Developed Developed 52WH 52WL 52WH 52WL Chg.mailers.sparkcapital.in/uploads/Daily/Spark Research 1... · 2016. 7. 1. · 9 TECH MAHINDRA LTD 67.7 54.8 -0.4% 10 INFOSYS LTD 67.6 68.0

Page 1

SPARK RESEARCH

01 July 2016

WHAT’S INSIDE

Initiating Coverage – Indian Media & Entertainment Sector

– Zee Entertainment Enterprise Limted ; Sun TV ; Dish TV

AR and Company Update – Ultratech Cement – ADD (TP of Rs. 3600)

Exchange and Currency Performance

Spark Focus Stocks

Technical Indicators

Spark Model Portfolio

Today’s News and Announcements

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

DEALER’S COMMENTS

Stocks of power sector, telecom and private sector banks led gains

for the benchmark equity indices. A likely boost to consumption

demand from increase in salaries and payment of arrears to

government employees due to the implementation of the 7th Pay

Commission recommendations, gains in global markets and short

covering aided the upmove. Market breadth was strong. BSE Mid-

Cap index outperformed the Sensex while BSE Small-Cap index

underperformed the Sensex. Among BSE sectoral indices, realty

gained the most followed by power, consumer durables and

infrastructure. India VIX advanced 0.83% to 16.2900. On the NSE, 89

shares rose to fresh 52 week high while 15 fell to new 52 week low.

VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022

Among the digital advertisement avenues, videos are the rapidly growing segment, especially on entertainment content

Source:FICCI KPMG, Industry Sources & Spark Capital research

Video 25%

Search & Display

47%

Classifieds 15%

Social 8%

Others 5%

Youtube 67%

Others 33%

Film/TV, 60.0%

Music, 28.0%

Education, 8.0%

Health, 1.0%

Others, 3.0%

Google dominating

offerings across

digital offerings has

certainly emerged as

the BAAP of Indian

Digital Space (Click

here for additional

information)

Page 2

SPARK RESEARCH

01 July 2016


Today 1d 5d 1m 3m 6m 12m Today 1d 5d 1m 3m 6m 12m

US (Dow Jones) 17,930 1.3 -0.5 0.8 0.8 2.9 1.0 -1.3 16.7 Dollar Index# 95.8 -0.3 0.4 0.4 1.3 -2.8 -0.5 -4.6 4.3

UK (FTSE100) 6,504 2.3 2.6 5.0 5.8 4.2 -1.6 -4.5 18.3 Pound 1.3 0.2 -2.5 -7.4 -6.2 -9.7 -14.6 -15.7 1.7

Japan (Nikkiei 225) 15,680 0.7 4.9 -7.5 -3.0 -17.6 -22.9 -25.1 5.5 Yen 102.9 0.3 -0.7 6.5 8.5 17.0 19.7 -17.9 4.0

Germany (DAX) 9,680 0.7 -5.6 -5.1 -1.2 -9.9 -13.4 -18.0 11.3 Euro 1.1 0.0 -0.1 -0.8 -2.5 2.2 0.4 -5.2 5.5

Brazil (IBOV) 51,527 1.0 -0.1 5.1 1.9 18.9 -2.3 -6.3 39.1 Real 3.2 0.2 3.9 12.4 11.8 23.3 -3.4 -24.4 3.3

Russia (Micex) 1,891 0.2 -1.5 -0.1 1.8 7.4 15.3 -4.3 20.4 Ruble 63.9 0.0 1.9 5.0 5.9 13.5 -12.6 -25.7 15.5

India (Sensex) 27,000 1.0 0.0 1.1 6.8 3.2 -3.6 -5.5 20.0 Rupee 67.5 0.2 -0.4 -0.4 -1.9 -2.0 -5.7 -1.8 6.7

China (SHCOMP) 2,937 0.3 2.9 0.8 -2.4 -17.0 -27.5 -32.0 11.3 Renminbi 6.7 -0.1 -0.5 -1.1 -2.6 -2.4 -6.8 -0.2 7.2

South Africa (Jalsh) 52,218 0.6 -2.6 -2.4 1.2 3.0 0.6 -4.6 13.6 Rand 14.8 -0.2 2.2 5.8 -0.3 5.5 -16.9 -17.7 21.2

HK (H S I) 20,794 1.8 -0.4 0.2 1.4 -5.1 -20.8 -21.4 13.8 HK Dollar 7.8 0.0 0.0 0.2 -0.1 -0.1 -0.1 -0.9 0.1

Korea (Kospi) 1,991 1.1 3.4 0.4 0.9 1.5 -5.1 -5.7 10.6 Won 1,146.5 0.5 2.8 4.1 0.7 2.3 -2.5 -7.9 3.1

Singapore (Straits) 2,841 0.0 3.9 1.8 0.8 -1.4 -14.7 -16.0 12.4 SG Dollar 1.3 0.1 0.6 2.3 0.4 5.0 0.6 -6.9 1.1

Malaysia (KLCI) 1,650 -0.3 1.0 1.4 -3.5 -2.5 -4.5 -5.4 9.7 Ringgit 4.0 1.1 2.7 4.1 -2.4 7.7 -6.0 -11.1 6.2

Indonesia (Jakarta) 5,020 0.1 3.8 3.7 3.7 9.3 2.4 -0.4 24.5 Ind Rupiah 13,190.0 0.2 1.5 3.6 -0.2 4.9 1.0 -11.0 1.6

Commodities Commodities

Brent ($/bbl) 50.1 0.7 3.4 0.7 29.5 34.3 -19.3 -21.0 84.7 Indonesian Coal ($/MT) 51.8 NA NA 1.2 0.4 -3.2 -13.1 -12.4 1.7

WTI ($/bbl) 48.6 0.6 2.1 -1.7 22.1 16.1 -19.6 -21.0 50.9 S Africa Coal ($/MT) 61.0 NA -3.7 -7.6 -6.9 -16.7 -26.4 NA NA

Copper ($/MT) 4,840 0.2 1.3 3.0 -0.8 2.9 -15.9 -16.1 12.3 Australia Coal ($/MT) 61.8 NA -1.0 -0.6 -4.4 -11.9 -25.4 NA NA

Zinc ($/MT) 2,102 0.8 3.2 9.3 16.3 32.0 5.3 0.0 44.9 Gold Spot $/Oz 1,330 0.6 1.1 9.7 8.8 25.3 13.8 -2.1 27.1

Aluminium ($/MT) 1,643 1.0 0.6 6.4 8.8 9.5 -0.5 -11.1 15.4 GOLD INDEX (Rs./10g) 30,539.0 -0.2 3.0 6.7 5.0 22.2 15.9 -2.3 24.3

Iron Ore ($/MT) 54 1.5 7.0 11.9 1.9 24.7 -12.9 -59.6 42.9 Silver Spot $/Oz 19.1 1.8 7.4 19.4 26.6 37.9 22.3 0.0 39.6

Lead ($/MT) 1,785 1.0 3.5 5.3 5.2 -0.7 2.4 -5.9 14.9 MCX Silver (Rs./KG) 43,065.0 1.4 5.1 11.9 17.5 30.6 20.9 0.0 31.0

Asian Asian

Chg.

from

52WH

Chg.

from

52WL

Developed Developed

BRICS BRICS

Global Indices

Equity Performance (%) Chg.

from

52WH

Chg.

from

52WL

Currency

Currency Performance (%)

Performance (%) Performance (%)

Page 3

SPARK RESEARCH

01 July 2016

NSE / BSE Category wise turnover


Particulars Today 1D 1M 3M 6M 12M

Reverse Repo 225 264 32 431 98 191

Repo 48 29 99 66 104 81

MSF - 1 - 3 8 1

Net liquidity 177 234 (67) 362 (14) 110

Change in BPS

NSE MIBOR 6.78 (7) (55) (42) (99) (136)

1M CP 7.60 (2) (14) (109) (1) (39)

3M CP 7.79 (3) (18) (91) 6 (36)

6M CP 8.08 - (10) (71) 4 (33)

3M CD 7.26 - 11 (23) (87) (108)

6M CD 7.46 9 24 (19) (81) (101)

12M CD 7.62 3 17 (25) (71) (104)

Change in BPS

India 10 yr 7.45 - (4) (1) (28) (37)

US 10 yr 1.46 (1) (38) (31) (81) (97)

Spread (India 10Y-US10Y) 599

India 10YR AAA corp 8.36 4 5 (5) (6) (20)

Spread (India 10Y-AAA10Y) 91

91D T.Bills 6.73 (4) (13) (50) (50) (96)

1Y T.Bills 6.88 2 (5) (25) (36) (83)

Call rate 6.39 14 0 (37) (29) (67)

Change in BPS

LIBOR 0.45 (21) (50) (82) (40) (65)

MIFOR 7.06 (16) (27) (34) 22 (7)

OIS 6.47 (4) (12) (23) (14) (32)

12m OIS fw d 6.57 - (12) (11) (48) (96)

Money Market Rates

Liquidity (Rs. Bn)

LIBOR, MIFOR

Bond Market

Last 5 Day FII Buy FII Sell Net DII Buy DII Sell Net

30-Jun-16 81.1 70.1 11.1 31.2 33.1 -1.9

29-Jun-16 35.7 34.6 1.0 15.7 15.9 -0.2

28-Jun-16 36.7 38.6 -1.9 15.7 18.2 -2.4

27-Jun-16 34.2 35.7 -1.5 14.3 15.8 -1.5

24-Jun-16 38.7 44.9 -6.3 29.7 28.5 1.1

Market Activity FII & DII - Provisional (INR Bn)

79

151

70 75 70 84

34

64

32 34 30 58

89

82

100 88 96

144

-

50

100

150

200

250

300

350

1M avg30-Jun29-Jun28-Jun27-Jun24-Jun

Rs. b

n

FII DII Others

Date Script Client Name Type Quantity Price

30-Jun-16 ARMANFIN RELIANCE MUTUAL FUND B 1,81,175 195.00

30-Jun-16 EUROCERA ASPIRE EMERGING FUND B 3,08,239 6.64

30-Jun-16 ARMANFIN PARAM CAPITAL B 1,32,304 235.88

30-Jun-16 JUBLFOOD CREDIT SUISSE (SINGAPORE) LIMITED A/C CREDIT SUISSE (SINGAPB 31,860 1,136.02

30-Jun-16 JUBLFOOD CREDIT SUISSE (SINGAPORE) LIMITED A/C CREDIT SUISSE (SINGAPS 4,48,457 1,134.90

Bulk Deals (INR Mn)

Rank Company Delivery % 30D Del. % Price Chg

1 HCL TECHNOLOGIES LTD 78.9 76.8 0.0%

2 POWER GRID CORP OF INDIA LTD 75.4 64.5 -0.3%

3 HOUSING DEVELOPMENT FINANCE 73.8 67.8 0.0%

4 WIPRO LTD 73.1 71.1 0.4%

5 ITC LTD 72.2 63.9 -1.1%

6 SUN PHARMACEUTICAL INDUS 71.7 63.6 0.5%

7 UNITED SPIRITS LTD 68.9 43.9 -0.6%

8 TATA CONSULTANCY SVCS LTD 67.9 63.2 0.6%

9 TECH MAHINDRA LTD 67.7 54.8 -0.4%

10 INFOSYS LTD 67.6 68.0 -0.5%

Nifty Top 10 Deliveries

Page 4

SPARK RESEARCH

01 July 2016

Spark Focus Stocks

1D 1M 3M 1Y FY17E FY18E FY17E FY18E

ASHOK LEYLAND LTD 99.9 0.2 (0.1) (5.8) 39.6 5526.3 0.1 38.0 22.2 19.6 10.6 9.5 Buy

AMARA RAJA BATTERIES LTD 865.0 0.8 (6.2) (4.4) (1.2) 220.7 0.6 66.0 24.7 19.6 15.6 13.0 Buy

GATEWAY DISTRIPARKS LTD 314.0 - 10.0 16.6 (13.1) 52.2 (0.5) 51.1 20.2 13.2 10.4 8.1 Buy

WABCO INDIA LTD 5568.5 (2.3) (3.9) (9.1) 2.8 2.6 (0.3) 62.2 33.9 26.5 23.1 18.2 Add

CHOLAMANDALAM INVESTMENT AND 932.9 (0.8) 6.4 35.7 46.3 43.5 (0.8) 69.6 3.3 3.1 3.3 3.1 Buy

CITY UNION BANK LTD 110.1 - 6.8 20.1 7.9 232.3 (0.2) 72.4 1.7 1.5 1.7 1.5 Buy

DCB BANK LTD 97.1 (0.5) 9.8 27.7 (26.3) 553.6 0.0 57.1 1.4 1.3 1.4 1.3 Sell

FEDERAL BANK LTD 55.7 (2.4) 12.3 12.2 (21.8) 2919.2 (0.2) 49.1 1.0 1.0 1.0 1.0 Buy

KARUR VYSYA BANK LTD 493.4 1.9 3.1 15.0 6.1 72.7 (0.1) 59.9 1.3 1.1 1.3 1.1 Buy

REPCO HOME FINANCE LTD 756.9 2.3 12.9 28.7 20.1 16.1 (0.7) 51.3 4.4 3.7 4.4 3.7 Buy

SOUTH INDIAN BANK LTD 20.1 (1.7) 11.1 13.0 (17.1) 1175.1 (0.5) 31.6 0.8 0.7 0.8 0.7 Buy

DALMIA BHARAT LTD 1088.2 0.6 26.5 35.6 77.4 31.5 0.7 61.3 32.6 22.0 8.7 7.6 Buy

RAMCO CEMENTS LTD/THE 548.2 (1.7) 12.3 33.6 58.9 119.6 (0.4) 50.4 21.3 18.8 12.8 11.5 Add

BLUE STAR LTD 429.4 1.2 0.3 12.4 21.1 18.5 (0.2) 75.8 29.0 19.7 15.9 11.3 Buy

TTK PRESTIGE LTD 4636.4 (0.4) (1.6) 4.1 17.5 2.5 0.6 47.3 37.4 31.9 22.8 19.6 Sell

VA TECH WABAG LTD 569.8 (3.7) (0.0) 5.5 (23.6) 72.3 0.2 63.6 22.2 17.0 12.2 9.9 Add

V-GUARD INDUSTRIES LTD 1367.5 0.0 15.1 59.0 48.9 12.9 (0.4) 32.8 31.9 26.5 19.8 16.8 Buy

CYIENT LTD 499.0 1.5 9.3 16.3 (17.5) 5.1 (0.9) 60.8 14.8 12.8 10.7 9.4 Add

FIRSTSOURCE SOLUTIONS LTD 46.2 - 17.1 42.2 52.5 1133.1 (0.4) 40.8 10.3 8.9 6.6 5.9 Buy

HEXAWARE TECHNOLOGIES LTD 221.5 4.5 5.7 (17.3) (16.5) 336.8 (0.1) 47.9 15.0 13.0 10.5 9.2 Sell

INTELLECT DESIGN ARENA LTD 201.9 (1.0) (2.8) (4.9) 83.9 112.4 (0.4) 27.5 86.7 28.8 52.1 21.3 Buy

REDINGTON INDIA LTD 103.0 0.3 (5.5) (10.0) 2.8 163.1 (0.9) 50.7 9.0 7.8 5.9 5.4 Add

BAJAJ CORP LTD 395.5 0.3 1.3 7.9 (8.8) 17.3 (0.6) 59.5 21.2 18.6 16.7 15.9 Buy

BERGER PAINTS INDIA LTD 285.0 (2.0) 2.7 23.9 45.9 49.5 (0.7) 64.5 39.6 30.0 23.6 18.5 Reduce

INDIAN TERRAIN FASHIONS LTD 151.7 0.1 10.6 14.5 15.6 28.9 (0.5) 65.3 13.7 10.5 0.8 0.5 Buy

JYOTHY LABORATORIES LTD 297.4 (0.4) (0.3) 4.4 (1.5) 31.4 (0.8) 58.7 31.2 29.3 20.0 17.5 Add

KEWAL KIRAN CLOTHING LTD 1805.7 0.4 (0.5) 1.4 (18.5) 0.2 (0.9) 84.1 18.0 19.4 11.4 11.1 Add

LA OPALA RG LTD 548.5 3.3 5.7 (6.5) 52.7 11.0 (0.3) 73.1 43.4 33.4 27.4 21.6 Reduce

RELAXO FOOTWEARS LTD 484.4 (2.1) 5.5 30.2 8.5 13.3 (0.2) 43.0 18.0 14.3 20.2 16.2 Add

Consumption

Returns (%)

Auto, Agri &

logistics

Financials

Cement

Top Del. % Company Price

IT Services

Delivery

Volume

('000)

Rating

PE for all sectors &

P/ABV for banksEV/EBITDA (x)

Capital Goods

% inc/dec

to 30D avg

Delivery

%

Page 5

SPARK RESEARCH

01 July 2016

0

150

7700

7750

7800

7850

7900

7950

8000

8050

8100

8150

8200

8250

8300

8350

8400

8450

8500

8550

8600

8650

Rs. b

n

Total Call Value Total Put Value

Max Pain Theory (based on Index Options) – Indicative Nifty closing for next Expiry

Nifty Open Interest (‘000 contracts)

Technical Indicators

Nifty PCR

0

20

40

60

7500

7600

7700

7800

7900

8000

8100

8200

8300

8400

8500

8600

8700O

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on

tracts Call Put

0.6

0.8

1.0

1.2

1.4

19-M

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21-M

ay

23-M

ay

25-M

ay

27-M

ay

29-M

ay

31-M

ay

2-J

un

4-J

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6-J

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8-J

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20-J

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22-J

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24-J

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26-J

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28-J

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30-J

un

Nifty PCR Nifty PCR (30D avg)

FII Open Interest 6-23 6-24 6-27 6-28 6-29 Delta 6-30 Delta Delta

Index Futures 137 143 120 140 153 13.7 165 11.1 (27.9)

Stock Futures 546 549 534 555 560 5.6 572 11.2 (108.2)

Stock Options 62 67 68 68 70 1.6 70 0.1 (69.0)

Index Options 466 488 519 548 564 16.1 586 21.8 6.5

Total (Rs. Bn) 1212 1246 1241 1310 1347 36.9 1392 44.2 (198.6)

Top CompanyPrice

Change

OI

Change

Close

Price

(Rs. / sh)

Indian Overseas Bank 0.9% 133.9% 27

Housing Development & Infrastr 3.9% 27.7% 103

PTC India Ltd 2.3% 25.1% 77

Adani Pow er Ltd 0.2% 22.6% 31

DLF Ltd 4.4% 22.0% 150

Reliance Communications Ltd 4.8% 20.7% 51

Shriram Transport Finance Co L 5.2% 16.4% 1,204

Oriental Bank of Commerce 1.5% 13.9% 108

Adani Enterprises Ltd 4.1% 12.2% 87

Tata Motors Ltd 1.4% 11.2% 292

IDFC Ltd -1.5% 21.5% 48

MRF Ltd -1.3% 15.5% 33,078

JSW Energy Ltd -0.8% 12.5% 84

Godrej Industries Ltd -3.1% 11.9% 397

Bata India Ltd -1.1% 10.9% 546

GAIL India Ltd 0.0% 6.8% 385

Sun Pharmaceutical Industries -0.9% 6.6% 763

Ambuja Cements Ltd -0.4% 5.3% 255

Cipla Ltd/India -0.3% 3.6% 501

Infosys Ltd -0.5% 1.9% 1,171

Ashok Leyland Ltd -1% -4% 98

Indian Oil Corp Ltd 0% -1% 441

- - 0% -

- - - -

- - - -

UCO Bank 3.1% -22.0% 43

Hero MotoCorp Ltd 0.7% -18.9% 3,178

NHPC Ltd 0.8% -14.6% 25

CESC Ltd 2.0% -8.3% 597

Unitech Ltd 1.6% -6.8% 6

Lo

ng

Un

win

dS

ho

rt

Co

veri

ng

Lo

ng

Bu

ild

up

Sh

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Bu

ild

up

Page 6

SPARK RESEARCH

01 July 2016

0.7%9.6% 5.9% 7.4%

111.7%

-0.4%

5.4% 1.6%

-1.8%

51.2%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

1M 3M 6M 1 yr Since Oct'13

Spark BSE 200

0

50

100

150

Oct-

13

No

v-1

3D

ec-1

3Jan

-14

Feb-1

4M

ar-

14

Ap

r-14

May-1

4Jun

-14

Jul-

14

Aug

-14

Sep

-14

Oct-

14

No

v-1

4D

ec-1

4Jan

-15

Feb-1

5M

ar-

15

Ap

r-15

May-1

5Jun

-15

Jul-

15

Aug

-15

Sep

-15

Oct-

15

No

v-1

5D

ec-1

5Jan

-16

Feb-1

6M

ar-

16

Ap

r-16

May-1

6Jun

-16

%

Spark Portfolio BSE 200 INDEX

Spark Portfolio returns vs. BSE 200 returns

Spark Model Portfolio

Spark Portfolio returns vs. BSE 200 returns CompanyB SE 200

Weights

Spark

Weights

M cap

(R s. B n)CMP

6M A T V

(R s. M n)

Fina nc ia ls 2 7 .9 % 3 3 .0 %

HDFC Bank Ltd 7.0% 2,978 1,176 1,681

Yes Bank Ltd 6.0% 466 1,107 3,478

Kotak Mahindra bank 5.0% 1,401 763 1,246

IndusInd Bank Ltd 5.0% 662 1,112 1,488

Federal Bank Ltd 4.0% 99 58 356

Karur Vysya Bank 3.0% 60 496 62

City Union Bank 3.0% 70 116 53

Consume r 13 .8 % 15 .0 %

Asian Paints Ltd 4.0% 962 1,003 1,056

Voltas Ltd 3.0% 107 322 525

Arvind Ltd 3.0% 85 329 616

Bata India Ltd 3.0% 70 546 231

Wonderla Holidays 2.0% 23 406 30

Auto 10 .8 % 16 .0 %

Maruti Suzuki India Ltd 4.0% 1,265 4,187 3,635

Hero Motocorp Ltd 4.0% 635 3,178 1,226

Eicher motors 3.0% 522 19,222 1,259

Exide Industries Ltd 3.0% 144 170 23

Timken India 2.0% 39 567 14

He a lthc a re 7 .6 % 4 .0 %

Sun Pharma 2.0% 1,837 763 2,874

Aurobindo pharma 2.0% 434 743 1,702

Informa tion Te c hnology 13 .1% 2 .0 %

Wipro Ltd 2.0% 1,379 558 831

Oil & Ga s 7 .8 % 4 .0 %

BPCL Ltd 2.0% 775 1,072 1,328

GSPL Ltd 2.0% 81 143 63

Infra struc ture 10 .6 % 2 1.0 %

Coal India 4.0% 1,977 313 1,418

Ultratech Cement 4.0% 936 3,411 956

Cummins India Ltd 3.0% 235 849 261

Sadbhav Engineering Ltd 3.0% 50 293 43

Ramco cements 3.0% 132 554 131

KNR constructions 2.0% 16 558 11

VA Tech Wabag 2.0% 32 592 80

Othe rs 2 .0 %

Kaveri Seed Ltd 2.0% 31 444 400

Ca sh & Othe rs 8 .5 % 3 .0 %Tota l 10 0 .0 %

Page 7

SPARK RESEARCH

01 July 2016

Today’s News

Today’s News

Sector News

Macro In FY16, external debt rose 2.2% to $485.6 b

Delay likely in farm sector recovery: Ind-Ra

CAG to audit crop insurance schemes in nine States

Petrol price cut 89 paise, diesel slashed 49 paise per liter

Maharashtra may have to spend Rs 21,000 cr on 7th pay panel proposals

Japan Manufacturing PMI 48.1 In June - Nikkei

South Korea Manufacturing PMI Climbs To 50.5 - Nikkei

Growth cheer! April core sector output at 8.5% rising for 5th straight month

April-May fiscal deficit at 43% of Budget estimates

Financials HDFC, SBI Life buy 18.5% in IDFC Infra Debt Fund

Reserve Bank to sell Rs 1.85 lakh cr of T-bills in Q2

Banks may need to write off 40-70% of bad loans in infrastructure sector

CAG to audit crop insurance schemes in nine States

http://www.thehindubusinessline.com/money-and-banking/in-fy16-external-debt-rose-22-to-4856-b/article8793130.ece?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication

























http://www.business-standard.com/article/finance/delay-likely-in-farm-sector-recovery-ind-ra-116063000736_1.html
















http://www.thehindubusinessline.com/money-and-banking/cag-to-audit-crop-insurance-schemes-in-nine-states/article8793132.ece

http://www.business-standard.com/article/economy-policy/petrol-price-cut-89-paise-diesel-slashed-49-paise-per-liter-116070100047_1.html

http://www.business-standard.com/article/economy-policy/maharashtra-may-have-to-spend-rs-21-000-cr-on-7th-pay-panel-proposals-116063000486_1.html




http://www.rttnews.com/story.aspx?Id=2665058





















http://economictimes.indiatimes.com/news/economy/indicators/growth-cheer-april-core-sector-output-at-8-5-rising-for-5th-straight-month/articleshow/52521651.cms

http://www.business-standard.com/article/pti-stories/april-may-fiscal-deficit-at-43-of-budget-estimates-116063000873_1.html



http://www.business-standard.com/article/finance/hdfc-sbi-life-buy-18-5-in-idfc-infra-debt-fund-116070100035_1.html

http://www.business-standard.com/article/finance/reserve-bank-to-sell-rs-1-85-lakh-cr-of-t-bills-in-q2-116070100056_1.html








http://www.thehindubusinessline.com/money-and-banking/banks-may-need-to-write-off-4070-of-bad-loans-in-infrastructure-sector/article8793128.ece




























http://www.thehindubusinessline.com/money-and-banking/cag-to-audit-crop-insurance-schemes-in-nine-states/article8793132.ece

Page 8

Indian Media & Entertainment Sector OUTLOOK: POSITIVE

Over The Top (OTT)

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

GNANASUNDARAM S [email protected] +91 44 4344 0062

Initiating Coverage Indian Television industry is at the cusp of digital revolution. Digitization is expected to play a key role in how content would

be consumed as well as how content is transmitted. On analysis, we believe the key themes impacting the television industry

are: (1) Emergence of Digital advertising is certainly a threat, but only on a longer term timeframe in the television industry,

(2) Over The Top (OTT) content applications are for certain exciting and promising, 3Ps in programming, Pricing and

Payment infrastructure would shape the growth of the OTT market in India, (3) Given the consumption opportunity in India

across FMCG and discretionary categories, advertisement growth from these sectors would continue driving advertisement

income for the television Industry, (4) Regional markets which boast of higher than national per capita income have become

the consumption companies’ key markets, thereby driving broadcasters to regional markets, (5) Television was not the most

effective medium for reaching out to rural audience, however this has changed with new Broadcast Audience Research

Council (BARC) data, growth of DD dish and digitization into rural markets, (6) Except for a few pockets, Digitization of

network to track the last mile user is progressing stealthily. Though a few litigations have temporarily halted the progress of

digitization in certain pockets, it is inevitable that the entire user base will be digitized but probably extending beyond the

stipulated December 31, 2016 deadline. (7) With several vertical holdings present across media houses, few Distribution

Platform Operators (DPO’s) complain of discriminatory pricing at wholesale level; Telecom Regulatory Authority Of India

(TRAI) has floated a consultation paper, and recommendations by TRAI on the pricing format is for sure set to have a bearing

across all the players in the industry.

Zee Entertainment Enterprise Limted (ZEEL) – Zealous Pursuit

We initiate coverage on Zee Entertainment Enterprise Limited (ZEEL) with a ‘BUY’ rating (TP: Rs. 510) on the back of revenues and

earnings CAGR assumptions of ~17% and ~25% respectively from FY16 –FY18 led by (1) ~19% advertisement revenue CAGR as

viewership across Hindi & Regional markets gain traction, (2) Mid teens growth in subscription revenues as broadcasters are expected

to get a larger share of subscription income, (3) Content cost rationalisation as new channel investments begin to pay off, (4) EBITDA

margin expansion on the back of lower business promotion and marketing expenses, (5) Established strong Over The Top (OTT)

platforms which should enable them to take advantage of rise in digital spends

Sun TV – Cloudy Skies Clearing

We initiate coverage on Sun TV with a ‘BUY’ rating (TP: Rs.433) as we believe revenues and earnings would grow at a CAGR of

~13% and ~17% respectively from FY16 –FY18 led by (1) Sun TV consolidating its market leadership in the lucrative Tamil market, (2)

Improving viewership traction in Telugu and Kannada market, (3) Cost savings arising from increased number of dubbed serials, (4)

Further reduction in Cable & Satellite (C&S) costs of movies, (5) Heightened subscription revenues on the back of digitization gaining

momentum in 3 of the 4 southern states and (6) Radio business improving its mileage

Dish TV – High Definition leverage play

We initiate coverage on Dish TV with a ‘BUY’ rating (TP: Rs.122) on the back of revenues and earnings CAGR assumptions of ~13%

and ~36% respectively from FY16 –FY18 led by (1) Increase in net subscriber base as digitization coverage extends to phase 4 cities,

where Direct To Home (DTH) operators are expected to gain higher traction Vs digital cable, (2) Dish TV anticipated to gain higher

share among DTH players led by its distinguished rural presence, higher number of channels and High Definition (HD) channels,

attractive bouquet packaging and superior technology (3) Average Revenue Per User (ARPU) increasing by ~2% led by price

increases and increasing traction for HD channels, (4) Improved EBITDA margins arising out of operating leverage that emerges out of

fixed fee content costs and other operating expenses (6) Lower Interest expenses with majority of debt being repaid over the next two

years.

