PL India - Zee Entertainment Enterprises - ERr Group - Digitization Cash Generating Machine

Company Report
Industry: Media Entertainment
Zee Entertainment Enterprises

Digitization Cash generating machine
Balwindar Singh (balwindarsingh@plindia.com)

+91-22-66322239
Contents
Page No.
Investment Arguments ............................................................................................... 5
Digitization - Will completely alter the dynamics of broadcasting industry... ................................... 5
Broadcasting industrys subscription revenues to grow at a CAGR of 26.2% from CY12-17E ........... 7
Zees domestic subscription revenues likely to clock CAGR of 20.9% over FY13-16E ....................... 7
How will Zee benefit from digitization in different scenarios? ......................................................... 8
DTH revenue growth to remain strong ............................................................................................. 9
Carriage fees set to reduce with implementation of digitization ...................................................... 9
ARPU set to increase with digitization ............................................................................................ 10
Long gestation period & considerable investments remain key entry barriers .............................. 12
Digitization - How is it shaping up? ................................................................................................. 13
Regional broadcasting - Zee gaining increased traction .................................................................. 16
Sports Business - subscription revenues under digitization to reduce sports losses going forward17
DMCL acquisition A tax bonanza .................................................................................................. 20
Advertising - TV remains one of the fastest growing mediums....................................................... 21
TV Ratings/Viewership share - Zee TV continues to strengthen its position................................... 23
Business Background ................................................................................................ 24

Risks .......................................................................................................................... 25
Financials .................................................................................................................. 26
Valuations ................................................................................................................. 29
Annexure................................................................................................................... 30
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report
January 17, 2014
Company Report

Rating
Price
Target Price
Implied Upside
Sensex
Nifty
BUY
Rs278
Rs330
18.7%
21,265
6,319
Digitization - Soon to become a reality: Though implementation of digitization

has encountered several hurdles leading to a considerable delay, we believe
digitization is bound to happen sooner than later. The intent of the Govt, along
with industrys willingness to push for digitization while forcing blackout of
analogue services, clearly demonstrates that the govt. is in no mood to
compromise and leave digitization midway. With TRAI upping the ante lately,
our channel checks suggests that gross billing has finally kicked off in the last
few days in Phase-I. In Phase-II, ~70-80% of seeding of set top boxes has been
completed and Customer Acquisition Form (CAF) is being collected. We assume
gross billing to commence from Q4FY14E in Phase-I and Q2FY15E in Phase-II.
Paradigm shift in business model from cyclicality to annuity: Broadcasting

industry, which was plagued by revenue leakage under the analogue system, is
likely to witness a paradigm shift in its business model. With the
implementation of digitization, subscription revenues will increase while the
reliance of broadcasters on advertising will come down. As per FICCI-KPMG,
subscription revenues for the broadcasting industry are likely to increase at a
CAGR of 26.2% over CY12-17E. Consequently, domestic broadcasting industrys
subscription revenues are likely to increase from Rs70bn in CY12 (36% of
broadcasting industry revenues) to Rs224bn (48% of broadcasting industry
revenues) in CY17E. On the contrary, contribution of advertising is likely to
reduce from 64% in CY12 to 52% of the broadcasting industry in CY17E.
(Prices as on January 16, 2014)
Trading data
Market Cap. (Rs bn)
Shares o/s (m)
3M Avg. Daily value (Rs m)
265.2
954.0
1147
Major shareholders
Promoters
Foreign
Domestic Inst.
Public & Other
43.08%
47.25%
4.05%
5.62%
Stock Performance
(%)
1M
Absolute
(1.3)
Relative
(4.3)
6M
15.8
8.7
How we differ from Consensus

EPS (Rs)
PL
Cons.
2015
11.2
10.8
2016
13.1
12.9
% Diff.
3.7
1.9
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
(Rs)
350
300
250
200
150
100
50
0
Jan-13
Contd4
12M
24.8
17.5
Price Performance (RIC: ZEE.BO, BB: Z IN)
Source: Bloomberg
January 17, 2014
Key financials (Y/e March)

Revenues (Rs m)
Growth (%)
EBITDA (Rs m)
PAT (Rs m)
EPS (Rs)
Growth (%)
Net DPS (Rs)
Profitability & Valuation
EBITDA margin (%)
RoE (%)
RoCE (%)
EV / sales (x)
EV / EBITDA (x)
PE (x)
P / BV (x)
Net dividend yield (%)
Source: Company Data; PL Research
2013
36,996
21.7
9,543
7,196
7.5
22.8
2.0
2014E
43,243
16.9
11,334
8,554
9.0
18.9
2.5
2015E
49,376
14.2
14,093
10,648
11.2
24.5
2.8
2016E
56,512
14.5
16,851
12,542
13.1
17.8
3.2
2013
25.8
19.6
24.9
7.0
27.2
36.9
6.8
0.7
2014E
26.2
20.4
26.1
5.9
22.7
31.0
5.9
0.9
2015E
28.5
22.2
28.5
5.1
17.9
24.9
5.2
1.0
2016E
29.8
22.8
29.8
4.4
14.7
21.1
4.5
1.2
January 17, 2014
...will result in increase in Zees domestic subscription revenues by 20.9%

CAGR: We expect Zees domestic subscription revenues to increase at a CAGR of
20.9% over FY13-16E. Consequently, domestic subscription revenues, which
accounted for 31.5% of total revenues in FY13, are likely to increase to 36.4% of
total revenues by FY16E. Robust growth in subscription revenues are likely to
continue over the next few years driven by commencement of gross billing in
Phase- I & II and digitization in Phase-III & IV markets. In the longer term, ARPU
growth also remains a promising driver driven by multiple factors including
increasing number of niche channels for kids/sports, HD offerings, Movie on
Demand, etc.
Advertising revenues to benefit from revival in economy: Advertising revenues,

which are directly related to the state of economy, have demonstrated strong
resilience to downturn in the economy, driven by strengthening of Zees market
share and consolidation of advertising towards top three GECs. We expect these
initiatives to culminate into strong advertising growth for Zee reflected in 13.7%
CAGR during FY13-16E.
Earnings likely to compound at a CAGR of 20.3%; RoE/RoCEs to inch up by

320bps/500bps by FY16E: With strong advertising growth and implementation
of digitization, we expect Zees top-line to increase at a CAGR of 15.2% over
FY13-16E. EBITDA margins are likely to increase by 400bps to 29.8% by FY16E.
We expect margins to improve for Zee though a portion of it would have to be
ploughed back to strengthen content over the long term. PAT is likely to
increase at a CAGR of 20.3% over FY13-16E with EPS likely to be Rs13.1 in FY16E.
Consequently, Zees RoEs/ROCEs are likely to increase to 22.8%/29.8% by FY16E.
Strong FCFF generation to further strengthen balance sheet: Going forward,

improved profitability, coupled with limited capex, is likely to translate into
strong FCFF generation for Zee. We expect Zee to generate FCFF of
Rs6.2bn/8.7bn/10.6bn in FY14E/15E/16E, respectively, translating into
cumulative FCFF of Rs25bn. Debt-free status, coupled with robust FCFF
generation, would further strengthen Zees balance sheet and enable it to invest
in niche content during the post-digitization era.
Zee will continue to trade at premium valuations: We believe Zee would

continue to trade at premium valuations due to the inherent opportunity laid
forward for broadcasters by way of digitization. Broadcaster is the only entity to
be benefited in the entire value chain without incurring any additional cost for
digitization. With strong earnings growth, debt-free balance sheet, limited
capex, robust FCFF generation, improvement in return ratios Zee presents an
attractive investment opportunity. We value Zee at 29x FY15E earnings resulting
into target price of Rs330 and recommend BUY.
Investment Arguments
Digitization - Will completely alter the dynamics of broadcasting
industry
The much-awaited digitization in the domestic broadcasting industry finally kicked
off in FY13. Transformation to the Digital Addressable System (DAS) for television
distribution has been the single largest development in the last decade in the cable
television industry. While digitization is widely being touted as a gamechanger for
the broadcasting industry, we highlight some of the key changes that digitization can
bring across.
Exhibit 1:
Implications of digitization and what it means for industry
Implications
Transparency in subscriber
declaration
Carriage fees reduction
Increase in ARPU
Increase in newer/niche offerings
What it means
Under the analogue regime, Local Cable
Operators (LCOs) used to under-report the
number of subscribers leading to revenue
leakage in the system
Who will benefit
Who will lose
Digitization will benefit Multi

System Operators (MSOs) and
Broadcasters
LCOs will lose as revenue

leakage will be plugged
Broadcasters will benefit as even

In the analogue era, broadcasters used to pay
with the same amount of money
huge sum to MSOs to carry their channels as
they will be able to carry higher
the bandwidth was limited
number of channels
To be driven by higher number of channels,
niche content, value-added services, pay-asBroadcasters, MSOs, LCOs
per-requirement
Consumers will pay for what they want to see
Consumers, Broadcasters
MSOs will lose
Source: PL Research
Under-reporting in analogue to be a past story

