TV 18 Broadcast Limited

Initial Recommended Price – 26 ( July 2014 )

Current Price – 33.5

Present Recommendation – Accumulate / Add More ( Oct 2015 )

Long Runway Ahead For Television Media Players

Estimated at 47000 crore in 2014, India’s television industry is expected to grow at a CAGR of 15.5 per

cent to reach 97000 crore in 2019.

Subscription revenue growth, at an annualized growth rate of 16 per cent, is expected to outpace the

growth of advertising revenue (14 per cent) on account of improving monetization due to digitization. With

the number of TV households in India increasing to 16.8 crores in 2014, TV penetration stands at 61 per

cent.

61% of all households in India are now equipped with a television making us the second largest TV

viewership market after China. With digitization, subscription revenues in urban and rural areas are

growing, resulting in a healthy impact on the industry. Subscription, digitization led growth is going to be

substantial.

Additional subscription revenues will accelerate

going forward, as phase III & phase IV digitization

is implemented. Channels with leadership & good

content quality will have the pricing power as

there will be more transparency in viewership

data.

The new era of subscriber-based viewership on TV will ensure that only the most innovative and relevant

channels will find their place in the individual bouquet that the subscriber pays for. This will increase

competition and will lead to consolidation with strong content players gaining significant competitive

advantage.

Why TV 18 Present Across All Categories

TV 18 is has an established bouquet of channels with most of its channels close to maturing. And they

are present in each category;

• National & Regional News – CNN-IBN, IBN7, ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand,

ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV

Kannada News, ETV Oriya News & ETV Haryana / Himachal Pradesh, IBN Lokmat

• Content Distribution – Indiacast

• Movies – Viacom 18 Motion Pictures

• Music – MTV, VH1

• Kids Entertainment – Nick, Nick Jr.

• Entertainment Channels – Colors ( national & regional both ), Rishtey, Colors Infinity, Sonic,

Comedy Central,

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

Company Brands Stake / Holding

AETN18 Media History 100%

Indiacast Media Distribution Private Limited*

Content Distribution & Monetization 50 : 50 Joint Venture with Viacom

Panorama Television Private Limited

ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand, ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV Kannada News, ETV Odia News & ETV Haryana / Himachal Pradesh

100%

Prism TV Private Limited

Colors Bangla, Colors Marathi, Colors Kannada, Colors Odia & Colors Gujarati.

50% ( In august 2015, Viacom picked up the remaining 50% stake from Reliance at 950 crores )

IBN Lokmat News Private Limited*

IBN Lokmat 50 : 50 Joint Venture With Lokmat

Viacom 18 Media Private Limited*

MTV, Colors, Rishtey, MTV Indies, Nick , Nick Jr., Sonic, VH1, Comedy Central, Colors Infinity, Viacom 18 Motion Pictures ( movie production )

50 : 50 Joint Venture With Viacom

TV 18 Broadcast

CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn, News18

100%. (Pays royalty to parent brands.)

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

One Of The Top 3 Players. Benefits From Scale.

Big channels with regional edge & scale are likely to do far better than small channels. TV 18 stands out

to be the 3rd largest national network in India post amalgamation of all its subsidiaries.

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

As most of TV 18’s channel are maturing, they can start monetizing viewership’s & should be able to fetch

better advertisement rates. Matured channels like CNBC already doing well, while colors bouquet is

rapidly marching ahead.

12 Minutes Cap On Advertising & Pricing Power Game To Benefit Big Channels

In TV advertising industry monetization of viewership happens after a lag. Channels usually monetize

their inventory after leadership is established.

Advertising is capped at 12 minutes per hour by as per the new guidelines. This affects ability of media

channels to have flexibility in their inventory. Only those channels with strong viewership shall command

pricing power. Small channels with weak viewers will be squeezed out further. Whatever advertisement

growth comes going forward, will come in the form of increased pricing by established channels.

So now the game of pricing is the only thing that's left, there is no more room for inventory or significant

inventory growth at least in advertisement revenues. New advertisement growth is below 15%. This only

hurts smaller channels. And benefits big ones. How many number of channels will mature & start

monetizing, will decide the revenue growth going forward.