Performance (%)

1m 3m 12m

Z IN 1% 18% 25%

DITV IN 10% 15% -8%

SUNTV IN 1% -3% 31%

Market data

BSE SENSEX 27184

Nifty 8343

-20%

-10%

0%

10%

20%

30%

Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

NIFTY Media Index Sensex

Page 9


#6 –Broadcasters

& DTH players to

gain the most in

next phase of

digitization

#4 – Regional

markets gaining

in prominence as

investments

increase

#2 – Content

holders to be the

king as OTT

platforms gains

acceptance

14%

213 361

637 116

181

320

2011 2015 2019P

Television Industry growth

Subscription Revenue Advertisement Revenue

12%

15%

15%

13%

15%

#1 – Impact due to

emergence of

digital platform to

be limited in near

to medium term

#3 – Consumption

growth should

continue to drive

television

advertisement

#5 – Broadcasters

changing the

game to suit

BARC &

regulatory needs

Page 10


Digital advertisements have gained significant mileage in the past few years, contributing to ~5% in 2015 and to contribute ~11% by 2020

% of market 2010 2011 2012 2013 2014 2015 2015-10 2020E 2020-15

TV 45.6% 45.2% 45.1% 45.4% 46.3% 46.9% 133bps 48.6% 167bps

Print 29.6% 28.7% 27.3% 26.5% 25.7% 24.5% -508bps 18.2% -626bps

Films 12.8% 12.8% 13.7% 13.6% 12.3% 11.9% -83bps 10.1% -189bps

Radio 1.5% 1.6% 1.5% 1.6% 1.7% 1.7% 18bps 1.9% 20bps

Music 1.3% 1.2% 1.3% 1.0% 1.0% 0.9% -39bps 0.9% -2bps

OOH 2.5% 2.4% 2.2% 2.1% 2.1% 2.1% -42bps 2.0% -11bps

Animation 3.6% 4.3% 4.3% 4.3% 4.4% 4.4% 78bps 4.8% 36bps

Gaming 1.5% 1.8% 1.9% 2.1% 2.3% 2.3% 76bps 2.2% -5bps

Digital Advertising 1.5% 2.1% 2.6% 3.3% 4.2% 5.2% 366bps 11.3% 609bps

Total Market Size (Rs.bn) 652 728 820 918 1026 1157 12.1% 2260 14.3%

Driven by rising aspirations and increase in disposable income, more Indian consumers are migrating to smartphone,

which should be the key driver to digital advertisement growth in India

Source: FICCI KPMG, Industry Sources & Spark Capital research

#1 – Impact due to emergence of digital platform to be limited in near to medium term

Among the digital advertisement avenues, videos are the rapidly growing segment, especially on entertainment content

Source:FICCI KPMG, Industry Sources & Spark Capital research

Video 25%

Search & Display

47%

Classifieds 15%

Social 8%

Others 5%

Youtube 67%

Others 33%

Film/TV, 60.0%

Music, 28.0%

Education, 8.0%

Health, 1.0%

Others, 3.0%

Google dominating

offerings across

digital offerings has

certainly emerged as

the BAAP of Indian

Digital Space (Click

here for additional

information)

CLICK HERE FOR ADDITIONAL DATA

Page 11


If international geographies are any indication, pace of digital growth to be humongous as 3Ps – Program, Pricing and Payment in India matures

% Contribution 2012 2015 2015-12 2020E 2020-15

USA UK CHINA USA UK CHINA USA UK CHINA USA UK CHINA USA UK CHINA

TV 39.1% 26.0% 36.0% 37.7% 25.2% 28.3% -140bps -80bps -771bps 32.9% 21.5% 15.4% -480bps -370bps -1286bps

Digital 22.3% 40.0% 30.0% 32.6% 50.7% 44.8% 1030bps 1070bps 1484bps 44.9% 60.0% 68.2% 1230bps 930bps 2332bps

Mobile 2.6% 4.0% 4.0% 17.3% 21.2% 24.6% 1470bps 1720bps 2062bps 32.9% 44.4% 57.4% 1560bps 2320bps 3281bps

Print 20.7% 24.0% 14.7% 15.4% 15.4% 8.6% -530bps -860bps -610bps 11.1% 11.0% 4.0% -430bps -440bps -455bps

Newspapers 11.5% 17.3% 12.8% 8.0% 11.1% 7.4% -350bps -620bps -539bps 5.5% 7.9% 3.4% -250bps -320bps -397bps

Magazines 9.2% 6.2% 1.9% 7.4% 4.3% 1.2% -180bps -190bps -72bps 5.6% 3.1% 0.6% -180bps -120bps -58bps

Radio 9.3% 3.0% 6.7% 7.8% 2.2% 6.2% -150bps -80bps -48bps 6.1% 1.8% 3.9% -170bps -40bps -229bps

Out of Home 4.0% 7.0% 12.0% 4.0% 6.6% 12.1% 0bps -40bps 6bps 3.4% 5.7% 8.4% -60bps -90bps -362bps

Directories 4.5% 0.0% 0.0% 2.5% 0.0% 0.0% -200bps NA NA 1.6% 0.0% 0.0% -90bps NA NA

Digital is certain to increase its share given its better efficiency vs other mediums however

we believe the loser in near to medium term would be print advertising and not television



However, our analysis reveals that advertisement segment for digital currently overlaps more with Print media, leading them to losing share

E-Comm Telecom BFSI Travel Auto FMCG Media Education HH

Durables

Real

Estate Retail

Clothing/

Fashion Others Corporate

Alcoholic

Beverage

Digital

Advertisement 15% 15% 11% 11% 10% 7% 7% 7% 5% 4% 3% 2% 1% 1% 1%

Print

Advertisement 22% 1% 0% 5% 1% 10% 7% 2% 5% 4% 6% 6% 13% 15% 4%

Print 2015-10

CAGR NA -2% -4% 3% 22% 24% -7% 0% 5% 6% 8% 11% 7% -8% -6%

Television

Advertisement 5% 3% 3% 3% 4% 36% 2% 4% 5% 2% 12% 5% 14% 1% 1%


CLICK HERE FOR ADDITIONAL INFORMATION

Page 12


#2 – Content holders to be the king as OTT platforms gains acceptance

Video has been the fastest growing segment among digital spends… …leading to several content owners launching OTT services

However the challenge would be to transform users from ‘YouTube’

Given that Indian consumer has got used to streaming videos for free in ‘YouTube’, we believe it would be difficult to convince consumers to

shift to Subscription based model until differentiated and exclusive content is offered.

Source: Industry & Spark Capital Research.

Youtube 67%

Others 33%

Typically the revenues are shared

in the ratio of 45:55 between

google and the content producer.

Being the pioneer in online videos

coupled with model being based

on Advertisement, YouTube

commands a significant following.

Average Cost Per Thousand (CPT)

for a content provider in 2013 on

YouTube was $7.60

OTT Brand Company India Launch Business Model

Yupp TV Yupp TV 2006 SVOD

YouTube Google 2008 AVOD

Viu PCCW-Vuclip 2008 TVOD

Zenga Zenga Media Pte 2009 SVOD

nexGTV Media Matrix 2010 SVOD

The Viral Fever TVF 2010 TVOD

Ditto TV Zee Group 2012 SVOD

Sony Liv Multi Screen Media 2013 AVOD

Dish Online Dish TV 2013 TVOD

Box TV Times Group 2013 TVOD

Eros Now Eros International 2014 TVOD

Lukup Lukup Media 2014 TVOD

Spuul Spuul 2014 TVOD

Hotstar Star India 2015 TVOD

Hooq Singtel 2016 SVOD

Netflix Netflix 2016 SVOD

PressPlay Pressplay 2016 AVOD

Voot Network 18 2016 AVOD

Arre Udigital 2016 TVOD

Ozee Zee Group 2016 AVOD

ALTBalaji Balaji Telefilms TBL 2016 SVOD

21.7 27.0

37.3 3.6

8.3

15.0

3.9

7.0

4.8

0.9

1.3

3.0

2013 2014 2015

Search & Display Video Social Others

2.4x

7.3x

2.2x

AVOD: Advertisement based Video On Demand, SVOD: Subscription based Video On Demand, TVOD: Transaction based Video On Demand



Page 13



Three essential infrastructure services that needs to be improved for OTT market to improve its reach

Given that users and their requirements are different in OTT platforms as against what is available on Cable & Satellite (C&S), innovative

content, improvement in pricing infrastructure and Payment gateways to lead to next leg of growth for OTT platforms in India

PROGRAM (Click here for details)

PRICING (Click here for details)

PAYMENT (Click here for details)

3 essential P’s driving the growth of Over The Top (OTT) market in India

Tailor made to suit youth

audience needs

Movie content being

available sooner

Improving speed – 4G to

provide further impetus

Encountering piracy

Reducing smartphone

prices

Faster internet at lower cost (RELIANCE JIO to be a revolution)

3G/4G has bought down

pricing levels

Government initiatives to

provide Wi-Fi zones

Credit card enrolments still

low

Emergence of payment

gateways

Prominence of mobile

wallets

Financial service inclusion

“In India, entertainment is life. The fact that

today people are finding it easy to cut away

from appointment viewing and are able to watch

their chosen entertainment anytime and

anywhere has only driven consumer

expectations higher.” - Punit Goenka, Zee

Entertainment Enterprises Ltd

"The idea is to move to a fee-based subscription

model over a period of time and see what content

can be monetised with advertising and what

content can be charged to the customer. We will

have a combination of these two models going

forward,“ - Uday Sodhi, Multi Screen Media

“There aren’t many platforms available to Indian

consumers offering high-quality, curated content

besides, say, YouTube,”

“It’s a valuable audience and advertising will be

very targeted. We can charge a premium versus

other digital players,” - Sanjay Gupta, Star India,

Page 14


#3 – Consumption growth should continue to drive television advertisement

Advertisement revenue growth for the industry pegged at 13% CAGR Led by GDP growth rates improving and…

…A&P spending of key categories sustaining

Consumption sector strongly reliant on Television advertisements, which makes broadcasting players as ZEEL and Sun TV a proxy to playing

Indian consumption story.

Source: FICCI KPMG, Industry Sources & Spark Capital research Source: FICCI KPMG, Industry Sources & Spark Capital research

88 103

116 125 136 155

181 198

226

260

299

0

50

100

150

200

250

300

350

2009 2010 2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P

Rs. B

n

17.0%

12.6%

7.8% 8.8%

14.0%

16.8%

10.3%

6.6%

5.1% 6.9%

7.3% 7.6%

4%

6%

8%

10%

12%

14%

16%

18%

2010 2011 2012 2013 2014 2015

TV Advertisement Industry growth (%) GDP growth (%)

E-Comm, 5%

Telecom, 3%

BFSI, 3%

Travel, 3%

Auto, 4% FMCG, 36% Media, 2%

Education, 4%

HH Durables, 5%

Real Estate, 2%

Retail, 12%

Clothing/Fashion, 5% Others, 16%

, 0% , 0%

Patanjali has earmarked Rs.3bn crore for advertisement

spend to make Patanjali a "recallable brand"

“Amazon will invest $3 billion more in India. This is in

addition to the $2 billion announced in 2014,” CEO -Jeff

Bezos

Reliance JIO is slated to spend upwards of Rs.10bn on

commercial launch indicate industry sources.

Key near term themes to watch out for

Source: FICCI KPMG, Industry Sources & Spark Capital research Source: FICCI KPMG, Industry Sources & Spark Capital research

Page 15


SECTOR CONTRIBUTION KEY ADVERTISEMENT

MEDIUM

INFLUENCE OF

DIGITAL NEAR TERM MONITORABLES OPPORTUNITIES

FMCG ~35% Television Limited Raw material prices and competitive

intensity from Patanjali and P&G.

Increasing focus on rural

consumers

RETAIL ~12% E-Commerce/ Television High Western brands plaguing the market

should keep advertisement outlay high Increase in modern trade

CONSUMER

DISCRETIONARY ~10% Television High

Incessant launches by new players and

incumbents

Emergence of regional

players

AUTO ~4% Print/Digital Medium Passenger Vehicle and two wheeler

industry volumes

Increasing number of new

launches

E-COMMERCE ~5% Digital/Print High Funding constraints and emergence of new

platforms

Rise in multi national

participants

TELECOM ~3% Television/Print Medium Reliance JIO launch and the counter spend

from other providers

Technological

advancements

BFSI ~3% Print/Digital High Spends from Insurance sector New age banking solutions

TRAVEL ~3% Print/Television Medium Air passenger growth and increase in flight

services

International tourism

growth

EDUCATION ~4% Print/Digital Medium Admission spends from coaching institutes Rise in number of

universities

Near term triggers and long term opportunities across sectors keeps us sanguine on the near and long term advertisement growth.

Source:



Page 16



FMCG advertisements have been a key driver to television advertisement growth…

…our analysis of BARC data indicates that there are 8 FMCG

products on an average among top 10 advertisements every week

Despite gross margins not being as lucrative as it was in FY16, we believe increase in competitive intensity will keep advertisement spend to

their historical ranges.

FMCG companies apportion ~15% of sales on A&P

8.8% 10.0%

9.1% 9.1%

8.9% 9.1%

9.5%

12.3% 12.4%

14.5%

17.0%

12.6%

7.8% 8.8%

14.0%

16.8%

4%

6%

8%

10%

12%

14%

16%

18%

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

FMCG A&P expenses (% of sales) Television Advertisement spend growth (%)

FMCG related Advertisements

85.0%

Others 15.0%

0%

5%

10%

15%

20%

25%

30%


Source: Industry Sources & Spark Capital research Source: Industry Sources & Spark Capital research

Page 17



Despite near term pressure emanating in a few sectors, we see that underlying consumption opportunity should keep advertisement counters

ringing for the broadcasters

Launches from Auto sector should lead to heightened A&P spend E-commerce funding's are drying up, Amazon is the sweet spot

Source: Industry Sources & Spark Capital research

With the advent of JIO, more A&P to flow from telecom operators

EM Upcoming launches Segment

Bajaj

Pulsar 400 SS Premium

Pulsar 160 NS Premium

Pulsar 400 CS Premium

Platina Refresh Economy

HMCL

Impulse 250 Premium

Xtreme Sport Premium

HX250R Premium

Hastur Premium

I Smart 110 Economy

HMSI

CB Hornet Premium

CBR 300R Premium

CB500F Premium

CBR500R Premium

CB500X Premium

Suzuki Gladius 650 Premium


Rs in million FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Bharti Airtel 7,215 5,586 5,993 6,074 7,022

Idea 3,848 4,211 4,536 4,617 4,929

Reliance

Communications 4,440 3,550 2,310 7,140 6,860

BSNL 1,861 489 407 638 867

$ Mn Jan 1- May 31, 2015 Jan 1 – May 31, 2016

Rounds Deals Funds Raised Deals Funds Raised

Series A 54 272.6 38 158.7

Series B 29 950.5 22 234.6

Series C 11 329.1 13 505.2

Total 94 1552.2 73 898.5

Page 18


Hindi GEC, 31%

Hindi Movies, 14% Kids, 7%

Hindi News, 4%

Music, 3%

Sport, 2%

Others, 11%

Regional, 27%

#4 – Regional markets gaining in prominence as investments increase

Regional markets to benefit from the next leg of advertising growth

With regional markets catching the attention of national players, several national players through organic and inorganic acquisitions have

ventured into these markets and have tasted good success

…led by superior programming content

BARC data on top 5 shows for 42 weeks Source:

Sun TV ZEEL Star TV Network18

Tamil 55% 6% 9% NA

Telugu 20% 27% 24% 25%

Kannada 18% 18% 20% 35%

Malayalam 10% NA 31% NA

Marathi NA 50% 14% 29%

Bengali NA 35% 57% 8%

With exceptions in a few, most markets have a dominant leader…

Sun TV ZEEL Star TV Network18

Tamil 5 - - NA

Telugu 1 2 - 2

Kannada - - 1 4

Malayalam - - 5 NA

Marathi NA 3 - 2

Bengali NA 1 4 -

Tamil, 28%

Telugu, 24%

Marathi, 14%

Kannada, 12%

Bengali, 12%

Malayalam, 5%

Others, 5%



Page 19



Tamil Nadu

Population (mn) 69

Per capita income ($) FY16 2807

GDP (bn $) 194

Andhra Pradesh

Population (mn) 51


GDP (bn $) 92

Telangana

Population (mn) 37


GDP (bn $) 89

West Bengal

Population (mn) 93


GDP (bn $) 139

Kerala

Population (mn) 34


GDP (bn $) 89

Karnataka

Population (mn) 62


GDP (bn $) 158

Maharashtra

Population (mn) 120


GDP (bn $) 298

India

Population (mn) 1283


GDP (bn $) 2072

Fortune at the bottom

Given the regional market’s higher per capita income Vs the national

average, regional markets form an important consumption market

making these markets significant for national advertisers

Further, a good retail market has also fueled several regional

advertisers, who strongly bank on these regional channels to carry

their advertisements.


Page 20



Marathi

Zee Marathi 1999

Zee talkies 2005

Star Pravah 2008

Colors Marathi 2015

Star Pravah HD 2016

Colors Marathi HD 2016

Kannada

Udaya TV 1994

Udaya Movies 2002

Udaya Comedy 2002

Udaya News 2004

Zee Kannada 2006

Udaya Music 2006

Asianet Suvarna 2009

Chintu TV 2009

Suriyan TV 2012

Asianet Suvarna Plus 2013

Colors Kannada 2015

Colors Kannada HD 2016

Bangla

Star Jalsha 2008

Zee Bangla 2009

Jalsha Movies 2012

Zee Bangla Cinema 2012

Colors Bangla 2015

Star Jalsha HD 2016

Star Jalsha Movies HD 2016

Colors Bangla HD 2016

Star Jalsha 2008

Zee Bangla 2009

Jalsha Movies 2012

Zee Bangla Cinema 2012

Malayalam

Surya TV 1998

Asianet 2008

Asianet Plus 2008

Kochu TV 2011

Asianet Movies 2012

Surya Action 2012

Kiran 2013

Surya Music 2013

Asianet HD 2016

News18 Kerala 2016

Tamil

Sun TV 1993

Sun News 2000

KTV 2001

Star Vijay 2004

Sun Music 2004

Chutti TV 2007

Zee Tamil 2008

Adithya TV 2009

Sun TV HD 2011

K TV HD 2011

Sun Music HD 2011

Sun Life 2012

Sun Action 2012

Sun TV RI 2012

STAR Vijay HD 2016

News18 Tamil 2016

Telugu

Gemini TV 1995

Gemini News 2004

Zee Telugu 2005

Gemini Music 2008

Kushi TV 2009

Gemini TV HD 2011

Gemini Comedy 2012

Gemini Action 2012

Gemini Life 2012

Gemini Movies 2013

Maa TV 2015

Maa Music 2015


Page 21


#5 – Broadcasters changing the game to suit BARC & regulatory needs

…change in key universe profile…

Ambiguity and mistrust of Television Audience Measurement (TAM) led to the formation of Broadcast Audience Research Council (BARC)

BARC was different from TAM for the number of rural audience

profiled…

Source: BARC, Industry Sources & Spark Capital research:

…and for the new SEC classification

Broadcast Audience Research Council (BARC) held by 3 federations

Source: BARC, Industry Sources & Spark Capital research:

4 - 8 yrs 8%

9 - 14 yrs 10%

15 - 21 yrs 15%

22 - 30 yrs 20%

31 - 40 yrs 17%

41 - 50 yrs 13%

51 - 60 yrs 9%

61 yrs 8%

A 23%

B 25%

C 30%

DE 22%

Indian Broadcasting

federation 60%

Indian Society of advertisers

20%

Advertising Agencies

Association of India 20%

Metro 12%

10-75L Population

12%

<10 L Population 27%

Rural 49%


Source: BARC, Industry Sources & Spark Capital research: Source: BARC, Industry Sources & Spark Capital research:

Page 22



Rural increasingly becoming important for FMCG companies too...

Rural has emerged to be a key segment, that is beginning to get advertisers interest given that BARC data with higher rural population and

digitization has given better clarity about the target market which were largely difficult to crack through television media.

Phase 3 & 4 digitization to encompass smaller towns


…given that rural continues to outpace urban growth

DD Dish bringing in rural consumers under the foray of digitization

Rollout of DAS in Phase 3 areas where there is high proportion of cable dark

areas and consumers affordability for paid DTH is low

Inclusion of rural market data by BARC India in its TV viewership

measurement which has led broadcasters and advertisers to realize that there

is a large audience being catered by DD Free Dish

The Operator recently added 50 new channels on the new MPEG 4

technology after moving its transponder to GSAT-15 satellite.

The Free Dish platform already has an estimated 20mn installations, making it

the biggest DTH operator in the country.

Some pay channels like Aaj Tak and Big Magic Ganga have chosen to give

their feeds free of cost of Doordarshan

Phase Regulatory Date

for Shutdown

No of Paid C&S

Subs

Non-digitized

subs Digitization Including

I Jun-12 14 1.2 >90% (100% exclusive

Chennai)

II Mar-13 25 1.2 >95%

III Dec-15 40 8 >80%

IV Dec-16 81 61 ~25%

159 71 ~67%

Rural Contribution

35%

Urban Contribution

65%

Consumer durables growing at 25% CAGR (All India – 17%)

Tele-density at 50% (All India: 76%)

More than 80% of FMCG products posted faster growth than in Urban

FMCG consumption grew at 12.5% during 2013-14 (All India: 17%; FMCG

accounts for 50% of Rural spending (Urban – 40%)

Rural markets bigger than Urban markets for many categories

36% of mobile app users are from small town India



Page 23



A two hour prime time has got extended to 6 hours in 2016

Though Effective Rate (ER) for FTA channels are expected to remain far lower to the Pay channels, advertisement potential excitement on these

channels has certainly caught up off late given that content cost is often nil.

…broadcasters increasing their upper band of prime time fiction

Average market share for a period of 42 weeks from BARC data Source: BARC, Spark capital Research

Broadcasters FTA channels gain all the more significance now

Rural has a early viewing peak habit which has translated to a few…

02:0

0

03:0

0

04:0

0

05:0

0

06:0

0

07:0

0

08:0

0

09:0

0

10:0

0

11:0

0

12:0

0

13:0

0

14:0

0

15:0

0

16:0

0

17:0

0

18:0

0

19:0

0

20:0

0

21:0

0

22:0

0

23:0

0

00:0

0

01:0

0

Rural Urban

1 Colors 12%

2 STAR Plus 12%

3 Zee TV 10%

4 STAR Utsav 10%

5 Zee Anmol 9%

6 Sony Pal 8%

7 Life Ok 8%

8 SONY SAB 7%

9 Sony Entertainment Television 7%

10 Rishtey 6%

2001 2002 2004 2006 2008 2010 2012 2014 2016

2008 2009 2012 2016

Primetime Start 8PM 8PM 6PM 5PM

Primetime End 10PM 11PM 11PM 11PM +

Source: BARC, Spark Capital Research

Source: Industry Sources, Spark Capital Research Source: Industry Sources, Spark Capital Research

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiK4bO2lsjNAhUGtI8KHeuiDbwQjRwIBw&url=https://twitter.com/zeeanmol4&bvm=bv.125596728,d.c2I&psig=AFQjCNHaw1nWJGXEzNEju-TsUA81hId7tg&ust=1467115805092379

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjOvY3BlsjNAhWIPI8KHSzuD_MQjRwIBw&url=https://en.wikipedia.org/wiki/Zee_Smile&bvm=bv.125596728,d.c2I&psig=AFQjCNGtTdTwCc7sP_IQQGFowfteCIaw5g&ust=1467115826864771

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj4_-HilcjNAhUfSY8KHXtoD28QjRwIBw&url=http://eng.sekisat.com/satellite/index.php?path=channel_view&no=140&psig=AFQjCNHogTHeSHyieuHmCkjFI5W3gTOglA&ust=1467115613968418

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjTqZfwlcjNAhUMu48KHdCuAeUQjRwIBw&url=https://en.wikipedia.org/wiki/Rishtey_(TV_channel)&bvm=bv.125596728,d.c2I&psig=AFQjCNFbLk_uVnIqZAtDP2IhEar244t4cg&ust=1467115657097135

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiUhbz9lcjNAhXFNY8KHQu9ABoQjRwIBw&url=http://www.indiantelevision.com/television/tv-channels/gecs/sony-pal-where-original-shows-failed-old-shows-did-the-turnaround-150530&bvm=bv.125596728,d.c2I&psig=AFQjCNFtkk37sPvPcVz6YEEg3UIk8FHvgg&ust=1467115685515185

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiuqe6LlsjNAhUFqY8KHebBAakQjRwIBw&url=http://www.indiantelevision.com/television/tv-channels/gecs/star-utsav-movies-to-launch-on-28-may-focuses-on-being-truly-rural-160526&bvm=bv.125596728,d.c2I&psig=AFQjCNGp3VoNVVLKO9cvXZH0lReWk63uwg&ust=1467115712494373

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjTqZfwlcjNAhUMu48KHdCuAeUQjRwIBw&url=https://en.wikipedia.org/wiki/Rishtey_(TV_channel)&bvm=bv.125596728,d.c2I&psig=AFQjCNFbLk_uVnIqZAtDP2IhEar244t4cg&ust=1467115657097135

Page 24


With limitations to advertisement inventory, flanking channels

increased to tap into the market


12 minute advertisement rule as per current status is restrained only to paper, any adverse court ruling could however have serious impacts to

revenue profile of all the broadcasters and remains a key risk to our thesis.

Recent comments from I&B ministry provides for hope for

broadcasters

Despite the Advertisement Cap ruling in 2013, several broadcasters

continue to flout it citing the lack of subscription revenue flow through

Geo-targeting prospects exciting but doubts over practicability

prevails

55% 54% 52%

45% 46% 48%

0%

20%

40%

60%

80%

100%

June 2015 September 2015 December 2015

Quarter ending

% of pay channels that flouted the 12 minute Advertisement Cap Rule Others

2013 TRAI issues a notification capping the number of minutes of

advertisement in an hour to 12

2014 Mr. Prakash Javdekar, erstwhile I&B ministry had indicated over

exempting Free To Air channels from the Ad Cap rule

2016 Mr. Arun Jaitley, has indicated that government should not be

dictating how much ads a TV channel or a newspaper can carry.

Current

Status

The matter is before Delhi High Court, next hearing scheduled to be

in August 2016

It allows the broadcasters to sell higher inventory for the same cost base

Increasingly tapping into regional advertisers

Media planners are excited given that it is expected to reduce cost

Star has developed its own software known as Adsharp, while other third

party providers are Amagi and Vubites

Small and regional based advertisers may have an advantage to target

programs on popular GEC's at lesser cost

National advertisers could better plan and execute advertisement campaigns

especially in the Hindi speaking belt.

Given that ~30% of television advertisement spend is wasted, sharper focus

to improve efficiency

Source: TRAI, Spark Capital Research Source: Industry Sources, Spark Capital Research


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj06NvEn8jNAhUMNI8KHeOwDPUQjRwIBw&url=http://www.frocus.net/main.php?lng=en&rzd=tvkanal&pag=1&sp=28&id=6420&psig=AFQjCNFJOhj_FZt0FClgbUuuG18VUikg0A&ust=1467118249831795

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiM3d3Xn8jNAhWHQY8KHfnGANAQjRwIBw&url=http://logos.wikia.com/wiki/Zee_TV&bvm=bv.125596728,d.c2I&psig=AFQjCNHm6UkgMN-ZW1Gt-vWwl6s13DWaKA&ust=1467118291211785

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj_u8nyn8jNAhWJQY8KHfIhAVoQjRwIBw&url=https://en.wikipedia.org/wiki/Sony_Entertainment_Television_(Latin_America)&bvm=bv.125596728,d.c2I&psig=AFQjCNHWx4lxarNQGIus_l8bttdkN4NEuA&ust=1467118324840670

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiVzIS8oMjNAhUIN48KHcKMCRAQjRwIBw&url=https://en.wikipedia.org/wiki/File:Life_OK_channel_logo.png&bvm=bv.125596728,d.c2I&psig=AFQjCNEm7PDe7F63dY4Ru9xk53Cwt3TGPg&ust=1467118502108867

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwigyaDMoMjNAhXFMY8KHVWNCVEQjRwIBw&url=http://tv.burrp.com/channels.html&bvm=bv.125596728,d.c2I&psig=AFQjCNG2LwHmXNyTtGkJ_gCt90paCHoARA&ust=1467118536534376

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwigwbrdoMjNAhUJq48KHbYuDYwQjRwIBw&url=http://logos.wikia.com/wiki/SAB_TV&bvm=bv.125596728,d.c2I&psig=AFQjCNFFNM1OvtwrTyny_Q7yaW6Lk6DZqg&ust=1467118572235592

Page 25


#6 –Broadcasters & DTH players to gain the most in next phase of digitization

Digitization to increase the advertisement revenues for the industry... …with the share for broadcasters increasing

We from our industry interaction believe that ~70mn households are yet to be digitized

Digitization progress has been slow and hindered with several challenges which has delayed the benefits the broadcasters were to accrue for it,

which should start monetizing in near to medium term.

