Rating Rationale Zee Entertainment Enterprises Limited 22 Nov 2018

Brickwork Ratings has placed the ratings of BWR AAA on “Credit Watch with ​ Developing Implications” of Zee Entertainment Enterprises Limited’s (ZEEL) 6% ​ Cumulative Redeemable Non-convertible (CRNPS) Preference Shares and Issuer rating

Particulars Previous Outstanding Previous Current Instruments Amount Amount Rating Rating (Rs. Cr) (Rs. Cr) ​

6% Cumulative BWR AAA Redeemable BWR AAA (Credit Watch With Non-convertible 2100 (Outlook: Stable) 1615 Developing Preference Shares Implications) (CRNPS)

BWR AAA NA BWR AAA (Credit Watch With Issuer Rating NA (Outlook: Stable) Developing Implications) *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings ​ ​

BWR has essentially relied on the press release published by ZEEL on 14th November 2018 and details shared with BWR, audited financials of ZEEL up to FY18, financials projection, and information available in public domain and the information and clarifications provided by the management.

The Change in the outlook follows the Company’s announcement on 14th November 2018, ​ regarding Promoter/Promoter Group of the Company conveying their intention to sell/divest UPTO to 50% of their equity stake in the Company to a Strategic partner, which according to the Promoters is to pursue disruptive technological development and transform the business in to tech-media Company.

Key highlight of Press Release: 14 November​ 2018 ​ ▪ The proposed transaction to divest UPTO 50% of Essel holding is expected to address the ’s capital allocation priorities.

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▪ Essel group has decided to appoint Goldman Sachs Securities () Ltd. as their investment banker and US and European based Lion Tree as an international strategic advisor for this exercise. ▪ The deal is expected to be completed by March/April 2019.

Considering the above announcement as a material event, rating outlook has been revised from ‘Stable’ to “Credit Watch with Developing Implications”. Once the clarity emerges BWR, will analyses the implications of the transaction and will take appropriate rating action. BWR will continue to monitor the developments in this regard and remove the ‘Watch’ after complete clarity emerges.

Rating Rationale The ratings factor in strong financial profile as reflected from low debt, satisfactory net worth and profitability. The ratings continue to factor strength of the promoter group who are known to be the pioneers of the private Indian television broadcasting industry and are in the media and entertainment industry since more than two decades, strong presence of Brand Zee in the Indian Media Space, large array of offerings of channels, continuous investment in programming through launch of new channels as well as increase in original programming hours on existing channels, and expansion in international markets and alternate platforms such as Digital TV.

Analytical Approach: BWR has analyzed ZEEL’s credit profile by considering the consolidated ​ financial statements of the group owing to financial and operational linkages between the parent and its subsidiaries. The list of subsidiaries are as per the annexure.

Key Rating Drivers Established Promoter Group with long track record in the media and entertainment industry: The promoters are known to be the pioneers of the private Indian television broadcasting industry and are in the media and entertainment industry since more than 2 decades. Strong presence of Brand Zee in the Indian Media Space via its presence in diverse segment and positioning of the flagship channel ‘Zee TV’ amongst the top Hindi General Entertainment Channels (GECs)

Strong Financial Risk Profile: The Company has consistently maintained Comfortable ​ financial risk profile as reflected from scale of operation, healthy profitability, and negligible debt negligible but for the CRNPS and sizable cash and cash equivalents. ​

Coverage and Liquidity Profile: ZEEL has a comfortable overall gearing and debt coverage as ​ reflected from Debt/TNW and ISCR and DSCR. The Company has adequate liquidity as reflected from cash and cash equivalent amounting to Rs 1611.7 Cr and investment in mutual fund amounting to Rs.997.1 Cr and current ratio of 4.05 times as on March 2018.