Analogue cable system was plagued with revenue leakage as under-reporting of the
total number of actual subscribers benefited only LCOs, while MSOs and
broadcasters lost out. Not only did LCOs report lower number of subscribers, they
also shared lower ARPUs with MSOs and broadcasters (this was also because of the
fact that 2nd and 3rd TV in a particular home were provided with cable access free of
charge). Hence, analogue cable system benefited only LCOs, while the other two
parties in the value chain lost out.
MSOs and broadcasters will benefit in postdigitization era as LCOs will be forced to
report actual number of subscribers
January 17, 2014
All this is set to change with the implementation of digitization as eventually every
television having cable access in the country will become paid. Digitization will bring
about transparency in the entire system as LCOs will be forced to report every
subscriber. Hence, subscription revenues for MSOs and broadcasters will get a boost
through the implementation of digitization. In the TV distribution value chain,
broadcaster is the only entity which will benefit from the roll-out of digitization
without shelling out any additional cost.
Exhibit 2: How the revenue sharing mechanism will change post digitization?
Particulars
Pre digitization
Post 2016
100%
100%
65-70%
35-50%
ARPU of consumer
LCO
Distributor
5%
0-5%
MSO
15-20%
25-30%
Broadcaster
10-15%
30-35%
Source: FICCI-KPMG Report 2012, PL Research
Broadcasters business model to shift from cyclical to annuity

Internationally, subscription revenues are quite substantial (60-65% of broadcasters
revenues in the US) and form the primary source of revenues for broadcasters. On
the other hand, in India, their contribution is comparatively lower. Indian
broadcasters have traditionally been dependent on advertising as under-reporting of
total number of subscribers has impacted the subscription bouquet. With the
implementation of digitization, broadcasters business model is likely to shift from
cyclical to annuity-driven as subscription revenues are quite sticky in nature. This
transition will be a welcome one as the current volatility related to advertisement
would reduce and a steady stream of subscription revenues would emerge.
Subscription model is quite sticky in nature

and provides for steady stream of
revenues. Hence, growth in subscription
revenues will gradually reduce dependence
on advertising
Exhibit 3:
TV Industry - Subscription revenues set to zoom (Rs bn)

CY07
CY08
CY09
CY10
CY11
CY12
CY13E
CY14E
CY15E
CY16E
CY17E
140
158
169
194
214
245
281
345
427
518
607
% YoY
14.8%
12.9%
7.0%
14.8%
10.3%
14.5%
14.7%
22.8%
23.8%
21.3%
17.2%
% of TV revenues
66.4%
65.8%
65.8%
65.3%
64.8%
66.2%
66.9%
68.7%
70.3%
71.4%
71.7%
71
82
88
103
116
125
139
157
180
207
240
% YoY
16.4%
15.5%
7.3%
17.0%
12.6%
7.8%
11.2%
12.9%
14.6%
15.0%
15.9%
% of TV revenues
33.6%
34.2%
34.2%
34.7%
35.2%
33.8%
33.1%
31.3%
29.7%
28.6%
28.3%
211
240
257
297
330
370
420
502
607
725
847
15.3%
13.7%
7.1%
15.6%
11.1%
12.1%
13.5%
19.5%
20.9%
19.4%
16.8%
Subscription rev
Advertisement rev
Total Revenues
% YoY
CAGR
'07-'12
11.8%
CAGR
'12-'17
19.9%
12.0%
13.9%
11.9%
18.0%
January 17, 2014
Broadcasting industrys subscription revenues to grow at a CAGR of

26.2% from CY12-17E
With the implementation of digitization, we expect broadcasting industrys fortunes
to change dramatically over the next few years. We expect broadcasting industrys
subscription revenues to grow at a CAGR of 26.2% from CY12-17E.
Exhibit 4:
Broadcasting industry revenues (Rs bn)

CY11
Subscription revenues
CY12
49
% YoY
Contribution to broadcasting industry
29.9%
Advertisement revenues
115
% YoY
Contribution to broadcasting industry
70.1%
Broadcasting Industry size
164
% YoY
CY13E
CY14E
CY15E
CY16E
CY17E CAGR '12-'17
70
87
116
156
191
224
42.9%
24.3%
33.3%
34.5%
22.4%
17.3%
35.9%
38.5%
42.5%
46.4%
48.0%
48.3%
125
139
157
180
207
240
8.7%
11.2%
12.9%
14.6%
15.0%
15.9%
64.1%
61.5%
57.5%
53.6%
52.0%
51.7%
195
226
273
336
398
464
18.9%
15.9%
20.8%
23.1%
18.5%
16.6%
26.2%
13.9%
18.9%
Source: FICCI-KPMG report 2013, PL Research
Zees domestic subscription revenues likely to clock CAGR of 20.9%

over FY13-16E
We expect Zees domestic subscription revenues to increase at a CAGR of 20.9%
over FY13-16E. Domestic subscriptions revenues will be helped by:
Zee expects total subscription revenues to

increase to 50% of total revenues in the
next 4-5 years compared to 42% in FY13
Ongoing digitization implementation
Continued growth in DTH subscriber base
Better negotiating power through MediaPro joint venture
Increase in ARPU
Exhibit 5: Zees domestic subscription revenues
Domestic Subscription Revenues
Exhibit 6: Contribution of domestic subscription revenues to increase
YoY gr. (RHS)
25,000
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
(Rs m)
20,000
15,000
10,000
Source: Company Data, PL Research
January 17, 2014
FY16E
FY15E
FY14E
FY13
FY12
FY11
FY10
5,000
36.4%
38%
34.4%
35%
30.3%
32%
31.5%
32.7%
29%
26%
23.9%
23%
20%
FY11
FY12
FY13
FY14E
FY15E
FY16E
How will Zee benefit from digitization in different scenarios?

Exhibit 7:
Scenario Analysis
Post Phase I
Post Phase II
Post Phase III
Post Phase IV
BEAR CASE
No. of subscribers - m
10
32
67
87
50.0%
50.0%
50.0%
50.0%
Potential Zee subscribers - m
16
34
44
Zee's DTH ARPU - Rs/month
19
19
19
19
14
14
14
14
Penetration of Zee
Zee's analogue ARPU - Rs/month

Incremental ARPU owing to digitization - Rs/month
Incremental Revenues - Rs m
840
2,688
5,628
7,308
33.0%
33.0%
33.0%
33.0%
Incremental PAT owing to digitization
563
1,801
3,771
4,896
No. of shares
954
954
954
954
Incremental earnings/share - Rs
0.6
1.9
4.0
5.1
10
32
67
87
60.0%
60.0%
60.0%
60.0%
19
40
52
19
19
19
19
Tax @33%
BASE CASE
Penetration of Zee
14
14
14
14
1,008
3,226
6,754
8,770
Tax @33%
33.0%
33.0%
33.0%
33.0%
675
2,161
4,525
5,876
No. of shares
954
954
954
954
0.7
2.3
4.7
6.2
BULL CASE
10
32
67
87
70.0%
70.0%
70.0%
70.0%
22
47
61
19
19
19
19
14
14
14
14
Penetration of Zee

1,176
3,763
7,879
10,231
Tax @33%
33.0%
33.0%
33.0%
33.0%
788
2,521
5,279
6,855
No. of shares
954
954
954
954
0.8
2.6
5.5
7.2
January 17, 2014
DTH revenue growth to remain strong

DTH performance has been below
expectations in Phase-I & II. However,
Phase-III & IV are likely to see DTH witness
higher seeding
Increasing DTH penetration has been a major growth driver for Zees subscription
revenues over the last few years. Transparent declaration of number of subscribers,
along with higher ARPU, has led to DTH revenue growth remaining strong. Success of
DTH clearly shows that the Indian consumer is willing to pay for quality services even
if it comes at a slightly higher cost. Our channel checks suggest that DTH has been
able to capture only 15-20% of the opportunity in Phase-I & II. However, Phase-III &
IV are likely to see DTH witness higher seeding due to cable-dark areas and lack of
bigger MSOs in these regions. As per FICCI - KPMG, DTH subscribers in India are likely
to grow at a CAGR of 15.4% over CY12-17E.
Exhibit 8: DTH subscribers in India
DTH subscribers in India
YoY gr. (RHS)
95.0
35%
85.0
30%
75.0
25%
(Rs m)
65.0
55.0
20%
45.0
15%
35.0
10%
25.0
5%
15.0
5.0
0%
CY10
CY11
CY12E
CY13E
CY14E
CY15E
CY16E
CY17E
Carriage fees set to reduce with implementation of digitization

In Phase-I cities, carriage fees has reduced
by 15-20%. In cases where absolute
carriage fees have not decreased,
broadcasters are allowed to carry more
number of channels resulting into lower
carriage fees/channel
Carriage fees has increased considerably over the last few years as limited
availability of bandwidth for analogue pushed broadcasters to shell out higher
amounts to MSOs to carry their channels. However, with the implementation of
digitization, we believe carriage fees will reduce as shift to digital removes the
bandwidth constraints and higher number of channels can now be carried. Further,
as subscription revenues increase for MSOs, it can lead to rationalization in carriage
fees by the MSOs as their reliance on carriage fee decreases.
Our recent channel checks point out that post the Phase-1 digitization, Mumbai and
Delhi have witnessed a 15-20% drop in carriage fees. In many cases where carriage
fee has not decreased, broadcasters are allowed to carry a larger number of
channels at same cost.
January 17, 2014
ARPU set to increase with digitization