213 245 281

320 361

407 468

548

637

0

100

200

300

400

500

600

700

800

2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P

Subscription Revenue

47 57

69 75 86

114

145

174

201

-30

20

70

120

170

220

2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P

Subscription Revenue for broadcasters

14

25

40

81

1.2

1.2

8

61

Jun-12

Mar-13

Dec-15

Dec-16

Non-digitised subs

No of Paid C&S Subs

Phase 1

Phase 2

Phase 3

Phase 4

>90% (100% exclusive Chennai)

>95%

>80%

~25%

Source: FICCI KPMG 2016, Spark Capital Research



Page 26



TV Households on the rise


Digitization benefits fro here on expected to benefit Broadcasters and Direct To Home (DTH) players as leftover digitization markets are highly

fragmented

So have been the C&S households Digital cable has gained in Phase 1&2

Phase 3 & 4 though to benefit DTH players Gross ARPU’s in DTH higher… …leading to intense battle among the 6

players

138

146

154

161

169

175

185

191

194

197

76.8%

81.5%

84.4%

86.3%

88.2%

91.4%

91.9%

93.7%

95.9%

97.5%

2010

2011

2012

2013

2014

2015

2016P

2017P

2018P

2019P

Number of TV Households (mn)

C&S households (%)

98

111

122

130

139

146

151

159

165

170

71.0%

76.0%

79.2%

80.7%

82.2%

83.4%

81.6%

83.2%

85.1%

86.3%

2010

2011

2012

2013

2014

2015

2016P

2017P

2018P

2019P

Paid C&S households (mn)

Paid C&S households (%)

65 74

69 68 70 65

5 6

19 25

29 37 28 31 34 37 40

44

8

8

9 9 10 15

2010 2011 2012 2013 2014 2015

Analog Cable Digital Cable

Pay DTH Free DTH

160 170 175 196

248 258

160 166

200 220 214 219

2011 2012 2013 2014 2015 2016P

AR

PU

(R

s.

Per

mo

nth

)

DTH Digital cable

Phase 1 Phase 2 Phase 3 Phase 4

Digital DTH

Dish TV, 27%

Tata Sky, 21%

Sun Direct, 11%

Big TV, 5%

Airtel Digital, 20% Videocon

D2H, 16%


Source: FICCI KPMG 2016, Spark Capital Research Source: FICCI KPMG 2016, Spark Capital Research


Source: Dish Presentation, Spark Capital Research

Page 27



Despite court cases, Digitization has progressed across other states except for in Tamil Nadu, where a stiff continues between the state run

Arasu Cable and I&B ministry over grating of DAS license

Phase 3 completed

Phase 3 – Stayed by

court orders

No Progress

Phase 3 completed States

Andaman and Nicobar

Arunachal Pradesh

Assam

Bihar

Delhi

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Karnataka

Kerala

Maharashtra

Meghalaya

Nagaland

Punjab

Sikkim

Uttarakhand

West Bengal

Court Stays

High Court of Judicature at

Hyderabad

Bombay High Court

Sikkim High Court

Odisha High Court

High Court of Chhattisgarh

Madras High Court

Allahabad High Court.

Chandigarh

Allahabad

Indore

Jaipur

Source: TRAI filings, Spark Capital Research

Page 28



Several litigations by stakeholders have led to gains of digitization not really benefitting anyone in the value chain, much awaited Telecom

Regulatory Authority Of India (TRAI) recommendation on pricing expected to settle the ambiguity

BROADCASTERS

574 Free To Air

(FTA) channels

256 Pay channels –

53 broadcasters

LOCAL CABLE

OPERATORS

~60000 operators

MULTI SYSTEM

OPERATORS

~6000 operators, ~534

DAS registered

DIRECT TO HOME

6 Pay DTH players DD

Dish – Free DTH Subscription Income

Carriage Fees

Placement Fees

Marketing Fees

Subscription Income

Subscription Income

For addressable systems, the channels or bouquets are required to be offered at 42% of

the corresponding rates applicable for non addressable systems.

The composition of bouquets offered in addressable systems shall be the same as offered

for non addressable systems.

Broadcasters have to offer all its channels on a-la-carte basis. In addition, the broadcaster

may offer bouquet of channels, subject to the following TWIN conditions

− The sum of the a-la-carte rate of pay channels forming part of such bouquet shall in no

case exceed 1.5 times of the rate of that bouquet of which such pay channels are a part.

− The a-la-carte rate of each pay channel shall in no case exceed 3 times the average rate

of a pay channel of that bouquet.

Niche channel like HD/ advertisement free channels are under price forbearance. However,

twin conditions are applicable, if niche channels are offered as part of bouquets.

Every broadcaster is required to report the a-la-carte and bouquet rate fixed by it to TRAI

and shall also publish such rates on its website. Any change in the rate has to be reported

at least 30 days prior to the proposed date of change.

If the broadcaster intends to convert a free to air channel into pay channel then it should

inform to TRAI, at least 30 days prior to the proposed date of such conversion.

At present the retail tariff in addressable system for both FTA and Pay channels is under

price forbearance i.e. the DPOs are free to decide their price as per market conditions.

All broadcast TV channels (FTA and Pay) are mandated to be provided to customers on a-

la-carte basis so that customers can choose any channel. The DPOs are free to form

bouquet of channels and price them.

If the DPOs provide broadcast TV channels as bouquet(s), the bouquet price is linked to a-

la-carte rate of the channels forming part of the bouquet to check unrealistic variations

between bouquet price and a-la-carte price. The revised tariff order has been issued and

will be applicable from 01.04.2016.

It is mandated by the Government that public broadcasting service channels as notified

from time-to-time must be carried by the DPOs and be delivered to the subscribers

irrespective of whether the subscriber subscribes to any a-la-carte channel(s) or bouquet(s)

or both.

A Basic Service Tier (BST) comprising of 100 FTA channels at Rs. 100 plus taxes is

mandated to be provided.

In case of FTA channels, it is mandated that the price of FTA channels be uniform.

It is open to the DPOs to specify a minimum monthly subscription limit of not exceeding Rs.

150/-

CONSUMERS

~160mn Cable &

Satellite

Households


Page 29



With several broadcasters having vertical cross holdings, TRAI recommendation on the fee structure to have an impact across companies in the

broadcasting value chain

CONSUMER

Average Revenue Per user has not

increased to the proportion of

advertisement income

Lack of Foreign Direct Investment

(FDI) in the sector

Does not support innovation due to

price curbs

DISTRIBUTION PLATFORM

OPERATORS (DPOs) BROADCASTERS

Discriminatory pricing

Revenue realisation on ground

remains low despite cost of pay

channel increasing

Large gap between Reference

Interconnect Offer (RIO) and mutually

agreed pricing

Compulsion to subscribe to bouquets

as a la carte rates are untenable

Small and medium sized MSOs being

squeezed

High number of litigations on pricing

Despite wide availability, price control

of channels not in their hands.

Subscription or discontinuation of

channels is opaque

Channel selection is cumbersome and

non-customer friendly

High number of litigations on pricing

Pricing linked to

‘non-addressable’

prices

Discriminatory

pricing

Players holding

stake across value

chain

Regulatory

ambiguity

Consumer interest

not kept in mind

Political involvement

at MSO & LCO levels


Page 30



Most broadcasters have recommended a price forbearance + regulatory pricing cap model

Regulating price caps only

for the mass genres of entertainment (Hindi

and regional), movies (Hindi and regional) and

sports genres. wholesale price forbearance

for all other genres like English entertainment

and movies, lifestyle, kids, other genres, HD

and upcoming 4K, 3D and virtual reality. It has

also proposed to cap the wholesale discounts

at 33%.

While calling for the total

abolition of carriage fee in digital addressable

system (DAS) areas, the NBA has proposed that

TRAI should regulate it in non-DAS areas. The

association has submitted that till such time that

DAS is fully implemented, the price cap should

be between 50 paisa and one rupee per set-top

box (STB) on carriage fee payable by

broadcasters to DPOs.

They have also proposed that

the broadcasters will have to offer HD and SD

channels as part of separate bouquets.

Broadcasters are to offer maximum 50%

discount on a la carte rates and bouquet rates

under different schemes offered to DPOs on

non-discriminatory basis including but not limited

to (i) the number of channels subscribed by

DPOs, (ii) reach of the channels/placement of

the channels on packages formed by DPOs, (iii)

placement of the channels on particular LCN,

etc.

TRAI should fix genre-wise tariff

ceiling of a la carte channels based on the

maximum existing tariffs of a la carte

channels. The maximum existing tariffs of a la

carte channels needs to be considered as a

broadcaster would offer discounts on such price.

Such ceiling shall be subject to inflation-based

increase or annual increase of 5%, whichever is

higher.

Broadcasters should be allowed to

execute mutual agreements based on details

provided in the RIO, Sony said in its response

to TRAI. This, in effect, will take best note of

transparency and non-discrimination issues

raised by TRAI. It also suggested that

broadcasters should be allowed to have

flexibility to price their channels within the

limits prescribed by TRAI.

The broadcaster has proposed that the

prices of the mass genre would be regulated

by TRAI through stipulation of RIO methodology

and prices for the niche channel would be

under forbearance. It has also proposed that

the cumulative discount on the listed wholesale

price because of various parameters should not

exceed 40%. Like Star, ZEEL has suggested

that the carriage fee/placement fee/marketing

fee should be subsumed in the

discounting/incentive scheme and no separate

payment would be made for the same.

NEWS BROADCASTERS ASSOCIATION

Source: Industry Sources, Spark Capital Research

Page 31



Recommendations across DTH players though not in cognizance with each suggesting a model that suits them the best

It has proposed that the

regulated RIO model must provide the flexibility

to the broadcasters and distributors of TV

channels to enter into fixed-fee arrangements.

TRAI should have the power to conduct audit of

all the stakeholders so as to verify the

compliance of the regulations by the said

stakeholders.

Provision of carriage fee, marketing fee,

placement fee and packaging fee should be

regulated, made transparent and uniform for all

DPOs without discriminating against the DTH

operators.

Videocon d2h submitted that

the wholesale pricing of both SD and HD

channels should be regulated to ensure that

DPOs could offer reasonable a la carte rates to

subscribers. The regulated RIO should be

adopted looking at existing and historical

commercial deals between broadcasters and

DPOs.

Tata Sky submitted that TRAI

should do away with the price cap on

wholesale price and continue forbearance

on retail pricing. The existing regulations to

ensure non-discriminatory access, including a

‘must carry’ obligation, are enough to check

discrimination in offering content. Further, it

stated that there are sufficient laws that already

provide safeguards against monopolies.

Carriage/placement fees should not be

regulated and the regulator should allow

market forces to decide on the same. It noted

that placement fee is a common place in many

industries.

The RIO rate of bouquets

formed by the DPO from the channels of a

broadcaster should be as per the existing twin

conditions at the wholesale level. The price

forbearance model would be suitable at the

retail level in the broadcasting sector.

As an alternative to the cost-

based model, Sun Direct said that the

regulated RIO model would be in the best

interest of the industry, as it would provide

flexibility to the broadcasters to price their

channels within the prescribed price caps while

controlling risk of exorbitantly high price due to

their monopolistic behaviour. It further

submitted that there should be further

rationalisation of tariff for DTH operators to

ensure a level playing field between DTH

operators and MSOs.

Airtel Digital TV argued that a

cost-based model would allow for an effective

recovery of the seller’s costs with a reasonable

margin. This makes the broadcasters’ business

viable as costs and returns are accounted for.

Further, it constrains the ability of broadcaster

to charge monopolistic price (i.e. an

unwarranted price premium) as the price must

be aligned to the cost base. This protects

consumer interests and prevents over-charging

Attempt to lay down a ceiling on carriage or

placement will only result in market distortions

and may lead to covert or disguised deals,

which will be difficult to regulate.


Page 32

Zee Entertainment Enterprise Limited (ZEEL) CMP

Rs.445

Target

Rs.510

Rating

BUY ZEALOUS Pursuit

Stock performance (%)

1m 3m 12m

Z 1% 18% 25%

Sensex 1% 7% -3%

NSE Media 3% 13% 18%

Financial summary

Year Revenues (Rs. mn) EBITDA margin PAT (Rs. mn) EPS (Rs.) P/E(x) ROE (%)

FY15 48,837 25.7% 9,775 10.2 43.7 31%

FY16 58,515 25.8% 10,482 10.9 40.8 27%

FY17E 68,377 27.8% 13,477 14.0 31.7 29%

FY18E 80,296 28.7% 16,341 17.0 26.2 29%

Date 1st July 2016

Market Data

Bloomberg Z IN

Shares o/s 960mn

Market Cap Rs. 438bn

52-wk High-Low Rs. 467-347

3m Avg. Daily Vol Rs. 862mn

Index member NIFTY

Latest shareholding (%)

Promoters 43.1

Institutions 51.3

Public 5.6

Initiating Coverage We initiate coverage on Zee Entertainment Enterprise Limited (ZEEL) with a ‘BUY’ rating on the back of revenues and

earnings CAGR assumptions of ~17% and ~25% respectively from FY16 –FY18 led by (1) ~19% advertisement revenue

CAGR as viewership across Hindi & Regional markets gain traction, (2) Mid teens growth in subscription revenues as

broadcasters are expected to get a larger share of subscription income, (3) Content cost rationalisation as new channel

investments begin to pay off, (4) EBITDA margin expansion on the back of lower business promotion and marketing

expenses, (5) Established strong Over The Top (OTT) platforms which should enable them to take advantage of rise in

digital spends.

ZEEL, a pioneer of the Indian Media and Entertainment (M&E) sector has through the last 23 years not only established

itself as one of the largest media conglomerates in the country but has also been one of the most profitable. This approach

of foresightedness coupled with conservatism is what sets ZEEL apart from several other broadcasters. With a bouquet of

~32 domestic channels spread across the country, we firmly believe ZEEL is currently the best proxy play on Indian M&E

sector. Further, a healthy balance sheet, consistent dividend pay-out, repute promoters and steady free cash flow growth

further increases our comfort on stock. Target Price of Rs.510 (30x FY18e EPS )

• To outperform industry advertisement growth: With a wide and established presence across several languages, we

believe ZEEL should comfortably report ~19% growth over FY16-18, newly introduced channels are also expected to

contribute to increase in advertisement share.

• Subscription revenues to be in mid teens: With broadcasters expected to get a larger pie of digitization revenues in

near term, subscription revenues should inadvertently increase for ZEEL too, however we remain conservative in our

numbers as we understand that several negotiations with Distributor Platform Operators (DPO’s) are put on hold in

anticipation of the new pricing announcement from the regulators.

• Cost rationalisation with channels maturing: With the launch of ~13 channels over the past 3 years, ZEEL had to

forego its margins to invest and promote these new channels, however with these channels having established certain

mileage, savings in content costs and Advertisement & Publicity costs to accrue in near term.

• Exciting digital prospects: Though ZEEL’s digital investments do not contribute much to revenues, we believe these

are essentials as consumer tastes and preference evolve.

• Risks & Concerns: Increase in competitive intensity, Reduction of advertisement outlay by FMCG and discretionary

companies, adverse pricing contracts in newly formulated pricing order and lack of turnaround of the sports business

GNANASUNDAR S [email protected]

+91 44 4344 0062

mailto:[email protected]

Page 33


Rs.445

Target

Rs.510

Rating

BUY Factsheet

Corporate Factsheet

Company Background

The Company was originally incorporated as Empire Holdings Ltd on November 25, 1982. In 1992, the Company entered the business of

entertainment software and the name was changed to Zee Telefilms Limited from September 8, 1992. Since then, the Company has expanded its

operations considerably. In 2007, post de-merger of News and Cable Business Undertaking, the name of the Company was changed to Zee

Entertainment Enterprises Limited (ZEEL) with effect from January 10, 2007.

Key Revenue Drivers

(FY16) Advertisement Revenues (~59% of revenues), Subscription Income (~35% of revenues), Others (~5% of revenues)

Management depth

Mr. Punit Goenka – Managing Director and Chief Executive Officer, Mr. Amit Goenka – Chief Executive Officer, International Broadcast Business,

Mr. Ashish Sehgal- Chief Sales Officer- ZEEL, Mr. M. Lakshminarayanan- Chief Compliance Officer & Company Secretary, Mr. Mihir Modi–

Chief Finance & Strategy Officer at ZEEL, Mr. Rajesh Sethi- CEO of Ten Sports and Taj TV Ltd, Mr.Rajendra Mehta- Head – Human Resources,

Ms.Sharada Sunder - Executive Vice President, Regional Channels and Mr.Sunil Buch, Chief Business Officer (CBO) at ZEE

Reach ZEEL currently has ~32 domestic channels & 37 international channels and is present in over 171 countries.

Library ZEEL houses over 222,000 hours of television content, with rights to more than 3,818 movie titles

High Definition (HD)

Channels ZEEL caters its offerings in 14 languages to ~959mn viewers.

Genre Split ZEEL has 20 direct and step down subsidiaries in India and Overseas

ZEEL currently has 8 HD channels – Zee TV, Z Cinema, &tv, &pictures, TEN 1, Zen Café, Ten Golf and Z Studio

Corporate Bankers BNP Paribas, Deutsche Bank, Kotak Mahindra Bank, Standard Chartered Bank ,Yes Bank Ltd.

IPO bankers ZEEL had its IPO in September 1993, wherein 8.2 mn equity shares of Rs.10 each were offered to the public at a premium of 20 per share. The

Company was listed on Bombay Stock Exchange (BSE) on November 25, 1993.

IPO money raised In 1999, the Company announced a stock split of 1:10 and the face value was reduced to 1 per share.

Corporate Auditors M/S MGB & CO. LLP

Page 34


Rs.445

Target

Rs.510

Rating

BUY Z

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cti

on

Zee T

V

Zee C

lassic

Zee C

inem

as

Zee B

an

gla

Zee M

ara

thi

LF

Liv

ing

Fo

od

z

Ten

Sp

ort

s

Zstu

dio

Z C

afé

Zee S

mile

Zee T

elu

gu

Zee K

an

nad

a

Zee t

alk

ies

Zee T

am

il

Zin

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Ten

Cri

cket

Ten

Acti

on

/ T

en

2

Zee T

V H

D

Zee C

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D

Ten

1 H

D

Zee S

tud

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Zee B

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gla

Cin

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ZeeQ

&P

ictu

res

Zee A

nm

ol

Zin

dag

i

& P

ictu

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D

&T

V

& T

V H

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Zee B

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orl

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Zee C

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HD

Ten

Go

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D

Timeline – A brief history over the years

1992 1994 1998 2000 2002 2004 2006 2008 2010 2012 2012

Launches Zee

TV

Initial Public

Offering of

Zee Telefilms

Limited

Zee TV goes

global -

launches Zee

TV, UK

Commences

Siticable

operations Joint

Venture with

News Corp

Launches

Zee TV,

Africa.

Launches

Zee TV in the

US.

Launches

regional

channels.

Launches

Internet over

Cable services

Introduces Zee TV and

Zee News as pay

television offerings.

De-merger of

Zee Telefilms

Limited.

Zee Entertainment

Enterprises Limited

(ZEE) gets listed as an

independent company.

ZEE's distribution arm, Zee-Turner Ltd,

enters into a 50:50 JV with Star Den Media

Services Pvt. Ltd. to form MediaPro

Enterprise India Pvt. Ltd.

Dec-9

1

Oct-

92

Oct-

93

Ap

r-95

Sep

-99

Sep

-99

Dec-0

1

Ap

r-02

Mar-

05

Mar-

05

Mar-

05

May-0

5

May-0

6

Au

g-0

7

Oct-

08

Ap

r-09

Fe

b-1

0

Au

g-1

0

Sep

-10

Au

g-1

1

Au

g-1

1

Au

g-1

1

Ap

r-12

Sep

-12

No

v-1

2

Au

g-1

3

Sep

-13

Ju

n-1

4

Au

g-1

4

Mar-

15

Mar-

15

Ju

l-15

Sep

-15

Oct-

15

1996

Launches Zee

News and Zee

Cinema.

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiK7si9jM_NAhXJKY8KHdOJCyUQjRwIBw&url=http://pslt20cricket.abbottabadweb.com/?p=199&bvm=bv.125801520,d.c2I&psig=AFQjCNEusmFtcQ9UlLmw3i-mnbtnkDaslA&ust=1467353630161167

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiK7si9jM_NAhXJKY8KHdOJCyUQjRwIBw&url=http://pslt20cricket.abbottabadweb.com/?p=199&bvm=bv.125801520,d.c2I&psig=AFQjCNEusmFtcQ9UlLmw3i-mnbtnkDaslA&ust=1467353630161167

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiqt_iijc_NAhXJuo8KHWVNCQgQjRwIBw&url=http://logos.wikia.com/wiki/Zee_TV&psig=AFQjCNH7KmViiksauaG-KXe3I7_2wnvDQQ&ust=1467353868414684

Page 35


Rs.445

Target

Rs.510

Rating

BUY Timeline – Channel Bouquet

Hindi Entertainment Hindi Cinema Regional Entertainment

Sports Music, Lifestyle and Niche English Entertainment

HD Channels Select International Channels

Page 36


Rs.445

Target

Rs.510

Rating

BUY Key Financials

Zee revenues expected to grow at ~17% CAGR over FY16-18 led by… …~19% growth in advertisements and ~16% growth in subscription

Source: Company Filings & Spark Capital Research Source: Company Filings & Spark Capital Research

With content investments lower, margins to expand… …leading to better than anticipated returns


30.1 30.4 37.0

44.2 48.8

58.5

68.4

80.3 37%

1%

22%

20%

10%

20%

17% 17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

10

20

30

40

50

60

70

80

90

FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs. B

n

Revenue (Rs.bn) growth (%)

Advertisement Revenue

58.6%

Subscription Revenue

35.2%

Others 6.2%

18.0% 18.0% 19.6%

26.9%

31.3%

27.1% 28.6% 28.3%

17.5% 18.1% 19.5%

20.5% 18.8%

17.7% 18.6%

20.3%

15%

20%

25%

30%

35%


ROE (%) ROCE (%)

52.2% 52.9% 53.0% 53.2% 56.2% 55.5% 56.5% 57.2%

27.3% 24.3% 25.8% 27.2% 25.7% 25.8% 27.8% 28.7%

20.3% 19.4% 19.4% 20.1% 20.0% 18.0% 19.7% 20.3%


Gross Margin (%) EBITDA Margin (%) PAT Margin (%)

Page 37


Rs.445

Target

Rs.510

Rating

BUY Investment Thesis

Advertising revenues to

increase at ~19% CAGR from

FY16-18 led by traction

across Hindi & Regional

markets.

1

Subscription revenues to

grow in mid teens as Average

Revenue Per User (ARPU)

improves on digitization

2

With several investments

maturing, operating cost

leverage to lead to better

EBITDA margins

3

Sports investments loss to

prolong. Watch out for

traction in subscription

revenues and non-cricket

content

4

Opportunity in Over The Top

platforms augurs well from a

long term perspective

5

Page 38


Rs.445

Target

Rs.510

Rating

BUY Advertising revenues to be driven by traction across Hindi & Regional markets

ZEEL well equipped to outpace industry growth given its dominant positioning across markets and their constant content innovations

ZEEL advertisement revenues to increase ~19% CAGR… …outpacing industry’s 14.5% growth CAGR

Increasing traction from &tv to lead to Hindi GEC growth… ZEEL well placed to outpace industry growth given its channel ratings

15.8 19.6

23.8 26.6

34.3

40.8

48.9

-7%

24% 21%

12%

29%

19%

20%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

10

20

30

40

50

60

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs. B

n

ZEEL Advertisement Revenue (Rs.bn) growth (%)

125 136 155 181 198

226 260

7.8% 8.8%

14.0% 16.8%

9.4% 14.1%

15.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

50

100

150

200

250

300


Rs. B

n

Industry Advertisement Revenue (Rs.bn) growth (%)

41.7% 44.7%

35.0% 34.9%

23.3% 20.4%

0%

20%

40%

60%

80%

100%

FY15 FY18 Hindi Regional Others

Channel Viewership Share among top 10 channels

Sun TV 17.8%

STAR Plus 13.6%

Colors 13.2%

Zee TV 11.3%

Sony Pal 9.5%

Life Ok 8.9%

STAR Utsav 8.3%

Zee Anmol 8.1%

Zee Telugu 7.6%

Rishtey 1.7%


Source: BARC& Spark Capital Research Source: Company Filings & Spark Capital Research

Page 39


Rs.445

Target

Rs.510

Rating


Given ZEEL’s exposure to both Hindi and regional markets, ZEEL well equipped to outpace industry growth

Hindi Genre

What is in it for the Advertisers

Target market of ~500mn population

Constitutes the largest homogenous

markets

Caters to most of the North and Central

Hindi speaking markets

National level mass launches can be

concentrated here

Enables to target Rural and Urban with

the emergence of flanking and FTA

channels

Celebrity endorsements are easier

Regional Genre

What is in it for the Advertisers

Caters to a divers ~400mn population

across the 6 markets

Several of these states enjoy a GDP far

superior to National average

Higher disposable income in these

markets

Has a wide local advertisement market

Established Retail market in several of

these states

Homogenous celebrity endorsement not

possible

How Zee Capitalizes on the trend?

Zee with its 4 Hindi channels commands

consistent viewership and has competitive

advertisement rates in the Hindi GEC that makes

it a effective advertisement mode for advertisers.

Long standing relationship with production houses

and a strong in-house production team ensures

freshness and relevance in contents.

Flagship Zee Tv continues to command a strong

set of loyal women audience

In Zee Anmol, Zee caters to rural audience while

&TV with its contemporary shows acts as a

medium to target urban audience.

How Zee Capitalizes on the trend?

Zee operating in 6 of the 7 languages has

become an established player in several of these

markets

Commands strong market position across

Marathi, Telugu, Odia, Bengali and Kannada

languages

Being an established player in Hindi assisted in

cracking open the regional markets for Zee

Serials dubbed into various regional languages

have minimal cost but promises huge returns.

Source: Company Filings & Spark Capital Research

Page 40


Rs.445

Target

Rs.510

Rating


With ZEEL having made significant investments behind &TV over the past couple of years, non-linear revenue growth to emerge in near term in

the Hindi GEC

Zee TV caters to mass audience, Anmol as a Free To Air (FTA) channel to rural audience while &tv with contemporary program caters to urban

young audience

Zee TV Zee Anmol & TV

About the channel Flagship Channel, caters to all audience

types and age group

Free-To-Air TV channel primarily telecasting

repeat content from other group channels

Launched in 2015 as a flaking channel

targeting the urban young viewer

Launch date Oct-92 Sep/13 Mar-15

Prime time content Predominantly Fiction Fiction Fiction and Realty

Target Audience Caters mostly to women audience Rural audience Young audience

Story Pitch Stuggles of Women Mythological and Women empowerment

oriented

Cotemporary story lines showcasing

modern India dreams and struggles

Original content hours 26 NA 21

Episodes less than 100 NA 33% 50%

Episodes more than 100

and 300 70% 44% 20%

Episodes above 300 30% 22% 30%

Ratings

Consistently among top 5 in Rural and

Rural+Urban ratings, Among top 3 in

Urban impressions

Among the top 3 in Rural and Rural+Urban

ratings and Among top 10 in Urban markets

viewership

Among top 10 in urban impressions

Best Performing Shows Kumkum Bhagya Jodha Akbar, Bandini, Meri Doli Teri Angana Gangaa, Begusari

RIO rate (Rs.) 5.83 Free To Air Rs.9


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjOw6-jsc_NAhVMK48KHbQjAtIQjRwIBw&url=http://logos.wikia.com/wiki/Zee_TV&bvm=bv.125801520,d.c2I&psig=AFQjCNFH1un7pTVNP7jbdCpVa55ll-H4TQ&ust=1467363532772922

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjwj8ywsc_NAhVJo48KHed-B_UQjRwIBw&url=https://twitter.com/zeeanmol4&bvm=bv.125801520,d.c2I&psig=AFQjCNG6Ygg3kOWnZ23RDjNX0yN_alLZtA&ust=1467363558523820

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjf-MPFsc_NAhXFvo8KHZBiCuAQjRwIBw&url=http://tv.burrp.com/channels.html&bvm=bv.125801520,d.c2I&psig=AFQjCNHUTz-MgZz7NohzHxzKIUNHMlHedA&ust=1467363592265600

Page 41


Rs.445

Target

Rs.510

Rating


ZEEL continues to invest in movies, however with overall cost for movies coming down, movie expenses assumed to be lower

ZEEL’s 3 strong regional markets are Marathi, Bengali and Telugu Vs the industry pie

ZEEL maintains its viewership in the Hindi movies genre… …by continuously buying blockbuster movies

Star Cinema Channels

28.0%

Zee Cinema Channels

32.3%

Sony Cinema Channels

19.2%

UTV Cinema Channels

12.5%

Others 8.0%

Sony 25%

Zee 24% Star

20%

UTV 11%

Colors 7%

Others 13%

Marathi 33.1%

Bengali 24.8%

Telugu 18.2% Kannada

13.2%

Tamil 4.0%

Oriya 6.5%

Others 0.3%

Among the top 100

movies released over

the past 5 years, ZEEL

has bought out rights

for ~24% of those

movies

Tamil 24.7%

Telugu 23.4%

Marathi 12.6%

Others 16.8% Kannada

10.6%

Bengali 6.6%

Malayalam 5.2%

0.0%

0.0%

0.0%



Page 42


Rs.445

Target

Rs.510

Rating


ZEEL should continue its strong hold in both these markets given the strong properties they hold in these markets along with the potential for

dubbed Hindi serials in these markets

ZEEL dominates Marathi market… …while they are dominant in the Bangla market

Has emerged to be the third largest regional market with an estimated advertisement

market size of Rs.~8bn

Reaches out to ~17mn television homes in India

Marathi market captures ~5% of the regional viewership share.

