After being shunned from most portfolios for several years, the Indian media sector made a stunning comeback this year with a 44% rise on the BSE 500 index.
After being absent from most portfolios for several years, Indian media shares made a stunning comeback, rising 39% on an average (more details) . Indian television is expected to dominate the industry with 24% compounded annual growth rate (CAGR). Moreover, the compulsory digitisation will increase the subscriber base and thereby, revenues. "We are extraordinarily bullish on the media sector," Manish Chokhani of Axis Capital told CNBC-TV18 in a special Samvat 2069 interview.
"Typically, when a bull market starts one needs find a very depressed bombed out sector, which will surprise people on the upside," said Ramesh Damani, member of BSE who was also present at the occasion. "Now that the digitisation bill has been passed, and implemented and we roll into phase II and III, I think the revenue stream of the media companies will change," he said.
"Big corporate houses are getting into media sector, valuations are depressed and it is a good story built around digitization. Ad spends are the lowest in India on television, so there is no place but go up. So you've created this great consumer society and everyone wants to advertise — where are they going to advertise? Television!," he said.
My sense is media will be probably one of the sectors powering up the next few years, Damani reiterated.
Chokhani recollected, "We had taken Zee TV public (acted as merchant banker) in 1991-92. The market cap was Rs 25-26 crore. The current market cap of the company is Rs 28,000 crore. But the story is just beginning. So it is a fun place to be in." If the whole story of people buying equities turns out to be right, Chokhani feels then they will spend a lot more time watching the markets and investing in them. Therefore, he says the advertising rates will go up drastically.
The sector is now headed for consolidation, believes Madhu Kela of Reliance Capital. "Once we are left with only 3 or four players in a country like India, there is no way to make a case as to how they (media stocks) will not do well," he told CNBC-TV18.
Even big bull Rakesh Jhunjhunwala is betting on the media space. "I have taken a big bet on media, which is TV18 and I have taken a fairly good sized bet." He feels getting new channels is going to be extremely difficult. It is a high fixed cost business. So if revenues go up, profitability goes up disproportionately. He is also betting on digitization to change the whole picture for the industry.
"After all TV18 is the leader in news and it is the leader in Colors (general entertainment channel). I think the amalgamation of the entertainment channels will make it the second or third largest media play in TV in India," he told CNBC-TV18 in an interview.
Fund manger Samir Arora of Helios Capital is also "super bullish" on TV18. "We have bought it (TV18 shares) in rights, post rights. And even I personally own it separately now. So we are very bullish on TV18,” he told the channel. (read here)
Disclaimer: Moneycontrol is part of the Network18 Group, which owns TV18 Broadcast.