Zee Entertainment

Detailed Report | 21 July 2015 Sector: Media Zee Entertainment

Also called the Habitable Zone or Life Zone, the Goldilocks Zone is an area of space in which a planet is just the right distance from its home star so that its surface is neither too hot nor too cold. The Earth, of course, fills that bill, while Venus roasts in a runaway greenhouse effect and Mars exists as a frozen, arid world. In between, the conditions are just right so that liquid water remains on the surface of the planet without freezing or evaporating out into space. In other words, the conditions are such that life can thrive. In the Goldilocks Zone…

Shobhit Khare ([email protected]); +91 22 3982 5428 Jay Gandhi ([email protected]); +91 22 3089 6693 Zee Entertainment Contents

Summary ...... 3 Story in charts ...... 4 All set to ride the ad tailwind ...... 9 24% domestic susbcription revenue CAGR...... 13 Sharp margin rebound in FY17/18 ...... 16 Sports investments to continue ...... 18 Premium valuations to sustain ...... 19 Financials and valuations ...... 26

Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

21 July 2015 2 Detailed ReportZee Entertainment | Sector: Media Zee Entertainment BSE Sensex S&P CNX CMP: INR387 TP: INR475 (+23%) Buy 28,182 8,529

Motilal Oswal values your In the Goldilocks Zone…

support in the Asiamoney Perfect ad/subscription environment; earnings to double over FY15-18 Brokers Poll 2015 for India Research, Sales and Trading  Zee Entertainment (ZEE) has entered the ‘Goldilocks Zone’—a zone of perfect conducive conditions that will enable EBITDA and PAT to double over FY15–18E team. We request your ballot.  We expect 22%/24% ad/domestic subscription revenue CAGR over FY15–18E, driven by share gains in a rebounding advertising market and digitization-led increase in the broadcaster’s share of subscription revenue  We believe EBITDA margin will rebound sharply in FY17/18 to reach ~30% by FY18E. ZEE’s flat margin guidance for FY16 (+-100bp), despite it being one of its biggest investment periods, lends confidence about strong revenue growth visibility and opportunities to improve cost efficiencies  Our earnings estimates are 9-21% above consensus and imply 25% earnings CAGR Stock Info over FY15-18. Maintain Buy with a price target of INR475 (23% upside) Bloomberg Z IN Equity Shares (m) 960.4 22% ad revenue CAGR led by market share gains: Our genre-wise forecasts M.Cap. (INR b)/(USD b) 371.7/5.8 indicate that ZEE is well placed to ride the expected advertising rebound and 52-Week Range (INR) 402 / 265 gain market share to achieve ~22% ad revenue CAGR over FY15-18E compared 1, 6, 12 Rel. Per (%) 10/0/19 with ~14% CAGR expected for TV advertising as a whole (assuming a 1.7x GDP Avg Val (INRm)/Vol‘000 914/2686 multiplier, in line with the historical average). Excluding the recently launched Free float (%) 56.9 Hindi GEC &TV, we expect ad revenue CAGR of 17% for ZEE.

Uniquely positioned for phase III/IV digitization: Phase IIII/IV digitization Financial Snapshot (INR Billion) (deadline of December 2015/December 2016) presents improved monetization Y/E MAR 2015 2016E 2017E 2018E opportunity from ~80m households; this should increase the broadcasters’ Net Sales 48.8 57.6 69.4 83.8 share of domestic subscription revenue from ~INR75b–80b in FY15 to ~INR150b EBITDA 12.5 13.8 18.9 25.5 by FY18E. ZEE is uniquely positioned as one of the only two networks having a NP 9.8 10.9 14.6 19.3 leading GEC across Hindi/major regional markets along with presence across all EPS (INR) 10.2 11.4 15.2 20.1 relevant genres. Assuming ZEE largely maintains its share in subscription EPS Gr. (%) 9.7 11.5 33.5 32.6 revenue, we expect 24% domestic subscription revenue CAGR over FY15-18E. EPS (INR)* 10.8 13.1 15.8 19.6 Sharp margin rebound in FY17/18; improved cash flows: While FY16 RoE (%) 31.2 28.0 30.5 32.0 EBITDA margin might decline to an 8-year low, primarily due to first year losses RoCE (%) 27.3 27.3 31.8 36.4 for &TV, we expect margins to rebound sharply from 26%/24% in FY15/FY16E to D. Payout (%) 22.1 18.5 14.8 12.4 27%/30% in FY17E/FY18E – led by operating leverage in core business and Valuations increasing profitability for &TV (expect break-even in FY18E). ZEE’s flat EBITDA P/E (x) 38.0 34.1 25.5 19.2 margin guidance for FY16 (+-100bp YoY) means that the worst of margin P/E (x)* 35.8 29.4 24.5 19.7 uncertainty is already behind. Our industry interactions also indicate lower EV/EBITDA (x) 29.6 26.6 19.2 13.8 competitive intensity for movie rights, which will lead to lower inventory Div. Yield (%) 0.6 0.5 0.6 0.6 accumulation on the balance sheet and better FCF generation. *ex-&TV

Adjusting for &TV We are significantly ahead of consensus; maintain Buy: and preference share liability, ZEE trades at ~31x FY16E EPS (~30% premium v/s

its average P/E of ~24x). Our earnings estimates are 9-21% ahead of consensus.

We expect rich valuations to sustain given 25% earnings CAGR and scarcity premium. Maintain Buy with a price target of INR475, based on 30x FY17E EPS (ex-&TV) plus INR18/sh &TV DCF value less INR18/sh preference share liability.

21 July 2015 3 Zee Entertainment Story in charts

Exhibit 1: Expect TV industry ad revenue CAGR of 14% Exhibit 2: FY15–18E Incremental ad revenue analysis for ZEE Real GDP growth (%) TV industry ad growth (%) Ad to GDP multiplier (x) 8 4 17 17 5 2.5 14 6 9 13 13 14 14 7 1.5 49 9 1.9 1.9 8 1.9 1.7 1.7 27 7 9 7 5 7 1.3 7 8 8 1.7 8 0.9

FY15 ad &TV Regional Hindi GEC Others FY18E ad FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E revenue ex-&TV revenue

Source: Company, MOSL Source: Company, MOSL

Exhibit 3: Estimated TV ad revenue market share of ZEE Exhibit 4: Genre wise estimated TV ad revenue market share network (%) of ZEE network (%)

ZEE ad revenue (INRm) ZEE ad share (%) Hindi Regional Others ZEE ad share ex-&TV (%) 27.7 25.1 26.5 21.5 21.6 19.2 20.7 17.5 19.8 20.5 15.7 17.2 13.7 18.4 19.2 17.6 18.9 18.5 15.5 16.2 12.1 13.5 16 20 24 27 34 41 49

FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY15E FY16E FY17E FY18E

Source: Company, MOSL Source: Company, MOSL

Exhibit 5: ZEE: Estimated FY15 ad revenue break-up Exhibit 6: Industry: Estimated FY15 ad revenue break-up

Others, 6.8, 26% Others, 56, Hindi, 50, Hindi, 10.8, 36% 32% 40%

Regional, 9.1, 34% Regional, 49, 32%

Source: Company, MOSL Source: Company, MOSL

21 July 2015 4 Zee Entertainment Story in charts

Exhibit 7: India: Estimated C&S subscribers (m) Exhibit 8: India: Estimated C&S subscriber mix (%)

200 174 Analogue Cable (%) Digital Cable (%) 158 166 DTH (%) Other Digital HH (%) 149 139 150 130 119 105 8 7 7 6 7 6 5 5 100 27 26 26 27 27 30 36 41 5 5 15 18 19 25 50 33 62 62 41 53 49 47 38 26 0 13 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Industry, MOSL Source: Industry, MOSL