Has managed to emerge as a alternate medium to Hindi, despite high prevalence of

floating Hindi population in state capital, Mumbai.

Zee is the market leader in this segment having ventured into this market as early 1999

Posses a library of over 9,000 hours & rights to over 400 movie titles

Zee Marathi has ~21 hours of original fiction content in a week and has about ~15 hours

of reality show content in a week

Key properties of Marathi includes Honar Soon Mi Hya Gharchi, Jai Malhar, Maze Pati

Saubhagyavati, Chala Hava Yeun Dya

Zee Marathi contents concentrated around Family issues and Love stories genres for its

fiction content

Sizeable advertisement market size of Rs.~6bn, catering to West Bengal and Bangladesh

audience


Bengali market captures ~3% of the regional viewership share.

Zee is a dominant player in this segment having ventured into this market as early 1999

Has transformed itself to be the leading GEC in West Bengal with dominant share in non-

fiction programming

Zee Bangla has ~22 hours of original fiction content in a week and has about ~15 hours


Zee holds a library of over 9,000 hours & rights to over 600 movie titles

Key properties of Zee Bangla includes Sa Re Ga Ma Pa, Didino. 1,Deep JweleJai, Eso

Ma Lakkhi, Goyenda Ginni, Mirakkel

Zee Bangla contents concentrated abound diverse topics as Family issues, women

struggles, horror and Investigation genres for its fiction content

Zee Marathi 49.0%

Star Pravah 20.8%

ETV Marathi 18.6%

Others 11.6%

Star Jalsha 47.3%

Zee Bangla 35.0%

ETV Bangla 9.6%

Others 8.1%


Page 43


Rs.445

Target

Rs.510

Rating


ZEEL has certainly created niche for itself in both of these markets through innovative and off beat fiction shows targeting new age viewers

ZEEL through its innovative offerings has created a niche in Telugu... …and in Kannada by having more fiction targeting younger viewers

Sizeable advertisement market size of Rs.~9bn, catering to audience in Andhra Pradesh

and Telangana



Zee has emerged to be the dominant player in this segment having ventured into this

market in 2005

Leading GEC in Andhra Pradesh, through its differentiated and refreshing content

Zee Telugu has ~34 hours of original fiction content in a week and has about ~15 hours


Library of over 18,000 hours & rights to over 500 movie titles

Key properties include Varudhini Parinayam, Mangammagaari Manavaraalu, Koncham

Ishtam Koncham Kashtam

Zee Telugu uses the dubbed versions of its popular Hindi Serials to fill up non-primetime

slots in Zee Telugu

Sizeable advertisement market size of Rs.~11bn, catering to the diverse Karnataka

market

The market commands ~10mn television homes in India

Kannada market captures ~11% of the regional viewership share.

Zee is a dominant player in this segment having ventured into this market as early 2006

Competitive player in the Kannada GEC, competes with all the other 4 major media

conglomerates in these markets

Zee Kannada has ~25 hours of original fiction content in a week and has about ~16 hours


Zee Kannada boasts of a Library of over 14,000 hours & rights to over 225 movie titles

Zee Kannada Key properties include Srirastu Subhamastu, Mahadevi, Gruhalakshmi

Dubbed contents are not telecasted in Kannada market, fiction programs mostly have

youth oriented stories

Maa Telugu 27.3%

Gemini TV 25.7%

Zee Telugu 23.0%

Eenadu TV 21.5%

Maa Gold 2.5%

Udaya TV 32.6%

ETV 23.3%

Suvarna 21.1%

Zee Kannada

13.5%

Others 9.5%


Page 44


Rs.445

Target

Rs.510

Rating


Journey in Tamil should remain a struggle despite seeing one off successes, Odisha market exciting, albeit currently small.

Sarthak acquisition presents an opportunity in Odisha markets… …prospects in Tamil though remain weak from a near term perspective

Advertisement market size of Rs.~1.5bn, catering to audience in State of Odisha.

Reaches out to ~3.5mn television homes in India

Odriya market captures ~3% of the regional viewership share.

Zee bought out Sarthak in 2015 for an all cash consideration of Rs.~1.15bn

Dominant market leader in the Odia GEC space

Key properties of Sarthak includes: Paree, To Aganara Tulasi Mun, Sindura Bindu and

Badhu

Sarthak's shows include different exclusive shows like serials, movies, jatras, reality

shows and music

Largest regional advertisement market size of Rs.~16bn, catering to Tamil audience



Zee ventured into the market in 2008, but has ever since found it difficult to break into the

Tamil market

Unlike other genres, higher proposition of slot based models creates a strong entry barrier

for new comers

Zee Tamil did manage to grab some decent movies off late, but placement is found

mostly wanting.

Zee Tamil has a mix of its own shows, several dubbed content from Hindi and popular

reality shows.

Sarthak TV 50.0%

Tarang TV 32.7%

Odisha TV 7.1%

Alankar 5.6%

Colors Oriya 4.7% Sun TV

55.9%

KTV 18.6%

STAR Vijay 12.3%

Zee Tamil 8.3%

Polimer 4.9%


Page 45


Rs.445

Target

Rs.510

Rating

BUY Subscription revenues to grow in mid teens driven by digitization

ZEEL to benefit from increasing realization for broadcasters as ambiguity over pricing and customer base begin to dwindle

ZEEL currently has ~1/3rd of its revenues from Analog cable

ZEEL subscription revenues to grow in mid teens… …as industry level subscription share for broadcasters improve

Analogue Cable 32.9%

Digital Cable 22.1%

DTH 38.8%

Other Digital 6.2%

22.1% 23.3% 24.6% 23.4% 23.8%

28.0% 31.0% 31.8% 31.6%

0%

5%

10%

15%

20%

25%

30%

35%

2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P

Broadcasters share in subscription revenues (%)

11.3 13.3

16.2 18.0 17.9

20.6

23.8

27.6

14.1%

17.7%

22.5%

11.0%

-0.5%

14.7%

15.7% 15.9%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

5

10

15

20

25

30


Rs. B

n

Subscription income (Rs.bn) Growth YoY (%)

ZEEL proposal on the Telecom Regulatory Authority (TRAI)

wholesale pricing model consultation

The broadcaster has proposed that the prices of the mass genre

would be regulated by TRAI through stipulation of RIO methodology

and prices for the niche channel would be under forbearance. It

has also proposed that the cumulative discount on the listed

wholesale price because of various parameters should not exceed

40%. Like Star, ZEEL has suggested that the carriage fee/placement

fee/marketing fee should be subsumed in the discounting/incentive

scheme and no separate payment would be made for the same.



Page 46


Rs.445

Target

Rs.510

Rating

BUY With several investments maturing, operating cost leverage to lead to better margins

&tv should not only to higher advertisement revenues in near term but should also assist in improving near term margins as profitability

improves

ZEEL content cost to come down as &TV costs come down… …especially in the programming front

9.5

14.4 14.3 17.4

20.7 21.4

26.0 29.7

34.4

43%

48% 47%

47%

47%

44%

45%

44% 43%

40%

41%

42%

43%

44%

45%

46%

47%

48%

49%

0

5

10

15

20

25

30

35

40

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs. B

n

Cost of revenues (Rs.bn) % of sales

5.6 9.3 8.9 10.0 11.1

14.3 18.3

20.9 24.2

26%

31% 29%

27%

25%

29%

31% 31% 30%

0%

5%

10%

15%

20%

25%

30%

35%

0

5

10

15

20

25

30

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs. B

n

Programming cost (Rs.bn) % of sales

&tv to be EBITDA positive in FY17 and margin accretive in FY18… …led by increase in advertisement share

0.2

2.9 3.4

4.1

-0.90

-1.60 0.08

1.24

-2

-1

0

1

2

3

4

5

FY15 FY16 FY17E FY18E

Revenues EBITDA

12.7%

14.4% 15.4%

14.6%

15.9% 16.6%

17.2%

12.7%

14.4% 15.4%

14.7%

17.3% 18.1%

18.8%

10%

12%

14%

16%

18%

20%


ZEEL Advertisement market share excluding &TV

ZEEL Advertisement market share



Page 47


Rs.445

Target

Rs.510

Rating

BUY With several investments maturing, operating cost leverage to lead to better margins

Marketing and advertising spends that were invested behind new shows and promotions on new channels should also rationalize in near to

medium term.

…new channels become EBITDA accretive and spend behind… …new launches dwindles

EBITDA margins to improve led by gross margin expansion… …and lower marketing expenses given that…

5.5 6.1 8.2 7.4

9.5 12.0 12.5

15.1 19.0

23.0 25%

28% 27%

24%

26% 27% 26% 26%

28%

29%

22%

23%

24%

25%

26%

27%

28%

29%

30%

0

5

10

15

20

25

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Rs. B

n

EBITDA (Rs.bn) % margin

&Pictures Zee Anmol Zindagi & Pictures

HD &TV & TV HD

Zee

Bollyworld

Zee Cafe

HD

Ten Golf

HD

Aug/13 Sep/13 Jun/14 Aug/14 Mar/15 Mar/15 Jul/15 Sep/15 Oct/15

PICTURES HD

PICTURES

HD

10 10 15 18

25

37 47

4.5%

3.5%

4.9%

4.9%

5.6% 7.6%

8.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0

10

20

30

40

50

FY10 FY11 FY12 FY13 FY14 FY15 FY16

Rs. B

n

Advertisement & Publicity Expenses % of sales

29% 35% 39% 34% 33% 35% 32% 35% 35% 36%

10%

-18%

-47% -38%

-18% -15% -4% -6%

-15% -15%

2% 10%


Non Sports Excl &tv Sports &tv



http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjd28Ta1s_NAhXFvI8KHevkCtEQjRwIBw&url=http://tv.burrp.com/channel/&tv/573/&bvm=bv.125801520,d.c2I&psig=AFQjCNGaUSn0xY6fcwt4Lb388IoXqudKFA&ust=1467373580929327

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjY2_rn1s_NAhWIsI8KHaoNCLMQjRwIBw&url=http://www.freetoair.in/2013/08/zee-anmol-test-channel-added-on-insat.html&bvm=bv.125801520,d.c2I&psig=AFQjCNEj-PMkZ5Kz_iTJDI-wIU3vD3Qhhg&ust=1467373607544867

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjhs5b01s_NAhWHNY8KHc3nAAkQjRwIBw&url=http://www.mouthshut.com/product-reviews/Zee-Zindagi-reviews-925792629&bvm=bv.125801520,d.c2I&psig=AFQjCNFdR4pOwv2MI4q2Y_SkSk2gdS8Lzg&ust=1467373633771290




Page 48


Rs.445

Target

Rs.510

Rating

BUY Watch out for traction in subscription revenues and non-cricket content

Subscription revenues and non-sports content to be the key growth and margin drivers for the sports business.

Success of Non-cricket properties key for success…

…given that India cricket series would lead to operating loss

Sports business expected to continue to bleed in near term… …until subscription revenues outpace advertisement growth

3.9 3.2

4.4 3.9

5

6.6 6.3 6.3

7.3 8.1 10%

-18%

-47% -38%

-18%

-15%

-4% -6%

-15% -15%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

0

1

2

3

4

5

6

7

8

9


Rs. B

n

Revenue Sports (Rs.bn) EBITDA margin (%)

Advertisement revenues

51%

Subscription Revenues

49%

Sport

Viewership

traction in

India

Revenue - Cost

economics

ZEEL's

dominance Properties with Zee

Cricket High Unfavorable Medium Matches held in South Africa, Sri Lanka,

Pakistan, Zimbabwe and West Indies

Football Medium Break-even Medium UEFA Champions league, Europa League,

ileague, ligue 1, DFB Pokal

Tennis Medium Break-even Medium US open, ATP & WTA series

Golf Low Favorable High Hazeltine, PGA, European Tour, Asian Tour,

LPGA

Athletics Low Break-even Medium Commonwealth Games, Asian Games

Wrestling High Favorable High WWE

Racing Medium Favorable Medium Le Tour France, Moto GP

Home Bangladesh Pakistan South Africa Sri Lanka West Indies Zimbabwe

Jul/16 India

Aug/16 West Indies

Sep/16

Oct/16 Australia Zimbabwe England

Nov/16 New Zealand

Dec/16 New Zealand Australia South Africa

Jan/17

Feb/17 New Zealand

Mar/17 West Indies

Apr/17

May/17 England England

Jun/17

Jul/17 Bangladesh England Sri Lanka

Aug/17 Australia England

Sep/17

Oct/17 South Africa Pakistan Zimbabwe

Nov/17 India South Africa

Dec/17 New Zealand

Jan/18 New Zealand Bangladesh Bangladesh

Feb/18

Mar/18 West Indies India





Page 49


Rs.445

Target

Rs.510

Rating

BUY Opportunity in Over The Top platforms augurs well from a long term perspective

ZEEL has been one of the early entrants into the space and has thereby attracted good base, piggybacking a popular show or event should help

them garner higher traction

Other digital initiatives by ZEEL includes…

Popular OTT platforms of ZEEL are Ditto TV and OZEE OTT brands in India and their launch dates and business model

Ditto TV Ozee

Ditto TV showcases content from

different providers and operates in a

SVOD format. It has ~3mn viewers

with an average monthly ARPU of

Rs.20. The OTT platform also has

several exclusive web only content

as Strugglers, etc

OZEE was launched to provide the

vast library of entertainment content

across the ZEEL channel network,

free of cost, on an anytime,

anywhere basis across devices. The

platform showcases the latest and

full episodes of TV shows

from popular ZEEL Channels.

OTT Brand Company India Launch Business Model

Yupp TV Yupp TV 2006 SVOD

Youtube Google 2008 AVOD

Viu PCCW-Vuclip 2008 TVOD

Zenga Zenga Media Pte 2009 SVOD

nexGTV Media Matrix 2010 SVOD

The Viral Fever TVF 2010 TVOD

Ditto TV Zee Group 2012 SVOD

Sony Liv Multi Screen Media 2013 AVOD

Dish Online Dish TV 2013 TVOD

Box TV Times Group 2013 TVOD

Eros Now Eros International 2014 TVOD

Lukup Lukup Media 2014 TVOD

Spuul Spuul 2014 TVOD

Hotstar Star India 2015 TVOD

Hooq Singtel 2016 SVOD

Netflix Netflix 2016 SVOD

PressPlay Pressplay 2016 AVOD

Voot Network 18 2016 AVOD

Arre Udigital 2016 TVOD

Ozee Zee Group 2016 AVOD

ALTBalaji Balaji Telefilms TBL 2016 SVOD

ZEE FAMILY TV INDIA.COM

ZEEL’s international OTT service,

Zee Family TV streams over 30 live

channels and has 2,000+ movies on

demand besides 25,000+ hours of

library content. It has over 86,000

users and is available across 152

countries.

India.com has gained significant

market position in several content

categories that include

entertainment, news and sports.

India. com also has transactional

brands in the automotive and

educational spaces that have the

potential to drive significant

revenue streams.



Page 50


Rs.445

Target

Rs.510

Rating

BUY Financial Analysis

Cash flow to significantly improve as operating margins carry limited capex investment need. Working capital limt increase to be in line with

sales.

Working capital days to fairly remain at current levels… …as inventory levels are expected to remain constant as a % of sales

Operating cash flow to be on the rising trend Leading to superior FCF growth

1.0

7.1

5.7

4.1 3.9 3.8

6.8 7.3 7.9

10.5

4.6%

32.1%

19.0%

13.4% 10.5%

8.7%

13.9% 12.4% 11.6%

13.1%

0%

5%

10%

15%

20%

25%

30%

35%

0

2

4

6

8

10

12


Rs. B

n

OCF (Rs.bn) % sales

0.4

6.5 5.3

3.3 3.2 2.4

5.7

4.5

7.4

10.0

1.9%

29.5%

17.8%

10.8% 8.5%

5.3%

11.7%

7.8% 10.7%

12.3%

0%

5%

10%

15%

20%

25%

30%

35%

0

2

4

6

8

10

12


Rs. B

n

FCF (Rs.bn) % sales

112 113

185

146 133

140 137 132 137 137

0

20

40

60

80

100

120

140

160

180

200


No

. o

f D

ays 108

124

106 104 98

85 80 83 80 80

0

20

40

60

80

100

120

140

160


No

. o

f D

ays





Page 51


Rs.445

Target

Rs.510

Rating

BUY Relative Valuation

ZEEL continue to trade at a year forward PE of ~32x, we believe the stock multiples would remain at these levels in near to medium term for

good Stocks don’t come cheap

…is within its stipulated range of 31x-34x Has been a clear outperformer in the media industry

ZEEL trading in excess of 30x multiple… …which is slightly above its +1sd levels though…

Source: Bloomberg & Spark Capital Research

15x

20x

24x

28x

32x

36x

100

150

200

250

300

350

400

450

500

550

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

Sep-1

2

Dec-1

2

Mar-

13

Jun-1

3

Sep-1

3

Dec-1

3

Mar-

14

Jun-1

4

Sep-1

4

Dec-1

4

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

CM

P (

Rs.)

Average PE, 26.1

+1 SD, 31.7

+2 SD, 37.2

-1SD, 20.6

-2 SD, 15.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Jun/1

1

Sep/1

1

Dec/1

1

Mar/

12

Jun/1

2

Sep/1

2

Dec/1

2

Mar/

13

Jun/1

3

Sep/1

3

Dec/1

3

Mar/

14

Jun/1

4

Sep/1

4

Dec/1

4

Mar/

15

Jun/1

5

Sep/1

5

Dec/1

5

Mar/

16

Jun/1

6

1.81x

3.12x

50

100

150

200

250

300

350

Jun/1

1

Sep/1

1

Dec/1

1

Mar/

12

Jun/1

2

Sep/1

2

Dec/1

2

Mar/

13

Jun/1

3

Sep/1

3

Dec/1

3

Mar/

14

Jun/1

4

Sep/1

4

Dec/1

4

Mar/

15

Jun/1

5

Sep/1

5

Dec/1

5

Mar/

16

Jun/1

6

NSEMED Index Z IN Equity

P/E Multiple range No. of days

traded

% of of no. of

days

Cumulative

traded no. of

days

%of

Cumulative no.

of days

16 - 19x 304 16% 304 16%

19 - 22x 145 8% 449 24%

22 - 25x 266 14% 715 39%

25 - 28x 471 25% 1186 64%

28 - 31x 198 11% 1384 75%

31 - 34x 338 18% 1722 93%

34 - 37x 126 7% 1848 100%

Source: Bloomberg & Spark Capital Research Source: Bloomberg & Spark Capital Research


Page 52


Rs.445

Target

Rs.510

Rating

BUY Zee TV – Risks & Concerns

Source:

FMCG advertisement

spends decline

Intensifying

competition

Adverse ruling from

TRAI on tariff

regulations

Higher content costs

Digital platforms

grabbing more eye

balls

With the amount of investments that have gone behind &tv, it is paramount that the new channels at least

break-even at EBITDA level and not dilute margins

Performance of newly

launched channels

failing

Increase in content

cost

Though content cost and marketing expenses are expected to be well within control, any adverse price

increase could cause operating margin pressure

Any delay in digitization roll out and mapping consumers could result in further delay of income from

subscription for broadcasters as ZEEL

Though C&S continue to be the most effective form of advertisements, any shift to digital platforms could

severely impact advertisement revenues

With competitors in Hindi and Regional GEC’s investing in new and innovative content, any slowdown in

content innovating from ZEEL to impact advertisement revenues

Any adverse recommendation by TRAI could be detrimental to how we have projected for subscription

revenues, bargaining power at the hands of DPOs would be detrimental for the industry

Though competitive intensity is expected to keep advertisements on the higher side, slowdown in the

same could severely impact the advertisement revenue potential

Page 53


Rs.445

Target

Rs.510

Rating

BUY Corporate Governance

Wealth Creation of group companies

Group Holdings

0

100

200

300

400

500

600

700

800

900

Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

Dish TV Zee Entertainment Zee Media Corp Siti Cable

ESSEL GROUP | Founder: Dr. Subhash Chandra | Market Cap: Rs. 578.8 bn

Media Other Businesses

Packaging (Essel Propack)

Market Cap: Rs. 31.7 bn

Theme Parks: Essel World and Water Kingdom

Playwin: India’s first and largest online gaming company

Cornership: Animation studio

Cyquator Technologies: IT Infrastructure outsourcing

Infrastructure

Education

Precious Metals

Health Lifestyle & Wellness

Launched in 1992

One of India’s largest

media and general

TV entertainment

network

Market Cap: Rs.

420.2 bn

Launched in 1992

Strong presence in

national and regional

news genre

Market Cap: Rs. 8.6

bn

Launched in 2005

Asia’s largest DTH

service provider

Market Cap: Rs.

89.0 bn

Launched in 2006

One of India’s

largest MSO,

presence across 54

cities

Market Cap: Rs.

29.3 bn

Launched in 2005

English broadcast

daily with presence

across Mumbai,

Bangalore, Pune,

Ahmedabad, Jaipur

and Indore

CONTENT DISTRIBUTION


Source: Company filing & Spark Capital Research

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiFybmskc3NAhXFr48KHXa1A-cQjRwIBw&url=http://www.esselnewsletter.com/news/zee-entertainment-fy-14-q3-results-quiz-zeequiz-trends-on-twitter.html&psig=AFQjCNERJOlgZ4H1pJViH4BEikyn6j9jJg&ust=1467286241784326

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj7pbzFkc3NAhXBr48KHfn2DSMQjRwIBw&url=http://www.bestmediainfo.com/2014/01/zee-medias-net-profit-comes-down-in-q3-fy14/&bvm=bv.125801520,d.c2I&psig=AFQjCNEdFCCtybR5IdiTdrNsXK5Lo9MZWw&ust=1467286283670212

https://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiGodvWkc3NAhUIqo8KHTF1CZgQjRwIBw&url=https://commons.wikimedia.org/wiki/File:Dish_TV_Logo.svg&bvm=bv.125801520,d.c2I&psig=AFQjCNHRmyduK5edJtM9zxeC8BhiwJ6b-w&ust=1467286330844909

https://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwicifPikc3NAhVCpo8KHZT6BucQjRwIBw&url=https://en.wikipedia.org/wiki/Siti_Cable&bvm=bv.125801520,d.c2I&psig=AFQjCNHnnshGh1j0uCC0DurrK5iUfMtn-Q&ust=1467286356318008

Page 54


Rs.445

Target

Rs.510

Rating

BUY Crystal Ball Gazing

We believe Zee

TV would be able

deliver a total

return of ~1.6x

BY 2020 driven

by robust

advertisement

growth and

operating

leverage

Assuming a revenue

and PAT CAGR of 18%

and ~21%

respectively over

the next four years

Entry = Rs.445@

32x FY17E

Dividends of Rs.13.5 over the next 4 years

EPS CAGR of ~21%,

exit implied multiple of 30x FY20E

FY11 FY15 FY16P FY17E FY18E FY19E FY20E

Revenue 30,405 48,837 58,515 68,377 80,296 94,749 1,11,804

EBITDA 7,395 12,538 15,095 19,009 23,031 26,530 31,529

Margins 24% 26% 26% 28% 29% 28% 28%

PAT 5,891 9,775 10,482 13,477 16,390 19,045 22,808

EPS 6.1 10.2 10.9 14.0 17.1 19.8 23.7

With revenues

outpacing cost

increases and new

investments being

lower, operating

leverage to occur

ZEEL remains the most

attractive play on the

Indian Media and

Entertainment sector

and in our opinion will

always be at a premium


ROE (%) 18% 31% 26% 29% 31% 32% 34%

ROCE (%) 18% 19% 25% 27% 29% 30% 32%

Dividend Per

Share 1.5 2.2 2.2 2.7 3.2 3.8 3.8

P/E multiple FY20E EPS Price target

26 Rs.23.7 Rs.617

30 Rs.23.7 Rs.712

TOTAL RETURN OF 1.6x

Source: Company filing & Spark Capital Research

Page 55


Rs.445

Target

Rs.510

Rating

BUY Financial Summary

Abridged Financial Statements

Rs. mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E

Profit & Loss Growth Ratios (%)

Revenue 48,837 58,515 68,377 80,296 Revenues 10.4% 19.8% 16.9% 17.4%

EBIDTA 12,538 15,095 19,009 23,031 EBIDTA 4.1% 20.4% 25.9% 21.2%

Depreciation & Amortization 673 840 860 928 PAT 9.6% 7.2% 28.6% 21.3%

EBIT 11,865 14,255 18,149 22,103 Margins (%)

Other Income 2,278 2,016 2,049 2,361 EBITDA 25.7% 25.8% 27.8% 28.7%

Interest 103 123 125 125 EBIT 24.3% 24.4% 26.5% 27.5%

PBT 14,040 15,817 20,073 24,339 PAT 20.0% 17.9% 19.7% 20.4%

Tax 4,285 5,528 6,624 8,032 Return Ratios (%)

Normalised PAT 9,775 10,482 13,477 16,341 RoCE 18.8% 17.7% 18.9% 20.6%

EPS (Rs.) 10.2 10.9 14.0 17.0 RoE 31.3% 27.1% 28.9% 28.8%

Balance Sheet Total Asset Turnover (x) 0.9 0.9 0.9 1.0

Net Worth 55,498 62,315 71,216 78,659 Leverage Ratios (x)

Debt 12 9 9 9 Debt to Equity 0.00 0.00 0.00 0.00

Minority Interest 4 85 85 85 Current Ratio 3.01 2.96 3.43 3.74

Other Long term liabilities 768 854 854 854 Working Capital Ratios

Sources of Funds 56,282 63,263 72,164 79,607 Debtor Days 80 83 80 80

Net Block 4,091 5,530 5,330 5,022 Inventory days 89 82 89 89

Intangibles 8,163 9,430 9,270 9,150 Creditor Days 31 32 32 32

Investments 15,762 16,946 16,946 16,946 Per Share

Other Long Term Assets 531 556 556 556 Face Value 1.0 1.0 1.0 1.0

Total Current Assets 41,511 46,480 56,542 65,458 Dividend 2.2 2.2 2.7 3.2

Total Current Liabilities 13,776 15,678 16,479 17,524 Valuation Metrics

Net Current Assets 27,735 30,802 40,063 47,934 Shares Outstanding (mn) 960 960 960 960

Application of Funds 56,282 63,263 72,164 79,607 Market Cap. (Rs. mn) 4,27,399 4,27,399 4,27,400 4,27,400

Cash Flow Enterprise Value (Rs. mn) 4,06,296 4,01,765 3,96,958 3,93,561

Cash Flow from Operation 6,809 7,254 7,931 10,526 EV /Sales (x) 8.3 6.9 5.8 4.9

Capex -1,091 -2,717 -500 -500 Price/Earnings (x) 43.7 40.8 31.7 26.2

Cash Flow from Investments -3,661 144 1,549 1,861 Price/Book (x) 7.7 6.9 6.0 5.4

Free Cash Flow 5,705 4,537 7,431 10,026 EV/EBIDTA (x) 32.4 26.6 20.9 17.1

Cash Flow from Financing -3,427 -4,053 -4,673 -8,989 FCF Yield (%) 1.4% 1.1% 1.9% 2.5%

Closing Cash Balance 5,353 8,698 13,505 16,903

Page 56

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Cloudy skies clearing


1m 3m 12m

SUNTV -3% -4% 29%

Sensex 1% 7% -3%


Financial summary


FY15 23,954 48.1% 7,820 19.8 18.5 25.4%

FY16E 25,698 53.0% 8,953 22.7 16.2 24.3%

FY17E 28,966 53.5% 10,567 26.8 13.7 26.0%

FY18E 32,823 55.0% 12,193 30.9 11.9 29.0%

Date 1st July 2016

Market Data

Bloomberg SUNTV

Shares o/s 394mn




Index member BSE 200


Promoters 75.0

Institutions 19.7

Public 5.3

Initiating Coverage We initiate coverage on Sun TV with a ‘BUY’ rating as we believe revenues and earnings would grow at a CAGR of ~13%

and ~17% respectively from FY16 –FY18 led by (1) Sun TV consolidating its market leadership in the lucrative Tamil

market, (2) Improving viewership traction in Telugu and Kannada market, (3) Cost savings arising from increased number

of dubbed serials, (4) Further reduction in Cable & Satellite (C&S) costs of movies, (5) Heightened subscription revenues

on the back of digitization gaining momentum in 3 of the 4 southern states and (6) Radio business improving its mileage.

