ZEEL - Zee Entertainment Enterprises Ltd. Share Price

Outlook by Management:
ZEE Entertainment's management remains cautiously optimistic, focusing on balancing growth investments with cost discipline. They anticipate gradual recovery in advertising revenues driven by improving consumption, hopeful for supportive measures in the upcoming Union Budget. Subscription growth is expected to sustain, aided by new pricing strategies (RIO), while digital (ZEE5) aims to narrow losses further. The company targets EBITDA margins of 18"“20% by FY26, leveraging operational efficiency and content investments.

Key Highlights:

1. Profitability & Cost Control: Successfully expanded margins YoY via cost optimization; strict fiscal discipline maintained.
2. Advertising Recovery: Muted FMCG spending impacted Q3, but rural recovery and retail focus may aid gradual rebound.
3. Subscription Growth: Up 8.2% YoY for 9M FY25; new RIO tariffs to drive growth after implementation.
4. Digital (ZEE5): Reduced EBITDA losses by Rs.107.8 Cr YoY; subscriber/watch-time growth despite delayed B2B deal renewal.
5. Content Investments: Strengthening Hindi/regional linear TV (e.g., Marathi, Tamil); movie slate lined up for Q4.
6. Financials: Strong liquidity (Rs.17 bn cash/investments); content inventory reduced by Rs.4.3 bn YTD.
7. Margins Target: Aiming 18"“20% EBITDA by FY26, balancing growth investments and cost prudence.
8. Risks: Q4 movie performance volatility; macroeconomic headwinds in urban ad markets.

Management remains committed to driving sustainable growth, prioritizing margin resilience and strategic content investments.

Question 1:
"Congrats on the margin expansion. My first question is on the movie production business and music rights business, choosing between the two for you as a Company. So, movie production business in FY"˜25 has been extremely challenging in terms of Hindi movies. Most have not done well; few sporadic successes are there only. And your latest movie in Q4 also till now has seen very muted response. So, why not reduce the focus on a riskier part of the business and flow that towards say music rights business? You did mention that music rights, you want to be a bit cautious, given the landscape change the music rights are going more expensive, so wanted to understand what is the landscape change, is it that the foreign players are entering the Indian music rights industry more aggressively? Or is it the listed players now getting more aggressive?"

Answer Summary:
The Company evaluates risk-reward ratios for movies and music, noting movies serve as a feeder for linear TV and OTT. Music rights competition is driven by domestic players, not international ones. Hindi films face challenges, but regional movies perform better. Capital allocation is balanced without diverting funds between verticals.

Question 2:
"Sir, my second and last question is on revenue acceleration. You have done well on the gross margin, EBITDA margin, good delivery, I would say ahead of expectation. And you did mention that now the margin improvement will be more a function of revenue acceleration or revenue growth coming back, in terms of at least advertising, subscription you are doing well. So, my question on advertising is essentially two, one is, FMCG, clearly rural is something more recovery will keep happening and urban clearly two more quarters of slowdown is definitely there in terms of FMCG. As a proactive step in terms of rural FMCG advertising, say local advertising or say any other proactive step, are you doing something different to capture the rural recovery? Given urban you can't do much. That is the first part of the question. I have one more follow-on question on advertising."

Answer Summary:
Retail-focused language markets and international ad sales (up 22% YoY) offset urban FMCG slowdown. Investments in marketing and sector diversification (e.g., device partnerships, international markets) drive growth. Domestic ad performance remains ahead of peers despite industry-wide declines.

Question 3:
"Sir on the advertising two quick follow up, one is, international, there is a slowdown. Everyone is talking about Europe recession, etc. So, is it that you are doing well because of a soft base or something proactive you have done, if you could talk about it? Second is, your market share in linear TV has expanded, a clear consolidation, the number one player now is part of a big conglomerate with ten other priorities. So, my question specific is, now you are a pure play good number two player in the linear team. And because the other player is part of a conglomerate and they are very big, and now they are sitting at a very strong dominant share, would you see that as a positive?"

Answer Summary:
International growth stems from targeting niche diaspora advertisers, not just soft bases. Competitive dynamics remain uncertain, but ZEE's nimble execution and focus on content strengthen market position. Urban ad slowdown impacts industry-wide revenue pools.

Question 4:
"My question is on ZEE5. You mentioned that you have seen growth in subscribers. And you also mentioned that the renewal of a B2B deal led to a lower growth. I believe you have taken price hike, right, in at least double digits. Would it be possible to split the growth in these three parts, to make us understand better?"

Answer Summary:
ZEE5's 8% YoY revenue growth was hampered by a delayed B2B deal renewal. Price hikes apply largely to B2C subscribers, but B2B negotiations are ongoing. Subscriber growth and watch time improved YoY, with losses narrowing due to cost optimization.

Question 5:
"Sir, my question is on the RIO copy that we have filed recently, it appears that in some markets like Hindi, Marathi, Bangla, etc., the bookie prizes have been revised downwards. So, just wanted to know the reason behind it, given the fact that in some of these genres like for example Hindi we launched about three new shows in the last quarter, and even in this quarter's PPT we have some new content come up."

Answer Summary:
Price adjustments reflect a strategy to prioritize market penetration over short-term monetization. Regional pricing varies based on maturity and objectives, with a blended approach balancing reach and revenue.

Question 6:
"My second question is on the exceptional charge that we have recorded in this quarter. I mean, I am going through the footnote which says that there is a Rs. 809 million of provisions for receivables. So, does it mean that there is some recovery which is pending? If yes, can you quantify what is the total outstanding amount?"

Answer Summary:
The provision relates to an unresolved arbitration claim against a government body. The full amount (Rs 809 million) was conservatively provided to avoid prolonged litigation. No further recoveries are expected.

Question 7:
"Sir, I have one book-keeping question. I can see that we have almost Rs. 900+ crores, DTA (Deferred tax asset) on books. Just wanted to know that will it be helping us to reduce our future effective tax rate (ETR) going forward, which was around 30% in the last year?"

Answer Summary:
Deferred tax assets are expected to lower future ETR, which has already declined. Specific guidance on FY25 ETR was not disclosed, but utilization of DTAs will continue to optimize tax outflows.

Question 8:
"Sir second question, I just wanted to understand, as you say that the ad consumption would pick up for FMCG and the ad spends will flow through. Just wanted to know, is there any change in mix of ad spends from the FMCG from television to digital taking place at this moment on a broad basis?"

Answer Summary:
FMCG advertisers prioritize transaction-driven digital spending amid weak consumption. However, TV's mass reach remains irreplaceable for brand-building, and recovery is expected with consumption revival.