Exhibit 9: Estimated Pay-TV revenue split (distribution platform-wise)

Analogue Cable Digital Cable DTH Other Digital Total Subscription Revenue 529 447 24 389 346 24 24 259 23 198 151 123 67 86 124 180 132 128 102 66 FY15E FY16E FY17E FY18E

Source: Company, MOSL

Exhibit 10: Analysis of Broadcasters’ share of Pay TV subscription revenue FY15E FY18E Pay TV subscription rev (INR b) -Analog 132 66 -Digital 213 463 Total 346 529 Broadcaster's share (INR b) -Analog 13 7 -Digital 65 139 Total 79 146 Broadcaster's share (%) -Analog 10 10 -Digital 31 30 Total 23 28

Source: Industry, MOSL

21 July 2015 5 Zee Entertainment Story in charts

Exhibit 11: EBITDA to double from ~INR12.5b to ~INR25.5b Exhibit 12: EPS impact of &TV launch

EBITDA (INRm) EBITDA (%) ZEE EPS excl '&TV' &TV EPS contribution ZEE EPS incl '&TV' 30 20.1 26 27 27 26 24 26 24 15.8 13.1 10.8 19.6 15.2 25.5 11.4 18.9 10.2 13.8 0.5 12.0 12.5 -0.6 -1.8 -0.7 7.6 7.4 9.5

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY15E* FY16E FY17E FY18E

Exhibit 13: EBITDA margin trajectory Exhibit 14: Content cost as a percentage of revenue Consolidated EBITDA margin Non sports EBITDA margin (incl &TV) Content Cost (INRm) As % of revenue Non sports EBITDA margin (excl &TV) 46 41 43 41 39 37 38 39 38.6 36.4 37.7 33.5 32.5 34.6 32.3 35.7 28.7 31.9 34.8 30.1 30.4 25.7 24.3 25.8 27.2 25.7 23.9 27.2 11 11 14 17 20 26 30 34

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Exhibit 15: ZEE P/E Band Exhibit 16: ZEE: Relative P/E v/s Sensex Zee Ent. PE Relative to Sensex PE (%) PE (x) Peak(x) Avg(x) Min(x) 150 LPA (%) 40 35.8 35 100 81.1 30 30.3 23.2 42.4 25 50 20 15 0 10 10.0 5 -50

11 15 10 05 06 14 09 13 08 ------11 06 08 13 10 05 15 09 14 ------Jul Jul Jul Jan Jan Oct Oct Apr Apr Jul Jul Jul Jan Jan Oct Oct Apr Apr

Exhibit 17: We are meaningfully ahead of consensus FY16E FY17E FY18E FY16E FY17E FY18E

Revenue (INR b) EBITDA margin (%)

MOSL 57.6 69.4 83.8 MOSL 23.9 27.2 30.4 Consensus 56.7 66.0 76.7 Consensus 25.1 27.4 29.0 MOSL vs Consensus (%) 1.5 5.1 9.3 MOSL vs Consensus (%) -118bp -24bp 140bp EBITDA (INR b) EPS (INR)

MOSL 13.8 18.9 25.5 MOSL 11.4 15.2 20.1

Consensus 14.3 18.1 22.3 Consensus 10.4 13.2 16.6

MOSL vs Consensus (%) -3.3 4.2 14.6 MOSL vs Consensus (%) 9.4 14.7 21.2

Source: Bloomberg, MOSL

21 July 2015 6 Zee Entertainment EBITDA/EPS to double during FY15-18E Advertising rebound and phase III/IV digitization to be the key catalysts

In the Goldilocks Zone: We expect ZEE’s EBITDA/EPS to almost double by FY18E to INR25.5b/INR19.3b, led by strong 20% revenue CAGR and inflection in EBITDA margin post FY16.

Exhibit 17: EBITDA to double from ~INR12.5b to ~INR25.5b Exhibit 18: EPS impact of &TV launch EBITDA (INRm) EBITDA (%) ZEE EPS excl '&TV' &TV EPS contribution ZEE EPS incl '&TV' 30 26 26 27 26 27 24 24 20.1 15.8 13.1 10.8 19.6 25.5 15.2 18.9 10.2 11.4 12.0 12.5 13.8 -0.6 -0.7 0.5 7.6 7.4 9.5 -1.8

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY15E* FY16E FY17E FY18E

Source: Company, MOSL Source: Company, MOSL

Large investments seeded: ZEE launched ~12 new channels during the three-year period ending FY15, thus taking its overall channel portfolio to 33 domestic/36 international channels. Having seeded several new investments during the downturn, ZEE is well placed to ride the upcoming ad rebound as well as subscription monetization, with several new properties getting established to drive growth.

Exhibit 19: New channel launches during FY13–15

Source: Company, MOSL

Well positioned to benefit from ad rebound: Indian TV advertising industry revenue exhibited a CAGR of just ~10% over FY12-15 due to economic slowdown. However, the number is expected to improve to 14% during FY15–18E based on ~8% real GDP CAGR and an average multiplier of 1.7x. We believe the launch of Hindi GEC &TV will increase ZEE’s ad market share and will drive ~22% ad revenue CAGR over FY15-18E for ZEE. Advertising contributes ~54% of total revenue for ZEE.

21 July 2015 7 Zee Entertainment

Domestic subscription monetization remains a big theme: Though high investments have kept monetization for MSOs from phase I/II digitization sub- optimal, broadcasters have been significantly increasing their subscription revenue share. We estimate that broadcasters’ share of domestic subscription revenue (cable and DTH combined) has almost doubled in the last three years to ~INR79b. We expect a 23% CAGR in broadcasters’ share of domestic subscription revenue during FY15-18E, largely driven by phase III/IV digitization. With one of the biggest channels, ZEE’s domestic subscription revenue is likely to witness a 24% CAGR.

Margin inflection ahead: ZEE’s non-sports EBITDA margin declined from 34.6% in FY14 to 30.1% in FY15 owing to increased investments in new properties. While FY16 non-sports margin is expected to remain under pressure at 28.7% (given the first full year of losses toward &TV), we expect it to rebound to 34.8% by FY18E as &TV achieves scale. Sports losses (expected at INR0.8b-INR0.9b per annum going forward) are likely to decline as a percentage of overall EBITDA, thus aiding a 27% consolidated EBITDA CAGR for ZEE.

Please refer to our earlier reports on the Media sector

Report dated 24 March 2015 Report dated 24 November 2014 Report dated 21 May 2015

21 July 2015 8 Zee Entertainment All set to ride the ad tailwind 22% ad revenue CAGR led by market share gains

 Our genre-wise forecasts indicate that ZEE is well placed to ride the expected advertising rebound and gain market share to achieve ~22% ad revenue CAGR over FY15-18E.  Excluding the recently launched Hindi GEC &TV, we expect ad revenue CAGR of ~17% for ZEE compared with ~14% CAGR expected for TV advertising as a whole (assuming a 1.7x GDP multiplier, in line with the historical average).

Ad growth rebound to sustain; FMCG category continues to dominate Given the discretionary nature of advertising spends, the TV industry ad growth-to- GDP growth multiple generally declines in a decelerating growth environment and increases during periods of accelerating growth. The TV ad growth multiple was 0.9x–2.5x of real GDP growth during FY09–15, with an average of ~1.7x. With GDP growth expected to accelerate to ~8%, we model TV ad revenue CAGR of ~14% over FY15-18E (1.7x multiple). FMCG continues to contribute the lion’s share of advertisement revenues (~est. 54%).