ARPUs in India have historically been lower during the regime of analogue cable due
to under-reporting by LCOs and also unfavourable sharing mechanism between
LCOs/MSOs and broadcasters. However, with the implementation of digitization,
ARPUs are bound to increase over the medium term gradually. Improvement in
ARPU would be driven by:
In the post-digitization era, ARPUs are

bound to increase. Success of DTH clearly
shows that consumers are willing to pay
for better quality and services
Mapping of subscribers to MSOs eliminating under-reporting by LCOs
Increase in offerings, value-added services like Movie on Demand, Pay/ view etc.
Increasing number of HD channels
Increasing content and launch of niche channels
Exhibit 9: ARPUs on a northward trajectory

Category
CY12
CY13E
CY14E
CY15E
CY16E
CY17E
Cable
166
174
194
227
260
289
DTH
170
180
209
236
266
293
Currently, MSOs offer base packs at Rs170/month while premium packs are
being offered around Rs250/month. On the other hand, DTH base pack starts at
Rs200/month. Comparison of these packages clearly shows that MSOs packages
offer lower channels/services to consumers. MSOs have time and again indicated
that package prices are set to go up for the consumer in the future.
January 17, 2014
10
Exhibit 10: Package price comparison for DTH players & MSOs
No. of channels
Rate
Comments
Super Gold
296
196
Exclusive of service tax
New Gold Sports
305
254
New Diamond Pack
350
303
Platinum
361
352
215
196
Super Gold
245+
250
Super World
260+
285
Super Platinum
280+
356
Titanium
285+
444
92
220
Inclusive of service tax
Dhamaal Cricket Music
100
250
Supreme Sports Kids
112
300
Metro
120
340
Grand Sports
144
430
Value Sports
158
220
Economy Sports Plus
191
300
Mega
210
350
Ultra
219
430
Digital Starter pack
199
160
Digital Popular Pack
259
245
Digital Premium Pack
278
275
Intro
181
180
Family
239
225
Platinum
258
270
Popular
169
170
Grand
211
222
Premium
228
267
Digi Chrome
154
180
Digi Glitter
169
225
Digi Explode
211
295
DTH Players
Videocon D2H
DISH TV
Super Family
Tata SKY (packages include HD)

Dhamaal Mix
Airtel DTH
MSOs
Hathway Cable
DEN Networks
SITI CABLE
DIGICABLE
Source: Industry, PL Research
January 17, 2014
11
Post digitization, it would simply not be possible for MSOs to offer such low-priced
packages as MSOs balance sheets are already stretched. Current ARPU levels of
around Rs170-180 for a digital pay TV service is among the lowest in the world.
We acknowledge that near-term ARPUs may not increase significantly during the
implementation phase as both MSOs and DTH players target the same consumer.
Further, delay in deployment of channel packages for already digitized cable
consumers have led to muted improvement in ARPUs till now. However, as
digitization picks steam and deployment of packages happens, ARPUs would
automatically increase.
Sports subscription will drive ARPU higher
Sports broadcasting is another genre which would play a key role in driving ARPU
higher in the digitization era. Previously, under analogue, cricket was made available
to every subscriber as the LCO/MSO provided the relevant cricket channel (which
was broadcasting live cricket games). However, with digitization kicking off,
subscribers would have to buy sports/cricket packages as sports channels are
available as add-ons and not included in base packages. Cricket is among the few
genres where subscribers are ready to pay higher prices and can influence selection
of packages.
Sports channels command significantly
higher ARPU. In the post- digitization era,
consumers would have to subscribe to
sports packages since they are available as
add-ons and not included in base package
Exhibit 11: A-la-carte sports packages comparison- price/channel

Category
GECs
Sports
Videocon D2H
Dish TV
Tata SKY
Rs 5-20
Rs 15-25
NA
Rs10-35
Rs 25-45
Rs 10-30
Regional
Rs5-15
Rs5-10
Rs5-10
Kids
Rs 5-15
Rs 25-45
Rs 5-15
English
Rs 5-20
NA
Rs 5-10
Hindi Movies
Rs 5-20
NA
Rs 5-10
Hindi News
Rs 5-10
Rs 10-15
NA
Music
Rs 5-10
Rs 5-15
Rs 5-10
Long gestation period & considerable investments remain key entry

barriers
Hindi GEC space witnessed at least 7-8 new
channel launches during the last decade.
However, only a couple of them have been
successful
January 17, 2014
The nature of broadcasting business is such that it requires long gestation period,
considerable marketing investment as well as aggressive content to become a
meaningful force in a market dominated by 3-4 networks. These broadcasters are all
well-settled players in the market and for any new player to challenge them would
require huge investments in content. For example, Hindi GEC space has witnessed 67 new channel launches in the last decade, of which, only couple of the channels
have been successful.
12
Zee continues to uphold a balanced strategy of investing in content as well as

maintaining margins. We do not foresee any further large international broadcaster
venturing into India as all major players have presence in India. Existing networks
may launch new channels, going forward. However, Zee is well-prepared to fight
with competition as demonstrated in the past.
Exhibit 12: New channel launches over last few years
Channel
Broadcaster
Amount invested (Rs bn) Launched in
Status
Unsuccessful channels in last few years

SaharaOne
Sahara
Zee Next
Zee
Imagine TV
Turner Broadcasting System
Real
Turner International India
INX
Zee
NA Mar'00
Negligible market share
5 Dec'07
Shut in Sep'08
10 Jan'08
Shut in May'12
5 Mar'09
Real has shut down the channel
10 Nov'07
INX Network sold off the channel to Zee in 2010
Successful channels in last few years

Life OK
Star
NA Dec'11
Current market share of 14% in Hindi GEC
Colors
Viacom 18
NA July'08
Current market share of 18% in Hindi GEC
Digitization will enable broadcasters to focus on content creation

Broadcaster is the only party within the entire distribution chain who stands to
benefit from digitization without incurring any additional costs. With the
implementation of digitization, while subscription revenues are expected to increase
for broadcasters, carriage fees are expected to decline, resulting in significant
improvement in profitability for the industry. Hence, broadcasters ability to invest in
niche content would get significantly enhanced over the medium term.
Digitization - How is it shaping up?

Though digitization implementation is running behind schedule, we believe it is
broadly in line with expectations. Even before digitization had kicked off, most
stakeholders had indicated a delay of at least 6-12 months. Since it was a new
experience altogether for MSOs as well as LCOs, challenges were bound to creep up.
Nonetheless, industry has demonstrated a willingness to eventually move towards
digitization as govt. remained firm on its stand and even pushed for blackout of
analogue services beyond the stipulated extension granted.
January 17, 2014
13
Exhibit 13: Timeline for Digitization

No. of
households to
be digitized- m
Phase
Areas
Revised Timeline
Extended Timeline
When we expect gross

billing
Phase I
Delhi, Mumbai, Kolkata & Chennai
30-Jun-12
31-Oct-12
Q4FY14E
10
Phase II
Cities with population greater than 1m
31-Mar-13
31-Dec-13
Q2FY15E
22
Phase III
All urban areas (municipal areas)
30-Sep-14
NA
FY16E
35
Phase IV
Rest of India
31-Dec-14
NA
FY17E
18-20
Source: Ministry of Information and Broadcasting, PL Research
Phase I
Phase 1 which includes cities of Delhi, Mumbai, Kolkata & Chennai saw its original
timeline being extended from June 30, 2012 to October 31, 2012. While by the end
of December 2012, Delhi and Mumbai witnessed almost 90% of the subscribers
shifting to digital cable from analogue, Kolkata and Chennai lagged behind. By the
end of Mar 2013, Kolkata almost completed seeding of set-top boxes. However,
digitization is still a distant reality in Chennai.
Though seeding of set-top boxes has been completed in Delhi, Mumbai and Kolkata,
the mapping of subscribers and deployment of packages is still underway. Consumer
Application Form (CAF) is being collected. Unless the mapping of subscribers and
deployment of packages are completed, the true benefits of digitization may not be
completely visible. Currently, ARPU at the consumer level has not increased
materially and the customer mostly still continues to pay analogue rates.
Exhibit 14: Phase-I digitization progress

Cities
Seeding of STB
Delhi
90-95%
Mumbai
90-95%
Kolkata
~90-95%
Chennai
~30-40%
CAF compliant
CAF filling almost
complete
CAF filling almost
complete
CAF filling almost
complete
NA
Packages deployment
Underway
Underway
Gross Billing
DEN - started Dec'13,
InCable- first week of Jan'14
DEN - started Dec'13,
InCable- Jan'14
Underway
To start from first week of Jan'14
NA
NA
Current ARPU
Rs 200-300; post DAS 10-15%
increase
Rs 200-300; post DAS 10-15%
increase
Rs 150-250; Unchanged ARPU;
gross billing will result in increase
Rs 125-225; Unchanged ARPU
Source: PL Research
Phase II
Given the fact that Phase I digitization implementation had witnessed manifold
challenges, all stakeholders were anticipating Phase II digitization to be delayed by at
least 6-9 months. Phase II involves significant investment required by MSOs towards
digital head-ends and other back-end infrastructure apart from set-top boxes costs.
Phase II is also expected to present new challenges in terms of managing logistics.
Our interactions with industry experts and channel checks suggests that, while
January 17, 2014
14
seeding of set-top boxes has been witnessed across cities, the mapping of
subscribers and deployment of packages will still take couple of months. Currently,
the filling of the CAF forms have picked up pace and certain cities are also on the
verge of a blackout. TRAI has extended the deadline of CAF submission in Phase-II
cities to Dec 31, 2013. ARPU in Phase-II cities has remained more-or-less unchanged
and we expect improvement only after the deployment of packages.
Exhibit 15: Phase-II digitization progress
Cities
Seeding of STB
Vishakhapatnam
Ahmedabad
Patna
70%-80%
~90%
~80-85%
Bangalore
~90%
Amritsar
~90%
Allahabad
~90%
Thane
90-95%
Pune
90-95%
CAF compliant
CAF filling underway ;
should take few weeks
CAF filling
almost complete
CAF filling underway ;
should take few weeks
CAF filling
almost complete
CAF filling
almost complete
CAF filling
almost complete
CAF filling
almost complete
CAF filling
almost complete
Packages deployment
Post collection of CAFs,
packages will be deployed
Gross Billing
Not yet started
Underway
To start in near future
Package deployment
started
Underway
Underway
Underway
Underway
Underway
Kanpur
70%-80%
CAF filling underway
Started
Jaipur
~90%
CAF filling underway
Started
Current ARPU
Rs 150-250;
Unchanged ARPU
Rs 150-250;
Unchanged ARPU
Rs 150-250;
Unchanged ARPU
Rs 200-250; minor
improvement seen till now
Rs 150-250; minor
Rs 150-250; minor
Rs 200-300; post
DAS 10-15% increase
Rs 150-250; post
DAS 10-15% increase
Rs 150-250;
Unchanged ARPU
Rs 150-250;
Unchanged ARPU
Source: PL Research
Phase III & IV