BARC Ratings

Broadcast Audience Research Council ( BARC ) and TAM, rating agencies for TV channels in India have

merged during 2015. Their ratings are going to be the only currency to measure viewership & ratings of

media networks; this will further put leading channels in a better position as they are able to negotiate

higher advertising rates.

Entry Barriers For New Players & Competitive Advantage For Existing Players

Media is a very high fixed cost business. The gestation period is extremely high. It will be extremely

difficult for newer channels to be launched & start competing against the big guys for gaining viewership.

Regional TV To Drive Growth

Today, with TV going regional, language preferences have changed, giving birth to a range of regional

channels with local programming. Channels with strong regional presence are going to perform well over

the years. TV 18 has a significant presence in hindi speaking belt via ETV. It also has strong presence in

Maharashtra, Karnataka, Rajasthan & Gujrat.

All Write-Offs Are Complete & Won’t Occur Again

During the year 2014-15, the TV18 Group companies made one-time adjustment to the profit and loss

account to the tune of 233.3 Crores. This adjustment will not impact future operating profit and cash flows.

Bad debts & obsolete assets worth 180 crores were written off across the group. 53-54 crores was

accounted as accelerated depreciation & written off accordingly.

History : During 2012 to 14 period, Reliance group acquired ETV Channels & Network 18 ( parent

company of TV 18 broadcast limited by infusing close to 4000 crores ). These transactions were done via

subsidiaries namely, Equator Holding, Shinnao Retail & Independent Media Trust. As amalgamation of all

channels & balance sheet cleanup is underway, the company made onetime write-offs & adjustments

during last year. These are onetime write-offs that impacted profitability during 2014-15. Now the

company shall post normalized earnings.

Ecommerce, FMCG & Consumer Durables To Consume Most Advertising Inventory

E-commerce continues its growth path and these have been the dominant growth drivers for the industry

in 2014-15. FMCG’s are cutting TV budgets & increasing share to online ad spends. Inefficient spend will

be cut & they will spend only on high quality TV content. This again hurts small channels with low

viewership.

Phase-I & Phase-II A Pricing Game, Phase-III & Phase-IV To Boost Subscription Revenues

Phase-I, Phase-II digitization has happened & it’s an inventory pricing game with subscription revenue

growth maturing. Phase III & Phase IV digitization where semi-urban & rural areas are going to be

covered, will drive the subscription revenues as more MSO’s / Cable Operators come on board.

Write-offs include bad debts, movie copyrights & obsolete assets worth 180 crores & nearly 54 crores as accelerated depreciation

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

Total Income

Operating Profits

Net Profits

Write- Offs

Operational Performance Of The Company & Subsidiaries ( excludes minority interest & associate companies )

Company Brands 2014 2015 2014 2015 2014 2015 2014 2015 AETN18 Media History 27 51.87 2.8 8.5 -13.6 -6.29 - -

Indiacast & others

Content Distribution & Monetization NA 210 NA 9.95 NA 0 - -

Panorama Television

ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand, ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV Kannada News, ETV Oriya News & ETV Haryana / Himachal Pradesh

146 187 66.6 6 40 -1 - -12.4

Prism TV

Colors Bangla, Colors Marathi, Colors Kannada, Colors Oriya & Colors Gujarati

269 343 -120 -38 -126 -134 - -95

IBN Lokmat IBN Lokmat 13 18.20 0.74 5.05 -0.5 3.8 - -1.35

Viacom 18

MTV, Colors, Rishtey, MTV Indies, Nick , Nick Jr., Sonic, VH1, Comedy Central, Colors Infinity, Viacom 18 Motion Pictures ( movie production )

818 940.40 87.5 137.5 34.2 84.20 - -

TV 18 CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn, News18 531 620 130 175 59.5 14.6 -27.4 -121

Total 2000 2370 243 303 85 -38 -27.4 -234

Combination Of Revenue Growth & Margins Expansion Going Forward

Revenue ( Crores )

Revenue Growth

Operating Profits

( crores)

Operating Margins

Margin Growth

Company Brands 2014 2015 2014 2015 2014 2015 AETN18 Media History 27 51.87 92% 2.8 8.5 10.37% 16.39% 58.02%

Indiacast & others

Content Distribution & Monetization NA 210 NA NA 9.9 NA 2% -

Panorama Television

ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand, ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV Kannada News, ETV Oriya News & ETV Haryana / Himachal Pradesh