Exhibit 20: Expect TV industry ad revenue CAGR of 14% Real GDP growth (%) TV industry ad growth (%) Ad to GDP multiplier (x)

17 17 14 14 14 2.5 13 13 1.9 1.5 1.7 1.7 1.7 9 1.3 1.9 7 7 1.9 8 8 7 8 7 7 8 0.9 9 5 9

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Company, MOSL

Exhibit 21: Category-wise break-up of TV advertising in India (%)

Advertising Category FY14 FY15 FMCG 57 54 E-comm 1 5 Telecom, Internet, DTH 9 8 Auto 8 7 HH Durables 5 4 BFSI 4 4 Clothing, Fashion & Jewellery 4 3 Retail Estate & Home Improvement 4 3 Others 9 11 Total 100 100

Source: Company, MOSL

22% ad revenue CAGR for ZEE; 17% CAGR (ex-&TV) We expect ZEE’s ad revenue to increase from ~INR27b in FY15E to ~INR49b in FY18E (~22% CAGR). Of the incremental INR22b revenue, ~INR6b would be contributed by the new Hindi GEC &TV, ~INR5b by the regional language channels (Marathi,

21 July 2015 9 Zee Entertainment

Bengali, Telugu, Kannada, Tamil), and ~INR4b by Hindi GECs other than &TV. The balance would come from genres like English, Sports, Kids, and other categories.

Exhibit 22: Estimated ad revenue break-up for ZEE &TV* Sports** Core Business Total 49 41 34 27 39 34 28 24 3.3 2.7 3.0 2.50.2 2.8 4.4 6.1 FY15E FY16E FY17E FY18E

Source: Company, MOSL

Exhibit 23: FY15-18E Incremental ad revenue analysis for ZEE

8 4 5 6 49

FY15 ad &TV Regional Hindi GEC ex- Others FY18E ad revenue &TV revenue

Source: Company, MOSL

ZEE set to gain ad market share With strong viewership performance across most genres and launch of &TV, ZEE is set to gain significant TV ad market share. We model ~430bp advertisement market share expansion for ZEE over FY15-18E, of which ~270bp would be contributed by &TV. With several new channel launches and continued strong viewership performance in most genres, we expect ZEE’s advertising market share to increase across the three broad categories: Hindi GEC and movies, regional language, and others— each accounts for almost one-third of the TV industry advertising revenue.

Exhibit 24: Estimated TV ad revenue market share of ZEE network (%) ZEE ad revenue (INRm) ZEE ad share (%) ZEE ad share ex-&TV (%) 20.7 21.5 19.2 17.5 17.2 15.7 13.7 18.4 18.9 17.6

16 20 24 27 34 41 49

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Company, MOSL

21 July 2015 10 Zee Entertainment

Exhibit 25: Genre-wise estimated TV ad revenue market share of ZEE network (%) Hindi Regional Others 27.7 25.1 26.5 21.6 19.8 20.5

18.5 19.2 15.5 16.2 12.1 13.5

FY15E FY16E FY17E FY18E

Source: Company, MOSL

Hindi GEC and Movies: Hindi GEC and movies genre accounts for ~32% of the ad revenue for the industry and ~40% for ZEE. Ad revenue market share for ZEE in this genre is estimated at ~22%. During FY15, ZEE fortified its presence in the Hindi GEC genre by launching two new channels: Zindagi (niche Hindi GEC) and &TV (mainstream Hindi GEC). Launch of &TV provides ZEE with an opportunity to improve its competitive positioning v/s Star and Sony, which have two mainstream GECs each that enjoy double-digit market share. While we do expect some cannibalization of flagship channel Zee TV due to &TV, the launch of the latter is expected to significantly improve ZEE’s overall ad revenue market share in the Hindi genre (from ~22% in FY15E to ~28% in FY18E).

Regional language channels: Regional language channels account for 32-34% of the ad revenue for the industry and ZEE. Ad revenue market share for ZEE in this genre is estimated at ~19%. Key regional markets include Tamil (~27% of the regional market), Telugu (~17%), Marathi (~15%), Bangla (~10%), Kannada (~11%), and Malayalam (~9%). ZEE has a strong presence in all these markets except Tamil and Malayalam. The company has scope to improve its market share, especially in the Tamil market where it has ~5% share. We expect ZEE’s overall ad market share in the regional language genre to increase from ~18.5% in FY15E to ~20.5% in FY18E.

Others: ‘Others’ include genres like News (Zee entertainment Enterprises is not present in this genre), Sports, English, Kids, Infotainment and several other niche categories; these genres together account for ~26% of advertising revenue for ZEE and ~36% for the industry. With several new channel launches from ZEE in sports, education, food etc., we model ZEE’s market share in these genres to increase from ~12% in FY15E to ~16% by FY18E.

21 July 2015 11 Zee Entertainment

Exhibit 26: ZEE: Estimated FY15 ad revenue break-up Exhibit 27: ZEE: Estimated FY18 ad revenue break-up

Others, 6.8, Others, 26% Hindi, 10.8, 12.6, 26% 40% Hindi, 21.9, 45%

Regional, 9.1, 34% Regional, 14.4, 29%

Source: Industry, MOSL Source: Industry, MOSL

Exhibit 28: Industry: Estimated FY15 ad revenue break-up Exhibit 29: Industry: Estimated FY18 ad revenue break-up

Others, 78, Hindi, 79, Others, 56, Hindi, 50, 34% 35% 36% 32%

Regional, Regional, 49, 32% 70, 31%

Source: Industry, MOSL Source: Industry, MOSL

21 July 2015 12 Zee Entertainment 24% domestic susbcription revenue CAGR Broadcasters’ rev share to increase from ~23% to ~28%, led by digitization

 ZEE is uniquely positioned as one of the only two networks having a leading GEC across Hindi/major regional markets along with presence across all relevant genres.  Phase III/IV digitization, which has a deadline of December 2015/December 2016, presents improved monetization opportunity from ~80m households.  Indian Pay TV consumer revenue for FY15 is estimated at ~INR346b (~145m average cable and satellite subscribers with a monthly ARPU of ~INR200). We expect all-India Pay TV subscription revenue to rise to INR529b (~15% CAGR), led by ~5% CAGR in subscriber base and ~9% CAGR in ARPU.  Broadcasters’ share of overall subscription revenue is estimated at ~23% in FY15 (~10% in analog and ~31% in digital). As phase III/IV digitization is achieved, we expect broadcasters’ share to increase to ~28% by FY18E—driving broadcasters’ Pay TV subscription revenue from ~INR79b in FY15 to ~INR146b by FY18E (23% CAGR).  Assuming ZEE largely maintains its share, we expect 24% domestic subscription revenue CAGR over FY15-18E.

All-India Pay TV subscription revenue to witness 15% CAGR India’s Cable & Satellite (C&S) subscriber base is estimated at ~150m—~100m cable, ~40m DTH, and ~10m other digital subscribers. While average pan-India Pay TV ARPU is estimated at ~INR200 per month, it varies according to the platform (DTH ARPU estimated at ~INR270; analog ARPU at ~INR160). With phase III/IV digitization likely to be completed by December 2016, we expect the analog subscriber base to decline from ~70m in FY15 to ~23m in FY18E. The mix shift to higher ARPU digital platforms (digital cable and DTH) along with ability to control and increase pricing should drive all-India Pay TV ARPU to ~INR259 by FY18E (9% CAGR). Assuming C&S subscribers register a 5% CAGR and increase to ~174m, we estimate all-India Pay TV subscription revenue to rise at a CAGR of 15%—from ~INR346b to ~INR529b.