Though the revised deadline of digitization in Phase-III & IV cities holds true, we
believe it will be delayed by at least a year. Experiences of Phase-I & II clearly
demonstrate that MSOs require significant upgrade of the existing infrastructure and
network. During Phase I & II, we have witnessed that efforts were more focussed
towards forced transition from analogue to digital and the looming prospects of
analogue blackout rather than demonstrating the benefits that digitisation could
provide to the consumer. We believe meaningful digitization can be achieved in
Phase III only in FY16E, while Phase IV is likely in FY17E.
January 17, 2014
15
Regional broadcasting - Zee gaining increased traction

Zee continues to strengthen its regional
portfolio which is evident from
improvement of market share over last few
years.
In Marathi GEC space, Zee ranks 2nd with

market share of 30%, while in the Bengali
GEC category, Zee holds 37% market share
nd
and occupies 2 slot
Regional channels are the second largest category in terms of viewership and
accounted for 26.6% of total TV viewership in CY12. In terms of language popularity,
Tamil and Telugu markets collectively accounted for ~50% of total regional
viewership, while Marathi and Bengali markets collectively accounted for ~29% of
total regional viewership in CY12. Within the regional broadcasting industry, regional
GEC is the most dominant genre accounting for 76-78% of viewership in Bengali and
Marathi markets, while in the Southern markets, regional GEC accounted for 65-70%
of viewership. With growing regional clamour, national broadcasters are increasingly
competing to strengthen their portfolio through launch of new channels - In CY12,
Zee and Star both launched their Bengali movie channels Zee Cinema Bangla and
Jalsha Movies. Star-owned Asianet Communications also launched Asianet Movies.
Exhibit 16: Viewership share of regional channels in FY13
Category
Broadcaster
Market share (%)
Marathi GEC
Star Pravah
Star
40%
Zee Marathi
Zee
30%
ETV Marathi
TV18
21%
Star Jalsha
Star
47%
Zee Bangla
Zee
37%
ETV Bangla
TV18
10%
Gemini TV
Sun Network
36%
Maa TV
MAA Television Network
25%
ETV telugu
TV18
20%
Zee Telugu
Zee
19%
Udaya TV
Sun Network
39%
Suvarna
Star
25%
ETV Kannada
TV18
19%
Zee Kannada
Zee
18%
Sun TV
Sun Network
63%
Star Vijay
Star
12%
Zee Tamil
Zee
6%
Bangla GEC
Telugu GEC
Kannada GEC
Tamil GEC
January 17, 2014
16
Zee has created a strong foothold in the regional markets and its strong content
ranks amongst the top 2 players in Marathi and Bengali space. During FY13, Zee
Marathi improved its market share to 30% and firmly held onto its No.2 position. Zee
Bangla consistently ranks amongst the top 2 players in Bengali with 37% overall
market share and an 87% market share in non-fiction genre. In the Telugu market,
Zee Telugu has been gradually gaining traction demonstrated in market share
improving slowly to 19%. Though Zee Telugu ranks 4th currently, it is very close to
the 3rd player in this market in terms of viewership share. Zee Kannadas market
share stood at 18%. In the Tamil genre, Zee is a marginal player currently though it
has been gradually strengthening its position.
Sports Business - subscription revenues under digitization to reduce

sports losses going forward
Zee entered the sports business through the launch of Zee Sports in 2005. Zee has
gradually strengthened its sports bouquet by adding TEN Sports (acquired through
Taj TV Mauritius) and launch of TEN Cricket and TEN Golf. TEN Cricket boasts of
cricket telecast rights for South Africa, West Indies, Zimbabwe, Sri Lanka and
Pakistan. TEN Cricket has renewed its contracts with South Africa, Zimbabwe and
West Indies cricket boards upto 2019-20. Remaining contracts with Sri Lanka and
Pakistan are due for renewal.
Digitization would force consumers to
subscribe for sports packages. Increase in
Exhibit 17: Zee's multi-year sports rights

Game
Details
Cricket
Year
Zimbabwe
2012-19
post- digitization era would help Zee to
South Africa
2013-20
reduce losses, going forward
West Indies
2013-19
Sri Lanka
2009-13
Pakistan
2009-13
Brazilian league
2012-14
English- The Football League
2012-15
English- The League Cup
2012-15
French Football League
2012-15
UEFA Champions League
2012-15
UEFA Europa League
2012-15
Tennis
US Open
2013-16
Golf
European Tour
2013-18
Asian Tour
2013-18
FIH Championship
2011-14
sports subscription revenues during the
Football
Hockey
January 17, 2014
17
Though Zees non-sports portfolio earns superior profit margins, investors have been
concerned about Zees investment in loss-making sports business. However, the
nature of sports business is such that it entails huge investments to acquire multiyear rights. Hence, Zee needs to invest in this business currently. Post digitization,
increase in subscription revenues would support the sports business and help to
reduce losses. Currently, most of the sports broadcasters make losses due to
aggressive acquisition of rights and primary dependence on advertising revenues.
However, post digitization ownership of sports properties would be a key
determinant for subscribers selection of packages. Sports channels would also help
to improve ARPU as sports packages are priced at a premium.
In FY15E, we expect sports losses to be
lower due to lower number of matches
involving India
Recent Rupee depreciation is likely to increase losses for the sports business as
revenues are denominated in Rupees, while sports rights are denominated in
Dollars. Typically, losses tend to increase when cricket matches involving India are
telecasted as the rights for India focussed matches are high-costs properties.
Though Zee was initially guiding for sports losses to be lower in FY14E (FY13 losses
were to the tune of Rs870m), it has now indicated that sports losses are likely to be
substantially higher than FY13. We model for sports EBITDA losses of Rs1.4bn/1.0bn
for FY14E/15E, respectively. For FY15E, sports losses are likely to be lower due to
lower number of cricket matches involving India.
Exhibit 18:
Sports losses to reduce, going further
Sports revenues
Sports EBITDA
10,000
8,000
(Rs m)
6,000
4,000
2,000
(2,000)
FY10
FY11
FY12
FY13
FY14E
FY15E
FY16E
January 17, 2014
18
Though movies come at a higher cost, their telecast helps spur

overall ratings, generate ad revenues and strengthen brand
Movie acquisition has become an integral
part of content sourcing. Ability of new
movies to pull viewership helps overall
ratings during periods of low viewership.
Perfect example of this is Sony whose
aggressive acquisition of movie rights has
helped to maintain overall ratings
Over the last couple of years, the battle for acquiring satellite rights of new Hindi
movies has intensified, with broadcasters willing to shell out huge amounts to
procure exclusive rights for telecast. Even though Zee traditionally has been a lowcost content broadcaster (focus on maintaining margins), it has upped the ante by
joining the race for acquisition of satellite rights. We believe that despite the huge
costs involved in acquisition of movie telecast rights, it still makes good sense as new
Hindi movies generate substantial viewership and self-promotes the channel.
Further, ability of new movies to pull viewership helps the broadcasters overall
ratings during periods of low viewership. One such example is Sonys aggressive
acquisition of movie rights has helped the company to maintain overall ratings
despite weak primetime performance. Advertising revenues also gets a boost when
a new movie is telecasted on the channel. In FY14, Zee plans to spend Rs2-3bn on
acquisition of movie rights.
Strengthening international presence

Zee has been gradually strengthening its international presence through new
channel launches as well as expanding into newer geographies. In FY13, Zee
launched two channels in UAE (Zee TV HD and Zee Cinema HD). ZEE entered the
Canadian market, with the launch of Zee TV HD in partnership with Ethnic Channels
Group Limited. Zees new launch, Zee Alwan (Zees first GEC for Middle East market)
has received encouraging response within a short span. Zee has also substantially
increased presence in the US by launching the first south Asian HD channel ZEE TV
HD. International subscription revenues amounted to Rs4.6bn in FY13 and
contributed 12% to total revenues. We expect international subscription revenues to
increase at a CAGR of 2.2% over FY13-15E.
Exhibit 19: International subscription revenues steady
Int'l subscription revenues
YoY gr. (RHS)
5,100
20%
4,900
15%
(Rs m)
4,700
10%
4,500
4,300
5%
4,100
0%
3,900
-5%
3,700
3,500
-10%
FY10
FY11
FY12
FY13
FY14E
FY15E
FY16E
January 17, 2014
19
Joint Venture MediaPro has enabled better negotiation