146 187 28% 66.6 6 45.62% 3.21% -92.9%

Prism TV

Colors Bangla, Colors Marathi, Colors Kannada, Colors Oriya & Colors Gujarati

269 343.00 27% -120 -38 -44.61% -11% 75.1%

IBN Lokmat IBN Lokmat 13 18.20 40% 0.74 5.05 5.69% 27.75% 387.4%

Viacom 18

MTV, Colors, Rishtey, MTV Indies, Nick , Nick Jr., Sonic, VH1, Comedy Central, Colors Infinity, Viacom 18 Motion Pictures ( movie production )

818 940.40 16.2% 87.5 137.5 10.6% 14.40% 35.8%

TV 18 CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn, News18

531 620 16.7% 130 175 24.5% 28% 14%

Total 2000 2370 18% 243 303 12.15% 12.78% 5.2%

Fixed cost component is over. As revenues grow, margins will expand disproportionately. We expect

operating margins to expand towards 20%+ levels on consolidated basis over the next 2 years.

Margin expansion is likely to be faster than the revenue growth, which shall result in accelerated earnings

growth.

History & Lokmat : History has gained 20% market share in factual entertainment space & margins have

improved significantly from 10.3% o 16.3%. Expect these margins to reach 25% range in a couple of

years as most of fixed cost part is over & depreciation rate goes down. Revenue growth should be around

30% going forward.

Lokmat has gained 27% market share & is at no 3 spot in Marathi news category. The business has

stabilized & operating margins have improved from 5% to 27%. Expect margins to expand further along

with revenue growth of 30%+.

CNBC & IBN : Impressive operating profit margins of around 28% & strengthening further. Expect

revenue growth to be around 16 to 18% on the back of strong pricing as financial markets continue to be

vibrant.

• CNBC : 50% market share ( ET now is growing fast & eating into market share. It recently toppled CNBC as the

market leader in September 2015. )

• CNBC Awaaz : 60% market share

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

• CNN-IBN : 25% market share ( need to watch out, its losing its market share to headlines today & ndtv )

• IBN 7 : Not doing well. Is on 8th slot with less than 5% market share

Panorama Television : Top market share in Rajasthan & Bihar / Jharkhand while on 3rd & 4th position in

other markets. Total reach to 11 crore viewers.

During the year, more than 540 employees were transferred from Prism TV to Panorama. As a result,

employee cost went up from 30 crore to 61 crores. There is a new expense under of 40 crores under

“cable TV charges” & looks like a inter-group transaction towards Indiacast. There is a lack of clarity on

this front.

With revenue growth to be more than 20%, it should post operating margins of around 16-18% in

FY2016. And eventually move towards 25%.

Prism TV : Recently TV 18 rebranded 5 regional channels, erstwhile ETV as Colors channels. For this

same reason, higher expenses occurred during first quarter of FY2016, and results were flat. It was a

onetime expense.

Prism TV operational loss narrowed down from -120 crores to -38 crores. As revenue growth is expected

to continue to be more than 20%, it should breakeven or post marginal operation losses for the

current financial year, i.e. FY2016. Worst is behind for this particular division & we see speedy margin

recovery going forward.

• Colors Marathi : Gained no 2 slot with more than 30% market share during 2015.

• Colors Gujrati : Only gujrati GEC channel with more than 30% market share.

• Colors Kannada : Gained top slot & is no 1 kannada channel with 35% market share during 2015.

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

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

Viacom 18 : Viacom 18 is a 50 : 50 joint venture between Viacom Inc. & TV 18. Revenue growth is

impressive at around 14-15%. During 2015, operating profit margins jumped from 10.7% to 14.4%.

Margins are expanding as fixed cost component is over & there are no major expenses apart from

programming expenses. We see margins going towards 22-24% range over the next 3 years &

improvement towards 18% during present financial year FY2016 along with conservative revenue growth

of 14-15%. Colors will be the main growth driver going forward.

• Colors : Gained no 1 slot in September 2015. More than 20% market share. Successfully

dislodged Star & Zee from top spots.