Exhibit 30: Estimated Pay-TV revenue split (distribution platform-wise)

Analogue Cable Digital Cable DTH Other Digital Total Subscription Revenue 529 447 24 389 346 24 24 259 23 198 151 123

67 86 124 180 132 128 102 66 FY15E FY16E FY17E FY18E

Source: Company, MOSL

21 July 2015 13 Zee Entertainment

Exhibit 31: India: Estimated C&S subscribers (m) Exhibit 32: India: Estimated C&S subscriber mix (%)

Source: Industry, MOSL Source: Industry, MOSL

24% domestic subscription revenue CAGR for ZEE Currently, ~40% of the Pay TV subscription revenue for the industry comes from analog cable where broadcasters’ revenue share is typically ~10% compared with ~31% for digital platforms (DTH and digital cable). With bulk of the subscriber base expected to migrate to addressable platforms, the broadcasters’ share of Pay TV subscription revenue is set to increase from ~23% to ~28%. This would drive broadcaster Pay TV subscription revenue from ~INR79b in FY15E to ~INR146b in FY18E (~23% CAGR). With strong bouquet of channels in place, we expect ZEE to largely maintain its share of industry subscription revenue and record ~24% domestic subscription revenue CAGR.

Exhibit 33: Analysis of broadcasters’ share of Pay TV subscription revenue FY15E FY18E Pay TV subscription rev (INR b) -Analog 132 66 -Digital 213 463 Total 346 529 Broadcaster's share (INR b) -Analog 13 7 -Digital 65 139 Total 79 146 Broadcaster's share (%) -Analog 10 10 -Digital 31 30 Total 23 28

Source: Industry, MOSL

Strong channel portfolio to drive superior monetization ZEE is uniquely positioned as one of the only two networks having a leading GECs across Hindi/major regional markets along with presence across all relevant genres. While leading GEC properties across languages would enable ZEE to extract fair share of subscription revenue in all markets, presence in most non-GEC genres allows for incremental upside from segmentation and packaging implementation from digitized universe.

21 July 2015 14 Zee Entertainment

Exhibit 34: Group Offerings

Networks Zee Group Star Group Viacom18 Group MSM Group Hindi GEC Zee TV Star Plus Colors SET &TV Life Ok Rishtey SAB

Zindagi Star Utsav Sony Pal

Zee Smile

Zee Anmol

Regional GEC

Marathi Zee Marathi, Zee Talkies Star Pravah Colors Marathi

Bengali Zee Bangla Star Jalsha Colors Bangla

Bengali Zee Bangla Cinema Jalsha Movies AATH

Telugu Zee Telugu MAA TV, MAA movies, MAA Music, MAA Gold

Kannada Zee Kannada Asianet Suvarna, Suvarna Plus Colors Kannada

Tamil Zee Tamizh Star Vijay

Malayalam NA Asianet, Asianet Plus, Asianet Movies

Gujarati Colors Gujarati

Odia Sarthak Colors Odia

Hindi Movie Zee Cinema Star Gold MAX

Zee Action Movies OK MAX2

Zee Classic

&Pictures

Sports Ten Sports Star Sports 1 SIX

Ten Action Star Sports 2 KIX

Ten Cricket Star Sports 3

Ten Golf Star Sports 4

English Entertainment & Movies Z café Star World Comedy Central AXN Z Studio Star Movies PIX

Star World Premiere

Star Movies Action

Kids ZeeQ Baby TV Nickelodeon ANIMAX NICK

Sonic

Music Zing Channel V India M TV MIX Z etc Bollywood Vh1

International business Zee Aflam (MENA region) Asianet Middle-East

Zee Alwan (MENA region)

Zee Variasi (Malaysia)

Zee Bioskop (Indonesia)

Zee Nung (Thailand)

Zee World

Zee Hiburan

Syndication Zee Bollyworld

Niche, Alternate lifestyle etc Zee Khana Khazana National Geographic Channel

Zee Salaam Net Geo Music

Nat Geo People

Nat Geo Wild

Fox India

Fox Crime

Fox Life

Fox Sports News

Source: Company, MOSL

21 July 2015 15 Zee Entertainment Sharp margin rebound in FY17/18 FCF generation to improve

 While FY16 EBITDA margin might decline to an eight-year low, primarily due to first year losses for &TV, we expect margins to rebound sharply from 26%/24% in FY15/FY16E to 27%/30% in FY17E/FY18E—led by operating leverage in core business and increasing profitability for &TV (expect break-even in FY18E).  ZEE’s flat EBITDA margin guidance for FY16 (+-100bp YoY) implies that worst of margin uncertainty is already behind.  Our industry interactions also indicate lower competitive intensity for movie rights, which will lead to lower inventory accumulation on the balance sheet and better FCF generation.

FY15/16 margin impacted by investments, but expected to rebound With two new Hindi GEC launches (Zindagi, &TV) in FY15, ZEE’s FY15 non-sports EBITDA margin declined ~450bp YoY to 30.1% (down ~230bp excluding &TV impact). However, consolidated EBITDA margin (including sports business) declined ~150bp to 25.7% due to lower sports loss. With FY16 being the first full year of operations for &TV (an incremental ~290bp EBITDA margin impact YoY) and sports loss expected to expand due to higher days of India Cricket, we model EBITDA margin to decline ~175bp to 23.9% during FY16.

While reported margin might continue to tread lower due to impact of &TV, core margin (excluding sports and &TV) has already bottomed-out. With major investments behind and strong advertising/subscription growth ahead, we expect core margin to expand ~540bp over FY15–18E.

Exhibit 34: EBITDA margin trajectory

Consolidated EBITDA margin (%) -Non-sports (incl &TV) -Non-sports (excl &TV) 38.6 37.7 34.6 35.7 36.4 33.5 38.6 32.5 32.3 31.9 34.8 34.6 28.7 33.5 32.5 30.1 30.4

25.7 25.8 27.2 25.7 27.2 24.3 23.9 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Company, MOSL

Content costs rise on new programming additions New channel investments have increased content cost as a percentage of revenue (from ~38% in FY13 to ~41% in FY15). FY16 would be the first full year of content costs being incurred for the new channel &TV (launched in March 2015). As a result, content cost is expected to increase ~32% YoY in FY16 (of which &TV would account for ~20% increase). Content cost as a percentage of revenue is expected to increase from 41% in FY15 to 46% in FY16. However, with content investment through in FY16, it will be a source of margin expansion in FY17/18.

21 July 2015 16 Zee Entertainment

Exhibit 35: Content cost as percentage of revenue Content Cost (INRm) As % of revenue 46 43 41 41 39 37 38 39

11 11 14 17 20 26 30 34

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Source: Company, MOSL

Rationalizing movie costs to drive better FCF generation ZEE underwent significant inventory increase during FY13/14, led by increased competitive intensity for movie purchases; as a result, inventory as a percentage of content costs increased to 69% in FY14. With competitive intensity coming down, inventory as a percentage of content costs declined to ~59% in FY15. Movie acquisition costs are expected to remain relatively soft, driving better FCF generation for the company going forward.