MediaPro, a 50:50 joint venture between Zee Turner and Star-Den for combined
distribution of their channels, gives Zee increased bargaining power with MSOs/DTH
players. The joint venture commenced operations in July11 and has resulted into
improvement in yields for Zee. During FY13, Mediapro recorded revenues of
Rs584m, 22.6% YoY (Zees share).
DMCL acquisition A tax bonanza

Recently, Zee announced the acquisition of the media business undertaking of
Diligent Media Corporation (DMCL). DMCL is a group entity and its media business
includes one channel license, event management activities and three reality show
format licenses. DMCLs other business included DNA newspaper which will be
acquired by Zee Media (listed Essel group entity).
DMCL acquisition will enable Zee to benefit
to the extent of Rs3.1bn of deferred tax
assets and reduce its tax payouts over next
two years
Through this acquisition, Zee will benefit to the extent of Rs3.1bn of deferred tax
assets which will be utilized by Zee to reduce its tax payouts during FY15E/16E.
Further, Zee can utilise DMCLs license for launching a new channel where getting
new licenses has been a challenge recently. Zee can also capitalise on DMCLs
holding of reality show formats to boost its content. DMCL had revenues of Rs50m
and EBITDA of Rs20m in FY13. Against this acquisition, Zee will issue Rs22.3m worth
of 3year, 6% coupon carrying non-convertible preference to DMCL and also take
over Rs1bn of unsecured loans. We have not incorporated the tax benefits of DMCL.
NPV of preference shares works out to Rs15

As a part of the celebration for the completion of 20 years of the brand Zee, Zee
recently announced distribution of Rs20bn through bonus issue of redeemable
preference shares. Zee will issue 21 preference shares of Re1 each for every one
equity share held by the shareholders. The preference shares carry dividend of 6%
p.a. and has tenure of eight years. Starting from the fourth year, every year Zee will
redeem 20% of the nominal value of these preference shares.
Exhibit 20: Calculation for preference shares
Rs/share
O/S value of preference shares
Repayment done
C/S value of preference shares
FY14E
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
21.0
21.0
21.0
21.0
21.0
16.8
12.6
8.4
4.2
4.2
4.2
4.2
4.2
4.2
21.0
21.0
21.0
21.0
16.8
12.6
8.4
4.2
Interest due
Outflow
Discount rate
Discount factor
NPV
Cumulative NPV
1.3
1.3
1.3
1.3
1.0
0.8
0.5
0.3
1.3
1.3
1.3
5.5
5.2
5.0
4.7
4.5
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
1.0
0.9
0.8
0.7
0.6
0.6
0.5
0.4
0.4
1.1
1.0
0.9
3.4
2.9
2.4
2.1
1.7
15.4
January 17, 2014
20
Advertising - TV remains one of the fastest growing mediums

TV remains the second largest medium of advertising accounting for 38.1% of the
total advertising market in CY12. While TV ad revenues grew at a CAGR of 11.9% to
Rs125bn during CY09-12, growth is expected to accelerate to 14.0% during CY1217E. The TV ad market is significantly influenced by the prevailing overall macroeconomic situation.
Exhibit 21: TV ad growth to accelerate
Category- Rs bn
TV
CY08
CY09
CY10
CY11
CY12
CY13E
CY14E
CY15E
CY16E
CY17E
82
88
103
116
125
139
157
180
207
240
% YoY
15.5%
7.3%
17.0%
12.6%
7.6%
11.1%
13.0%
15.0%
15.0%
16.0%
Contribution to mkt size
37.2%
38.5%
38.8%
38.7%
38.1%
38.3%
38.3%
38.3%
38.2%
38.1%
Print
% YoY
Radio
% YoY
OOH
% YoY
Digital Advertising
% YoY
Ad mkt size
% YoY
108
110
126
139
150
162
179
200
222
248
8.0%
2.2%
14.1%
10.6%
7.6%
8.0%
10.5%
11.7%
11.0%
11.7%
49.0%
48.3%
47.5%
46.5%
45.8%
44.7%
43.7%
42.5%
41.0%
39.4%
10
12
13
14
15
19
23
27
13.5%
-1.2%
20.5%
15.0%
10.4%
10.2%
10.0%
21.4%
21.4%
20.7%
3.8%
3.6%
3.8%
3.8%
3.9%
3.9%
3.8%
4.0%
4.2%
4.3%
16
14
17
18
18
19
21
23
25
27
15.0%
-14.9%
20.4%
7.9%
2.2%
6.0%
9.3%
9.0%
8.7%
9.2%
7.3%
6.0%
6.2%
5.9%
5.6%
5.3%
5.2%
4.9%
4.6%
4.3%
10
15
22
28
37
49
65
87
50.0%
33.3%
25.0%
54.0%
40.9%
30.4%
31.1%
31.8%
33.1%
33.9%
2.7%
3.5%
3.8%
5.1%
6.6%
7.8%
9.1%
10.4%
12.0%
13.8%
221
228
266
300
327
362
409
471
542
630
12.3%
3.6%
16.2%
13.0%
9.1%
10.6%
13.0%
15.0%
15.1%
16.3%
CAGR
'07-'12
11.9%
CAGR
'12-'17
14.0%
8.4%
10.6%
11.4%
16.6%
5.4%
8.4%
40.2%
32.1%
10.8%
14.0%
Source: FICCI-KPMG Report 2013, PL research
FMCG remains the largest advertiser on TV, accounting for ~33% of the total TV
advertising market in CY12. New product launches, ever increasing competition, race
to capture further market share are some of the key reasons which are likely to keep
FMCG advertising strong. Auto industry is also witnessing increasing ad spends as
companies launch new models and look to garner further market share.
We have modelled for Zees advertising revenues to grow at a CAGR of 14% over
FY13-16E driven by strong positioning of flagship Zee TV, launch of new channel
providing advertisers new options like &Pictures, increased traction in regional
broadcasting etc.
January 17, 2014
21
Exhibit 22: Zee's advertisement revenue growth to remain strong
Advertisement Revenues
YoY gr. (RHS)
35,000
72%
62%
30,000
52%
(Rs m)
25,000
42%
20,000
32%
22%
15,000
12%
10,000
2%
5,000
-8%
FY10
FY11
FY12
FY13
FY14E
FY15E
FY16E
Regional broadcasting has emerged as a strong alternate source of revenues for

national broadcasters. Apart from generating subscription revenues, regional
channels provide growing opportunities for regional advertising. Localised content in
regional channels focussed on a specific target audience is attracting regional
advertisers towards advertising on these channels. Also, the cost of advertising on
regional channel is significantly lower than national channels providing opportunities
to regional advertisers. Currently, regional channels account for 27.2% of the overall
TV ad market size.
Language-wise, Tamil & Telugu ad markets are the largest followed by Bengali,
Malayalam, Kannada and Marathi. As highlighted earlier, Zee has created a strong
foothold in the regional markets and its strong content ranks amongst the top 2
players in Marathi and Bengali space. In the Telugu & Kannada market, Zee is close
to occupying the third slot.
Exhibit 23:
Regional ad market size
Language
TV Households
Penetration of
TV households
Tamil
16.4
92.7%
Penetration of
C&S
households
15.9
97.0%
Telugu
15.1
72.2%
14.8
98.0%
9.0
Bengali
9.5
46.8%
8.6
90.5%
7.0
Malayalam
7.6
93.8%
7.1
93.4%
6.6
Kannada
10.0
74.1%
9.9
99.0%
6.2
Marathi
16.8
67.5%
14.9
88.7%
4.1
Bhojpuri
16.6
29.4%
11.3
68.1%
1.0
Punjab
4.8
87.3%
4.3
89.6%
1.5
Oriya
4.2
42.0%
3.5
83.3%
0.8
Gujarati
8.1
63.8%
7.0
86.4%
0.5
C&S
Households
Ad mkt size
(Rs bn)
13.5
January 17, 2014
22
TV Ratings/Viewership share - Zee TV continues to consolidate its

position
After the loss of marketshare in FY12, Zees market share recovered in FY13 as
company introduced new programs and premiered blockbuster movies. Strong
momentum continued into FY14 as Zee TV strengthened its offerings further leading
to a gain in the market share.
Exhibit 24: Zee continues to maintain market share
Star Plus
Colors
Zee TV
Sony
Sab TV
Life OK
26%
23%
20%
17%
14%
11%
Week 52
Week 51
Week 50
Week 49
Week 48
Week 47
Week 46
Week 45
Week 44
Week 43
Week 42
Week 41
Week 40
Week 39
Week 38
Week 37
Week 35
Week 36
8%