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

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

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

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

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

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

Emergence Of 4G, Smartphone’s & Broadband

The emergence of 4G play and the possibility of watching video content on Smartphone handsets is a

game changer that will trigger cross platform mobility of content viewing. It will give rise to the format of

‘short duration content’ that can be consumed effortlessly on mobile, and will open up yet another channel

for distribution of news, entertainment, as well as digital content.

• It is very unlikely that the long form television content will have any threat in visible future from

Smartphone’s. Rather it will create an opportunity to monetize in terms of short form content.

• Penetration of broadband opens up possibilities of pay per view model, which is again good for

entire industry as a whole.

• Long-form content is still being consumed largely on television but Short-Form content like

watching a music video or short clips is what people can easily consume on their smart devices.

• It is highly inconvenient to watch long-form content on a small device including the data cost itself

is very prohibitive.

Margin Expansion In Media Companies Happens As Channels Mature

2011 2012 2013 2014 2015 Comments

Sri Adhikari Brothers : Breakeven Phase As channels breakeven, operating margins shot up from 3% to 28%.

Operating Profit Margin (%) 3.02 5.89 24.45 26.86 28.01

Adjusted Net Profit Margin (%) -23.18 -17.18 0.73 3.06 3.77

Return On Capital Employed (%) 0 0 6.37 8.67 10.34

Return On Equity (%) 0 0 0.83 3.08 4.36

TV Today : Growth Phase Post Breakeven period As channels stabilized, operating margins improved from 12% to 32%. Net profit margins & return on equity saw substantial growth.

Operating Profit Margin (%) 12.07 10.34 13.42 31.07 32.4

Adjusted Net Profit Margin (%) 4.23 3.41 3.91 15.75 17

Return On Capital Employed (%) 5.87 5.27 5.32 23.98 28.32

Return On Equity (%) 4.4 3.64 3.8 17.43 19.55

Zee Entertainment : Stable High Margin Business Post Growth Period Zee’s entire channels profile is mature & growth comes mainly via advertising rates i.e. pricing power.

Operating Profit Margin (%) 39.83 34.29 38.24 39.54 37.13

Adjusted Net Profit Margin (%) 26.56 22.22 24.97 25.11 24.28

Return On Capital Employed (%) 28.91 24.76 29.84 32.06 28.14

Return On Equity (%) 20.14 16.6 20.19 28.8 31.45

CNBC channels have matured. Viacom / History / Lokmat / ETV are in high growth phase. Regional colors channels are breaking even in FY2016 & are ready to grow now.

TV 18 Broadcast : Mix Of Matured & High Growth Period

Operating Profit Margin (%) 6.85 1.67 9.17 12.35 12.08 Adjusted Net Profit Margin (%) -2.15 -6.82 -2.49 4.35 -1.66Return On Capital Employed (%) -4.22 -14.3 -2.14 2.56 -1.12Return On Equity (%) 3.66 2.03 4.16 4.14 0.78

Approximate Estimates Of Present Channel Portfolio For FY2015-16

Revenue Operating

Profits ( crores )

Operating Margins Revenue

Operating Profits

( crores )

Operating Margins

Company Brands 2014-15 2015-16 AETN18 Media History 51.9 8.5 16.4% 72 ~14 20%

Indiacast & others Content Distribution & Monetization 210.0 20.5 9.7% 260 ~25 10%

Panorama Television

ETV Rajasthan, ETV Urdu, ETV Bihar / Jharkhand, ETV Uttar Pradesh / Uttarakhand, ETV Madhya Pradesh / Chhattisgarh, ETV Bangla News, ETV Kannada News, ETV Odia News & ETV Haryana / Himachal Pradesh

187.0 6.0 3.2% 220 ~10 5%

Prism TV Colors Bangla, Colors Marathi, Colors Kannada, Colors Odia & Colors Gujarati.