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About the Company: Zee Entertainment Enterprises Limited (ZEEL) ZEEL is one of India's leading television, media and entertainment companies, and a key operating company of the Group. It is among the largest producers of Hindi programming in the world, with an extensive library housing over 240,000 hours of television content and houses the world’s largest Hindi film library with rights to more than 4,200 movie titles across various languages. The Company’s programming reaches out to over 1 Billion viewers across 173 countries. It has pan India presence through regional and Hindi channels with diversified portfolio of 32 domestic channels and 39 international channels Some of Zee's well-known brands include Zee TV, Zee Cinema, Zee Classic, , ETC Music etc. The company also has a strong offering in the regional language domain with channels such as , Zee Bangla, Zee Telugu, Zee Kannada, Zee Talkies. Mr. is Non-Executive Chairman and Mr. is Managing Director of the company

Details of CRNPS During the year ended 31 March 2014, the Company had issued 20,169,423,120 6% Cumulative Redeemable Non-Convertible Preference Shares of Rs. 1 /- each (consolidated to face value of Rs.10 /- each in 2017) by way of bonus in the ratio of 21 Bonus Preference Shares of Rs. 1 /- each fully paid up for every one Equity share of Rs. 1 /- each fully paid up and are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India.The Company redeems at par value, 20% of the total Bonus Preference Shares allotted, every year from the fourth anniversary of the date of allotment. The Company has an option to buy back the Bonus Preference Shares fully or in parts at an earlier date(s) as may be decided by the board.

Financial Performance. FY18: The Total operating income was supported by healthy growth in advertisement revenues, which grew 15% YoY. The revenue growth however was impacted by decline in subscription revenue. ZEEL has sold its sport broadcasting business resulting in substantial increase in Profit After Tax (PAT) in FY17. The first phase of the transaction was concluded during FY17 and second phase concluded in FY18. 1H FY19: Revenue from Operations increased by 20% to ​ ​ Rs. 3748.5 Cr. PAT stood at Rs. 711.99 Cr for 1HFY19 v/s Rs. 873.34 Cr for 1H FY18.

Key Financials Result Type 31-Mar-17 31-Mar-18 Particulars ( Rs in Crs) Audited Audited Total Operating Income 6434.20 6685.70 OPBDIT 1943.5 2087.4 PAT 2220.1 1477.8 Tangible Net Worth 6349.30 6841.90 Total Debt : TNW (times) 0.35 0.22 Current Ratio (times) 4.87 4.05

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ISCR (times) 14.17 14.42 DSCR (times) 6.47 3.42

List of Subsidiary Consolidated (As Per Annual Report) Name of the Subsidiary Mode & % of Shareholding Zee Turner Limited 74% Essel Vision Productions Limited 100% ZEE Digital Convergence Limited 100% Zee Unimedia Limited 100% Margo Networks Private Limited 80% Fly by Wire International Private Limited 100% India Webportal Private Limited 100% Idea Shopweb and Media Private Limited 51.04% Zee Multimedia Worldwide (Mauritius) Limited 100% Zee TV USA Inc. 100% Asia TV Limited & 100% OOO Zee CIS Holding LLC 100% OOO Zee CIS LLC 100% Asia Multimedia Distribution Inc. 100% Zee TV South Africa (Proprietary) Limited 100% Asia TV USA Limited 100% ATL Media Ltd 100% Expand Fast Holdings (Singapore) Pte Limited 100% Taj TV Limited 100% Asia Today Limited 100% Asia Today Singapore Pte Limited 100% Zee Technologies (Guangzhou) Limited 100% Zee Entertainment Middle East FZ-LLC 100% ATL Media FZ-LLC 100% Zee Radio Network Middle east FZ - LLC (upto 23 Dec 2017) 100% Zee Studio International Limited 100% Z5X Global FZ - LLC 100% Asia TV Gmbh 100% Pantheon Production Limited 100% Eevee Multimedia Inc. 100%

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Rating History

Instrument/ S N Current Rating (Year 2017) Rating History Facility Amount November March November Rating Type 2016 (Rs Crs) 2017 2016

Cumulative Redeemable BWR AAA Non-converti BWR AAA BWR AAA BWR AA+ ble 1 Long 2100.00 Credit Watch With Preference Outlook: Term Developing Outlook: Stable Outlook: Stable Shares Stable Implication (CRNPS) Fund Based

Hyperlink/Reference to applicable Criteria

● General Criteria

● Approach to Financial Ratios

● Policy for Placing Rating on Credit Watch

● Services Sector

Analytical Contacts Media

Bal Krishna Piparaiya [email protected] Chief General Manager -Ratings Relationship Contact [email protected] [email protected] Phone: 1-860-425-2742

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