Though Sun TV has been incessantly trying to shackle off the political image being attached to it, we certainly cannot

ignore the favourability they would enjoy in case the Dravida Munetra Kazhagam (DMK) party reigns supremacy in Tamil

Nadu (TN). With opposition in power over the past 6 years in the state, Sun TV had to tweak several business practices

and alter its business model to be as much apolitical as possible. Despite several challenges emerging over broadcasting

distribution and movie buying over the past few years, Sun TV continues to dominate Tamil television market indicating its

strong connect with consumers. Standoff on digitization prevails in Tamil Nadu, however subscription revenues from other

three states are promising as Phase 4 digitization roll out commences. Strong balance sheet, Robust cash flows, healthy

dividend payout policy further augurs well from an investment angle. We believe negatives are priced in and with ‘cloudy

sky’ for sure clearing, we value the stock at 14x FY18E with a TP of Rs. 433.

Advertising revenue traction to improve: Sun TV enjoys a fanatical patronage among consumers in TN, which makes

Sun TV the most profitable and cost effective medium for content producers and advertisers respectively. In other three

southern markets though Sun TV has certainly ceded its dominant position to national broadcasters by not innovating

and faulty program choices. With Sun TV realising the same, the channel has hired a new set of team and improved its

content, which is beginning to reflect in improved ratings. Venture into dubbed serials and conversion to commission

based programming to rein costs in near to medium term. With the industry having rationalised that high cost movies

does not make economic sense, cost of movie C&S rights have considerably dropped over past few years

Subscription revenues to show non-linear growth: With ~20mn households to be converted into digital over the three

states excluding Tamil Nadu, Sun TV DTH subscription revenues should grow ~17-18%. Digitaization in TN continues

to be in a tiff with I&B ministry not granting DAS licence to the state run MSO, Arasu Cable.

Risks & Concerns: Business risks include Network18’s entry into Tamil GEC market, continued underperformance in

Telugu and Kannada market, slowdown in phase 4 digitization implementation and continuing losses from Indian

premier League franchisee. Stock price risks - any announcement on the court cases pending against the promoters.


+91 44 4344 0062


Page 57

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Corporate Factsheet

Corporate Factsheet

Company

Background

Sun TV Network Limited is a south Indian media conglomerate based out of Chennai, Tamil Nadu. Sun network entered the cable business as early as

1993 with the launch of its flagship Sun TV in Tamil Nadu as a Tamil GEC. The company has since then ventured across genres and South Indian

language establishing itself as one of the largest broadcasting companies in India.

Number of

channels Sun Network has 33 channels spread across 4 South Indian languages.

Management depth

Mr. Kalanithi Maran - Executive Chairman and his wife Mrs. Kavery Kalanithi who is an executive director of the company actively manage day to day

affairs of the Sun group. Further the team is well appointed with Mr. Mahesh Kumar as President, Sun TV network, Mr. KL Narayanan as Sun group

CFO, Mr. V.C. Unnikrishnan as Sun TV CFO, Mr. Praveen as Chief Operating Officer, Mr. Kannan as Chief Technical Officer and Mr. S .Ravi as

company secretary.

Key Revenue

Drivers (FY16) Advertisements (~47%), Subscription (~32%), Radio Advertisements (~6%), Broadcast Fees (~4%), IPL Income (~4%), International subscription (~7%)

Language Split –

Number of

channels

Tamil (12 channels), Telugu (8 channels), Kannada (7 channels) and Malayalam (5 channels)

Language Split –

Revenue Tamil (~64%), Telugu (~17%), Kannada (~15%) and Malayalam (~4%)

Genre Split GEC (~60%), Movies (~20%), Songs (~15%) and Others (5%)

Production

Capacity Sun TV has two subsidiaries viz., Kal Radio Limited and South Asia FM Limited.

Corporate Bankers Andhra Bank, Axis Bank, City Union Bank, Corporation Bank, HDFC Bank, ICICI Bank, Indian Bank, Indian Overseas Bank, Karur Vysya Bank, Kotak

Mahindra Bank, Ratnakar Bank, Standard Chartered, Bank State Bank of India and Yes Bank

IPO bankers Kotak Investment Banking DSP Merrill Lynch

IPO money raised Sun TV was listed on the Bombay Stock Exchange on 24 April 2006 upon raising $133 million.

Secretarial Auditors M/s. Lakshmmi Subramanian & Associates

Corporate Auditors M/s S.R. Batliboi & Associates LLP

Page 58

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Timeline – A brief history over the years

1992 1994 1998 2000 2002 2004 2006 2008 2010 2012 2014

Sun Network has 33 channels spread across 4

South Indian languages.


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi4yufPksrNAhVBPo8KHa3UBucQjRwIBw&url=http://www.indiantelevision.com/regulators/supreme-court/sun-groups-entry-order-in-fm-phase-iii-auctions-expected-on-22-july-in-delhi-chennai-hc-150721&bvm=bv.125596728,d.c2I&psig=AFQjCNH4xDkgjz39y2fTj_-voIdEDzwDcg&ust=1467183502267424

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjEsPuPhMrNAhXLNo8KHc39A78QjRwIBw&url=https://en.wikipedia.org/wiki/File:Sun_TV_logo.svg&psig=AFQjCNHiKAMqj8uEApiPDequrhbwtGBwqw&ust=1467179578963877

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Page 59

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY

KARNATAKA – Kannada ANDHRA PRADESH & TELANGANA – Telugu

KERALA – Malayalam TAMIL NADU – Tamil

Entrenched presence across South India



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http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj10JXUicrNAhWMrY8KHRnsDqUQjRwIBw&url=http://www.gtplkcbpl.net/packageService.php&bvm=bv.125596728,d.c2I&psig=AFQjCNFSU3sMoIvUQOMQATBXGfQWTgRT8w&ust=1467181095002603

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjA3PPiicrNAhXLLo8KHWD9D6EQjRwIBw&url=http://www.sun.in/television.aspx&bvm=bv.125596728,d.c2I&psig=AFQjCNFSU3sMoIvUQOMQATBXGfQWTgRT8w&ust=1467181095002603

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi-h7TqhMrNAhVKPo8KHX2CBDQQjRwIBw&url=http://tv.burrp.com/channel/udaya-movies/140/&bvm=bv.125596728,d.c2I&psig=AFQjCNF0rI77emE_RVHhU8fcVOGISoWh-w&ust=1467179803028504

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiqlb75hMrNAhWKvI8KHfrnBT4QjRwIBw&url=http://timesofindia.indiatimes.com/tv/channel/udaya-comedy/params/tvchannel/channelid-10000000005140000&bvm=bv.125596728,d.c2I&psig=AFQjCNFtkLfW_3mLiDv2_58cHukQx__80A&ust=1467179833734022

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwioz-3bkMrNAhXHvI8KHR1ZBToQjRwIBw&url=http://www.sun.in/television.aspx&bvm=bv.125596728,d.c2I&psig=AFQjCNGPnaXo6XviQh_ExXJtNvf3zlJixw&ust=1467182992305944


https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiClrefkcrNAhUKs48KHQ1CAyIQjRwIBw&url=https://www.pinterest.com/yupptv/telugu-tv-in-usa/&bvm=bv.125596728,d.c2I&psig=AFQjCNHA7NSTR11zoe3MtMrsigMLj30FhQ&ust=1467183135374399

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjxrtKMksrNAhXHPI8KHS56CTUQjRwIBw&url=http://www.keralatv.in/2013/07/kiran-will-be-a-movie-channel/&bvm=bv.125596728,d.c2I&psig=AFQjCNG4Hysc7RYTvkfD7oGSdDXcD7fq_g&ust=1467183364411206

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjno6yZksrNAhVCt48KHevEC3IQjRwIBw&url=http://www.keralatv.in/2013/08/launch-date-of-surya-music-channel/&bvm=bv.125596728,d.c2I&psig=AFQjCNHgDjURERFsE7vEF1986ZzfMYJmwg&ust=1467183390788079

Page 60

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Financials

Revenue growth has been fairly subdued… …as the business went through several testing times


Margins finally beginning to inch up in FY16… …which should also witness capital efficiency increasing


14.5

20.1 18.5 19.2

22.2 24.0

25.7

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015 2016

Rs. B

n

Advertising Income 54.1%

Broadcast fees 4.3%

International Subscription

5.6%

Domestic Subscription

32.0% Indian Premier

League 3.6%

Others 0.4%

91.6% 93.2% 92.8% 90.4% 86.5% 88.0% 88.3%

59.1% 58.8% 57.0% 55.5% 50.5% 48.1%

53.0%

34.5% 37.8% 37.0% 36.6%

33.5% 32.7% 35.1%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015 2016

Gross margin (%) EBITDA margin post Amortization (%) PAT margin (%)

29.0%

37.2%

29.1%

26.8% 25.4%

24.3%

26.0%

26.0%

34.1%

26.9% 25.2%

24.1% 23.1%

24.6%

20.0%

25.0%

30.0%

35.0%

40.0%

2010 2011 2012 2013 2014 2015 2016

ROE (%) ROCE (%)

Page 61

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Investment Thesis

Enviable

moat in

Tamil

Dubbed

serials to

provide near

term margin

fillup

Steep

decline in

movie

buying cost

Subscription

income to

increase

exponentially Improving

traction in

Telugu

& Kannada

22.7

30.9

+[VALUE]

+[VALUE] +[VALUE]

+[VALUE]

-[VALUE]

0.19

+[VALUE] +[VALUE]

-[VALUE] -[VALUE]

FY

16

Ad

ve

rtis

ing

In

c

Su

bscri

ptio

n in

c

Oth

er

Inco

me

Raw

ma

t co

sts

Em

plo

ye

e C

ost

Op

era

tin

g E

xp

Mo

vie

Am

ort

Exp

Dep

recia

tio

n

Oth

er

Inco

me

Oth

ers

FY

18

Page 62

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertisement income to grow ~14% CAGR over FY16-FY18

Advertisement growth to be led by continuing strong patronage in… …Tamil market and improving traction in Kannada and Telugu

Contribution from General Entertainment Channels should increase National FMCG & Regional retailers to lead advertisement growth

Sun TV should continue enjoying favorable growth drivers in Tamil markets, recent initiatives undertaken in the Kannada and Telugu market to

improve advertisement revenue growth.

Tamil 64%

Telugu 17%

Kannada 15%

Malyalam 4%

GEC 60%

Movies 20%

Songs 15%

Others 5%

National FMCG 50%

Regional 30%

Others 20%

7.89

9.70 9.45 10.50 10.67

11.36 12.11

13.82

15.81 23.0%

-2.6%

11.0%

1.7%

6.5% 6.6%

14.1% 14.4%

-5%

0%

5%

10%

15%

20%

25%

6

8

10

12

14

16

18

FY10 FY11 FY12 FY13 FY14 FY15 FY16P FY17E FY18E

Rs. B

n

Advertisement Revenues (Rs.bn) Growth %




Page 63

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertising revenues– Enviable Moat in Tamil

The fact that several Local Cable Operators were forced to provide Sun TV signal using alternate DTH as tiff with Arasu Cable continued for

providing analog signals in 2013, indicates the CONSUMER PULL power that Sun TV commands in the market.

ADVERTISEMENT AGENCIES

CONSUMER

PRODUCTION HOUSE

1. Long term liaison

2. Offers the best Return on Investment

3. Strong connect with audience

4. Familiar known artists who gain better

acceptance

5. Sun provides best-in class technology in terms

of telecasting

1. Synonymous with Cable TV

in Tamil Nadu

2. Pioneer in fiction shows in

Tamil Nadu

3. Lack of alternate

entertainment platforms

4. Competitive intensity largely

limited to urban markets

5. Higher number of original

content in a day

6. Women-centric/Rural based

stories that easily connects

with the viewers

7. Higher number of fiction

8. Advantageous channel

placement

1. Most effective way to

reach mass audience

2. Regional advertisers

continue to strongly rely

on Sun TV given its reach

and the effectiveness.

3. Assurance of eye balls

4. Only mass communication

platform to reach to rural

populace in Tamil Nadu

5. Strong movie library

Page 64

Sun TV CMP

Rs. 367

Target

Rs.433

Rating


Sun TV, pioneer of Cable TV in Tamil Nadu has time and again enthralled viewers with superior content which has enabled them to dominate the

market.

Being the pioneer, Sun TV has been synonymous with Cable in Tamil Despite the entry of several other players, Sun retains its leadership

Sun TV’s dominance strongly built on its fiction content… …which have built a strong connect with its viewers

Includes Fiction+ Reality shows, Source Industry & Spark capital research:

1993 1994 1999 2000 2010 2014 2007 64.0

0

10

20

30

40

50

60

70

Sun TV Vijay TV Zee Tv Jaya TV Polimer TV

No

. o

f o

rig

inal

Ho

urs

(w

eekly

)

13%

88%

0%

20%

40%

60%

80%

100%

Sun TV Vijay TV Zee Tv Jaya TV Polimer TV

Reality Fiction

Less than 100 episodes

100-500 episodes

500-1000 episodes

More than 1000 episodes



http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjc0b2Mq8rNAhXCto8KHd3LDcEQjRwIBw&url=http://logos.wikia.com/wiki/Star_Vijay&bvm=bv.125596728,d.c2I&psig=AFQjCNFt4qykS6qhT1d_-y8N8vp9x4kI4A&ust=1467190075175614

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj0iPuaq8rNAhXJto8KHcEvDvAQjRwIBw&url=http://www.tamiltvschedule.com/tag/jaya-tv-schedule/&bvm=bv.125596728,d.c2I&psig=AFQjCNHty27cj2yfYqsdinzAJ-S0P8I3qQ&ust=1467190104079685

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjVz6Sxq8rNAhXEQ48KHX3CBJcQjRwIBw&url=http://www.livetvant.com/polimer-tv/&bvm=bv.125596728,d.c2I&psig=AFQjCNGWmJHSva6gtMBWVage35txrCrm5A&ust=1467190152024717

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwij0aO_q8rNAhWMp48KHQQNDHAQjRwIBw&url=http://aishwaryacommunication.in/SD_Pack.php&bvm=bv.125596728,d.c2I&psig=AFQjCNGMYUOTwwUG23LKgNg0RXooLtzLvw&ust=1467190181390449

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi87rvRq8rNAhXMto8KHaJuCn0QjRwIBw&url=https://getch.wordpress.com/about-2/captain-tv-logo-01/&bvm=bv.125596728,d.c2I&psig=AFQjCNElPJ39U2-ku55Ib47dSutVcv6A4A&ust=1467190218935580

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiQrIDgq8rNAhXGPo8KHbOIAF0QjRwIBw&url=http://www.tvonlinestreams.com/mix-playlist-2/&bvm=bv.125596728,d.c2I&psig=AFQjCNGBzn2cXsFp7GF61AbcaMjFIoRw9Q&ust=1467190242686999


Page 65

Sun TV CMP

Rs. 367

Target

Rs.433

Rating


Sun TV commands a viewership premium to rest of the channels enabling them to command a strong premium in its advertisement rates too.

Sun TV continues to dominate viewership share…

Thereby commanding a deserved premium in its Advertisement rates Sun TV top 5 shows indicate its target audience: Rural Women

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000 W

k 1

Wk 2

Wk 3

Wk 4

Wk 5

Wk 6

Wk 7

Wk 8

Wk 9

Wk 1

0

Wk 1

1

Wk 1

2

Wk 1

3

Wk 1

4

Wk 1

5

Wk 1

6

Wk 1

7

Wk 1

8

Wk 1

9

Wk 2

0

Wk 2

1

Wk 2

2

Wk 2

3

Wk 2

4

Sun TV KTV Star Vijay Polimer Zee Tamil

0

5

10

15

20

25 Sun TV Advertisement rate premium to other channels 7:30:00 PM Kula Deivam

A couple stay together with their children and

grand children and facing the problems from

their close knit family

Epi 341

8:00:00 PM Deivamagal Story of working women Epi 957

8:30:00 PM Vamsam A girl from the relative comes as a maid to unite

both families Epi 903

9:00:00 PM Priyamanaval

A kind women leads a satisfying life and her

friend envies her financial status-drats a evil

plan

Epi 433

9:30:00 PM Vani Rani A story of two sisters who are diffrent from each

other Epi 985

Source: Industry Sources & Spark Capital Research Source: Company Filings & Spark Capital Research

Source: BARC & Spark Capital Research



http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjc0b2Mq8rNAhXCto8KHd3LDcEQjRwIBw&url=http://logos.wikia.com/wiki/Star_Vijay&bvm=bv.125596728,d.c2I&psig=AFQjCNFt4qykS6qhT1d_-y8N8vp9x4kI4A&ust=1467190075175614

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjVz6Sxq8rNAhXEQ48KHX3CBJcQjRwIBw&url=http://www.livetvant.com/polimer-tv/&bvm=bv.125596728,d.c2I&psig=AFQjCNGWmJHSva6gtMBWVage35txrCrm5A&ust=1467190152024717

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiQrIDgq8rNAhXGPo8KHbOIAF0QjRwIBw&url=http://www.tvonlinestreams.com/mix-playlist-2/&bvm=bv.125596728,d.c2I&psig=AFQjCNGBzn2cXsFp7GF61AbcaMjFIoRw9Q&ust=1467190242686999

Page 66

Sun TV CMP

Rs. 367

Target

Rs.433

Rating


Business challenges prevail – Sun TV well equipped to change game plan to suit changing needs

DUBBED Serial

Sun TV have for the first time since its inception has launch dubbed

serials in the flagship channel - Naagini (Weekday at 10pm) and Jai

Hanuman (Sunday at 10am)

We understand from industry sources that management is currently on a

test mode, wanting to understand viewership acceptance for dubbed

serials.

Superior technology, richer content and properties and differentiated

offerings have led to the success of dubbed content in Tamil

On the cost part we understand that Dubbed serials cost Rs.20-30

thousand per episode against original content that costs up to ~150-200

thousand per episode. Though cost metrics work in favor we would be

closely monitoring the impacts it has on the brand image of Sun TV.

POLITICAL IMPACT

Though Sun TV for sure is set to enjoy favorable political courtship if

DMK is in power, we note that the business has managed to sustain and

grow even in adverse political climates.

With ADMK government revitalizing the once defunct Arasu cable, Sun

TV subscription revenues have been impacted. We understand that Sun

TV has sacrificed its subscription revenues to protest its viewership

share thereby advertising income.

We observed that several LCO’s despite being linked with the State run

MSO, Arasu Cable had set up individual dish to obtain and provide Sun

TV signals at their expense as consumers demanded Sun TV.

Though not apolitical and aligned towards DMK, Sun TV has exhibited

its resilience even during adverse political environments.

BARC

Though ratings largely stabilized over time, we understand from industry

participants that larger rural population in the sample survey and

reclassification of SEC standards has benefitted Sun TV viewership

share

Sun TV along with its movie channel KTV continues to command market

dominating leadership in BARC ratings ever since its inception.

BARC ratings currently has 1.94bn gross impressions in Tamil Nadu

with GEC commanding ~1.4bn impressions, Movies -0.36bn

impressions and news -0.06bn impressions.

Of the total market, rural commands ~47% share while Metro markets

command ~20% share.

Of the total Tamil viewership, 7% comes from outside Tamil nadu

12 MINUTE AD CAP RULE

Despite the 12 minute Advertisement capping rule imposed by TRAI IN

2013, we notice that Sun TV has been a repeated offender of breaching

that rule every quarter ever since.

Though Effective Rate (ER) was increased to counter the loss in

volumes, we understand that incessant rate hike is impossible beyond

the prevailing inflation rates, especially given that consumption economy

remains subdued.

Recent events, including comments from I&B minister has though led to

better sentiment with the management and believes the Delhi high court

ruling would be in their favor.

Sun TV as per TRAI report for quarter ending March 31st, Sun TV on an

average runs ~17 minutes of advertisement per hour.

Page 67

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY

Fiction 90%

Reality Shows 10%

Telugu GEC 69%

Telugu Movies

19%

Telugu News 6%

Others 6%

Advertising revenues– Improving traction in Telugu

Gemini TV through its experimenting process has lost the initiative to other national broadcasters, who also have good Hindi content that are

being used as fillers. Gemini TV too has begun telecasting dubbed serials.

Gemini TV viewership on the rising trend led by its recent initiatives

Telugu predominantly a 4 player market…

100,000

200,000

300,000

400,000

500,000

Wk 1

Wk 2

Wk 3

Wk 4

Wk 5

Wk 6

Wk 7

Wk 8

Wk 9

Wk 1

0

Wk 1

1

Wk 1

2

Wk 1

3

Wk 1

4

Wk 1

5

Wk 1

6

Wk 1

7

Wk 1

8

Wk 1

9

Wk 2

0

Wk 2

1

Wk 2

2

Wk 2

3

Wk 2

4

ETV Telugu Maa TV Zee Telugu Gemini TV Gemini Movies

…where viewership is aligned towards fictional GEC content

Zee Telugu, 21.7%

ETV Telugu, 20.7%

Maa TV, 18.4%

Gemini TV, 17.8%

Gemini Movies,

9.6%

Others, 11.9%



http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi1nZmQtMrNAhWIq48KHR6-B1kQjRwIBw&url=http://dreamdth.com/Thread-Update-ETV-Telugu-logo-color-changed&bvm=bv.125596728,d.c2I&psig=AFQjCNE32rsfg2HJr8f-jkUBgXmW6QVhWQ&ust=1467192496002087

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjFy_CgtMrNAhVDLI8KHV1VC6wQjRwIBw&url=https://en.wikipedia.org/wiki/File:Maa_tv.png&bvm=bv.125596728,d.c2I&psig=AFQjCNGDnzyk0tgtEezLGa9H3RJUF6SoNA&ust=1467192533507821

Page 68

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertising revenues– Improving traction in Telugu

Right steps have been taken in Telugu which we understand has led to GRP increase, paramount to stabilize ratings before the commencement

of festive season

Primetime catalogue

As indicated by the management, Commission based model on the

higher proportion… …led by launch of several new serials over the past 6 months

Slot Based Model 20%

Dubbed 20%

Commissioned 60%


46%

100-400 episodes

36%


18%

Gemini TV Maa Zee Telugu Etv Telugu

6:00:00 PM Dubbed Fiction Dubbed Fiction Fiction Reality Show

6:30:00 PM April 2016 Launch Fiction Fiction Fiction

7:00:00 PM April 2016 Launch Dubbed Fiction Fiction Fiction

7:30:00 PM Episode Number: 274 Fiction Top 5 rated Fiction Top 5 rated Fiction

8:00:00 PM Episode Number: 1000 Fiction Fiction Top 5 rated Fiction

8:30:00 PM Episode Number: 802 Fiction Fiction Top 5 rated Fiction

9:00:00 PM Naagini - Episode 1 Fiction Fiction News

9:30:00 PM Episode Number: 157 Dubbed Fiction Top 5 rated Fiction Reality Show

10:00:00 PM Repeated Dubbed Fiction Crime Show Fiction Reality Show

We analyse from the

prime time pattern that

Sun TV has decided to

create leadership in new

time zones rather than

take on existing top

performing shows of

competition given that

fictional viewership is

fairly sticky and new

investments in those slots

could turn out to be tricky

Source: Company filings & Spark Capital Research Source: Company filings & Spark Capital Research

Source: Company filings & Spark Capital Research

Page 69

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertising revenues– Improving traction in Kannada

Along with colors, we see in viewership data that numbers for Udaya TV has also significantly improved over the past 3 weeks, sustainability of the ratings

to be a key monitorable

Colors Kannada from Network 18 through its differentiated content is breaking away as the clear market leader…


100,000

150,000

200,000

250,000

300,000

350,000

Wk 1

Wk 2

Wk 3

Wk 4

Wk 5

Wk 6

Wk 7

Wk 8

Wk 9

Wk 1

0

Wk 1

1

Wk 1

2

Wk 1

3

Wk 1

4

Wk 1

5

Wk 1

6

Wk 1

7

Wk 1

8

Wk 1

9

Wk 2

0

Wk 2

1

Wk 2

2

Wk 2

3

Wk 2

4

Colors Kannada Udaya TV Suvarna Udaya Movies Zee Kannada

Colors Kannada

28.8%

Udaya Movies 17.5%

Zee Kannada

16.6%

Udaya TV 15.9%

Suvarna 11.6%

Kannada has the presence of the 4 major

players… …in a market which is a bit more diversified away from GEC content.

Kannada GEC 63%

Kannada Movies

21%

Kannada News 6%

Others 11%

Fiction 90%

Reality/ Movies

10%


Page 70

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertising revenues– Improving traction in Kannada

We understand from our interactions with Industry participants, that Udaya TV has hired a good wet of professionals to manage at the helm who

are turning around the fortunes for Udaya TV.

More than 2/3rds of the serials have been launched over the past 6

months… …and in commission model basis only

Primetime catalogue

Source:


69%

100-200 episodes

23%


8%

Udaya TV Suvarna Zee Kannada Colors Kannada

6:00:00 PM Devotional Fiction Fiction Devotional Fiction Fiction

6:30:00 PM Comey Fiction Fiction Fiction Fiction

7:00:00 PM Fiction - Episode 424 Devotional Fiction Fiction Top 5 rated Fiction

7:30:00 PM April 2016 Launch Reality Show Fiction Top 5 rated Fiction

8:00:00 PM April 2016 Launch Reality Show Fiction Top 5 rated Fiction

8:30:00 PM Fiction - Episode 201 Fiction Fiction Top 5 rated Fiction

9:00:00 PM Fiction - Episode 121 Fiction Fiction Fiction

9:30:00 PM Show Top 5 rated Fiction Fiction Fiction

10:00:00 PM March 2016 Launch Fiction Fiction Fiction

10:30:00 PM May 2016 Launch Fiction Fiction Fiction

Kannada is the only

market where dubbed

serials are morally

banned and we see that

every player adheres to

those norms. Sun TV

launches have been in

the primetime taking

Colors Kannada directly.

Slot Based Model 20%

Commissioned 80%

Source: Company filings & Spark Capital Research Source: Company filings & Spark Capital Research


Page 71

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Advertising revenues– Revenues from Malayalam market to remain a drag

Surya TV ratings have been on a constant decline which were further impacted with the advent of Flowers TV

Asianet has been dominating market share in this market…

0

60,000

120,000

180,000

240,000

300,000

360,000

420,000

Wk 1

Wk 2

Wk 3

Wk 4

Wk 5

Wk 6

Wk 7

Wk 8

Wk 9

Wk 1

0

Wk 1

1

Wk 1

2

Wk 1

3

Wk 1

4

Wk 1

5

Wk 1

6

Wk 1

7

Wk 1

8

Wk 1

9

Wk 2

0

Wk 2

1

Wk 2

2

Wk 2

3

Wk 2

4

Asianet Mazhavil Manorama Flowers TV Surya TV Asianet Movies

Asianet 53%

Mazhavil Manorama

17%

Flowers TV 10%

Surya TV 12%

Asianet Movies 8%

Malayalam GEC 73%

Malayalam Movies

14%

Malayalam News 8%

Others 5%

…where Surya TV of Sun Network is at a distant 4th position Reality shows in GEC have a higher viewership in Malayalam


Source: BARC & Spark Capital Research Source: BARC & Spark Capital Research

Page 72

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Movie buying cost to significantly come down

We understand that cable & satellite costs of movies have significantly dropped with broadcasters realizing that movie cost breakeven

economics.