343.0 -38.0 -11.1% 270 ~-25 -10%

IBN Lokmat IBN Lokmat 18.2 5.1 27.7% 22 ~6 30%

Viacom 18

MTV, Colors, Rishtey, MTV Indies, Nick , Nick Jr., Sonic, VH1, Comedy Central, Colors Infinity, Viacom 18 Motion Pictures ( movie production )

940.4 142.0 15.1% 1100 170 15.5%

TV 18 Broadcast CNBC, CNBC-Awaaz, CNBC Bajar, CNN-IBN, Ibn, News18 620.0 159.0 28.1% 670 130 19%

Total 2370.0 303.0 12.8% ~2620 ~330 ~12.5%

Approximate Estimates On Consolidated Level Considering Todays Channel Portfolio

Projections 2016 2018 2020

Revenue 2620-2650 3500-3600 4700-4800

Operating Profits 310-330 870-900 1400-1500

Operating Margins 12 to 13% 24 to 25% 29 to 31%

Profit After Tax 160 to 180 540 to 580 1000 to 1050

PAT Margins 6.5%~ 14 to 16% 19 to 20%

EPS* 1 to 1.1~ 3.1 to 3.4~ 6 to 7~

Networth 3700~ 4600~ 6000~

Book Value 21.5~ 27~ 34~

Half Yearly Results For 2015-16

Consolidated Apr-Sept 2014 Apr-Sept 2015

Revenue 1081 1205

Other Income 18.6 21

Total Income 1099.6 1226

Expenses 1017 1178

Operating Profit 82.5 47.5

Finance Cost 26.8 25.5

Exceptional Item -223 -

Taxes 11.1 19.4

Net Profit -111 20.2

Standalone Apr-Sept 2014 Apr-Sept 2015

Revenue 279 259

Other Income 6.4 13.87

Total Income 285.4 272.87

Expenses 226 245

Operating Profit 59.4 27.87

Finance Cost 11.6 9.2

Exceptional Item -127 -

Taxes - -

Net Profit -79.7 18.7

Result Update :

1. From 1st Aug 2015, Prism TV numbers are recorded as Joint Venture & not as subsidiary ( viacom pickedup remaining 50% stake in Prism ). That means only 50% of earnings will be reported under TV 18 profit &loss account.

2. We have revised projections & estimates for 2015-16 in accordance with the changed accounting policy &poor half yearly results.

3. Long term view remains favorable, however looks like 2015-16 will not be a real comeback year. Earningswill be better in second half, but EPS is not likely to cross 1.2 to 1.4 in best case scenario. Any declinetowards 28-30 will be a good opportunity to add more.

Additional Notes :

• TV 18 holds 24.5% in Eenadu Television which owns ETV Telugu channels based out of Andhra

& Telangana. The original investment made for this acquisition was 450~ approximately & it is

being carried out in balance sheet at 471 crores as on date. TV 18 can either monetize this

investment by selling out in future or even acquire more stake and expand its footprint in Andhra

Pradesh going forward. There is no clarity or guidance given by the management on this front.

• Indiacast, the distribution & content division is breaking even since last 2 years. Revenue is

growing rapidly at around 40%+. There is no earnings visibility in Indicast as of now, however this

division will benefit the group overall as it keeps carriage & distribution costs low for its assets.

• Viacom 18 is a 50 : 50 joint venture between Viacom Inc, USA & TV 18. Numbers mentioned in

all reported numbers are 50% of what Viacom 18 numbers are.

Viacom 18 2013-14 2014-15 % Change

Revenue 1623.5 1887.8 16.27%

Other Income 12.5 4.2 -66%

Total Income 1636 1892 15.6%

Expenses 1550 1684 8.6%

Debt 545 303 -44%

Finance Cost 74.6 49.8 -33%

Operating Profit 174 275 58.4%

Operating Profit Margin 10.6% 14.4% 35.8%

Net Profit 69 168.4 144%

Net Profit Margin 4.2% 8.87% 111%

Equity 718 887 23.5%

ROCE% 8.8% 13% 47.7%

ROE% 9.7% 18.9% 94.8%

• Viacom 18 is emerging as a growth driver for the company going forward. Here is an interesting

article on why Viacom is increasingly betting on India & regional channels

http://www.wsj.com/articles/why-viacom-is-looking-to-india-for-a-new-tv-audience-1421724781

• Viacom acquired 50% stake in Prism TV from reliance in August 2015 & paid 950 crores. The

deal values Prism TV at around 1850-1900 crores. That gives it a valuation of approximately 5.6

times its 2014-15 sales. Prism TV is loss making & shall breakeven during present financial year.

TV 18 reports 50% of above numbers in its consolidated PL account.

There is a possibility that, Prism will be eventually merged with Viacom 18 to consolidate all

colors channels under one umbrella.