Exhibit 36: Inventory as a percentage of content cost Content Cost (INR b) Inventory as % of COGS (%)

69 64 63 59 47

20.1 17.1 14.0 11.4 11.4

FY11 FY12 FY13 FY14 FY15

Source: Company, MOSL

Exhibit 37: FCF generation (INR b) INR b FY12 FY13 FY14 FY15 FY16E FY17E FY18E CFO 1.5 3.8 8.9 5.1 7.5 8.4 12.1 Capex 0.6 0.9 0.7 0.5 0.5 0.6 0.7 FCF 0.8 2.9 8.2 4.6 7.0 7.8 11.4

Source: Company, MOSL

21 July 2015 17 Zee Entertainment Sports investments to continue Consolidation, digitization, non-cricket sports key to profitability

 ZEE is among the three major sports broadcasters in India (besides Star and Sony).  India remains a predominantly cricket-viewing nation. However, non-cricket sports such as football, tennis, badminton and Kabaddi are picking up.  Sports business is currently loss-making, given the lack of subscription monetization. However, phase III/IV digitization is expected to be a catalyst.  For ZEE, FY16 would have more India cricket v/s FY15; hence, losses from sports are expected to increase. We model sports losses of INR0.8b-0.9b each in FY16/17/18 as we expect investments to continue in the medium term.

Star dominates the sports segment The estimated INR27b sports segment is led by Star, which has broadcast rights for all major ICC events and matches of India, Australia and England. It also has a good mix of non-cricket sports. Sony has IPL rights, which it mixes up with non-cricket sports like football, basketball and fight sports. ZEE hasn’t been very aggressive in sports and currently holds broadcasting rights for five cricket boards—South Africa, Sri Lanka, Pakistan, West Indies and Zimbabwe—along with non-cricket sports.

Sports profitability to improve in the long term TV revenue for sports channels in India is largely advertising led and cricket heavy (Cricket constitutes 80-85% of the sports media revenue). With high competition for broadcast rights, cricket is currently a loss-making sport for channels. Three key trends will improve long-term profitability: 1) Consolidation, 2) Better subscriber monetization, led by digitization, and 3) Increased popularity of non-cricket sports, which have lower cost.

…however sports losses for ZEE to increase in FY16 Sports Losses for Zee in FY15 reduced significantly due to lower number of matches involving India. FY16 is expected to have more matches involving India (~85 days v/s ~9 days in FY15); hence, sports losses are expected to increase. We have factored in sports losses of INR0.8b for FY16 v/s INR0.26b in FY15 and INR0.97b in FY14 .

Exhibit 38: ZEE: Yearly sports loss (INR m) FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

-266

-870 -811 -815 -976 -892

-1,480

-2,078

Source: Company, MOSL

21 July 2015 18 Zee Entertainment Premium valuations to sustain 25% earnings CAGR, scarcity premium to support valuations

 Adjusting for &TV and preference share liability, ZEE trades at ~31x FY16E EPS (~30% premium v/s its average P/E of ~24x and ~15% discount v/s MOSL consumer universe). Given strong earnings CAGR of ~25% and scarcity premium, we expect rich valuations to sustain.  Since March 2015, we have upgraded our earnings estimates 23%/13% for FY16/FY17.  Maintain Buy with a price target of INR475, based on 30x FY17E EPS (ex-&TV). We add INR18/sh toward our DCF-based valuation for &TV and deduct INR18/sh towards NPV of the preference share liability.

Exhibit 39: ZEE P/E Band Exhibit 40: ZEE: Relative P/E v/s Sensex Zee Ent. PE Relative to Sensex PE (%) PE (x) Peak(x) Avg(x) Min(x) 150 LPA (%) 40 35.8 35 81.1 30 30.3 100 25 23.2 42.4 50 20 15 0 10 10.0 5 -50

11 11 06 06 13 08 08 13 15 10 05 10 14 05 15 09 09 14 ------Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr

Source: Company, MOSL Source: Company, MOSL

Exhibit 41: Media universe valuation

Sector / Companies Mkt CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) EPS Gr (%) (USD B) (INR) FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17

D B Corp 1.0 321 Buy 17.2 19.3 23.6 18.6 16.6 13.6 12.0 9.6 7.9 26.0 25.9 28.0 8.4 12.1 22.1 Den Networks 0.4 155 Neutral -8.1 4.5 1.3 -19.1 34.0 120.2 25.1 7.2 7.9 -7.4 4.2 1.1 PL LP -71.7 Dish TV 1.8 115 Buy 0.0 2.2 6.5 - 51.8 17.8 13.2 12.6 8.0 NA NA NA Loss LP 191.0 Hathway Cable 0.6 48 Buy -2.9 -0.6 2.1 -16.5 -81.0 22.5 21.0 11.4 6.6 -17.4 -3.4 11.7 Loss Loss LP Hindustan Media 0.2 243 Buy 19.2 21.7 25.1 12.7 11.2 9.7 6.8 4.3 3.0 20.9 19.4 18.6 26.7 12.9 15.8 HT Media 0.3 91 Neutral 8.5 7.2 8.7 10.7 12.7 10.5 6.4 3.0 1.9 9.9 7.5 8.3 14.9 -15.8 21.8 Jagran Prakashan 0.6 135 Buy 7.2 8.3 9.3 18.6 16.2 14.5 9.4 7.7 6.9 21.7 22.0 21.8 12.8 15.0 11.5 PVR 0.5 816 Buy 3.3 6.1 18.4 244.2 134.2 44.2 16.6 13.7 9.3 3.4 4.8 10.6 -77.7 81.9 203.3 Siti Cable 0.4 35 Buy -1.6 0.2 0.3 -21.8 146.5 140.5 25.0 11.2 9.5 -55.9 6.3 6.1 Loss LP 4.2 Sun TV 1.7 263 Not 18.7 21.9 25.8 14.0 12.0 10.2 10.2 5.5 4.7 21.8 23.7 25.5 4.7 17.2 17.8 Zee Entertainment 5.5 387 Buy 10.2 11.4 15.2 38.0 34.0 25.4 24.5 23.7 17.0 31.3 28.1 30.7 9.7 11.6 33.7 Media Sector Aggregate 13.1 11 39.4 25.9 18.2 14.8 11.3 8.7 13.9 18.5 22.3 -1.9 51.9 42.6

Source: Company, MOSL

21 July 2015 19 Zee Entertainment

Exhibit 42: Consumer universe valuation

Sector / Companies Mkt CMP Reco EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) EPS Gr. (%) (USD (INR) FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17

Asian Paints 11.4 817 Buy 14.8 18.9 24.0 55.1 43.2 34.0 37.0 26.9 20.9 32.4 35.2 37.5 15.8 27.5 27.2 Britannia 5.2 2,874 Buy 47.8 66.0 77.9 60.2 43.6 36.9 32.7 28.6 23.8 61.9 62.4 54.0 44.8 38.1 18.2 Colgate 4.3 2,052 Neutral 41.1 48.6 59.1 49.9 42.2 34.7 32.8 27.2 21.7 88.0 92.8 99.9 13.9 18.3 21.5 Dabur 7.7 301 Neutral 6.1 7.5 8.7 49.3 40.1 34.5 35.3 30.0 25.5 35.9 35.7 33.8 16.5 22.9 16.2 Emami 4.1 1,160 Buy 21.6 24.4 32.3 53.7 47.5 35.9 40.8 35.5 27.7 45.3 41.5 45.8 21.7 13.2 32.2 Godrej Consumer 6.6 1,223 Neutral 25.9 36.0 43.8 47.2 34.0 27.9 27.5 24.0 19.7 20.4 24.2 24.8 19.6 38.9 21.6 GSK Consumer 4.1 6,335 Neutral 138. 171.0 206.0 45.7 37.0 30.7 33.6 26.1 21.4 29.6 31.0 31.6 - 23.2 20.5 Hind. Unilever 31.1 891 Neutral 17.5 20.6 24.4 50.9 43.3 36.5 35.9 31.7 26.0 108. 116.6 133.4 6.4 17.6 18.5 ITC 39.4 314 Neutral 12.1 13.5 15.3 25.9 23.2 20.5 18.3 15.7 13.8 34.8 34.9 35.6 9.8 11.3 13.4 Jyothy Labs 0.8 310 Buy 4.4 9.1 8.2 71.0 34.1 37.7 35.1 25.6 21.3 16.6 26.4 22.4 -7.5 108.0 -9.6 Marico 4.6 429 Neutral 8.9 10.8 13.4 48.3 39.8 32.0 28.6 27.0 21.6 33.5 31.0 32.6 18.1 21.2 24.4 Nestle 9.6 6,085 Neutral 130. 116.0 145.3 46.7 52.5 41.9 31.9 31.5 25.7 48.2 40.1 51.8 6.8 -11.0 25.3 Pidilite Inds. 4.4 546 Neutral 10.2 13.6 15.8 53.7 40.2 34.5 39.1 26.3 22.4 23.1 25.9 26.0 9.9 33.3 16.7 Radico Khaitan 0.2 85 Buy 5.7 6.2 7.5 14.9 13.7 11.3 10.9 8.7 7.2 8.6 8.9 10.1 - 8.6 21.8 United Spirits 7.7 3,530 Buy -47.2 41.4 62.3 - 85.3 56.6 74.2 44.5 33.6 -21.7 16.8 20.9 LP LP 50.8 Sector Aggregate 141.3 15 43.1 35.0 29.6 28.2 24.0 20.1 33.2 36.0 37.3 7.8 23.0 18.4