With only 10 major holidays requiring blockbuster movies… …we believe Sun TV is well covered in movies

Number of movies released continue on the uptrend… …and Sun TV has resumed in purchasing big ticket movies

50.0% 55.0%

30.0% 20.0%

60.0%

0%

10%

20%

30%

40%

50%

60%

70%

2011 2012 2013 2014 2015

Sun TV C&S share in top 20 blockbusters of the year

131 145 151

201 192

0

50

100

150

200

250

2011 2012 2013 2014 2015

English New Year

Pongal

Uzhavar Thirunaal

Tamil New Year

Ramzan

Vinayakar Chathurthi

Ayutha Pooja

Vijaya Dasami

Deepavali

Christmas

15.0 18.4

22.2 26.4

30.2 31.6 35.1

39.6

3.9 3.6 2.9 3.7 5.1 4.1 4.6 4.8

0

5

10

15

20

25

30

35

40

45

FY 11 FY 12 FY 13 FY 14 FY 15 FY 16P FY 17E FY 18E

Intangibles Amortization for the year

Source: Industry & Spark Capital Research Source: Industry & Spark Capital Research

Source: Company Filings & Spark Capital Research Source: Industry & Spark Capital Research

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjHxPWcxcrNAhXHrY8KHZorDpsQjRwIBw&url=http://www.mycrackers.com/?cPath=50&bvm=bv.125596728,d.c2I&psig=AFQjCNFAFlHJLg_n0EW0aCdIjyC16TU3mg&ust=1467197086324559

Page 73

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Movie buying cost to significantly come down

We firmly believe that Sun TV has enough movie titles running without having to splurge in excess except for the big occasion days movies, 6

days of fiction further reduces the need for movies

Total Number of Movies in

a year (~200)

Super Hits

(~18-20%)

Other movies

(~160-180 movies)

Break-evens

(~30-40 movies)

Big hero movies and offbeat low

budget movies which exceed

market expectations. Average Cost

– Rs.40-70mn

Given the cheaper cost of

conversion into digital, several small

time producers have emerged

banking on movie story. Average

Cost – Rs.0.5mn – 2mn

These movies are generally bought

out post their performance in box-

office. Average Cost – Rs.10-15mn

Sun TV continues to buy ~50-60%

of these super hits relying on star

value and box office performance

Several producers try selling out

movies at sunk cost given that Sun

TV telecast gives the movie some

kind second viewership.

Sun TV through its marketing

muscle buyout a few of these

movies to keep its movie database

running.

Source: Industry & Spark Capital Research

Page 74

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Subscription income to increase exponentially

With ~20mn consumers from 3 states poised to be converted into digital, subscription revenue growth should easily be in mid-teens

Malayalam

Households 8.1

C&S households 7.1

Digital Consumers ~2mn

Analog Consumers ~5mn

Tamil

Households 17.7

C&S households 15.9



Telugu

Households 20.9

C&S households 14.8



Kannada

Households 13.5

C&S households 9.9

Digital Consumers ~4.5mn

Analog Consumers ~5.5mn

Source: Industry & Spark Capital Research

Page 75

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Subscription income to increase exponentially

Any positive solution over Tamil Nadu C&S market digitization could lead to non-linearity in subscription revenues

…however analog revenues to prevail because of the situation in

Tamil Nadu

Subscription growth to be fueled by digitization in 3 states other than

in Tamil Nadu… Domestic subscription contribution to increase…

Arasu Cable & Rest

With Arasu cable becoming active as an Multi System operator (MSO)

since 2011, Sun TV cable subscription revenues have been severely

majorly on account of political vendetta.

We understand that Sun currently gets only Rs.~300mn annually from

Arasu cable as subscription revenues.

Arasu cable continues to operate as an analogue network, as permission

for a state run operator to become an MSO in the Digitally Addressable

System (DAS) is prohibited.

The AIADMK government as part of its 2016 state election manifesto

had indicated to provide set-top box free for every home, however

ambiguity prevails over its ability to obtain digital license.

4.0

5.8 5.9 6.2

7.7 8.8

9.6

10.9

12.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY16P FY17E FY18E

Domestic Subscription

Income 85%

International Subscription

Income 15%

Analog Cable 28%

Digital Cable 72%



Page 76

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Sun TV – Other Business – Radio & IPL

Radio business to grow ~14% CAGR, Indian Premier League (IPL) continues to be a loss making proposition until hefty franchisee fee payment regime

ends in FY18. Even on winning the 2016 edition, the franchisee is expected to post Rs.~200mn loss

Number of radio channels have exceeded 50 channels with license…

IPL to remain a bleeding proposition at least for another year

…for 8 new channels obtained in latest auctions

As cost metrics are unfavorable until year 10 of the event

1,055 1,002 963

1,220

1,421 1,585 1,532 1,550

-365

-583 -569

-330

(700)

(600)

(500)

(400)

(300)

(200)

(100)

0

0

200

400

600

800

1000

1200

1400

1600

1800

FY14 FY15 FY16 FY17

Revenues Cost Profits

Sun TV Network Ltd

(Broadcasting, Production, Entertainment)

KAL Radio Ltd (Radio) South Asia FM Ltd (Radio)

Strategic alliance with RED FM

(Radio) 48.9% beneficial

interest

23 FM Radio licenses

Focused on Northern, Eastern &

Western parts of the country

18 FM Radio licenses

Focused on Southern cities

97.78 subsidiary 59.44 subsidiary

Rs.mn 2012 2013 2014 2015

Revenue

KAL radio 461.2 576.4 684.0 810.5

South Asia FM 437.4 551.1 669.3 841.1

Profit After

Tax

KAL radio 14 -126 192 260

South Asia FM -134 -25 89 195

Central Media Rights 57%

Sale of Properties

29%

Other reciepts

14%

Franchisee Fees 57%

Player cost 35%

Operational Expenses

8%





Page 77

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Sun TV – Risks & Concerns

Network 18 venturing

into Tamil Nadu

Delay in digitization in

Tamil Nadu

Star Network increasing

its focus in Tamil

Performance in Telugu

and Kannada GEC

remaining weak

Radio business license

being revoked

Financials in IPL are expected to improve post FY17 when franchisee fee payment ceases and collection receipts

improve, any adverse change in regulation could further impact profitability

Continued financial

bleeding in IPL

franchisee

CBI cases against Mr.

Kalanidhi Maran

With Enforcement Directorate cases against Mr.Kalanidhi Maran pending, any adverse ruling could see near term

impact on stock prices.

Though industry sources do indicate that viewership in Kannada and Telugu markets have improved significantly

for SUN, intense competitive scenario could once again pressurise viewership share

Though Sun has manged to get ruling in its favour with regards to participation in Radio auctions, any adverse

ruling could impact Radio business revenues and profitability.

Tamil Nadu (TN) continues to be the only state where digitization has not at all progressed given the state

government network’s inability to get DAS license, We have not factored for income from digitization in TN

Star Vijay has been indicating for quite sometime regarding launching a flanking channel to cater to the rural

audience in TN. Though no announcement is yet made, it could impact SUN viewership share

With industry sources indicating that Network18 is looking to enter into Tamil GEC market, competitive intensity

might increase given that Network18 has cracked the Telugu and Kannada market successfully.

Page 78

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY

Well diversified board presence and committee’s as per SEBI guidelines

Source: Company Filings, Spark Capital Research

Management tenets – Pay scale and holdings

BOD Remuneration as a % of PAT

Source: Company Filings, Spark Capital Research;

Average dividend payout to be ~15-20 % over next few years

Source: Company Filings, Spark Capital Research

Mrs.Kavery Kalanidhi Mr.K.Vijaya Kumar J. Ravindran M.K. Harinarayanan Nicholas Martin Paul R. Ravivenkatesh

Audit Committee - - CHAIRMAN MEMBER MEMBER MEMBER

Remuneration

Committee - - CHAIRMAN MEMBER MEMBER MEMBER

Stakeholders

Committee - - MEMBER CHAIRMAN MEMBER MEMBER

CSR Committee MEMBER CHAIRMAN - - MEMBER -

Rs.mn % of PAT

Mr. Kalanithi Maran 613 7.8%

Mrs. Kavery Kalanithi 613 7.8%

Mr. K. Vijaykumar 9 0.1%

Mr. J. Ravindran 0 0.0%

Mr. M.K. Harinarayanan 0 0.0%

Mr. Nicholas Martin Paul 0 0.0%

Mr. Ravivenkatesh 0 0.0%

Mr. Selvam 0 0.0%

Mr.R. Ravi 2 0.0%

Mr.V.C.Unnikrishnan 7 0.1%

7.5 8.7 9.5 9.5 9.5

11.3

15.5

56.8%

44.8%

54.0% 52.8%

50.1% 56.7%

66.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

2

4

6

8

10

12

14

16

18

2010 2011 2012 2013 2014 2015 2016

Dividend Per Share (Rs.) Payout

Page 79

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY

Board of Directors

Contingent

Liabilities

Political Alliance

Cases against

management/

Company

2011 2012 2013 2014 2015

Total No. of Directors 7 8 8 8 8

No. of Independent Directors 4 4 4 4 4

No. of changes in directors over last year 1 - - - -

Being a grand nephew of the Dravida Munetra Kazhagam (DMK) patriarch Mr.Karunanidhi, Sun TV had enjoyed several

favourable business practices when the DMK government has been in power over the state. Though the party was seen as a

political mouthpiece to the DMK party, Sun TV since a family feud in 2013 has began portraying itself as a political neutral

channel. Promoter’s brother, Mr.Dayanidhi Maran was an elected Member Of Parliament (MP) under the DMK party ticket and

served as telecommunication minister from 2004-2007 and then served as a textile minister from 2009-11.

Aircel: Maxis Case – Enforcement Directorate (ED) – Summons have been issued against the Promoter, Mr. Kalanithi Maran.

BSNL Exchange case - FIR lodged in 2013 against Dayanidhi Maran for allegedly installing more than 300 BSNL telephone

lines, which were used commercially for his family-run Sun TV network, at his residence.

Corporate Governance

Auditor change

(In Rs.Mn) 2014 2015

Contingent Liabilities outstanding as on March 31st 3404.9 4230.3

Contingent Liabilities as a % of Networth ~10.2% ~11.9%

The Auditors have remained constant for the past 5 years.


Page 80

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Corporate Governance – RTP mapping

Income head Related Party Rs.mn % of sales

Subscription Income Sun Distribution Services Private Ltd 2114.7 8.8%

Subscription Income Sun Direct TV Private Limited 2099.3 8.8%

Advertising Income SpiceJet Limited 7.1 0.0%

Advertising Income Kal Publications Private Limited 3.8 0.0%

Income from IPL SpiceJet Limited 80.3 0.3%

Income from IPL Sun Direct TV Private Limited 40 0.2%

Business Support Income Sun Direct TV Private Limited 18.8 0.1%

Business Support Income Kal Publications Private Limited 15.9 0.1%

Subscription Income Others 10.1 0.0%

Movie Content Income Sun Direct TV Pvt Ltd 104.5 0.4%

Income from IPL : Digital Radio (Delhi) Broadcasting 15 0.1%

Income from IPL : Digital Radio (Mumbai) Broadcasting 10 0.0%

Income from IPL : Kal Radio Limited 15 0.1%

Business Support Income Kal Radio Limited 5.9 0.0%

Business Support Income South Asia FM Limited 2.3 0.0%


Program production expenses Kal Publications Private Limited 43.8 0.6%

Pay channel service charges Sun Distribution Services Pvt ltd 212.6 3.0%

Rent Expenses Kal Publications Private Limited 23.6 0.3%

Expenditure on CSR Sun Foundation 11.2 0.2%

Advertisement Exps Kal Publications Private Limited 0.5 0.0%

Recovery of shared services Kal Publications Private Limited 2.7 0.0%

Travelling Expenses SpiceJet Ltd 16.6 0.2%

Channel Placement Fee Sun Direct TV Private Limited 45.7 0.6%

Among the digital advertisement avenues, video’s seem to be the Among the digital advertisement avenues, video’s seem to be the


Accounts Reveivable Sun Direct TV Private Limited 1242.1 16.4%

Accounts Reveivable Sun Distribution Services Pvt Ltd 915.1 12.1%

Accounts Reveivable Others 6.8 0.1%

Other Receivable Kal Publications Private Limited 55.1 0.7%

Other Receivable Sun Direct TV Private Limited 7 0.1%

Other Receivable Sun Business Solutions Pvt Ltd 0.3 0.0%

Other Deposits Kal Publications Private Limited 0.6 0.0%

Other Receivable : Digital Radio (Delhi) Broadcasting Ltd 1.3 0.0%

Other Receivable : Kal Radio Limited 0.6 0.0%

Other Receivable : South Asia FM Limited 0.1 0.0%

Among the digital advertisement avenues, video’s seem to be the


Other Current Liabilities Kal Publications Private Limited 0.1 0.0%

Other Current Liabilities Sun Direct TV Private Limited 0.2 0.0%

Other Current Liabilities Others 6.2 0.3%

Accounts Payable Sun Distribution Services Pvt Limited 102.9 4.6%

Accounts Payable Kal Publications Private Limited 3.9 0.2%

Other Current Liabilities : Kal Radio Limited 1.3 0.1%

Among the digital advertisement avenues, video’s seem to be the


Page 81

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Financials – With debt being settled, Balance sheet stronger than ever

Revenues to grow ~13% CAGR over the next two years… …led by improved traction in advertising and subscription income


Employee cost to be on the rising trend… …however content cost to significantly drop over the next two years


20.1 18.5 19.2

22.2 24.0

25.7

29.0

32.8 39%

-8%

4%

16%

8% 7% 13% 13%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

30

35


In R

s.b

n

Net Sales (Rs.bn) growth (%)

59% 58% 60% 54% 54% 54% 54% 55%

32% 33% 32% 35% 37% 37% 38% 38%

9% 9% 7% 6% 5% 4% 4% 3%

0%

20%

40%

60%

80%

100%


Advertising Income Subscription Income

Broadcast fees Income from content trading

Income from Indian Premier League Others

1.2 1.4 1.3

1.8

3.0 2.9 3.0

3.3 3.7

8.4%

6.8% 7.2%

9.6%

13.5%

12.0% 11.7% 11.5% 11.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16P FY 17E FY 18E

Cost of reveneus % of sales

1.3

1.9 1.9 2.0 2.2

2.4

2.7

3.1

3.6

9.2%

9.5%

10.1%

10.4%

9.8% 9.8%

10.6% 10.8%

10.9%

8%

9%

9%

10%

10%

11%

11%

12%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Employee Cost % of sales

Page 82

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Financials – Working Capital consistency + Robust internal cash accrual on cards

EBITDA margins post amortization to improve… …on the back of lower other expenses and…


…contained amortization… …which should lead to improvement in profitability


8.6 11.8 10.5 10.7 11.2 11.5

13.6 15.5

18.0

59.1% 58.8%

57.0% 55.5%

50.5% 48.1%

53.0%

53.5% 55.0%

0%

10%

20%

30%

40%

50%

60%

70%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0


EBITDA post amortization % of sales

1.1 1.1 1.1 1.3

2.0 2.0

2.2 2.5

2.8

7.2%

5.3%

6.1% 6.8%

8.8% 8.2%

8.6%

8.5% 8.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0.0

0.5

1.0

1.5

2.0

2.5

3.0


Other Expenses % of sales

2.3

3.9 3.6 3.4

3.9

5.3

4.1 4.6 4.8

16.0%

19.6% 19.6% 17.7%

17.3%

22.0%

16.0% 15.8%

14.5%

0%

5%

10%

15%

20%

25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0


Amortization % of sales

5.2

7.7 6.9 7.1 7.5 7.8

9.0

10.6

12.2

35.8%

38.2%

37.5% 36.9%

33.6%

32.6%

34.8%

36.5% 37.1%

29%

30%

31%

32%

33%

34%

35%

36%

37%

38%

39%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


Normalised PAT post MI % of sales

Page 83

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Financials – Working Capital consistency + Robust internal cash accrual on cards

Improving profitability to lead to better capital efficiency… …while working capital days remain fairly constant


Operating cash flow yield to increase as margins improve… …which is expected to lead to improvements in FCF yields too


29.0%

37.2%

29.1%

26.8% 25.4%

24.3%

26.0%

29.0%

31.2%

26.0%

34.1%

26.9% 25.2%

24.1% 23.1%

24.6%

26.7%

28.9%

20%

25%

30%

35%

40%


ROE (%) ROCE (%)

83 78

101 111

103 115 117

110 110

1 0 0 0 0 0 0 0 0 10 10 9 9 9 11 12 12 12

74 68

92 102

94 105 106

98 98

0

20

40

60

80

100

120

140


Days

Debtor Days Inventory Days Creditor Days Net Working Capital Days

7.5

11.5 8.8 8.7

11.9 11.6 10.3

17.1 15.8

51.4% 57.0%

47.4% 45.2%

53.7% 48.5%

40.1%

59.1%

48.2%

0%

10%

20%

30%

40%

50%

60%

70%

0

2

4

6

8

10

12

14

16

18


Rs.b

n

Operating Cash Flow (Rs.bn) % of sales

1.6

6.7

1.6 2.8

5.5 5.8

8.4 9.9 9.5 11.3%

33.1%

8.8%

14.3%

24.6% 24.3%

32.7% 34.3%

29.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2

4

6

8

10

12


Rs.b

n

Free Cash Flow (Rs.bn) % of sales

Page 84

Sun TV CMP

Rs. 367

Target

Rs.433

Rating

BUY Valuation

…indicating the near term opportunity in the stock

Source: Bloomberg, Spark Capital Research

In comparison to Zee, the stock trades below its historical average


Sun TV at current prices trading close to -1SD levels…


Sun TV trading well below its average PE of 16x


9x

12x

15x

18x

21x

24x

100

300

500

700

Jun-1

1

Sep

-11

Dec-1

1

Mar-

12

Jun-1

2

Sep

-12

Dec-1

2

Mar-

13

Jun-1

3

Sep

-13

Dec-1

3

Mar-

14

Jun-1

4

Sep

-14

Dec-1

4

Mar-

15

Jun-1

5

Sep

-15

Dec-1

5

Mar-

16

Jun-1

6

CM

P (

Rs.)


traded

% of of no. of

days

Cumulative

traded no. of

days

%of

Cumulative no.

of days

11 - 12x 66 4% 75 4%

12 - 13x 128 7% 203 11%

13 - 14x 267 14% 470 25%

14 - 15x 283 15% 753 41%

15 - 16x 263 14% 1016 55%

16 - 17x 218 12% 1234 67%

17 - 18x 202 11% 1436 78%

18 - 19x 167 9% 1603 87%

19 - 20x 124 7% 1727 93%

Above 20x 121 7% 1848 100%

Average PE, 15.9

+1 SD, 18.4

+2 SD, 20.9

-1SD, 13.4

-2 SD, 10.9 10.0

15.0

20.0

25.0

Jun/1

1

Sep/1

1

Dec/1

1

Mar/

12

Jun/1

2

Sep/1

2

Dec/1

2

Mar/

13

Jun/1

3

Sep/1

3

Dec/1

3

Mar/

14

Jun/1

4

Sep/1

4

Dec/1

4

Mar/

15

Jun/1

5

Sep/1

5

Dec/1

5

Mar/

16

Jun/1

6

-80.0%

-70.0%

-60.0%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

Jun/1

1

Sep/1

1

Dec/1

1

Mar/

12

Jun/1

2

Sep/1

2

Dec/1

2

Mar/

13

Jun/1

3

Sep/1

3

Dec/1

3

Mar/

14

Jun/1

4

Sep/1

4

Dec/1

4

Mar/

15

Jun/1

5

Sep/1

5

Dec/1

5

Mar/

16

Jun/1

6

Sun TV Vs ZEEL Average +1SD

-1SD +2SD -2SD

Page 85

Sun TV CMP

Rs. 367

Target

Rs.433

Rating


We believe Sun

TV would be able

deliver a total

return of ~1.8x BY

2020 driven by

strong revenue

growth and margin

expansion

Assuming a revenue

and PAT CAGR of ~16%

each respectively over

the next four years

Entry = Rs.367@

14x FY17E

Cumulative Dividends of Rs.79

EPS CAGR of ~16%,




Revenue 18,472 23,954 25,698 28,966 32,823 37,272 42,452

EBITDA 10,529 11,511 13,633 15,483 18,046 20,519 23,488

Margins 57% 48% 53% 53% 55% 55% 55%

PAT 6,929 7,820 8,953 10,567 12,193 13,805 16,010

EPS 17.6 19.8 22.7 26.8 30.9 35.0 40.6

With overall movie buying

cost also expected to

come down, amortization

expenses expected to go

down

Though corporate

governance overhang

fairly limits the fair multiple

for Sun TV, we believe

even at current multiple

the stock should deliver

1.8x


RoE 29% 24% 26% 29% 31% 32% 34%

ROCE 27% 23% 25% 27% 29% 30% 32%

Net Block 4,346 11,810 8,674 10,330 10,802 11,520 12,012

Dividend per

share 10 11 16 18 19 21 22


14 Rs.40.6 Rs.569

15 Rs.40.6 Rs.609

Trading History – % of times stock traded

PE

range

<13x 13 - 15x 15 - 17x 17 - 19x 19 - 21x >21x

11% 30% 26% 20% 11% 2%

Page 86

Sun TV CMP

Rs. 367

Target

Rs.433

Rating



Rs. mn FY15 FY16P FY17E FY18E FY15 FY16P FY17E FY18E



EBIDTA 16,772 17,742 20,051 22,804 EBIDTA Post Amortization 2.5% 18.4% 13.6% 16.6%

Amortization 5,261 4,109 4,569 4,757 PAT 4.5% 14.5% 18.0% 15.4%

EBITDA post Amortization 11,511 13,633 15,483 18,046 Margins (%)

Depreciation 892 940 975 1,071 Gross Margin 70.0% 88.3% 88.5% 88.8%

Other Income 989 1,106 1,171 1,112 EBITDA less Amortization 50.5% 48.1% 53.0% 53.5%

Interest 23 22 25 25 PAT 33.6% 32.6% 34.8% 36.5%

Tax 3,760 4,755 5,166 5,961 Return Ratios (%)

Normalised PAT 7,820 8,953 10,567 12,193 RoCE 24.1% 23.1% 24.6% 26.7%

EPS (Rs.) 19.8 22.7 26.8 30.9 RoE 25.4% 24.3% 26.0% 29.0%


Net Worth 33,481 35,263 37,524 40,699 Leverage Ratios (x)

Other Long term Liabilities 977 996 996 996 Debt to Equity 0.00 0.00 0.00 0.00

Deffered Tax Liabilities 226 188 188 188 Current Ratio 7.77 8.94 8.75 9.30

Minority Interest 547 1,756 1,677 1,586 Working Capital Ratios


Gross Block 44,440 46,343 53,543 59,843 Inventory days 0 0 0 0

Net Block 11,810 8,674 10,330 10,802 Creditor Days 11 12 12 12


Other Long Term Assets 0 12 12 12 Face Value 9.0 10.0 11.0 12.0

Total Current Assets 17,234 24,165 24,826 27,565 Dividend 11.3 15.5 17.5 19.0


Net Current Assets 15,015 21,462 21,988 24,600 Shares Outstanding (mn) 394 394 394 394

Application of Funds 35,231 38,203 40,385 43,469 Market Cap. (Rs. mn) 1,44,629 1,44,627 1,44,629 1,44,629

Cash Flow Enterprise Value (Rs. mn) 1,29,607 1,26,216 1,23,450 1,21,875


Capex -4,400 -1,903 -7,200 -6,300 Price/Earnings (x) 18.5 16.2 13.7 11.9

Cash Flow from Investments -5,183 763 -6,029 -5,188 Price/Book (x) 4.3 4.1 3.9 3.6

Free Cash Flow 5,812 8,396 9,927 9,506 EV/EBIDTA (x) 7.7 7.1 6.2 5.3

Cash Flow from Financing -6,350 -7,303 -8,331 -9,043 FCF Yield (%) 4.5% 6.7% 8.0% 7.8%

Closing Cash Balance 7,593 11,352 14,119 15,695 Dividend Yield 3.1% 4.2% 4.8% 5.2%

Page 87

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY High Definition leverage play


1m 3m 12m

DISH TV 10% 15% -8%

Sensex 1% 7% -3%


Financial summary


FY15 26,880 27% 31 0.0 NA 9%

FY16E 30,599 33% 2,564 2.4 38.2 31%

FY17E 34,829 35% 3,304 3.1 29.7 27%

FY18E 38,666 35% 4,260 4.0 23.0 27%

Date 1st July 2016

Market Data

Bloomberg DITV IN

Shares o/s 1,066mn






Promoters 64.5

Institutions 25.9

Public 9.7

Initiating Coverage We initiate coverage on Dish TV with a ‘BUY’ rating on the back of revenues and earnings CAGR assumptions of ~13% and

~36% respectively from FY16 –FY18 led by (1) Increase in net subscriber base as digitization coverage extends to phase 4

cities, where Direct To Home (DTH) operators are expected to gain higher traction Vs digital cable, (2) Dish TV anticipated

to gain higher share among DTH players led by its distinguished rural presence, higher number of channels and High

Definition (HD) channels, attractive bouquet packaging and superior technology (3) Average Revenue Per User (ARPU)

increasing by ~2% led by price increases and increasing traction for HD channels, (4) Improved EBITDA margins arising out

of operating leverage that emerges out of fixed fee content costs and other operating expenses (6) Lower Interest expenses

with majority of debt being repaid over the next two years.

Dish TV, a pioneer of DTH industry in India like every other successful media company has constantly innovated in terms of

product offerings and pricing which has enabled them to maintain their market leadership despite entry of several other

strong players in the DTH market. Operational achievements were also visible on financial performance, as the company

went on to become the first DTH player to become FCF positive in FY12. Exhibition of consistent financial performance in

the few years along with management’s confidence in being able to wipe out all the accumulated losses over the next two

years, makes us believe that it is the right time to enter into Dish TV to make the most out of the digitization drive. We value

the stock on a DCF basis with a TP: Rs. 113 (Implied PE of 25x FY18E EPS)

Dish TV best positioned to tap into Phase 4 digitization: Fragmented markets, capital intensity and lack of large Multi

System Operators (MSOs) in phase 4 towns to act in favour of DTH players. Dish TV further to be the significant player in

these markets given their Value For Money (VFM) packs and positioning and their technical superiority. ARPU growth

however to be ~2% only as increasing number of consumers in phase 4 expected to adversely impact product mix,

increase in LED television screens (if an indicator) should propel growth of HD set top boxes.

Operating leverage and financial de-leveraging to improve profitability: With revenues expected to grow ~13% over the

next two years, fixed content costs, technical costs and marketing expenses to enable EBITDA margins expanding

~170bps to ~35.2% by FY18E. Further a debt settlement of ~7.5bn over the next two years expected to halve the current

interest outgo. Depreciation charged over the Consumer Premises Equipment (CPE) also to marginally reduce as prices

of CPE are on a downward trend.

Risks & Concerns: Given that boxes are imported and there is buyer’s credit being offered in USD, Dish TV is exposed to

currency risks and hedging costs. Advent of Reliance Jio, its plans and impacts on Distribution Platform Operators (DPOs)

to be a key near term monitorable. Delay in phase 4 implementation and Dish TV losing share are other risks


+91 44 4344 0062


Page 88

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Factsheet

Company Background

Dish TV, pioneer of DTH services in India began operations in 2003 and has emerged to be the largest DTH player

in Asia Pacific. Dish TV is a part of Zee group, which is one of the largest media conglomerates in India. Being the

market leader of DTH industry, Dish TV has come a long way since its inception with incessant technological

innovations and impactful marketing campaigns to ensure consumer addition and retention.

Key Revenue Drivers (FY16) Subscription income constitutes to ~92% of overall revenues. Others include lease rental, bandwidth charges,

advertising income and sale of customer premises equipment.

Management depth

Mr. Jawahar Lal Goel – Chairman and Managing Director. He has been the managing Director since 2007. Mr.

Arun Kapoor – CEO since 2015, a seasoned Media executive having led Zee Turner, Big TV DTH, Media Pro and

Taj TV for around 9 years. Mr. Gaurav Goel - President – Business Development and Strategy (with Dish TV since

2011). Mr. Rajeev K. Dalmia, CFO (with Dish TV since 2007). Mr. Veerender Kumar Gupta – COO (with Dish TV

since 2009) and Mr. Ranjit Singh - Sr. Vice President Legal & Company Secretary (with Dish TV since 2004)

Reach Dish TV as on June 2016, had a net subscriber base of ~12.9mn.