Exhibit 25: Number of shows of Zee TV in weekdays top 10
Week Week Week Week Week Week Week Week Week Week Week Week Week Week Week Week Week Week
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
Star Plus
4
4
4
5
5
4
4
6
4
5
5
5
5
5
6
6
5
5
Colors
Zee TV
Sony
Sab TV
Life OK
January 17, 2014
23
Business Background
Zee Entertainment is one of Indias leading television, media and entertainment
companies. Zee is amongst the largest producers and aggregators of Hindi
programming in the world, with extensive library housing over 1 lakh hours of
television content. The company holds more than 3,000 movie titles and boasts of
holding one of the largest Hindi film library. Zee reaches out to over 670+ million
viewers across 169 countries. Started in 1992 with one channel, Zee now offers a
bouquet of 34 domestic channels and 29 international channels.
Key Personnel
Mr. Subhash Chandra, Chairman: Mr. Subhash Chandra, Chairman of Zee and
promoter of the Essel Group of Companies is amongst the leading lights of the global
media & entertainment industry. Mr. Chandra revolutionized the television industry
by launching the country's first satellite television channel, Zee TV in 1992 and later
the first private news channel, Zee News. For his contributions to the industry, Mr.
Chandra has been awarded the 2011 International Emmy Directorate Award. Mr.
Chandra became the first Indian ever to receive a Directorate Award recognizing
excellence in television programming outside the United States.
Punit Goenka, Managing Director and CEO: Mr. Punit Goenka, the eldest son of Mr.
Subhash Chandra, is the MD and Chief Executive Officer of Zee Entertainment. Punit
also holds an executive position of Managing Director of Zee News. In his tenure as a
MD & CEO, ZEE has achieved a global recognition and has attained many milestones
and bagged prestigious awards. His strategic guidance and approach has maintained
ZEE's ranking at the top most level in the M&E sector in the annual ET 500 Lists.
Atul Das, Chief Strategy Officer: Atul Das is the Chief Strategy Officer for Zee. Atul
joined ZEE in 1998 and in his current role as the Head of Corporate Strategy and
Business Development, his responsibilities include setting the company's strategic
direction, scout new opportunities for organic/in-organic growth and supporting
businesses in investments, strategic alliances and M&A. Atul also represents ZEE on
Corporate Boards including Media Pro Enterprise India Pvt. Ltd. and India Web Portal
Pvt. Ltd., a joint-venture between Zee and PMC, USA. Atul has held various positions
within Essel Group and has rich experience across content and distribution business
including Direct to Home (DTH), Cable Distribution and Broadcasting.
Hitesh Vakil, Chief Executive Officer - Service Excellence: Hitesh Vakil is the Chief
Executive Officer - Service Excellence. Mr. Vakil is responsible of setting up a stateof-the-art shared service centre, which will offer shared services across the group.
Prior to this, he was Chief Financial Officer of the Company for 18 years. He joined
the Company in 1995. Mr. Vakil is also a member of the Board of Directors in joint
venture Companies, namely, Zee Turner Ltd. and subsidiary Company, Taj India Ltd.
January 17, 2014
24
Risks
TRAIs regulation on capping ad minutes to 12/hour- negative for all
broadcasters
The Telecom Regulatory Authority of India (TRAI)s recent regulation related to
limiting advertising minutes to 10+2 (10 minutes for commercial advertisements and
2 minutes for channels self-promotion) minutes per clock hour from Oct 1, 2013 is
likely to have a negative impact on all broadcasters. Limiting ad minutes per hour
from the previously prevalent daily average basis would result in decline of primetime ad inventory. Certain genres of channels used to run higher advertising
minutes, while GECs used to run ad minutes of 14-16/hr, movie/news
channels/regionals run advertising minutes of even more than 18-20 minutes/hour.
Hence, this regulation is likely to have a negative impact on all broadcasters.
Though our recent channel checks suggests that leading GECs (Star Plus, Zee TV,
Colors) have raised ad rates by 2030% to counter the impact of declining inventory,
still we believe the current regulation can have some near-term impact on
advertising revenues. As per Zee, post the implementation of this regulation,
onetwo months might be volatile due to adjustments in advertising inventory.
Delay in digitization will put at risk our earnings estimates

Implementation of digitization has met with multiple headwinds in Phase-I and II
delaying the process by almost a year. While we are modelling for delay of 12-15
months in implementation, any further delay can put at risk our earnings
assumptions, going forward.
Aggressive bidding for movies/sports can offset benefits of

digitization
Though implementation of digitization is likely to result in improved profitability for
broadcasters, aggressive bidding for movies/sports rights to strengthen content and
maintain market share might result into partially offsetting benefits of digitization.
Movie acquisition costs have more than doubled over the last few years (Zee
acquired Chennai Express rights for Rs480m compared to average movie
acquisition costs of Rs150-200m few years back). Successful monetization of such
high costs property remains a risk to earnings.
Restriction on MediaPro can negatively impact bargaining power

Recently, the TRAI released a consultation paper related to monitoring of
distribution of channels. We believe such a move, which can restrict bundling of
Zee/Star bouquet under the Mediapro joint venture, remains a major risk and can
negatively impact bargaining power of broadcasters against MSOs.
January 17, 2014
25
Financials
Revenues to grow at a CAGR of 15.2% over FY13-16E
We expect Zees revenues to grow at a CAGR of 15.2% over FY13-16E driven by
accelerated growth in domestic subscription stream of revenues. Domestic
subscription revenues are expected to increase by 20.9% CAGR over FY13-16E. On
the other hand, international revenues are likely to increase at a CAGR of 2.2%.
Collectively, subscription revenues (incl. domestic and international) are expected to
increase at a CAGR of 17.6%. We expect advertising revenues to increase at a CAGR
of 13.7% during the same period.
Exhibit 26: Revenues & revenue growth % YoY
YoY gr. (RHS)
Zee's Subscription Revenues

40%
50,000
30%
40,000
20%
30,000
FY16E
FY15E
FY14E
FY13
0%
FY12
10,000
FY11
20,000
10%
Advertisement Revenues
60,000
50,000
(Rs m)
60,000
FY10
(Rs m)
Zee's total revenues
Exhibit 27: Break-up of Zees advertisement and subscription stream
40,000
30,000
20,000
10,000
FY10
FY11
FY12
FY13 FY14E FY15E FY16E
Earnings likely to increase at a CAGR of 20.3% over FY13-16E

We expect Zees EBITDA to increase at a CAGR of 20.9% over FY13-16E, with EBITDA
margins expanding by 400bps during the same period. Improvement in margins is
driven primarily by higher growth in revenues without a commensurate increase in
costs. As highlighted earlier, broadcaster is the only entity within the entire value
chain that stands to benefit without incurring any additional cost. With the
implementation of digitization, we also expect carriage revenues per channel to
decline. Though we do not expect absolute carriage costs to decline, however,
positioning of higher number of channels at the same cost would lead to decline in
carriage costs/channel. PAT is likely to increase by 20.3% CAGR over FY13-16E with
EPS increasing to Rs13.1 by FY16E.
January 17, 2014
26
Margins (RHS)
Adjusted PAT
FY16E
FY15E
FY14E
FY13
FY12
FY11
FY10
3,000
9,000
6,000
3,000
FY16E
6,000
12,000
FY15E
9,000
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
FY13
12,000
15,000
FY10
(Rs m)
15,000
YoY Gr. (RHS)
FY12
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
FY11
18,000
(Rs m)
EBITDA
Exhibit 29: Adjusted PAT & Profitability growth
FY14E
Exhibit 28: EBITDA & EBITDA margins
RoE/RoCEs likely to improve by 320bps/500bps during FY13-16E

With profitability set to improve in the post-digitization era, return ratios are likely
to follow suit. We expect RoE to improve by 320bps to 22.8% by FY16E from 19.6%
in FY13. Similarly, RoCEs are likely to improve by 500bps to 29.8% by FY16E from
24.9% in FY13. Strong jump in subscription revenues flowing directly to EBITDA is
likely to improve profitability substantially, going forward, resulting into higher
return ratios.
Exhibit 30: RoE/RoCEs on a northward trajectory
RoE
RoCE
35.0%
28.5%
30.0%
24.9%
22.5%
25.0%
20.0%
26.1%
21.6%
17.6%
15.0%
29.8%
18.4%
18.0%
FY11
FY12
19.6%
20.4%
FY13
FY14E
22.2%
22.8%
FY15E
FY16E
14.6%
10.0%
FY10
January 17, 2014
27
Robust FCFF generation to translate into stronger Balance sheet