Source: Company, MOSL

Exhibit 43: MOSL estimates vs Consensus

FY16E FY17E FY18E

Revenue (INR b)

MOSL 57.6 69.4 83.8 Consensus 56.7 66.0 76.7 MOSL vs Consensus (%) 1.5 5.1 9.3 EBITDA (INR b)

MOSL 13.8 18.9 25.5 Consensus 14.3 18.1 22.3 MOSL vs Consensus (%) -3.3 4.2 14.6 EBITDA margin (%)

MOSL 23.9 27.2 30.4 Consensus 25.1 27.4 29.0 MOSL vs Consensus (bp) -118bp -24bp 140bp PAT (INR b)

MOSL 10.9 14.6 19.3 Consensus 10.2 13.0 16.3 MOSL vs Consensus (%) 7.1 12.3 18.2 EPS (INR)

MOSL 11.4 15.2 20.1 Consensus 10.4 13.2 16.6 MOSL vs Consensus (%) 9.4 14.7 21.2

Source: Bloomberg, MOSL

21 July 2015 20 Zee Entertainment

Exhibit 44: Annexure 1: &TV DCF calculation

INRb FY15E* FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E FY24E FY25E Industry ad revenue 155 175 199 227 258 295 336 376 421 463 510 Hindi GEC share (%) 27 29 30 30 30 30 30 30 30 30 30 Hindi GEC Industry ad revenue 42 51 59 68 77 88 101 113 126 139 153 & TV share of Hindi GEC (%) NA 6 8 9 9 9 9 9 9 9 9 & TV ad revenue 0.2 2.8 4.4 6.1 7.0 7.9 9.0 10.1 11.3 12.5 13.7 & TV subscription revenue 0.0 0.0 0.8 1.5 2.0 2.3 2.6 3.0 3.3 3.7 4.1 Total revenue 0.2 2.8 5.2 7.6 9.0 10.2 11.7 13.1 14.7 16.2 17.8 YoY (%) 1453 86 46 18 14 14 12 12 10 10 Total content cost 0.3 4.1 4.5 5.1 5.5 6.0 6.6 7.2 7.9 8.6 9.2 Other cost (incl launch expenses in 0.8 1.3 1.6 1.9 2.1 2.4 2.7 3.0 3.4 3.8 4.2 Total cost 1.1 5.4 6.2 6.9 7.7 8.5 9.3 10.2 11.2 12.4 13.4 EBITDA -0.9 -2.5 -0.9 0.7 1.3 1.8 2.4 2.9 3.4 3.8 4.4 YoY (%) NA NA NA 90 40 34 20 19 12 15 EBITDA margin (%) -481 -90 -18 9 14 17 21 22 23 24 25 Capex 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.4 Capex/Sales (%) 110 7 4 3 2 2 2 2 2 2 2 Increase in working capital 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Tax -0.4 -0.9 -0.4 0.2 0.4 0.5 0.7 0.9 1.1 1.2 1.4 FCF -0.7 -2.2 -1.1 0.0 0.5 0.9 1.2 1.5 1.9 2.1 2.4 YoY (%) NA NA NA NA 65 42 25 21 14 16 Terminal Value 42 Mar' 16E PV of FCF -1.0 0.0 0.4 0.6 0.7 0.8 0.9 0.9 0.9 Net Debt (Mar-16E) 3 PV-Explicit Period 4 PV-Terminal Value 16 Equity Value (INR b) 18 Equity value per share of ZEE 18 Terminal value assumptions

EBITDA margin 25% WACC Wt (%) Cost Rf ERP Beta Capex/Sales 2% Equity 0.60 13.4% 7.5 6.5 0.9 Cash tax rate 34% Debt 0.40 7.8% FCF margin 15% WACC 11.1% FCF growth 5.0% FCF multiple 16.3x EBITDA multiple 9.9x WACC 11.1%

Source: Company, MOSL

21 July 2015 21 Zee Entertainment

Exhibit 45: Sports broadcasting contracts in India Star group Zee group MSM group Neo Broadcast rights with cricket board of Cricket ICC World Twenty20 2016 IPL South Africa Broadcasr rights with cricket board of ICC Champions Tropy 2017 and 2021 Pakistan Broadcast rights with cricket board of ICC cricket World Cup 2019 and 2023 West Indies Broadcast rights with cricket board of ICC World Twenty20 2020 Sri Lanka ICC U19 Cricket World Cup 2016, 2018, Broadcast rights with cricket board of

2020, 2022 Zimbabwe ICC Women’s World Cup 2017, 2021 ICC Women’s World Twenty20 2018, 2022 Broadcast rights with cricket board of India

(2012-18) Broadcasr rights with cricket board of

England (2013-19) Broadcast rights with cricket board of

Australia (2013-17) Big Bash league Football AFC Champions League UEFA Champions League UEFA Euro 2016 AFC Cup UEFA Europa League UEFA Euro 2016 Qualifiers Series A UEFA Super League FIFA World Cup Scottish Professional Bundesliga Supercopa de Espana Football league Major League Soccer Ligue 1 Copa America 2015 Premier League Copa del Rey FA Cup Indian Super League German FA Cup Italian Cup English League Cup Brazilian League Cup Dutch League Eredivisie I-League FFA Cup A-League

Golf U.S. Open PGA Tour

Hockey Hockey India League

French Tennis U.S. Open U.S. Open Australian Open Open Wimbledon ATP World Tour/WTA Tour

Kabaddi Pro-Kabaddi League World Kabbadi league Badminton Indian Badminton League

Motor Racing MotoGP Italian Series A

Basketball NBA

TNA Wrestling WWE RAW, Smackdown Wrestling Others Tour De France Multi-discipline Summer Olympics events