Market Share Dish TV is the market leader with ~27% market share. Tata Sky (~20% share), Videocon D2h (~16% share), Airtel

Digital (~19% share), Sun Direct (~12% share) and Big TV (~6% share)

Reach Dish TV has a distribution network of over 1,685 distributors & over 2,01,300 dealers that span across 8,929 towns

in the country

Genre Split

Dish TV uses MPEG-2 digital compression technology, transmitting using NSS-6 Satellite at 95.0E and SES 8

satellite at 95.0E. Dish TV has started to use MPEG 4 DVB S2 digital compression technology using Asiasat 5 at

100.5 E using its dish tru hd + STB.

Corporate Bankers ICICI Bank, Standard Chartered Bank, State Bank of India, Yes Bank, IDBI Bank, Kotak Mahindra Bank and Axis

Bank

IPO bankers Enam Securities Private Limited

IPO money raised Rs.~5bn

Corporate Auditors Walker Chandiok & Co. LLP - Statutory Auditors, Pro Advisory India LLP - Internal Auditor, Mr. Jayant Gupta -

Secretarial Auditor


Page 89

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Timeline – A brief history over the years

Though established in 1997, scaling up activities picked up in last 3 years


Plant Location


2015

2014

2013

2012

2012

2010

2009

2007

2003

2015

2009

First DTH in India

Launches Live TV for moving vehicles

Rights Issue of 100:121 at a premium of Rs.21/- per share

First to negotiate content on a fixed fee basis

First to launch High Definition

First to offer unlimited recording

First to be FCF positive in the Indian DTH industry

First to launch online TV for DTH viewers – “Dish Online”

First to launch a sub brand targeting regional language markets –

“Zing”

First to be PAT Positive in the Indian DTH Industry

First to launch Home Video System - DishFlix

Plant Location


Zing Digital

7

13

Zonal Offices

Regional Offices

Page 90

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Timeline – Production Facility

Revenues to grow at ~13% CAGR over the next two years… …Driven by increase in subscription revenues


Margins to improve on operating leverage… …leading to PAT margins of ~11% in FY18


14.4

19.6 21.7

25.1 26.9

30.6

34.8 38.7 32.4%

36.3%

10.7%

15.8%

7.1%

13.8% 13.8% 11.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

30

35

40

45

FY11 FY12 FY13 FY14 FY15 FY16 FY17e FY18e

Rs. B

n

Revenue (Rs.bn) % growth YoY

45.3% 48.9% 48.5%

46.8% 47.9% 51.7% 52.9% 53.2%

16.6%

25.4% 26.7% 24.9%

27.3%

33.5% 34.9% 35.1%

10%

20%

30%

40%

50%

60%


Gross Margin EBITDA Margin

Subscription revenue

92%

Bandwidth charges

4%

Others 4%

2.56 3.30

4.26

8%

9%

11%

0%

2%

4%

6%

8%

10%

12%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

FY16 FY17e FY18e

PAT (Rs.bn) PAT margin (%)

Page 91

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Earnings to increase ~29% led by revenue growth momentum and operating leverage

2.4

4.01

1.0

0.4

0.1

0.5

-[VALUE]

0.7

-[VALUE]

FY16 EPS

Revenue growth

Cost of revenues

Operating expenses

Depreciation

Other Income

Interest Expenses

Tax Expenses

FY18 EPS

Net subscriber addition of ~3.0mn in two years (~10% growth) * 2%

ARPU CAGR over 2 years

Programming costs to come down by 100bps +

Other fixed fees down by ~50bps

Fixed expenses in other operating income and a tad lower

marketing outlay to lead to ~30bps cost savings

Lower cost of the hardware equipment (both SD & HD) to bring

down depreciation expenses

With net debt expected to go down from current ~4.7bn to ~(1.01)

bn in 2 years, other income to reduce

Interest Expenses expected to lower as we factor in ~7.5bn gross

debt repayment over the next two years

With tax loss credits exhausted in FY16, FY17 & FY18 to have an

effective tax of ~33%

Page 92

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY #1 Subscription income growth

Subscription income to grow at a CAGR of ~13% over the 2 years… …led by ~3mn subscriber additions over two years…

…and an ARPU growth of ~1.6% Key Risks to our thesis

Given that there are ~50-60mn consumers to be digitized in Phase 4, Dish TV should be easily able to achieve the ~3mn subscriber additions

11.9

16.6 19.2

22.7 25.4

28.3

32.4 36.1

42.8% 39.5%

15.6% 18.0%

12.1% 11.2% 14.5%

11.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

5

10

15

20

25

30

35

40


Rs. B

n

Subscription Revenue (Rs.bn) % growth YoY

3.5

2.5 2.3

1.5

2.7

3.3 3.3 3.4

2.9

1.7

1.1 0.8

1.5 1.6 1.5 1.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Mn

Gross Subscribers addition (mn) Net Subscribers addition (mn)

150 151

157

163

172 174

177 180

135

140

145

150

155

160

165

170

175

180

185


Delay in Phase 4 implementation of digitization

Digital cable continuing to indulge in massive CAPEX in Phase 4

Other DTH players undercutting price to gain market share

Higher churn due to aggressive marketing by other players

ARPU growth lower than anticipated ~2% CAGR on account of

minimal HD offtakes





Page 93

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY #1 Subscription income growth

Opportunity for Dish TV is humongous considering a ~7-8% in crease in C&S households increase in India

SUBSCRIBER

ADDITION

OPPORTUNITY


Page 94

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Phase 1

Phase 2

Phase 3

Phase 4

As per industry estimates, we understand that ~50-60mn homes are to be digitized in Phase 4

13.6

24.6

40.6

81

1.2

1.2

1

47.9

Jun-12

Mar-13

Dec-15

Dec-16

Non-digitised subs

No of Paid C&S Subs

Despite litigations and delays, Digitization in India is progressing steady, Phase 4 deadline can be extended to March 2018 realistically

Number of C&S households on the rise… …so have been the digital subscribers especially in the past 3 years


>90% (100% exclusive Chennai)

>95%

>80%

~45%

119 130 139 149

160 170 179 186 192 197

76.0%

79.2% 80.7%

82.2% 83.4%

82.0% 83.0% 85.0% 86.0% 87.0%

60%

64%

68%

72%

76%

80%

84%

88%

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mn

Number of C&S households (mn) Paid C&S households(%)

74 69 68 70 65 41

5 5 5 5

6 19 25 29 37 55

80 84 87 90

31 34 37 40 44 55 74 76 78 79

8 9 9

10 15 19

20 21 22 22

0

50

100

150

200

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

Analogue Digital Pay DTH Free DTH

#1 Subscription income growth


Page 95

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Given the fragmented markets in Phase 4, Lack of large MSOs and lack of funds with major MSO’s to expand should work in favor of DTH

players

DTH also boasts of higher ARPU… …and promises greater convenience

DTH to be a bigger beneficiary in phase 3 and Phase 4 markets… …and why we believe so

0%

20%

40%

60%

80%

100%

Phase 1 Phase 2 Phase 3 Phase 4

Digital DTH

Fragmented Locations

Smaller & Regional MSO's

Larger MSO's will have to burn substantial CAPEX to enter Phase 3

areas

DTH players as Dish TV have better rural foothold

Convenience in installation

160 170 175 196

248 258

160 166

200 220 214 219

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016P

Rs. P

er

Mo

nth

DTH Digital cable

Broadcaster Consumer

Better Consumer data Convenience in choosing packs

Few DTH players to negotiate Transferrable Pan India

Higher ARPU Hassle free payments

No player with significant market share Higher number of HD channels

Contributes ~60% to broadcaster's

domestic subscription Reliable service help desk

HD channels Not reliant on a single LCO

No Carrige fees Options of portability


Source: Company Filings & Spark Capital Research Source: Spark Capital Research

Source: Spark Capital Research


Page 96

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Dish TV, market leader in the DTH industry continues to have best technology and offers maximum number of channels

Dish operates on MPEG -4 and MPEG 2 with 16 transponders Dish TV offers the maximum number of channels providing an edge

Dish TV continues to be the market leader among DTH players… Players have actually meaning fully contributed to the industry

Dish TV Enhanced consumer understanding of DTH

Airtel Digital Enabled last mile connectivity for offline recharge cards

Videocon D2h Links up several 'after sale' service agents

Tata Sky Enabled premiumization

Sun Direct Assisted in Regional penetration

30% 29% 28% 27% 27% 27%

18% 19% 19% 20% 23% 21%

16% 14% 13% 13% 8% 11%

9% 8% 7% 7% 2% 5%

18% 19% 19% 19% 20% 20%

9% 12% 14% 14% 20% 16%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 2016

Dish TV Tata Sky Sun Direct Big TV Airtel Digital Videocon D2H

S.No DTH Operator Compression

standard Capacity

No of

Transponders

1 Dish TV MPEG-2 & MPEG-4 720 MHz 16

2 Tata Sky MPEG-2 432 MHz 12

3 Sun Direct TV MPEG-4 180 MHz 5

4 Reliance BIG TV MPEG-4 324 MHz 9

5 Airtel Digital TV MPEG-4 396 MHz 11

6 Videocon d2h MPEG-4 540 MHz 10

415

336

220

276

378 389

0

50

100

150

200

250

300

350

400

450

Dish TV TATA Sky Sun Direct Reliance Digital

Airtel Digital Videocon D2H





Page 97

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Key reasons why we believe Dish TV has an edge over other DTH operators

…low value recharge packs… …competitive box prices…

Locational advantage being the pioneer… …higher number of HD channels…

Price (Rs.) No of

Channels Price (Rs.)

No of

Channels

Dish TV 99 135 535 352

TATA Sky 99 184 591.667 415

Sun Direct 199 132 379 212

Airtel Digital 190 177 603 334

Videocon D2H 99 139 500 352

Zing Digital 99 155 369 290

SD With Recorder HD+ With Recorder

Dish TV 1600 1700

TATA Sky 1600 1800

Sun Direct 1690 1990

Airtel Digital 1640 2095

Videocon D2H 1520 1920

2003 2004 2005 2006 2007 2008 2009 2010


50 46

12 12

35 38

0

10

20

30

40

50

60

Dish TV TATA Sky Sun Direct Reliance Digital

Airtel Digital Videocon D2H




https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi2xpy_hcDNAhUKKY8KHc0TD38QjRwIBw&url=https://teamatul.wordpress.com/2014/02/03/10-million-dth-connections-in-just-4-years-a-major-landmark-for-videocon-d2h-videocon-d2h-celebrates-the-achievement-of-10-million-connections-in-a-short-span-of-just-4-years/&bvm=bv.125596728,bs.2,d.dGo&psig=AFQjCNHiqAZ77padMkMzzIAeYQTABvz9JA&ust=1466836383211252

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwig-bHvhMDNAhXHKY8KHauWCiMQjRwIBw&url=https://commons.wikimedia.org/wiki/File:Dish_TV_Logo.svg&psig=AFQjCNGT8GPb7rAHL5yXgsK5P5BKQHFTKQ&ust=1466836214921360

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwibvKyAhcDNAhUKRY8KHen0BYgQjRwIBw&url=http://www.tatasky.com/&bvm=bv.125596728,d.dGo&psig=AFQjCNEo6PP-cgNLH838q3zyni5SNsSd9Q&ust=1466836250779615

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwipk-yjhcDNAhXIKY8KHaiQAUIQjRwIBw&url=http://www.worldofdth.com/threads/2551-Here-is-Hi-Resolution-Logo-of-Reliance-Digital-TV&bvm=bv.125596728,d.dGo&psig=AFQjCNEXFiCZu2BeogdaGuskVgyw4gAeIw&ust=1466836322701845

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiTsquZhcDNAhVMOo8KHUJ8D94QjRwIBw&url=http://toublanc.info/sun/sun-direct-logo-vector-free-download&bvm=bv.125596728,d.dGo&psig=AFQjCNFwxxX1eZ3Kgt5sEA1P6aZTHjuD0Q&ust=1466836271045021

Page 98

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

ARPU INCREASE = Price Increases (competition limits the base unit pack pricing) + Change in Mix (does not normally happen) + increase in HD

subscriber (Best possible case for ARPU increase)

…and inflationary pricing actions

ARPU to increase ~1.6% over the next two years Led by increase in number of High Definition subscribers…

150 151 157

163

172 174 177 180

8.7%

0.7% 3.9%

4.2%

5.2%

1.2% 1.9%

1.4%

0%

2%

4%

6%

8%

10%

130

140

150

160

170

180

190


Rs.

ARPU (Rs.) ARPU growth (%)

HD channel Contribution

10%

Basic SD pack 65%

Other SD pack 25%

200 255

380

220 280

400

220

300

421

230 275

320

440

240 285

335

460

250 295

345

475

260 305

355

485

270 315

365

475

0

100

200

300

400

500

600

Super Family Maxi Sports # All Sports Platinum Sports

Rs.

Previous Price Revised Price (w.e.f. Apr'13) Revised Price (w.e.f. Jun'14) Revised Price (w.e.f. Aug'14)

Revised Price (w.e.f. Feb'15) Revised Price (w.e.f. Aug'15) DAS Ph I&II cities (w.e.f. Aug'15) New Pricing





Page 99

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY #2 Cost of revenues to be contained

Dish TV has proposed a Fixed Fee model to TRAI consultation paper for agreeing on price with broadcasters, we understand that currently ~45% of

content is on fixed fee basis.

License fees to remain at current levels… …Intrduction of GST could lower enetertianment tax

Cost of revenues to decline ~150bps… …led by 100bps decline in content costs

7.9

10.0 11.2

13.4 14.0 14.8 16.4

18.1 54.7%

51.1%

51.5%

53.2% 52.1%

48.3% 47.1% 46.8%

42%

44%

46%

48%

50%

52%

54%

56%

0

5

10

15

20


Rs.

Cost of Revenue (Rs.bn) % of sales

5.0 6.1 6.5

7.8 8.0 8.6

9.6 10.4 35.1%

31.0% 30.1% 31.0%

29.8% 28.0% 27.5%

27.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2

4

6

8

10

12


Rs.

Content Costs (Rs.bn) % of sales

1.5

2.0 2.3

2.6 2.9

2.2 2.5

2.7

10.4% 10.2%

10.4% 10.4%

10.7%

7.1% 7.1% 7.1%

0%

2%

4%

6%

8%

10%

12%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


Rs.

License Fees (Rs.bn) % of sales

0.5 0.7

1.1

1.3 1.5

1.7 1.9

2.1

3.6% 3.5% 4.9%

5.3%

5.5% 5.4% 5.4%

5.4%

0%

1%

2%

3%

4%

5%

6%

0.0

0.5

1.0

1.5

2.0

2.5

FY11 FY12 FY13 FY14 FY15 FY16 FY17e FY18e R

s.

Entertainment Tax (Rs.bn) % of sales




Page 100

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY #3 Operating leverage to lead to EBITDA margin expasnion

Overall SAC expected to trend lower in near to medium term as hardware subsidy and acquisition related marketing spends decline

Subscriber Acquisition Cost also on the lower trend (Rs.) As hardware subsidy and marketing costs decline..

Other Expenses cost expected to be down by ~30bps… …led by lower business promotion expenses

3.4 3.9 3.9

4.6 4.5 4.3 4.8

5.4 23.4%

19.7%

18.0% 18.3%

16.8% 14.2% 13.9% 13.9%

0%

5%

10%

15%

20%

25%

0

1

2

3

4

5

6


Rs.

Other expenses (Rs.bn) % of sales

Customer support services

19%

Advertisement and publicity

expenses 12%

Commission 55%

Business promotion expenses

9%

Others 5%

1,828 1,849 1,889 1,800 1,800

1,650 1,725 1,725 1,750 1,725 1,550

1,450

Hardware

Subsidy Marketing Costs Commission

Rs.~1153 as on

March 2016

80% of the cost

assumed to be

on New

acquisition

Appropriate

commission

applicable during

seeding of the

box and filing

KYC forms




http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiNpovp-szNAhUST48KHdnZAVQQjRwIBw&url=http://icons.mysitemyway.com/legacy-icon/069596-blue-jelly-icon-alphanumeric-plus-sign-simple/&psig=AFQjCNHpEcnie-72-UIAte-Bs4YWruwjMg&ust=1467280193754472

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiNpovp-szNAhUST48KHdnZAVQQjRwIBw&url=http://icons.mysitemyway.com/legacy-icon/069596-blue-jelly-icon-alphanumeric-plus-sign-simple/&psig=AFQjCNHpEcnie-72-UIAte-Bs4YWruwjMg&ust=1467280193754472

Page 101

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Depreciation to be lower in the next two years as gross block addition is lower than gross subscriber addition over the next two years

Depreciation to be line with historical levels… …however increase in gross subscriber growth to outpace capex

Hardware subsidy costs have been on the downtrend Rs.~15bn to be added as gross block for CPE in next 2 years

18.4%

22.7%

14.8%

17.7%

20.1%

12.7% 12.1%

23.6%

17.9%

9.6%

16.1% 17.0%

14.4% 13.3%

5%

10%

15%

20%

25%

FY12 FY13 FY14 FY15 FY16 FY17e FY18e

Gross Block growth (%) Gross Subscriber growth (%)

1,933

1,465

1,153

0

500

1000

1500

2000

2500

FY14 FY15 FY16

Rs.

3.8

5.1

6.2 5.9 6.1

5.9 6.0 6.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0



#4 CAPEX growth to be lower

24.0 28.5 34.9 40.1

47.2 56.7

63.9 71.6

6.6 4.4

6.5 5.2

7.1

9.5 7.2

7.7

0

20

40

60

80


Rs. B

n

Gross Block (Rs.bn) Gross Block Addition (Rs.bn)




Page 102

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

With financial de-leveraging, interest cost benefits are expected to reflect in PAT.

Debt/Equity in FY18 to be as low as 0.4x Net debt too expected to turn negative from FY18

Gross Debt repayment of Rs.7.5bn to be done over next two years… …which should bring down sizeable foreign currency debt

8.5

13.9

10.3 9.4

15.0

12.2

8.2

4.7

3.1

2.4

0.9 0.8 1.1 1.9

-1.2

-10.3

-12

-10

-8

-6

-4

-2

0

2

4

0

2

4

6

8

10

12

14

16


Rs. B

n

Gross Debt (Rs.bn) Increase/Decrease

Foreign currency Loan 66%

Rupee Loan 34%

23.1

-14.9

-6.6 -3.0

-4.8

3.2 1.2 0.4

-20

-15

-10

-5

0

5

10

15

20

25

30


2.8

8.1

3.1 3.0

7.7

4.8

2.5

-0.8 -2

0

2

4

6

8

10


#5 Reduction in debt to bring down interest cost



Page 103

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Dish TV – Risks & Concerns

Delay in digitization

Intensifying

competition

Reliance JIO MSO

operations

Increasing cost of

Consumer Premises

Equipment

Rupee Weakening

We understand that Dish TV has recommended Fixed fee to be the basis for finalising deal between DPOs

and Broadcasters to Telecom Regulatory Authority Of India (TRAI), any adverse ruling could result in rise

in content cost.

Adverse ruling from

TRAI on tariff

regulations

Higher License fee

outgo ruling

Dish TV is currently providing for ~7% of its sales as license fees on the ruling stipulated by the courts,

any increase could impact license fee outgo.

Though prices have been on the declining trend, Dish TV relies majorly on single vendor in Handan

Broadinfocom Co of South Korea for majority of its supplies, any adverse pricing action could pressurise

cash flow

Given that set top boxes are imported and often a buyers credit is being provided to supplier to ensure

continuous supply of set top boxes, weakening of Rupee could result in significant forex loss despite

hedging.

Given the DTH market players have become fairly mature, we anticipate minimal disruptive competitive

intensity from the incumbent players.

With Reliance having obtained license to operate as a digital cable operator, pressure from Reliance JIO

in the form digital cable is expected to intensify, success of achieving last mile connectivity to be litmus

test for JIO

Though we have anticipated a one year delay in the implementation of digitization in phase 4 cities,

further than anticipated delay for on ground implementation could result in subscriber addition being

lower


Page 104

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Financials (1/2)

Led by revenue growth and savings in depreciation and interest costs, PAT to grow at ~29% CAGR over FY16-18

Lower interest cost to further boost… …PAT to Rs.4.7bn

Revenues to increase at ~13% CAGR… …leading to margins expanding ~170bps in two years

14.4

19.6 21.7

25.1 26.9 30.6

34.8 38.7 32.4%

36.3%

10.7%

15.8% 7.1%

13.8% 13.8% 11.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

30

35

40

45


Rs.

Revenues (Rs.bn) % growth

2.4

5.0 5.8 6.2

7.3

10.2

12.2 13.6

16.6%

25.4%

26.7% 24.9%

27.3%

33.5% 34.9% 35.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2

4

6

8

10

12

14

16


Rs.

EBITDA (Rs.bn) EBITDA margin (%)

-1.92 -1.31 -1.25

-0.41

0.03

2.56

3.30

4.26

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0


Rs. B

n 1.5

2.0

1.3 1.3

1.8

2.1

1.5

1.0

0

1

1

2

2

3


Rs.

Interest expenses (Rs.bn)

Interest expenses (Rs.bn)




Page 105

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY

Dish TV should continue its free cash flow growth path, which is expected to fund the due repayment over the next two years

Working capital days very much in control Capital efficiency to improve on improving proitability

Operating Cash Flow growth to be robust… Leading to strong Free Cash Flow

6 5 5 6 9 9 9 9 1 1 1 1 1 1 1 1

63

24 36

20 17 27 27 27

-57

-17 -29

-13 -7 -17 -17 -17

-80

-60

-40

-20

0

20

40

60

80


No

. o

f D

ays

Debtor Days Inventory Days Creditor Days Working Capital Days

Financials (2/2)

3.9 4.1

6.1 7.1 7.7

13.9

10.7 11.7

27.5%

21.0%

28.1% 28.1% 28.6%

45.4%

30.8% 30.2%

0%

10%

20%

30%

40%

50%

0

2

4

6

8

10

12

14

16


Rs. B

n

OCF (Rs.bn) OCF/sales

-6.1

-1.9 -0.9

4.1

0.6

3.3 3.5 3.9

-42.5%

-9.8% -4.1%

16.2%

2.3% 10.8%

10.1% 10.2%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

-8

-6

-4

-2

0

2

4

6


Rs. B

n

FCF FCF/sales

-4%

6% 0%

12% 9%

31% 27% 27%

-10%

0%

10%

20%

30%

40%


ROCE (%)

ROCE (%)



Page 106

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Relative Valuation

EV/EBITDA band Trading days

Source: Bloomberg, Spark Capital Research:

0.0

5.0

10.0

15.0

20.0

Jun-1

1

Oct-

11

Fe

b-1

2

Jun-1

2

Oct-

12

Fe

b-1

3

Jun-1

3

Oct-

13

Fe

b-1

4

Jun-1

4

Oct-

14

Fe

b-1

5

Jun-1

5

Oct-

15

Fe

b-1

6

Jun-1

6

EV/EBITDA Average


traded

% of of no. of

days

Cumulative

traded no. of

days

%of

Cumulative no.

of days

6 - 8x 98 5% 98 5%

8 - 10x 779 43% 877 48%

10 - 12x 648 35% 1525 83%

12 - 14x 229 13% 1754 96%

14 - 16x 49 3% 1803 99%

16 - 18x 25 1% 1828 100%


Page 107

Dish TV CMP

Rs.92

Target

Rs.122

Rating

BUY Corporate Governance

Wealth Creation

Group Holdings

0

100

200

300

400

500

600

700

800

900

Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

Dish TV Zee Entertainment Zee Media Corp Siti Cable

ESSEL GROUP | Founder: Dr. Subhash Chandra | Market Cap: Rs. 578.8 bn

Media Other Businesses

Packaging (Essel Propack)

Market Cap: Rs. 31.7 bn

Theme Parks: Essel World and Water Kingdom

Playwin: India’s first and largest online gaming company

Cornership: Animation studio

Cyquator Technologies: IT Infrastructure outsourcing

Infrastructure

Education

Precious Metals

Health Lifestyle & Wellness

Launched in 1992

One of India’s largest

media and general

TV entertainment

network

Market Cap: Rs.

420.2 bn

Launched in 1992

Strong presence in

national and regional

news genre

Market Cap: Rs. 8.6

bn

Launched in 2005

Asia’s largest DTH

service provider

Market Cap: Rs.

89.0 bn

Launched in 2006

One of India’s

largest MSO,

presence across 54

cities

Market Cap: Rs.

29.3 bn

Launched in 2005

English broadcast

daily with presence

across Mumbai,

Bangalore, Pune,

Ahmedabad, Jaipur

and Indore

CONTENT DISTRIBUTION



http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiFybmskc3NAhXFr48KHXa1A-cQjRwIBw&url=http://www.esselnewsletter.com/news/zee-entertainment-fy-14-q3-results-quiz-zeequiz-trends-on-twitter.html&psig=AFQjCNERJOlgZ4H1pJViH4BEikyn6j9jJg&ust=1467286241784326

http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj7pbzFkc3NAhXBr48KHfn2DSMQjRwIBw&url=http://www.bestmediainfo.com/2014/01/zee-medias-net-profit-comes-down-in-q3-fy14/&bvm=bv.125801520,d.c2I&psig=AFQjCNEdFCCtybR5IdiTdrNsXK5Lo9MZWw&ust=1467286283670212

https://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiGodvWkc3NAhUIqo8KHTF1CZgQjRwIBw&url=https://commons.wikimedia.org/wiki/File:Dish_TV_Logo.svg&bvm=bv.125801520,d.c2I&psig=AFQjCNHRmyduK5edJtM9zxeC8BhiwJ6b-w&ust=1467286330844909

https://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwicifPikc3NAhVCpo8KHZT6BucQjRwIBw&url=https://en.wikipedia.org/wiki/Siti_Cable&bvm=bv.125801520,d.c2I&psig=AFQjCNHnnshGh1j0uCC0DurrK5iUfMtn-Q&ust=1467286356318008

Page 108

Dish TV CMP

Rs.92

Target

Rs.122

Rating


We believe Dish

TV would be able

deliver a total

return of ~1.8x BY

2020 driven by

robust subscriber

additions and

operating leverage

Assuming a revenue

and PAT CAGR of 13%

and ~28%

respectively over

the next four years

Entry = Rs.92@

30x FY17E

We have assumed Nil

dividends

EPS CAGR of ~28%,



Revenue 19,579 26,880 30,599 34,829 38,666 44,466 49,122

EBITDA 4,978 7,331 10,249 12,171 13,588 16,185 18,197

Margins 25% 27% 33% 35% 35% 36% 37%

PAT -1,314 31 2,564 3,304 4,260 5,772 6,983

EPS -1.2 0.0 2.4 3.1 4.0 5.4 6.6

With cost of procurement

of Consumer Premises

Equipment set to increase

at a lower rate,

depreciation to be lower

Dish TV expected to be

one of the foremost

beneficiary of the

Digitization remaining

phases should see strong

operating leverage play


RoE 6% 9% 31% 27% 27% 28% 29%

Net Debt 10333 10821 4767 2476 -1017 -6558 -13876

Net Block 18,088 19,510 24,201 25,392 26,337 26,839 26,721

FCF -1,927 617 3,290 3,500 3,946 5,543 6,709


20 Rs.7.1 Rs.131

25 Rs.7.1 Rs.164


Page 109

Dish TV CMP

Rs.92

Target

Rs.122

Rating



Rs. mn FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E



EBIDTA 7,331 10,249 12,171 13,588 EBIDTA 17.5% 39.8% 18.8% 11.6%

Depreciation & Amortization 6,138 5,907 6,030 6,777 PAT NA NA 28.9% 28.9%

EBIT 1,193 4,342 6,141 6,811 Margins (%)

Other Income 635 640 320 515 EBITDA 27.3% 33.5% 34.9% 35.1%

Interest 1,754 2,087 1,530 967 EBIT 4.4% 14.2% 17.6% 17.6%

PBT 74 2,895 4,932 6,359 PAT 0.1% 8.4% 9.5% 11.0%

Tax 42 331 1,627 2,098 Return Ratios (%)

Normalised PAT 31 2,564 3,304 4,260 RoCE -1.0% 761.8% 44.5% 29.9%

EPS (Rs.) 0.0 2.4 3.1 4.0 RoE 8.5% 31.4% 27.1% 27.5%


Net Worth -3,134 3,807 7,111 11,371 Leverage Ratios (x)

Debt 15,021 12,199 8,199 4,699 Debt to Equity -4.79 3.20 1.15 0.41

Deffered Tax Liabilities 0 0 0 0 Current Ratio 0.46 0.29 0.22 0.22

Other Long term liabilities 66 173 173 173 Working Capital Ratios


Gross Block 48,160 57,629 64,850 72,572 Inventory days 1 1 1 1

Net Block 19,510 24,201 25,392 26,337 Creditor Days 17 27 27 27


Other Long Term Assets 0 4,360 4,360 4,360 Face Value 1.0 1.0 1.0 1.0

Total Current Assets 9,147 6,793 5,185 5,283 Dividend NA NA NA NA


Net Current Assets -10,563 -16,422 -18,309 -18,494 Shares Outstanding (mn) 1,065 1,065 1,066 1,066

Application of Funds 11,953 16,179 15,483 16,243 Market Cap. (Rs. mn) 97,996 97,996 98,035 98,035

Cash Flow Enterprise Value (Rs. mn) 1,08,817 1,02,763 1,00,511 97,018


Capex -7,057 -10,597 -7,221 -7,722 Price/Earnings (x) 3,120.6 38.2 29.7 23.0

Cash Flow from Investments -6,699 -10,884 -6,901 -7,207 Price/Book (x) -31.3 25.7 13.8 8.6

Free Cash Flow 617 3,290 3,500 3,946 EV/EBIDTA (x) 14.8 10.0 8.3 7.1

Cash Flow from Financing -362 -3,898 -5,530 -4,467 FCF Yield (%) 0.6% 3.2% 3.5% 4.1%

Closing Cash Balance 1,195 3,392 1,682 1,676

Page 110


Rs.445

Target

Rs.510

Rating

BUY #1 – Impact due to emergence of digital platform to be limited in near to medium term

Google India revenues have increased 5x as digital markets… …gain prominence by dominating offerings across platforms

Google’s focus on India increasing with the following projects Fair share of controversies given that digital laws in India are evolving

Google by dominating offerings across platforms has emerged as a strong contender to take advantage of India’s digital evolution, financial

muscle and constant innovations to act as supporting pillars to google India growth ambitions.