Going forward, improved profitability, coupled with limited capex is likely to
translate into healthy FCFF generation for Zee. We expect Zee to generate FCFF of
Rs6.2bn/8.7bn/10.6bn for FY14E/15E/16E, respectively, translating into cumulative
FCFF of Rs25.5bn during this period. Consequently, cash balances (incl. long & short
term investments) are likely to increase to Rs27bn from Rs13bn in FY13. Strong
balance sheet would enable Zee to invest further into content as digitization will
throw up newer opportunities for niche channels.
Exhibit 31: FCFF generation to remain strong
Exhibit 32: Cash & Investments to increase, going forward
12,000
8,000
6,186
6,000
3,420
26,779
24,000
8,714
(Rs m)
(Rs m)
10,000
4,000
29,000
10,572
20,981
19,000
14,000
4,154
16,594
13,233
11,283
9,000
2,000
4,000
FY12
FY13
January 17, 2014
FY14E
FY15E
FY16E
FY12
FY13
FY14E
FY15E
FY16E
28
Valuations
We believe Zee would continue to trade at premium valuations due to the inherent
opportunity laid forward for broadcasters by way of digitization. With strong
earnings growth, debt-free balance sheet, limited capex, robust FCFF generation,
improvement in return ratios Zee presents an attractive investment opportunity. We
value Zee at 29x FY15E earnings resulting into target price of Rs330 and recommend
BUY.
Exhibit 33: 1yr. forward PE
P/E (x)
Exhibit 34: 1yr. forward EV/EBITDA
Peak(x)
Avg(x)
Median(x)
26.4
30.0
25.0
20.0
15.0
10.0
5.0
0.0
300,000
Min(x)
21.0x
250,000
26.3
17.0x
200,000
17.4
13.0x
150,000
17.0
9.0x
100,000
4.0
5.0x
50,000
Mar-07
Aug-07
Dec-07
May-08
Sep-08
Feb-09
Jun-09
Nov-09
Mar-10
Aug-10
Dec-10
May-11
Sep-11
Feb-12
Jun-12
Oct-12
Mar-13
Jul-13
Dec-13
Mar-07
Aug-07
Dec-07
May-08
Sep-08
Feb-09
Jun-09
Nov-09
Mar-10
Aug-10
Dec-10
May-11
Sep-11
Feb-12
Jun-12
Oct-12
Mar-13
Jul-13
Dec-13
Source: Company Data, Bloomberg, PL Research
Exhibit 35: Peer Comparison Financials

Name
Zee Ent.
Enterprises
Sun TV
Network
Sales (Rs bn)
Sales Gr. (%)
EBITDA (Rs bn)
EBITDA Margin (%)
PAT (Rs bn)
PAT Gr. (%)
FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E
43.2
49.4
56.5
16.9
14.2
14.5
11.3
14.1
16.9
26.2
28.5
29.8
8.6
10.6
12.5
18.9
24.5
17.8
22.8
26.2
30.0
18.6
14.8
14.4
15.3
17.8
21.0
66.9
68.1
70.1
7.8
9.2
10.7
9.8
18.6
15.8

Exhibit 36: Peer Comparison Valuation
Name
Zee Ent.
Enterprises
Sun TV
Network
EPS (Rs)
PE (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
FY14E
FY15E
FY16E
FY14E
FY15E
FY16E
FY14E
FY15E
FY16E
FY14E
FY15E
FY16E
FY14E
FY15E
FY16E
9.0
11.2
13.1
31.0
24.9
21.1
22.7
17.9
14.7
20.4
22.2
22.8
26.1
28.5
29.8
19.7
23.6
27.3
18.5
15.4
13.3
9.0
7.6
6.2
26.2
27.8
28.8
20.8
21.5
22.0
January 17, 2014
29
Annexure
Indias Media & Entertainment (M&E) industry - multiple drivers
likely to result in sustained growth of 15.2% CAGR over CY12-17E
At present, India is the 14th largest M&E
market in the world, while China is the
third largest market globally. Over the next
decade, it is expected that China will
surpass Japan and become the second
largest market worldwide next to the US
Domestic M&E industry is one of the fastest growing industries in the world with
market size estimated to be Rs820bn in CY12. Favourable demographics, increasing
media penetration, ongoing digitization, newer digital platforms and comparatively
lower spends on M&E are few of the reasons why we believe the domestic M&E
industry is poised to achieve newer heights. As per FICCI-KPMG, industry is projected
to grow at a healthy CAGR of 15.2% to reach Rs1,661bn by CY17E. During CY07-CY12,
the industry had grown at a CAGR of 9.8% from Rs514bn to Rs820bn.
Exhibit 37: M&E spend as a % of GDP
3.5%
3.1%
3.0%
2.9% 2.8%
2.4% 2.3%
2.5%
2.2%
2.0% 2.0% 2.0%

1.7%
2.0%
1.5%
1.5% 1.4%
1.2% 1.1%
1.0%
0.9%
0.5%
0.0%
Source: FICCI-KPMG Report, PL Research

Exhibit 38: Domestic Media & Entertainment industry Rs bn
Medium
TV
% YoY
Contribution to M&E mkt
Print
% YoY
Film
% YoY
CY09
CY10
CY11
CY12
CY13E
CY14E
CY15E
CY16E
CY17E
257
297
329
370
420
501
607
725
848
6.6%
15.6%
10.8%
12.5%
13.5%
19.4%
21.1%
19.4%
16.9%
43.8%
45.6%
45.2%
45.1%
45.8%
47.4%
49.1%
50.4%
51.0%
175
192
209
224
241
261
286
311
340
1.9%
9.8%
8.6%
7.3%
7.5%
8.5%
9.3%
9.0%
9.3%
29.8%
29.5%
28.7%
27.3%
26.3%
24.7%
23.1%
21.6%
20.5%
89
83
93
112
122
138
154
172
193
-14.5%
-6.7%
11.5%
21.0%
8.5%
13.4%
11.1%
11.8%
12.6%
15.2%
12.8%
12.8%
13.7%
13.3%
13.1%
12.4%
11.9%
11.6%
CAGR
'07-'12
11.9%
CAGR
'12-'17
18.0%
7.0%
8.7%
3.9%
11.5%
Contd31
January 17, 2014
30
Exhibit 39: Domestic Media & Entertainment industry Rs bn

Medium
CY09
CY10
CY11
CY12
CY13E
CY14E
CY15E
CY16E
CY17E
10
12
13
14
15
19
23
27
-1.2%
20.5%
15.0%
10.4%
10.2%
10.0%
21.4%
21.4%
20.7%
1.4%
1.5%
1.6%
1.5%
1.5%
1.5%
1.5%
1.6%
1.6%
11
12
13
15
18
23
% YoY
5.4%
10.3%
4.7%
17.8%
13.2%
9.2%
16.8%
19.6%
23.0%
1.3%
1.3%
1.2%
1.3%
1.3%
1.2%
1.2%
1.3%
1.4%
Radio
% YoY
Music
Out of Home
% YoY
Animation & Visual
% YoY
Gaming
% YoY
Digital Advertising
% YoY
Domestic M&E Industry
% YoY
14
17
18
18
19
21
23
25
27
-14.9%
20.4%
7.9%
2.2%
4.4%
11.1%
9.0%
8.7%
9.2%
2.3%
2.5%
2.4%
2.2%
2.1%
2.0%
1.9%
1.7%
1.6%
20
24
31
35
41
47
54
63
73
14.9%
17.9%
30.8%
13.9%
16.1%
14.1%
16.0%
16.2%
16.3%
3.4%
3.6%
4.3%
4.3%
4.5%
4.4%
4.4%
4.4%
4.4%
10
13
15
20
24
31
36
42
14.3%
25.0%
30.0%
17.7%
30.7%
19.0%
29.8%
17.2%
16.3%
1.4%
1.5%
1.8%
1.9%
2.2%
2.2%
2.5%
2.5%
2.5%
10
15
22
28
37
49
65
87
33.3%
25.0%
54.0%
40.9%
29.0%
32.5%
31.8%
33.1%
33.9%
1.4%
1.5%
2.1%
2.6%
3.1%
3.5%
4.0%
4.5%
5.2%
587
651
728
820
917
1,058
1,238
1,438
1,661
1.3%
10.9%
11.8%
12.6%
11.8%
15.4%
16.9%
16.2%
15.5%
CAGR
'07-'12
12.7%
CAGR
'12-'17
16.6%
8.7%
16.2%
5.4%
8.4%
20.3%
15.8%
30.8%
22.4%
40.2%
32.1%
9.8%
15.2%
Television industry likely to grow at 18.0% CAGR over CY12-17E

Amongst the various mediums of M&E, TV still remains the most dominant among
Indian households. Indian television industry has grown at a CAGR of 11.9% over
CY07-12 and is currently valued at Rs370bn contributing 45% to the M&E space in
CY12. We believe television industry currently is at an inflexion point where
digitization is touted to be a game changer and benefit all stakeholders viz.
broadcasters, MSOs, consumers. Due to the ongoing digitization, rapid increase in
media penetration, launch of new channels and increased activity on this platform,
domestic TV industry is expected to grow at a higher rate of 18.0% over CY12-17E.
FICCI-KPMG estimates that domestic TV industry will be worth Rs848bn by CY17E
and its contribution will increase to 51.0% of M&E industry.
January 17, 2014
31
Exhibit 40: Domestic television industry - Rs bn
TV
YoY gr. (RHS)
Contribution to M & E mkt (RHS)
900
60%
800
50%
700
40%
600
500
30%
400
20%
300
10%
200
100
0%
CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E CY15E CY16E CY17E
TV penetration lowest in India; C&S penetration likely to increase to

94.7% by CY16E
Apart from increasing TV penetration,
average television viewing time is
considerably lower in India compared to
developed economies. Hence, scope for
television sector growth remains superior
January 17, 2014
TV penetration levels remain one of the lowest in India. Of the 247m households in
India at the end of CY11, only 148m households own a TV set, implying TV
penetration level of only 60%. Compared to other emerging economies of Indonesia,
Brazil and China, the current level of penetration is well below these countries.
However, it is estimated that penetration levels would increase to ~64% by 2016E
though they will still be significantly below other countries. With increasing TV
penetration, we believe demand for niche content is likely to increase which would
drive growth for C&S, going forward.
32
Exhibit 41: TV penetration in India is still way below other countries

