Zee hopeful of beating market growth on ad revenues

Zee Entertainment Enterprises is hopeful of continuing momentum after a robust start to FY17. The company hopes to be one of the go-to players for FMCG companies and other companies for advertisments, according to Mihir Modi, Chief Finance and Strategy Officer, Zee Entertainment.Zee Entertainment Enterprises on Tuesday reported a 21.76 percent increase in consolidated net profit at Rs 216.96 crore for the April-June 2016 quarter. The company had posted a consolidated net profit of Rs 178.18 crore during the first quarter of FY16. ZEEL's total income from operations was Rs 1,571.62 crore in the Q1FY17, up 18.46 percent, compared to Rs 1,326.68 crore it clocked in Q1FY16, the company said in a filing to the BSE.Its advertising revenues for the quarter were Rs 912 crore, up 19.2 percent while its subscription revenues stood at Rs 528.2 crore, recording a growth of 14.2 percent over the first quarter of previous fiscal.Going ahead, Modi expects the industry growth to rise to 14-15 percent from the current 13-14 percent. He said sustaining the 19 percent advertising revenue growth is just a matter of time for the Zee Entertainment and that the company aims to beat the market growth on advertising revenues.Below is the transcript of Mihir Modi’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Advertising growth at 19.2 percent. Brilliant number, sustainable?A: We expect that the industry growth will pick up a little more than what we saw in Q1. In Q1, we saw about 13-13.5 percent kind of an industry growth rate. We certainly expect it to go to 14-15 percent levels.The second part within what you said is that fast moving consumer goods (FMCG) companies are looking to rationalise their advertising spends. The way it will work is that within the available options, the best option will continue to maintain or grow its share and then the options on the fringe will lose out. So, we certainly hope to be in the main contenders for the spends that the FMCG guys or for that matter the other sectors would lay out for their businesses.Putting all of this together whether 19 percent is sustainable or not is a matter of time for us to see, but we would certainly aim to beat market growth on this one.Sonia: But programming hours in the main general entertainment channel (GEC) are down to 24 hours per week from 26 versus a lot of your leaders that are doing 30 plus. Are you losing any market share in the main channel? Is that an area of concern?A: No, it is not. The way we look at this is -- number one is that our portfolio of channels, which stands at 33 right now, is quite well balanced in terms of the dependence on one genre or the other. So, while yes, there are channels which are not performing -- and in this case Zee TV is performing below our expectations -- it is not going to be a concern. Of course, we would hope that it will correct itself sooner rather than later in terms of its own performance. So, therefore, I do not think it is a concern.On your question relating to the market share, we -- as a bouquet, as a company -- clearly get a leverage on our viewership shares. So, we get 10-20 percent higher revenues compared to our viewership share. And that is the way to look at the mix of viewership share versus the revenue shares in the market.Latha: I agree, but still the point with Zee TV is that a major contributor to your revenue, is advertising. Are you not worried that it has underperformed compared to the whole bouquet, this particular channel?A: Not really. Like I said, our portfolio is well balanced, so our flagship channel Zee TV does remain a large contributor to our topline. However, that does not now swing the entire company performance one way or the other. We would have certainly liked Zee TV to contribute a little more than what it has done but we would not be unduly worried now given how our portfolio has shaped up. So to give you some colour on it, &TV has become an important part of our mix now.Our Hindi cinema cluster is very strong and that contributes significantly to our company revenues as well. And I have still not got to my regional portfolio, which is number one or number two in most of the markets that we operate in. Barring Tamil, every other regional channel is either number one or two and in case of Marathi and Oriya, it is a very strong number one.So, when I put all of these together, it does not worry me that one channel -- even if it is a flagship -- will swing things substantially. I would also want to add that Zee TV is already seeing traction of improvement. Last week it was number two, so we are already seeing that turnaround happening slowly but surely.