Project

‘LOON’

Streamlin-

-ed search

Free Wi-Fi

at railway

stations

Offline

mapping

Asus

Chromebit

Tap to

translate

Training

2mn

Android

developer

s

Campus

in Hydera-

-bad

CCI files a complaint on google rigging search

Controversy over comments on its blogging site

Equalisation levy

Google Street view plans rejected CO

NT

RO

VE

RS

IES

Market Position

(Share): 1 (97%)

Market Position

(Share): 1 (60%)

Market Position

(Share): 1 (62%)

Market Position

(Share): 1 (52%)

Market Position

(Share): 1 (90%) 8.5

11.6

20.8

30.5

41.2

FY 11

FY 12

FY 13

FY 14

FY 15

Revenue (Rs.bn)

IT services 31%

Advertising space 68%

Enterprise products

1%



Page 111

Appendix

Page 112


Channel Number of campaign slots Slot Specification Total Reach (mn viewers)

Colors 29 Rs. 34160/10 seconds 26

Star Plus 20 Rs. 49350/10 seconds 26

Sun TV 34 Rs. 29406/10 seconds 11

Zee Marathi 163 Rs. 6130/10 seconds 4

ABP news 297 Rs. 3370/10 seconds 13

MTV 621 Rs. 1610/10 seconds 9

Times Of India - Mumbai Edition - Strip Ad - First Page 0.8 Rs. 1285350 /day 1.56

Hindustan Times - New Delhi - Strip Ad - First Page 0.7 Rs. 1452000/ day 0.64

Nai Dunia - Main - Dewas - Strip Ad - First Page 2.2 Rs. 451440/ day 1.77

Daily Thanthi- Main - Chennai - Strip Ad - First Page 2.1 Rs. 465300/ day 0.76

Half Page advertisement in India Today 1.9 Rs.540000/day 1.85

Half Page advertisement in Readers Digest 3.4 Rs.297000/day 2.12

Boarding Pass - Indigo Airlines 0.2 Rs. 5000000/1 month 0.10

Luggage Tag - Jet Airlines 0.3 Rs. 3000000/1 month 0.05

PVR Sangam, Delhi with 300 seats (10 sec Mute Slide

Rate) 181 Rs.5520/10 second slot 0.22

IRCTC catering All India - Napkin 15.6 Rs.64300/day 2.00

Newspaper inserts Bangalore 42.6 Rs.23500/day 2.13

Hotstar 20 Rs. 50000/0.0625mn views 1.3

Moneycontrol 10 Rs. 100000/0.5mn impressions 5.0

Google Ad Words 27027 Rs.37/click 4.0

Facebook Ads 100000 Rs.10/click 5.0

Linkedin Ads 6667 Rs.150/click 3.0

Digital mediums certainly seem to be scoring better on ‘efficiency’ metrics given the superior methods to reach out to targeted audience,

however television advertisements still seem to be the preferred channel over ‘effectiveness’ metric.



Page 113



Digital spends to be driven by increasing mobile spends …as number of internet users rapidly increase in India…

…especially mobile internet users… …in rural markets

Increase in mobile internet users to be a key driver for digital ad spend growth. Mobile internet users in India rising rapidly on the back of

affordability and rising aspirations

10 13 18 23 33 51 65

85 107

130 153

0 1 2 3

5 9

16

28

46

70

102

-40

10

60

110

160

210

260

2010 2011 2012 2013 2014 2015 2016 2017P 2018P 2019P 2020P

Digital Ad Spends (Excl Mobile)

Mobile Ad Spends

92 126

159 193

233

354

462

8% 10%

13% 15%

18%

27%

35%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

2010 2011 2012 2013 2014 2015 2016

Internet Users Penetration %

48 91 110 137 159 173 192

238 276 306

371

89

99 95

106 119

129 138

116 99

96

91

0

100

200

300

400

500

Jun-12 Jun-13 Oct-13 Jun-14 Oct-14 Dec-14 Mar-15 Jun-15 Oct-15 Dec-15 Jun-16

Mobile Internet Users Fixed Landline Users

4 21 25 27 29 32 68

109 44

70 85 103 126

153

171

262

0

50

100

150

200

250

300

350

400

Jun-12 Jun-13 Oct-13 Dec-13 Mar-14 Jun-14 Jun-15 Jun-16

Rural mobile subscribers (mn) Urban mobile subscribers (mn)

Source: IAMAI, Spark Capital Research




Page 114



Differentiated content needed to keep younger audience glued… …newer movies certainly seem to be helping in keeping them hooked

Increase in average speed has been a key enabler for OTT services… …however threat from pirated contents remains a key challenge

OTT to help content producers, content owners and advertisers to target niche audiences.

15-24 35%

25-34 40%

35-44 16%

45-54 6%

55+ 3%

0

10

20

30

40

50

60

70

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Average number of months from theaterical release before a film is available on Electronic Sell Through

183 24

4263

2095

6565

325 40

2682

959

4005

0

1000

2000

3000

4000

5000

6000

7000

Music Gaming Television Film Total

Size of the industry ($mn) Value Loss due to piracy ($mn)

2.3% 2.6% 3.5% 4.2% 4.9%

7.2% 6.9% 7.8%

9.9% 11.0%

14.0%

17.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Q1 2012

Q2 2012

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

>4 MBPS



Page 115



Prices of smartphones have been on the declining trend… …so has been the data cost

Increasing 3G users along with… …government digital initiatives augurs well from OTT standpoint

With handset makers and telecom service providers continuing to flood the market with new offerings and improved service levels, OTT market

growth to zoom in near to medium term.

29 28 27 27 27 26 25 24 23

0

5

10

15

20

25

30

35

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Data Realization/MB (Rs.)

244 254

223

174

138

101 90

0

50

100

150

200

250

300

2010 2011 2012 2013 2014 2015 2016

ASP of Smartphone in India ( USD)

2G 62%

3G 36%

4G 2%

Broadband

Highways

Electronics

Manufacturing – Target

NET ZERO Imports

E-Governance –

Reforming government

through Technology

Universal Access to

Phones IT for Jobs

eKranti – Electronic

delivery of services

Public Internet

Access Programme

Early Harvest

Programmes "Information for All"



Page 116



Number of credit card users though fairly low hampering payments… …however number of debit card users on the constant rise…

…driven by government’s financial inclusion programs Payment apps have led to mobile banking users (mn) also increasing

Government’s financial inclusion programs and advent of mobile payment applications has enabled higher number of users embracing online

payment option. SECURITY THEFT fear though still prolongs, stricter regulations could help.


17.8 17.7 19.5 19.2

21.1

24.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2011 2012 2013 2014 2015 2016

No of Credit Card (in Mil)

278 331

394

553

637

0

100

200

300

400

500

600

700

FY12 FY13 FY14 FY15 FY16

Number of Debit Card Users (mn)

36 60 100

140 170

230 257 17%

25%

30%

35%

40% 42%

45%

0%

10%

20%

30%

40%

50%

0

50

100

150

200

250

300

FY14 FY15 FY16 FY17E FY18E FY19E FY20E

Mobile Banking Users % of mobile data users

35.2%

53.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2011 2014

% of population having access to bank account (+15yrs old)



Page 117



on OTT On YouTube

Football Match (90 mins) Movies Reality Show News GEC

Device SD HD SD (480p) HD (720p) SD (480p) HD (720p) SD (480p) HD (720p) SD

Netflix

HD

Netflix

PC / Tablet (MB) 1,140 2,880 524 1,543 58 171 87 257 358 1,536

Smartphone (MB) 480 850 450 1,080 50 120 75 180 358 1,536

Airtel Broadband

40 MBPS - 60GB @ Rs.1699

PC / Tablet (Rs.) 32 80 14 43 2 5 2 7 10 42

Smartphone (Rs.) 13 24 12 30 1 3 2 5 10 42

BSNL Broadband 4 MBPS -

30 GB @ Rs.1495

PC / Tablet (Rs.) 55 140 25 75 3 8 4 13 17 75

Smartphone (Rs.) 23 41 22 53 2 6 4 9 17 75

Airtel 3G

Rs.1500 (10 GB)

PC / Tablet (Rs.) 167 422 77 226 9 25 13 38 53 225

Smartphone (Rs.) 70 125 66 158 7 18 11 26 53 225

Idea 3G

Rs.1250 (10 GB)

PC / Tablet (Rs.) 139 352 64 188 7 21 11 31 44 188

Smartphone (Rs.) 59 104 55 132 6 15 9 22 44 188

Jio 3G Rs.400 ( 20 GB)

PC / Tablet (Rs.)

22.3 56.3 10.2 30.1 1.1 3.3 1.7 5.0 7.0 30.0

Jio 3G Rs.400 ( 40 GB) 11.1 28.1 5.1 15.1 0.6 1.7 0.9 2.5 3.5 15.0

Jio 3G Rs.400 ( 60 GB) 7.4 18.8 3.4 10.0 0.4 1.1 0.6 1.7 2.3 10.0

Jio 3G Rs.400 ( 20 GB)

Smartphone (Rs.)

9.4 16.6 8.8 21.1 1.0 2.3 1.5 3.5 7.0 30.0

Jio 3G Rs.400 ( 40 GB) 4.7 8.3 4.4 10.5 0.5 1.2 0.7 1.8 3.5 15.0

Jio 3G Rs.400 ( 60 GB) 3.1 5.5 2.9 7.0 0.3 0.8 0.5 1.2 2.3 10.0

Tata Sky

Channel name Sony Six Sony Six

HD

Zee

Cinema

Zee

Cinema HD Colors Colors HD

CNBC-TV

18

CNBC-TV

18 HD Star Plus

Star Plus

HD

A-La-carte (Rs.) 50 75 20 45 20 45 10 100 20 45

Rio rate (Rs.) 14.7 35 5.83 30 8.99 50 3.82 40 7.87 25

UltraTech Cement CMP

Rs. 3410

Target

Rs. 3600

Rating

ADD

UltraTech Cement published its FY16 annual report and we present below the key takeaways:

Grey Cement Volumes and realisations: UTCEM’s grey cement volumes grew by 7% y-o-y to 48mt, implying capacity

utilisation of 75%. Volume growth is led by capacity expansion and pick up in government infra expenditure amidst tepid

real estate market. Realisations/t de-grew by 2% y-o-y led by sharp price fall in North and West markets in 2HFY16.

Other segments (White cement, wall putty and RMC) and Overseas operations: UTCEM’s white cement and wall putty

volume grew 7% vs 5% last year led largely by wall putty performance. UltraTech Cement Middle East subsidiary grew

profit by 24% to Rs1.1bn (contributing 5% to consol revenue) led by higher capacity utilization of more than 100% (116% in

Q4FY16) and contained cost inflation.

Cost inflation: UTCEM’s total cost/t declined 3% y-o-y vs. five year CAGR of 10% led by lower energy and freight cost.

Overall power and fuel cost/t declined 16% on account of softening in coal and petcoke prices, increase in petcoke

consumption and a reduction in energy consumption norms. Use of pet coke in kilns rose from 52% to 70% this year and

company commissioned 26 MW of WHRS, pegging the total WHRS capacity at 59 MW(Contributing around 5-6% to

company’s total power requirement).

Capex: UTCEM has ploughed Rs 20bn into the business in FY16 and added 6.2mt grinding capacity (4.5mt in Jhajjar,

Haryana and Dankuni in West Bengal and 1.6mt in Pataliputra, Bihar) , resulting into total capacity of 66.3mt in India. Also,

company has increased WHRS capacity from 26MW in FY15 to 59MW this year. Company has signed definitive agreement

with Jaiprakash Associates Limited to acquire its plants with total capacity of 21.2mt in MP, UP, Himachal Pradesh,

Uttarakhand and Andhra Pradesh, leading to total capacity of 97.5mt in India.

Cash generation and debt re-payment: UTCEM generated operating cash flows to the tune of Rs.43bn vs. Rs. 41bn in

FY15. This was due to combination of improvement in EBITDA and lower working capital requirements. Inventory as % of

sales decreased to 10% vs 12% last year on lower price of fuel/packing materials. UTCEM generated free cash flows post

interest payments to the tune of Rs. 18bn. This has resulted in debt re-payment of Rs. 16bn in FY16. Net leverage currently

stands at 0.05x vs 0.14x in FY15.

Valuation and view: We value UTCEM based on 15x FY18E EBITDA, which is ~20% premium to last three year average.

We believe UTCEM deserves premium valuations due to superior volume growth, margin expansion led by cost saving

initiatives and balance sheet strength. At CMP, the stock trades at 14x FY18E EV/EBITDA and $210/t leaving very little

comfort from risk to reward perspective. Further, the stock is up 20% on YTD basis factoring in pick up in volumes and Jaypee

deal. As a result , we would wait for a better entry point. Maintain ADD rating.

“BIG ON GROWTH” through capacity expansion and higher utilisations


1m 3m 12m

UTCEM 6 7 17

Sensex 1 7 -3

Date July 01, 2016

Market Data

SENSEX 26999

Nifty 8287

MC IN UTCEM IN

Shares o/s 274mn


52-wk High-Low Rs. 3454-2579




Promoters 62.7

Institutions 25.9

Public 11.4

Annual Report Analysis and

Company Update

GIRISH CHOUDHARY [email protected] +91 44 4344 0021

GAURAV NAGORI CFA [email protected] +91 44 4344 0072

Standalone financial summary

Year Revenues EBITDA Adj. PAT EPS EV/EBITDA EV/ton (Rs/t)

FY15 229,362 41,950 20,147 73.4 22.3 15,558

FY16E 241,074 46,161 21,747 79.2 20.2 14,055

FY17E 269,360 53,897 26,761 97.5 17.0 13,823

FY18E 306,266 63,662 33,133 120.7 14.2 13,679

All figures in Rs. mn, except EPS, which is in Rs.

Page 118


Rs. 3410

Target

Rs. 3600

Rating

ADD

Year 2012 2013 2014 2015 2016

Domestic

Capacity(In mt) 48.8 50.9 54.0 60.2 66.3

Capacity

Addition (In mt) 0.0 2.2 3.1 6.2 6.2

Region NA

Commissioning of the

cement grinding Unit at

Hotgi, Maharashtra with

capacity of 1.55mt.

Upgrading of grinding

capacity at Gujarat

Cement Works by 0.60mt.

Commissioning of grinding

unit of 1.5mt capacity at

Rajashree Cement,

Karnataka.

1.6 MMTPA cement mill at

Jharsuguda

Cement Works in Odisha.


unit of 1.4mt capacity at

Rajashree Cement,

Karnataka.

Acquisition of the Gujarat

Units of Jaypee Cement

with 4.8mt capacity


unit

4.5mt in Jhajjar, Haryana

and Dankuni in West

Bengal

1.6mt in Pataliputra, Bihar

UTCEM’s evolution from 0.5mt capacity in 1983 to India’s largest cement company

1983

First cement plant.

Capacity: 0.5 mtpa

1998

Group consolidation.

Capacity: 8.5 mtpa

2004

Acquired L&T

Cement Ltd.

Capacity: 31 mtpa

2008-10

Greenfield projects, brownfield

expansions, debottlenecking.

Capacity: 48.8 mtpa

2010

Acquired Star Cement.

Capacity: 51.8 mtpa

2015

Acquisition in Gujarat.

Capacity: 63.2 mtpa

2016 Greenfield/brownfield

expansion. Capacity: 67.7

mtpa (including 3 mtpa

overseas)

Future

Acquisition of

Jaiprakash

associates

capacity of

21.2mt:

91.1mtpa(87.5

mtpa domestic)

1982 1998 2000 2002 2004 2006 2008 2010 2014 2016

Capacities additions in last 5 years

Making of a “GIANT”

Page 119


Rs. 3410

Target

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Rating

ADD

Ultratech cement Capacity Snapshot

Capacity UOM Current

Grey Cement - Domestic Mtpa 66.3

- Overseas Mtpa 3.0

White Cement Mtpa 0.7

Wall Care Putty Mtpa 0.8

RMC Mn. Cub. Mtr 12.5

Captive Power Plants In MW 717.0

WHRS + Wind Mill + Solar In MW 63.0

Plants & Terminals

Grey Cement (Composite Plant) Nos. 12

Clinkerisation Plant (Overseas) Nos. 1

Grinding Units (Overseas- 4) Nos. 19

White Cement & Putty Nos. 2

RMC Plants Nos. 99

Bulk Terminals Nos. 7

Post Jaypee acquisition, UTCEM to have 91.1mt capacity

Current UT Cap. Share

in Industry

Post

Acquisition

North 19 13% 23.8

Satna Cl. - - 11.4

East 10.4 16% 11.4

West 20.4 38% 20.4

South 15.5 11% 20.5

All India 66.3 16% 87.5

Overseas 3 3.6

Total 69.3 91.1

UT Capacity Mix Post Jaypee Acquisition

North 28%

Satna Cl. 13%

East 13%

West 23%

South 23%

UTCEM Capacity at a glance

Page 120


Rs. 3410

Target

Rs. 3600

Rating

ADD

Capacity Utilisation trends


White cement and wall putty volumes grew at 7%


#1. UTCEM volume growth at 7%, higher than industry growth of 4-5%

Exports as % of total volumes remain sub 2%


Blended volume growth stood at 7% vs industry growth of 4% in FY16


40.5 41.7 41.7 42.6 46.1

49.3 3%

0%

2%

8%

7%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

30

35

40

45

50

55

FY11 FY12 FY13 FY14 FY15 FY16

Volumes in mt % growth

48.8 48.8 50.9 54.0

60.2 66.3

92%

81% 81% 78%

77% 75%

60%

65%

70%

75%

80%

85%

90%

95%

30

35

40

45

50

55

60

65

70


Capacity in mt Capacity utilisation %

0.64

0.93 1.02

1.17 1.23

1.31

44%

10% 14% 5%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4


White cement and wall putty volumes (mt) % growth

1.90

1.49

1.07 0.86 0.90 0.84

5%

4%

3%

2% 2% 2%

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

5%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


Exports (Clinker+Cement) in mt Exports as % of total volumes

Page 121


Rs. 3410

Target

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Rating

ADD

EBITDA/t trend


….whereas Cost/t saw 3% decline due to low power and fuel cost


Blended realizations fell by 2% in FY16 on tepid demand….


696 9

59

1,0

84

895

910

937

-27%

38%

13%

-17%

2%

3%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

200

400

600

800

1000

1200


EBITDA/t (Rs) % growth

3,0

22

3,3

99

3,7

20

3,8

61

4,0

68

3,9

55

20%

12% 9%

4% 5% -3%

-5%

0%

5%

10%

15%

20%

25%

2000

2500

3000

3500

4000

4500


Cost/t (Rs) % growth

3,7

17

4,3

58

4,8

04

4,7

56

4,9

78

4,8

92

7%

17%

10%

-1%

5% -2%

-5%

0%

5%

10%

15%

20%

2000

2500

3000

3500

4000

4500

5000

5500


Blended realisations/t (Rs) % growth

Revenue growth came in at 5% on lower realizations


131

182 200 203

229

241

38%

10%

1%

13%

5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

50

100

150

200

250

300


Revenue in Rs bn % growth

#2. EBITDA/t aided by lower cost inflation amidst lower realizations in FY16

Page 122


Rs. 3410

Target

Rs. 3600

Rating

ADD

Freight outward costs/t up 1% y-o-y on lower fuel prices but increase in

rail freight costs arrested overall gain


Raw material costs/t up 1% yoy


Rail and Road mix for UTCEM


Limestone cost has inched upwards due to DMF levy


511

571

670 683

712

721 8%

12%

17%

2% 4%

1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

100

200

300

400

500

600

700

800


RM consumed(/t) % growth

147

136

172

168 202

215

5%

-8%

26%

-2%

20%

6%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

50

100

150

200

250


Limestone cost(/t) % growth

725

800

909

961

1,0

24

1,0

37

19%

10% 14%

6% 7%

1% 0%

5%

10%

15%

20%

25%

0

200

400

600

800

1000

1200


External freight cost(/t) % growth

36% 34% 34% 29% 28%

61% 63% 62% 67% 69%

3% 3% 3% 4% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Sea Road Rail

#3. UTCEM’s freight mix inclined towards road transport in last 5 years

Page 123


Rs. 3410

Target

Rs. 3600

Rating

ADD

Power and fuels cost/t declined by 16% on back of lower fuel cost


Petcoke usage stood at 70% in FY16


Power mix- Total WHRS capacity of 59MW as of FY16. WHRS power

costs 1/6th of TPP power


78% 79% 81% 82% 82%

0% 0% 0% 2% 5%

22% 21% 19% 16% 13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Others WHRS TPP

44% 35%

26% 26% 20%

26% 38% 48% 52% 70%

30% 27% 26% 22% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Ind Coal and others Petcoke Imported coal

Power consumption per ton of cement has been declining consistently


884

1,0

33

1,0

32

970

1,0

29

861

25%

17%

0%

-6%

6%

-16%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

200

400

600

800

1000

1200


Power and fuel cost(/t) % growth

82

81

81

81

80

78

70

72

74

76

78

80

82

84


Power consumed (Kwh per ton)

#4. UTCEM’s petcoke usage stands at 70% vs 52% in FY15

Page 124


Rs. 3410

Target

Rs. 3600

Rating

ADD

OCF to EBITDA


Consistently adding land for future brownfield expansion and

acquiring mining rights


Strong free cash flow in last 3 years


20

35 36

32

41 43

25

40

45

38

42

46

10

15

20

25

30

35

40

45

50


OCF in Rsbn EBITDA in Rsbn

Last 5 year cumulative

OCF : 187 bn

EBITDA: 210 bn

Capex of Rs 21bn in FY16 in commissioning of grinding units and

WHRS


11.9

31.4 32.7

22.3

25.8

20.5

0.1

5.1

10.1

15.1

20.1

25.1

30.1

35.1


Capex in Rsbn

8 1 1 7 10 18

60%

4% 4%

32%

47%

81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

2

4

6

8

10

12

14

16

18

20


FCF in Rsbn FCF conversion

Last 5 year cumulative

FCF : 36 bn

Net Income: 114 bn

9 12 15 20 31 35

8%

10%

12%

13% 15%

15%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

5

10

15

20

25

30

35

40


Total Land in Rsbn Land cost as % of total asset

#5. Strong operating and free cash flow generation in last 3 years

Page 125


Rs. 3410

Target

Rs. 3600

Rating

ADD

Strong balance sheet with negligible leverage


Usage of cash in last 4 years (FY13-FY16)

Note: All Figures in Rs.bn; Source: Spark Capital Research

Return ratio trends


18%

21%

19%

13%

11% 11%

19%

23% 24%

17%

14% 13%

5%

7%

9%

11%

13%

15%

17%

19%

21%

23%

25%


ROE% ROCE%

5 4 6 1 27 10

0.05

0.03 0.04

0.00

0.14

0.05

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0

5

10

15

20

25

30


Net Debt in Rsbn Leverage

1.9

171.5

19.2

101.3

1.4 18.2 0.2

11.2 0.1

22.4

Cash and Eqv (2012)

EBITDA Change in WC Capex Debt raise (net repayment)

Interest paid Capital raise (net of buyback)

Dividend Misc Cash and Eqv (2016)

Operating Cash Flow

of Rs. 152bn

Free Cash Flow

of Rs. 51Bn

Free Cash Flow Post

Debt Repayment & Interest

Expense of Rs. 38bn

#6. Prudent cash management and capital allocation

Page 126


Rs. 3410

Target

Rs. 3600

Rating

ADD Corporate Governance

Non Executive directors remuneration details

Name of Director Category of Directorship

Sitting

fees

(Rs mn)

Remuneration(

Rs mn)

% increase in

remuneration

in the financial

year 2015-16

Ratio of remuneration of each

Director/ to median

remuneration of employees

# of shares % of Total

Shareholding

Kumar Mangalam Birla Chairman and Non-Executive Director 0.31 190.4 - 355.1 14,065 0.005%

Mrs. Rajashree Birla Non-Executive Director 0.1 10.6 - 19.7 41,701 0.015%

Arun Adhikari Independent Director 0.31 1.1 7.6 2.1 - -

R.C. Bhargava Independent Director 0.54 3.3 17.9 6.2 129 0.000%

G.M. Dave Independent Director 0.6 2.3 15.2 4.2 - -

Rajiv Dube Non-Executive Director 0.32 0.1 - 0.2 - -

Mrs. Sukanya Kripalu Independent Director 0.35 1.3 NA 2.3 - -

S. B. Mathur Independent Director 0.25 1.1 3.5 2.1 57 0.000%

S. Rajgopal Independent Director 0.17 0.5 NA 0.9 - -

Mrs. Renuka Ramnath Independent Director 0.18 0.9 - 1.6 - -

D.D. Rathi Non-Executive Director 0.41 0.1 - 0.2 2,515 0.001%

O. P. Puranmalka Managing Director Nil 91.3 23.1 170.3 11,832 0.004%

Dilip Gaur Deputy Managing Director Nil 35.3 NA 65.9 - -

Atul Daga Chief Financial Officer NA 14.6 NA NA NA NA

S. K. Chatterjee Company Secretary NA 8.7 14.1 NA NA NA

Comparison of Key personnel's remuneration with employees

The median remuneration of employees of the Company during the financial year was Rs. 0.54mn

Increase in the median remuneration of employees 13%

Average increase in remuneration during 2015-16 9%

Increase Company’s Profit after Tax 8%

Increase in total remuneration of Key Managerial Personnel 17.7%

Page 127


Rs. 3410

Target

Rs. 3600

Rating

ADD

Contingent Liabilities

Claims not acknowledged as debts in respect of matters in appeals 2013 2014 2015 2016

Sales-tax / VAT Matters 1400 1670 3060 3165

Excise Duty and Service Tax Matters 3740 4320 7260 8781

Royalty on Limestone/ Marl / Shale 2190 2340 2950 3141

Customs 20 1140 1220 1260

Others 2290 2540 3260 5143

Total 9650 12,010 17,740 21,490

Percentage of Net Worth 0.6% 0.7% 0.9% 1.0%

Corporate Guarantees

Purpose (Amount in Rsmn) 2013 2014 2015 2016

Bhaskarapara Coal Co. JV 40 40 40 40

UltraTech Cement Middle East Invt and its subsidiaries 24,271 31,457 30,413 16,603

Jaiprakash Associates - - - 5,000

Madanpur (North) Coal Company JV 36.5 36.5 - -

UltraTech Cement Lanka (Private) Limited


UltraTech Cement Middle East Investments Limited


164

270

231 255

0.61%

1.22% 1.10% 1.10%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

-

50

100

150

200

250

300

FY13 FY14 FY15 FY16

Rs. M

n

UTCEM's share in PAT % of consolidated profit/loss

215

504

907

1124

0.80%

2.28%

4.32% 4.90%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

200

400

600

800

1000

1200

FY13 FY14 FY15 FY16

Rs. M

n

UTCEM's share in PAT % of consolidated profit/loss

Subsidiary details

Page 128


Rs. 3410

Target

Rs. 3600

Rating

ADD Financial Summary

Page 129

Page 130

SPARK RESEARCH

01 July 2016

Spark Disclaimer

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time.

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Absolute

Rating

Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year

horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year

horizon SELL Stock expected to fall >10% over a 1-year horizon

Spark Disclaimer (1/2)

Page 131

SPARK RESEARCH

01 July 2016

Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,

Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement AL TPW, YES CIFC, IDFC, ICEM,

INFO, ITC, NHPC, PTC Others

Analyst financial interest in the company No Yes No No

Group/directors ownership of the subject company covered No No Yes No

Investment banking relationship with the company covered Yes No No No

Spark Capital’s ownership/any other financial interest in the company covered No No No No

Associates of Spark Capital’s ownership more than 1% in the company covered No No No No

Any other material conflict of interest at the time of publishing the research report No No No No

Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in

the last twelve months:

Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No No No No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No No No No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject

Company; No No No No

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research

analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

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