120%
350
300
90%
78%
80%
317
240
250
61%
60%
200
40%
150
174
154
146
142
Vietnam
97%
China
98%
China
Germany
Brazil
Indonesia
India
India
US
0%
Indonesia
100
20%
UK
100%
Exhibit 42: TV viewing time is very low compared to US, UK-mns/day
Source: FICCI-KPMG Report, PL Research

Exhibit 43: C&S penetration to increase over the medium term
Total Households
TV Households
Penetration of TV households (%)
C & S Households
Penetration of C & S households (%)
CY10
CY11
CY12E
CY13E
CY14E
CY15E
CY16E
239
247
255
262
270
277
284
141
148
155
162
169
175
181
58.9%
59.9%
60.8%
61.7%
62.5%
63.2%
63.9%
113
123
133
144
154
164
172
80.5%
82.8%
85.9%
89.0%
91.5%
93.4%
94.7%
Source: DISH TV presentation, PL Research
January 17, 2014
33

Income Statement (Rs m)
Y/e March
Net Revenue
Raw Material Expenses
Gross Profit
Employee Cost
Other Expenses
EBITDA
Depr. & Amortization
Net Interest
Other Income
Profit before Tax
Total Tax
Profit after Tax
Ex-Od items / Min. Int.
Adj. PAT
Avg. Shares O/S (m)
EPS (Rs.)
Cash Flow Abstract (Rs m)

Y/e March
C/F from Operations
C/F from Investing
C/F from Financing
Inc. / Dec. in Cash
Opening Cash
Closing Cash
FCFF
FCFE
Key Financial Metrics

Y/e March
Growth
2013
2014E
2015E
2016E
36,996
17,401
19,595
3,491
6,561
9,543
399
(1,375)
1,461
10,519
3,337
7,182
(33)
7,196
954.0
7.5
43,243
20,234
23,009
4,065
7,611
11,334
366
(1,800)
1,900
12,768
4,213
8,554
8,554
954.0
9.0
49,376
22,001
27,375
4,641
8,641
14,093
404
(2,086)
2,166
15,775
5,127
10,648
10,648
954.0
11.2
56,512
24,516
31,996
5,312
9,833
16,851
445
(2,313)
2,383
18,719
6,177
12,542
12,542
954.0
13.1
2013
2014E
2015E
2016E
3,873
446
(2,287)
2,032
3,274
5,316
4,154
4,159
6,935
(849)
(2,923)
3,162
5,316
8,478
6,186
6,186
9,485
(991)
(4,407)
4,087
8,478
12,565
8,714
8,714
11,376
(1,735)
(4,844)
4,798
12,565
17,363
10,572
10,572
2013
2014E
2015E
2016E
Revenue (%)
EBITDA (%)
PAT (%)
EPS (%)
21.7
29.0
22.2
22.8
16.9
18.8
18.9
18.9
14.2
24.3
24.5
24.5
14.5
19.6
17.8
17.8
25.8
19.5
24.9
19.6
26.2
19.8
26.1
20.4
28.5
21.6
28.5
22.2
29.8
22.2
29.8
22.8
(0.1)
173
(0.2)
169
(0.2)
160
(0.3)
155
36.9
6.8
27.2
7.0
31.0
5.9
22.7
5.9
24.9
5.2
17.9
5.1
21.1
4.5
14.7
4.4
31.7
13.9
3.2
57.8
33.0
14.9
2.8
72.3
32.5
13.7
3.0
81.8
33.0
12.7
3.1
84.3
Balance Sheet Abstract (Rs m)

Y/e March
Shareholder's Funds
Total Debt
Other Liabilities
Total Liabilities
Net Fixed Assets
Goodwill
Investments
Net Current Assets
Cash & Equivalents
Other Current Assets
Current Liabilities
Other Assets
Total Assets
Quarterly Financials (Rs m)

Y/e March
2013
2014E
2015E
2016E
39,116
17
33
39,166
9,975
8,245
20,658
5,317
26,734
11,393
288
39,166
44,879
17
44,896
10,257
8,445
25,905
8,478
30,190
12,764
288
44,896
51,200
17
51,217
10,544
8,745
31,639
12,565
33,278
14,205
288
51,216
58,968
17
58,985
10,835
9,745
38,116
17,363
36,635
15,881
288
58,984
Q4FY13
Q1FY14
Net Revenue
EBITDA
% of revenue
Depr. & Amortization
Net Interest
Other Income
Profit before Tax
Total Tax
Profit after Tax
Adj. PAT
9,643
2,423
25.1
115
(510)
538
2,818
1,014
1,796
1,796
9,733
2,915
30.0
87
(700)
722
3,528
1,289
2,246
2,246
Q2FY14 Q3FY14E
11,013
3,105
28.2
91
(395)
429
3,409
1,166
2,243
2,243
11,032
2,736
24.8
91
(375)
400
3,020
997
2,023
2,023
Key Operating Metrics

Y/e March
2013
2014E
2015E
2016E
Advt. Rev. Gr. (%)

24.0
Dom. Sub. Gr. (%)
26.3
Intl. Sub. Gr. (%)
14.0
Source: Company Data, PL Research.
15.0
21.5
2.5
13.0
20.2
2.0
13.0
21.0
2.0
Profitability
EBITDA Margin (%)
PAT Margin (%)
RoCE (%)
RoE (%)
Balance Sheet
Net Debt : Equity
Net Wrkng Cap. (days)
Valuation
PER (x)
P / B (x)
EV / EBITDA (x)
EV / Sales (x)
Earnings Quality
Eff. Tax Rate
Other Inc / PBT
Eff. Depr. Rate (%)
FCFE / PAT
Source: Company Data, PL Research.
January 17, 2014
34
THIS PAGE IS INTENTIONALLY LEFT BLANK
January 17, 2014
35
Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
Rating Distribution of Research Coverage
% of Total Coverage
60%
53.9%
50%
40%
30%
25.8%
18.8%
20%
10%
1.6%
0%
BUY
Accumulate
Reduce
Sell
PLs Recommendation Nomenclature

BUY
Over 15% Outperformance to Sensex over 12-months
Accumulate
Outperformance to Sensex over 12-months
Reduce
Underperformance to Sensex over 12-months
Sell
Over 15% underperformance to Sensex over 12-months
Trading Buy
Over 10% absolute upside in 1-month
Trading Sell
Over 10% absolute decline in 1-month
Not Rated (NR)
No specific call on the stock
Under Review (UR)
Rating likely to change shortly
This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as
information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be
considered or taken as an offer to sell or a solicitation to buy or sell any security.
The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy
or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the information,
statements and opinion given, made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The
suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an
independent expert/advisor.
Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or
engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication.
We may from time to time solicit or perform investment banking or other services for any company mentioned in this document.
January 17, 2014
36

PL India - Zee Entertainment Enterprises - ERr Group - Digitization Cash Generating Machine

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PL India - Zee Entertainment Enterprises - ERr Group - Digitization Cash Generating Machine

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Company Report

Industry: Media Entertainment

Zee Entertainment Enterprises

Balwindar Singh (balwindarsingh@plindia.com)

Zee Entertainment Enterprises

Business Background ................................................................................................ 24

January 17, 2014

Zee Entertainment Enterprises

Digitization - Soon to become a reality: Though implementation of digitization

Paradigm shift in business model from cyclicality to annuity: Broadcasting

(Prices as on January 16, 2014)

How we differ from Consensus

Price Performance (RIC: ZEE.BO, BB: Z IN)

January 17, 2014

Key financials (Y/e March)

Zee Entertainment Enterprises

January 17, 2014

...will result in increase in Zees domestic subscription revenues by 20.9%

Advertising revenues to benefit from revival in economy: Advertising revenues,

Earnings likely to compound at a CAGR of 20.3%; RoE/RoCEs to inch up by

Strong FCFF generation to further strengthen balance sheet: Going forward,

Zee will continue to trade at premium valuations: We believe Zee would

Zee Entertainment Enterprises

Implications of digitization and what it means for industry

Carriage fees reduction

Who will benefit

Who will lose

Digitization will benefit Multi

LCOs will lose as revenue

Broadcasters will benefit as even

MSOs will lose

Under-reporting in analogue to be a past story

January 17, 2014

Zee Entertainment Enterprises

Source: FICCI-KPMG Report 2012, PL Research

Broadcasters business model to shift from cyclical to annuity

Subscription model is quite sticky in nature

TV Industry - Subscription revenues set to zoom (Rs bn)

Source: FICCI-KPMG Report 2013, PL Research

January 17, 2014

Zee Entertainment Enterprises

Broadcasting industrys subscription revenues to grow at a CAGR of

Broadcasting industry revenues (Rs bn)

Broadcasting Industry size

CY17E CAGR '12-'17

Source: FICCI-KPMG report 2013, PL Research

Zees domestic subscription revenues likely to clock CAGR of 20.9%

Zee expects total subscription revenues to

Ongoing digitization implementation

Continued growth in DTH subscriber base

Better negotiating power through MediaPro joint venture

Exhibit 5: Zees domestic subscription revenues

Domestic Subscription Revenues

Exhibit 6: Contribution of domestic subscription revenues to increase

YoY gr. (RHS)

Source: Company Data, PL Research

January 17, 2014

Source: Company Data, PL Research

Zee Entertainment Enterprises

How will Zee benefit from digitization in different scenarios?

Post Phase III

Potential Zee subscribers - m

Zee's DTH ARPU - Rs/month