• If we apply same valuation metric i.e. sales to market cap for other profit making entities, Viacom

18 should be valued at 10500 crores ( effectively valuing TV 18’s stake in Viacom 18 at around

5300 crores ) & TV 18’s standalone operations should be valued at 3500 crores. Where in market

cap of TV 18 as on date is around 6000 crores.

• There is a lot of buzz around Reliance Jio, and its synergies with TV 18. We are not very

optimistic about it yet, as actual monetization of content via smart phones is not likely to happen

in the next 3 years at least. It may impact short form content like music, short videos etc. But can

not impact long form content. It will take considerable amount of time for TV 18 to benefit from 4G

& start earning additional revenues from there.

• The newly started English GEC Colors Infinity will add to Viacom18’s distribution arm, IndiaCast’s

muscle-power, when it comes to negotiating content deals with distribution platforms such as

multi-system operators and DTH players. It lacked the wider English entertainment spread that

some competing networks have had so far. While quite a few of Viacom18’s channels carry a

Hindi-English mix of programming such as MTV and Nick, it had only two under its only-English

category.

Why Buy At Present Valuations

• At 1.7 price to book, TV 18 is the most attractively valued electronic media company. As margin

profile increases along with group restructuring by way of amalgamation, write-offs & clean ups,

there will be more clarity going forward.

• Channels making losses, i.e. Prism TV channels are breaking even during current financial year.

As their earning starts contributing, EPS will move up rapidly.

• Recently Viacom 18 acquired 50% stake in Prism TV at valuations of 5.6 times sales even when

the company is yet to breakeven. By same valuation metric, TV18’s stake in Viacom 18 JV is

worth more than 5000 crores, while the entire company trades at 6000 crore market cap. In short

you are getting all other channels including CNBC for less than 1000 crores.

• In FY2016, the company is liley to post an EPS of 1.5 rs based on conservative estimates. The

stock trades at roughly 21 times FY2016 earnings. There is higher margin of safety here as stock

is fairly valued at this point of time.

• As earnings go up from present year, re-rating shall happen. It is next to impossible for any new

network to come in & set up from scratch. There are very high entry barriers. TV 18 has already

secured its place in top 3 national players along with Zee & Star. The business has the scalability

& potential to keep on growing for the next 5 to 7 years without spending heavy capital.

How Far It Can Go

• Zee which has national presence & enjoys mature margin profile, trades at 11 times book & 35

times earnings.

• TV 18 which has similar national presence as that of zee, & has the visibility to reach similar

scale, size & margin profile by 2020.

• Business model is such that it can continue to grow at 15 to 18% for next 5-7 years in a row. That

itself shall give it a large runway & can easily touch around 5000 crore revenue by 2020.

• The stock has the potential to trade at 8 to 10 times book value on normalized earnings. This

translates into a 50000 crore market cap company in another 5 to 7 years timeframe.

• This implies at least 5x upside in the stock over medium to long run. And even 10x upside if the

horizon is bigger.

What Can Go Wrong

• External technology disruption that will change the way we consume television media. Even if

disruption comes, the devices or medium will change. But basic demand for content will always

be there.

• The company slips into another financial stress cycle due to mis-management. With Viacom as a

50 : 50 JV partner, and Color’s bouquet being the growth driver, there are less chances of this

happening.

• TV 18 channels are not able to withstand competition & go down to the bottom in terms of ratings

/ viewership etc.

To sum it in one sentence we like TV 18 because it has;

High fixed cost business + Scalable business model + Entry barriers + Maturing Channels +

Viacom’s international scale & management.

And all of this available at 6000 crore market cap in a 2 trillion $ economy with ever growing

content consumption demand.

Financial Performance :