Source: Media Articles, ESPN CricInfo, MOSL

21 July 2015 22 Zee Entertainment

Exhibit 46: Annexure 3: Zee FY16 cricket calendar

FY15 FY16 Tests ODIs T20s Tests ODIs T20s Ireland vs Sri lanka 0 2 0 Zimbabwe vs Pakistan 0 3 2 England vs Sri Lanka 2 5 1 West Indies vs Australia 2 0 0 West Indies vs New Zealand 3 0 2 Sri Lanka vs Pakistan 3 5 2 Sri lanka vs South Africa 2 3 0 South Africa vs 2 3 2 Zimbabwe vs Afghanistan 0 4 0 Zimbabwe vs India 0 3 2 Sri Lanka vs Pakistan 2 3 1 Zimbabwe vs New Zealand 0 3 1 Zimbabwe vs South Africa 1 3 0 South Africa vs New 0 3 2 West Indies vs Bangladesh 2 3 1 Sri Lanka vs India 3 0 0 Pakistan vs Australia 2 3 1 India vs South Africa 4 5 3 India vs West indies 0 4 0 Pakistan vs England 3 5 1 New Zealand vs South Africa 0 3 0 Sri Lanka vs West Indies 2 3 2 Bangladesh vs Zimbabwe 3 5 0 Australia vs West Indies 3 0 0 India vs Sri Lanka 0 5 0 South Africa vs England 4 5 2 Australia vs South Africa 0 5 3 Pakistan vs India 3 5 2 Pakistan vs New Zealand 3 5 2 New Zealand vs Sri Lanka 2 0 0 Sri lanka vs England 0 7 0 India vs Sri Lanka 3 0 0 South Africa vs West Indies 3 5 3 South Africa vs Australia 0 0 3 New Zealand vs Sri Lanka 2 7 0 New Zealand vs Pakistan 0 2 0

West indies vs England 3 0 0

Bangladesh vs Pakistan 2 3 1

Total 30 77 15 Total 34 43 24 India-centric Cricket Days 0 9 0 India-centric Cricket Days 65 13 7

Source: Media articles, ESPN Cricinfo, MOSL

21 July 2015 23 Zee Entertainment

Exhibit 47: ZEE Rate Card for MSO/DTH/HITS/IPTV per subscriber in DAS and non-DAS areas (INR)

Name of the Channel Genre Rate payable per month Rate payable per month Zee TV Hindi GEC 7.44 17.71 Zee Cinema Hindi Movies 7.44 17.71 Zee Marathi Marathi GEC 4.59 10.92 Zee Café English GEC 4.59 10.92 Zee Studio English Movies 4.01 9.56 Zee Bangla Bangla GEC 4.65 11.07 Zee Salaam Urdu Infotainment 8.04 19.15 Zee ETC General Entertainment 1.72 4.09 Zing Music/Youth GEC 2.87 6.83 Zee Talkies Marathi Movies 8.89 21.17 Zee Khana Khazana Hindi Lifestyle 16.08 38.29 Zee Smile General Entertainment 3.52 8.39 Zee Kannada Kannada Regional General Entertainment 4.28 10.19 Zee Telugu Telugu GEC 5.97 14.21 Zee Classic Hindi Movies 5.73 13.65 Zee Action Hindi Movies 5.73 13.65 Zee Bangla Cinema Bangla Movies 8.68 20.68 Zee Q Educational 53.61 127.65 & Pictures Hindi Movies 9.65 22.98 Zee Anmol Hindi GEC FTA FTA Zindagi Hindi GEC 11.75 27.97 Zee News Hindi News 4.3 10.23 Zee Punjab Haryana Himachal Regional News 0.86 2.04 Zee Business Hindi Business News 2.75 6.56 Zee Sangam Regional News FTA FTA 24 Ghanta Bangla Regional 3.44 8.19 Zee 24 Taas Marathi News 4.87 11.6 Zee Tamizh Tamil GEC FTA FTA Zee Kalinga Regional Odia Infotainment 5.96 14.2 Zee MP/Chattisgarh Hindi Regional 4.87 11.6 &TV Hindi GEC 10.58 25.2 Zee Marudhara Hindi /Rajasthani Regional 5.9 14.04 Ten Sports Sports 8.61 20.49 Ten Cricket Sports 19.01 45.25 Ten Action Sports 18.76 44.68 Ten Golf Sports 19.3 45.95

Source: Company, MOSL

21 July 2015 24 Zee Entertainment

Exhibit 48: Zee Entertainment: A snapshot

INR b FY09 FY10 FY11 * FY12 FY13 FY14 FY15 FY16E FY17E FY18E Advertisement Revenue 10.6 10.7 17.1 15.8 19.6 23.8 26.6 33.7 41.2 48.9 YoY (%) 14 1 60 -7 24 21 12 27 22 19 Subscription Revenue 9.0 9.8 11.3 13.2 16.2 18.0 17.9 19.7 24.1 30.9 YoY (%) 22 9 15 17 23 11 0 10 22 28 - Domestic 4.5 5.7 7.2 9.2 11.6 13.2 13.9 15.8 20.1 26.7 YoY (%) 29 25 27 28 26 13 6 14 27 33 - International 4.5 4.2 4.1 4.0 4.6 4.8 4.0 3.9 4.0 4.1 YoY (%) 15 -8 -2 -2 14 6 -17 -3 3 3 Other Sales & Sevices 2.1 1.5 1.1 1.3 1.1 2.4 4.3 4.1 4.1 4.1 YoY (%) 33 -32 -28 25 -15 113 80 -5 0 0 Total Revenue 21.8 22.0 29.4 30.4 37.0 44.2 48.8 57.6 69.4 83.8 YoY (%) 19 1 34 3 22 20 10 18 21 21 Operating expenses 16.3 15.9 21.8 23.0 27.5 32.2 36.3 43.8 50.6 58.3 YoY (%) 26 -3 38 5 19 17 13 21 16 15 EBITDA 5.5 6.1 7.6 7.4 9.5 12.0 12.5 13.8 18.9 25.5 YoY (%) 1 11 24 -2 29 26 4 10 37 35 EBITDA margin (%) 25.2 27.7 25.7 24.3 25.8 27.2 25.7 23.9 27.2 30.4 Revenue mix (%) Ad and broadcast revenue 49 49 58 52 53 54 54 59 59 58 Subscription revenue 42 45 38 44 44 41 37 34 35 37 -Domestic 21 26 24 30 31 30 29 28 29 32 - International 21 19 14 13 12 11 8 7 6 5 Other sales and services 10 7 4 4 3 5 9 7 6 5 Sports/Non-sports break-up Revenue 21.8 22.0 29.4 30.4 37.0 44.2 48.8 57.6 69.4 83.8 -Sports 3.9 3.2 4.4 3.9 5.0 6.6 6.3 6.8 7.4 8.2 -Non-sports (incl &TV) 17.9 18.8 25.0 26.5 32.0 37.6 42.5 50.8 62.0 75.6 -&TV 0.2 2.8 5.2 7.6 -Non-sports (excl &TV) 42.4 48.0 56.8 68.0 EBITDA 5.5 6.1 7.6 7.4 9.5 12.0 12.5 13.8 18.9 25.5 -Sports 0.4 -0.6 -2.1 -1.5 -0.9 -1.0 -0.3 -0.8 -0.9 -0.8 -Non-sports (incl &TV) 5.1 6.7 9.6 8.9 10.4 13.0 12.8 14.6 19.7 26.3 -&TV -0.9 -2.5 -0.9 0.7 -Non-sports (excl &TV) 5.1 6.7 9.6 8.9 10.4 13.0 13.7 17.1 20.7 25.6 EBITDA margin (%) 25.2 27.7 25.7 24.3 25.8 27.2 25.7 23.9 27.2 30.4 -Sports 10.0 -18.3 -47.1 -37.6 -17.5 -14.8 -4.2 -12.0 -12.0 -10.0 -Non-sports (incl &TV) 28.5 35.4 38.6 33.5 32.5 34.6 30.1 28.7 31.9 34.8 -Non-sports (excl &TV) 28.5 35.4 38.6 33.5 32.5 34.6 32.3 35.7 36.4 37.7

* Includes merger of Regional General Entertainment Channels Source: Company, MOSL

