ecommerce, FMCG & Consumer Durables To Consume Most Advertising Inventory

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Operational Performance Is Improving. Write-offs Had A One Time Impact On Earnings.

Content Distribution &

MTV, Colors, Rishtey, MTV

CNBC, CNBC-Awaaz, CNBC

Write-offs include bad debts,

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Combination Of Revenue Growth & Margins Expansion Going Forward

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

CNBC Awaaz : 60% market share

CNBC Bajar Gujrati : Leader. Only player in the segment.

Colors Bangla :At no 3 slot with around 8% market share in Bengal.

Colors Oriya : At no 4 slot with 14% market share in Orrisa.

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Nick : A leader in its category of teen entertainment with a share of 18%.

Nick Jr : Struggling with a market share of 1%. At 10 position.

Comedy Central : 9% market share, 5 slot in English entertainment.

VH1 : No 1 in English music & lifestyle category with 22% share.

MTV : No 2 slot in hindi music with 14% market share.

Rishtey : 2% market share in free to air channels. 9 slot.

Emergence Of 4G, Smartphones & Broadband

Alpha Invesco Research

TV 18 Broadcast Limited / October 2015

Margin Expansion In Media Companies Happens As Channels Mature

Sri Adhikari Brothers : Breakeven Phase

Adjusted Net Profit Margin (%)