2009 2010 2011 2012 2013 2014 2015

Operational & Financial Ratios

Earnings Per Share (Rs) -5.14 -6.03 -0.73 -2.04 -0.15 0.61 0.26

Adjusted EPS (Rs.) -4.35 -5.2 -0.63 -1.76 -0.15 0.61 0.26

Book Value (Rs) 14.13 8.82 27.93 18.81 19.1 19.9 20.11

Dividend Pay Out Ratio(%) 0 0 0 0 0 0 0

Margin Ratios

PBIDTM (%) -24.03 -7.16 6.85 1.67 9.17 12.35 13.11

EBITM (%) -33.63 -10.25 4.68 2.08 6.71 8.13 1.32

Pre Tax Margin(%) -44.86 -18.14 -1.62 -6.41 -1.75 5.05 -0.75

PATM (%) -45.78 -18.15 -2.15 -6.82 -2.49 4.35 -1.66

CPM(%) -36.19 -15.07 0.02 -4.45 -0.02 7.18 0.07

Performance Ratios

ROA (%) -21.88 -13.86 -1.34 -5.36 -1.3 1.86 -0.8

ROE (%) -46.12 -53 -4.22 -14.3 -2.14 2.56 -1.12

ROCE (%) -19 -9.97 3.66 2.03 4.16 4.14 0.78

Net Sales Growth(%) 39.29 230.29 34.08 74.23 20.52 15.83 17.8

Financial Stability Ratios

Total Debt/Equity(x) 0.52 2.59 0.8 1.42 0.17 0.14 0.15

Current Ratio(x) 1.93 2.54 0.98 1.11 1.58 1.61 1.73

Interest Cover(x) -3 -1.3 0.74 0.24 0.79 2.64 0.64

Cash Flow

Cash Flow from Operations -14.99 -70.40 -185.02 -66.72 101.32 193.83 -109.98

Cash Flow from Investing activities -235.7 -174.13 -246.47 -16.87 -2040 -41.39 23.88

Cash Flow from Finance activities 243.9 457.73 367.96 -61.93 2109.8 -221.1 -39.306

Free Cash flow -34.55 -141.55 -221.51 -156.4 -19.65 139.38 -322.85

Profit & Loss / Balancesheet

P&L / Balancesheet Highlights 2009 2010 2011 2012 2013 2014 2015

Inc / Exp Performance

Sales 182.72 603.50 809.20 1409.86 1699.13 1968.13 2318.39

Total Income 195.71 658.87 822.73 1495.66 1742.99 2000.54 2369.74

Total Expenditure 239.63 702.08 767.30 1472.16 1587.14 1757.40 2065.87

PBIDT -43.92 -43.21 55.43 23.50 155.85 243.15 303.86

PBIT -61.45 -61.84 37.83 29.30 113.95 159.95 30.57

PBT -81.96 -109.49 -13.07 -90.41 -29.65 99.42 -17.28

PAT -83.66 -109.56 -17.40 -96.22 -42.24 85.59 -38.47

Cash Profit -66.13 -90.93 0.19 -62.69 -0.33 141.38 1.53

Sources of Funds

Equity Paid Up 35.83 36.33 47.56 72.42 342.33 342.33 342.87

Reserves and Surplus 217.39 132.83 616.64 608.68 2926.67 3064.27 3104.95

Net Worth 253.22 160.23 664.20 681.10 3269.00 3406.60 3447.83

Total Debt 130.85 471.95 550.73 964.63 550.40 490.33 501.18

Capital Employed 412.53 827.86 1239.13 1650.21 3822.89 3900.19 3949.02

Application of Funds

Gross Block 136.25 518.94 570.22 833.17 839.64 2794.97 2512.18

Investments 236.00 0.36 5.86 6.15 82.40 499.58 514.46

Cash and Bank balance 13.93 256.87 204.26 81.95 269.37 288.38 167.68

Net Current Assets 79.60 379.00 -13.81 119.70 564.08 670.76 810.72

Total Current Liabilities 85.31 246.43 653.51 1081.67 967.19 1091.55 1110.23

Total Assets 497.85 1083.22 1505.60 2082.93 4434.11 4792.83 4862.02

Stock trading in a range of 2o to 40 over the last 4 years. Any price between 30 to 36 is an excellent price range to accumulate the stock.

Disclaimer :

The information herein is used as per the available sources of bseindia.com, company’s annual reports & other public database sources. Alpha Invesco is not responsible for any discrepancy in the above mentioned data.

Future estimates mentioned herein are personal opinions & views of the author.

This report was prepared by Chetan Phalke of Alpha Invesco Research Services Limited – support@alphainvesco.com or call our support desk at 020-65108952.

SEBI registration No : INA000003106

Readers are responsible for all outcomes arising of buying / selling of particular scrip / scrips mentioned here in. This report indicates opinion of the author & is not a recommendation to buy or sell securities.

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