21 July 2015 25 Zee Entertainment Financials and valuations

Income Statement (INR Million) Y/E March 2012 2013 2014 2015 2016E 2017E 2018E Advertisement Revenues 15,841 19,639 23,800 26,603 33,737 41,188 48,857 Subscription Revenues 13,245 16,234 18,022 17,944 19,741 24,148 30,867 Other Sales & Sevices 1,320 1,123 2,395 4,299 4,084 4,089 4,094 Net Sales 30,406 36,997 44,217 48,846 57,561 69,425 83,817 Change (%) 3.4 21.7 19.5 10.5 17.8 20.6 20.7 Total Income 30,406 36,997 44,217 48,846 57,561 69,425 83,817 Total Expenses 23,010 27,452 32,175 36,299 43,778 50,572 58,318

EBITDA 7,396 9,545 12,042 12,547 13,783 18,854 25,499 Change (%) -2.3 29.0 26.2 4.2 9.9 36.8 35.2 % of Net Sales 24.3 25.8 27.2 25.7 23.9 27.2 30.4 Depreciation 323 399 501 673 730 792 860 EBIT 7,073 9,146 11,541 11,874 13,054 18,062 24,639 Other Income 1,384 1,461 1,807 2,278 3,189 3,597 4,069 Interest & Finance Charges 50 86 158 103 113 113 123 PBT 8,407 10,521 13,191 14,049 16,130 21,545 28,585 Tax 2,500 3,337 4,291 4,284 5,242 7,002 9,290 Effective Rate (%) 29.7 31.7 32.5 30.5 32.5 32.5 32.5 PAT 5,907 7,184 8,900 9,765 10,888 14,543 19,295 Minority Interest -15 14 21 20 20 20 20 Adj. PAT 5,892 7,198 8,921 9,785 10,908 14,563 19,315 Change (%) -7.5 22.2 23.9 9.7 11.5 33.5 32.6

Balance Sheet (INR Million) Y/E March 2012 2013 2014 2015 2016E 2017E 2017E Share Capital 959 954 960 960 960 960 960 Reserves 33,349 38,161 26,247 34,449 41,465 51,962 66,920 Net Worth 34,308 39,115 27,207 35,410 42,426 52,923 67,881 Preference capital 0 0 20,170 20,170 20,170 20,170 16,136 Minority Interest 14 33 61 4 4 4 4 Loans 21 28 29 22 22 22 22 Other non-current liabilities 0 174 324 288 288 288 288 Capital Employed 34,343 39,350 47,791 55,894 62,910 73,407 84,331

Net Fixed Assets 2,305 2,779 3,108 3,490 3,295 3,086 2,858 Goodwill 6,894 7,127 7,625 7,887 7,887 7,887 7,887 Capital WIP 201 69 997 878 828 778 728 Investments 675 651 2,941 1,464 1,464 1,464 1,464 Deferred tax assets (net) 337 288 298 531 531 531 531 Other non-current assets 314 329 361 378 378 378 378 Curr. Assets, Loans&Adv. 32,428 39,500 44,987 55,431 64,519 76,953 89,988 Program Films 7,339 8,745 11,736 11,878 15,266 17,451 19,835 Sundry Debtors 8,660 9,890 10,281 10,692 12,358 14,905 17,994 Cash & Bank Balances 11,100 13,100 15,300 20,480 25,081 30,348 34,955 Loans & Advances 4,975 7,430 6,788 11,053 10,512 12,679 15,307 Other Current assets 354 335 882 1,328 1,302 1,571 1,896 Current Liab. & Prov. 8,820 11,404 12,538 14,256 15,993 17,669 19,502 Sundry Creditors 3,872 5,172 5,050 4,204 5,591 6,449 7,388 Other Current Liabilities 3,015 3,445 3,842 4,980 5,330 6,148 7,043 Provisions 1,933 2,787 3,646 5,072 5,072 5,072 5,072 Net Current Assets 23,608 28,096 32,449 41,153 48,527 59,284 70,485 Appl.of Funds 34,343 39,350 47,791 55,790 62,910 73,407 84,331 E: MOSL Estimates

21 July 2015 26 Zee Entertainment Financials and valuations

Ratios Y/E March 2012 2013 2014 2015 2016E 2017E 2018E Basic (INR) EPS 6.1 7.5 9.3 10.2 11.4 15.2 20.1 Cash EPS 6.4 7.9 9.8 10.9 12.1 16.0 21.0 EPS (excl '&TV' loss) 6.1 7.5 9.3 10.8 13.1 15.8 19.6 Book Value per Share 35.4 40.9 28.5 36.9 44.2 55.1 70.7 DPS 1.5 2.0 2.0 2.3 2.1 2.3 2.5 Payout (Incl. Div. Tax) % 24.4 26.5 21.5 22.1 18.5 14.8 12.4

Valuation P/E 63.0 51.3 38.0 34.1 25.5 19.2 P/E (excl '&TV' loss) 60.3 48.7 35.8 29.4 24.5 19.7 EV/EBITDA 40.4 30.9 29.6 26.6 19.2 13.8 EV/Sales 9.8 8.0 7.6 6.4 5.2 4.2 Price/Book Value 9.3 8.1 10.5 8.8 7.0 5.5 Dividend Yield (%) 0.5 0.6 0.6 0.5 0.6 0.6

Profitability Ratios (%) RoE 18.0 19.6 26.9 31.2 28.0 30.5 32.0 RoCE 25.8 28.8 30.6 27.3 27.3 31.8 36.4

Turnover Ratios Debtors (No. of Days) 104 98 85 80 78 78 78 Inventory (No. of Days) 162 169 181 201 201 201 201 Creditors (No. of Days) 78 69 66 53 53 53 53 Asset Turnover (x) 0.9 1.0 1.0 0.9 1.0 1.0 1.1

Leverage Ratio Debt/Equity (x) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash Flow Statement (INR Million) Y/E March 2012 2013 2014 2015 2016E 2017E 2018E EBITDA 7,396 9,545 12,042 12,547 13,783 18,854 25,499 Other Inc/excep. items 1,384 1,461 1,807 2,278 3,189 3,597 4,069 Interest paid -50.0 -85.5 -157.8 -102.6 -112.6 -112.6 -122.6 Direct Taxes Paid -2,645.0 -3,288.0 -4,301.0 -4,517.0 -5242.3 -7002.3 -9290.1 (Inc)/Dec in Wkg. Capital -4,622.2 -3,837.9 -462.0 -5,132.4 -4114.2 -6944.4 -8049.2 Preference dividend paid CF from Oper. Activity 1,463 3,794 8,929 5,072 7,504 8,391 12,106

(Inc)/Dec in FA + CWIP -1,617 -974 -2,256 -1,198 -485 -532 -583 (Pur)/Sale of Invest. -52 24 -2,290 1,477 0 0 0 CF from Invest. Activity -1,669 -950 -4,546 279 -485 -532 -583

Issue of Shares 606 1,348 -20,159 2,472 0 0 0 Inc/(Dec) in Debt 4 7 20,171 -7 0 0 -4,034 Dividends Paid -1,683 -2,232 -2,244 -2,601 -2,439 -2,613 -2,903 Others -120 33 49 -37 20 20 20 CF from Finan. Activity -1,193 -844 -2,183 -173 -2,419 -2,593 -6,917

Inc/(Dec) in Cash -1,399 2,000 2,200 5,179 4,600 5,266 4,606 Add: Beginning Balance 12,500 11,100 13,100 15,300 20,480 25,081 30,348 Closing Balance 11,100 13,100 15,300 20,480 25,081 30,348 34,955 E: MOSL Estimates

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