ZEEL ad growth will be in high single-digit for FY21: Punit Goenka

MUMBAI: Even as the Indian economy continues to face challenges, media conglomerate ZEEL expects the advertising growth to be in high single-digit for FY21. From tepid growth in the first two quarters, the company’s ad growth declined by 15.8% in Q3.

In Q3 FY20, ZEEL’s consolidated advertising revenue declined by 15.8% YoY to Rs. 1230.8 crore from Rs 1462.6 crore. The domestic ad revenue for the quarter declined by 15.7% YoY to Rs. 1157 crore compared to Rs. 1371.9 crore. The international advertising revenue for the quarter was Rs. 73.8 crore.

“So fiscal ’21, we are expecting it to be in high single-digit kind of scenario,” ZEEL MD and CEO Punit Goenka told analysts during the earnings conference call on being asked about his projection for advertising growth. He also said that ZEEL’s aim is to grow faster than the industry. “Our endeavor will always be to beat the industry. So that — we will stick to that.”

ZEEL head of corporate strategy Bijal Shah said that the media agencies are predicting high single-digit growth for the entire television industry. “But if you look at last year, we had two big sporting events, one was the World Cup plus, that was IPL. Next year, it will be only one. So for entertainment, it could be low double digits.”

She also stated that the launch of new channels will help ZEEL to grow faster in FY21. The company launched Zee Keralam in FY19. In the current fiscal, the company launched Zee Punjabi in addition to regional movie channels in Tamil, Kannada, and Bhojpuri.

“And this launch of new channels will also help us in the coming year. And on top of that, Kerala, which we launched in the last fiscal, so that has been consistently gaining market share. So that will also start adding to overall growth. So again, I mean, on the growth side, which was a market share-led growth-driven story. If we are able to improve, we should be able to grow ahead of the market. But we have a lot of levers to improve our market share in the coming year,’ Shah said.

She also stated that the pullback of Zee Anmol and Zee Anmol Cinema from DD Free Dish has led to a 450 basis point decline in the ad revenue. She also that degrowth due to pullback from DD Free Dish will not be there in FY21.

“And secondly, we are seeing some stabilisation in ad revenues as — in the last couple of months. And we think that we are quite hopeful of recovery to normal growth trajectory in the coming fiscal,” she said.

Goenka noted that the programming costs of the company will grow by 10-12% despite new channel launches. “So programming costs on the back of the new channels and ZEE5 combined will be in the region of 10% to 12% for us. And going forward, it’ll be pretty much in line with that.”

He also exuded confidence that the company will achieve a 30% operating profit margin. “So we are still in the process of finalising our plans for the next 3 years. I’ll be in a better position to guide you on margins to — at the end of the fourth quarter. But right now, for the fiscal, we are making all endeavors to reach the 30% mark. If you see our 9-month total, we are still at 31%, and therefore, there’s no reason to doubt that why we can’t achieve 30% this fiscal.”

Shah said that the launch of movie channels will not lead to a very significant increase in costs. Zee Punjabi will add to cost, but in the overall scheme of things, it’s very small. “And on the ZEE5 side, also, I mean, we are already reaching, in terms of number of shows, we have reached where we wanted to reach, around 70-plus shows in a year’s time. So there also, we don’t see much of an increase. So overall, I don’t see any step jump or a discontinuous increase in the programming cost.”

In his opening remarks, Goenka stated that even with a significantly lower stake that the promoter family now owns he will continue to work for the company as long as the shareholders’ desire. He also informed that the Board has appointed a reputed HR consultant to review and recommend his compensation structure and other terms of engagement in line with global best practices.

“As far as my team is concerned, we have not seen any churn in senior management over the past year. And I would like to assure everyone that I don’t foresee any significant management change in the near future as well,” he said.

Explaining the board structure, Goenka said that he will remain the sole representative of the promoter family on the Board of the company. Essel Group chairman Subhash Chandra will not be putting up his name for re-election in the next fiscal and will assume the position of Chairman Emeritus.

“To further strengthen the Board, new independent board members with expertise in the field of either media or technology will be inducted. This exercise is expected to be completed by the month of February. All these appointments will have to be ratified by the shareholders and will come up for the consideration at the forthcoming AGM,” he stated.

On the receivables from Dish TV and Siti Networks, Goenka said that the company has performed a detailed analysis of recoverability. Based on the assessment, the company has determined that the entire balance is good and collectible.

“As per the plan agreed with Siti Cable and Dish TV, the arrears will be cleared over 12 and 24 months, respectively. Consequent to the delay in payments, the company has taken an expected credit loss charge of INR 376 million during the quarter. The company will closely monitor the collection pattern from the said customers,” he noted.

Goenka also said that fiscal 2020 will be the last year of a disproportionate increase in inventory. “In fiscal 20 and 21, we expect that over 50% of PAT should be converted to cash, significantly improving the cash conversion ratio,” he said.

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