GECs
Merger terminated, Sony demands $ 90mn termination fee
Mumbai: Sony India terminated the merger agreement with Zee Entertainment Enterprisers on 22 January 2024, seeking a termination fee of $ 90mn on account of alleged breaches of merger cooperation agreement (MCA) terms by Zee, invoking arbitration and seeking interim relief against Zee. Zee has denied all such assertions by Sony regarding the alleged breach of the MCA, including the latter’s demand of termination fee. Zee is evaluating all available legal options to contest Sony India’s claims.
Stiff competition from digital media and RIL/Disney merger
We believe the above termination may hit both the parties as both are facing stiff competition from digital media as also potential threat from the merger of RIL-Disney, near term. Zee has reported muted growth/profitability performance in the past two years, as revenue growth has converged (flat in FY20-23) and EBITDA margin dipped to 10.7 per cent (6MFY24), due to: 1) losses in the OTT segment and 2) lower growth in linear TV segment.
On the brink of multiple legal proceedings
Zee had also signed a contract with Disney for sub franchise of sports rights (ICC tournaments) in linear TV. We had estimated related annual losses of ~Rs 15.2bn in FY25E and beyond, given: 1) hefty content cost, 2) lower sports ad revenue and 3) cricket content being available free on OTT. Zee may now not fulfil this commitment (cash balance of mere Rs 6bn, versus potential contractual obligation of Rs 40 bn per year) as it was entered into given its strategic-synergistic contiguity with Zee-Sony merger. Also, Zee could see a hit from related penalty/legal proceedings due to 1) battle with Sony over the non-compete fee, 2) ongoing legal proceedings by various creditors of the Essel group (Axis Finance, IDBI Bank etc.) and 3) dishonouring of contract with Disney.
Valuation: Downgrade to sell; TP pared to RS 170
Zee may see a sharp de-rating in P/E valuation of its broadcasting business to at least 10x one-year forward or lower, due to the unfinished merger, as: 1) linear TV growth has converged sharply, 2) Zee may not have any potential to scale-up OTT offering in a highly fragmented market, 3) lower profitability – EBITDA margin, ex-Sports losses, could converge to 14 per cent and 4) any further write-offs on the inventory side or matters pertaining to related parties’ creditors or not honouring the sports contract with Disney (ICC tournaments – Zee could have potentially paid half of the $ 3bn value for TV rights). Merger with Sony was the key valuation driver to move up in the past two years. But given the termination, we downgrade Zee to Sell with March 2025E TP pared to Rs 170 from Rs 340. But if the Disney contract is honoured, TP may move to Rs 130, citing losses in the sports segment. We value the broadcasting business at 10x one-year forward P/E and OTT at 3.0x one-year forward EV/sales. Possibility of any other strategic/financial partner buying majority stake in Zee could provide respite to valuation multiples.
The credit of this article goes to Elara Capital SVP Karan Taurani.
GECs
Samsung TV Plus launches Kings of Comedy channel
New free FAST channel brings iconic Hindi comedy shows to millions of Samsung Smart TV owners.
MUMBAI: Samsung TV Plus has just turned up the laughter volume and it’s completely free. The leading free ad-supported streaming television (FAST) service in India has launched Kings of Comedy, a premium comedy channel featuring some of the country’s most beloved primetime shows. Available exclusively on Samsung TV Plus, the channel delivers back-to-back hits including Comedy Nights with Kapil, Khatra Khatra Khatra, and Comedy Nights Bachao, with no login or subscription required.
The launch marks a milestone for free streaming in India, offering audiences a dedicated comedy destination directly from their Samsung TV home screen. It arrives as Samsung TV Plus India celebrates its 5th anniversary, during which the service has grown its monthly active users by 42 per cent and more than doubled its total viewing hours. The platform now offers over 180 free channels across 14 languages.
Samsung TV Plus India general manager and head of business development Kunal Mehta said, “Comedy is the heartbeat of Hindi entertainment, and Kings of Comedy brings together the shows Indians already love, completely free on their Samsung TV. Our focus remains the same take the content people know and make it effortless to access.”
Globally, Samsung TV Plus has surpassed 100 million monthly active users across more than 4,500 channels, solidifying its position as one of the world’s leading free streaming services.
Kings of Comedy is now available on all compatible Samsung Smart TVs. For viewers seeking non-stop laughter without any cost, this new channel delivers a royal treat proving that sometimes the best entertainment really does come with no strings (or subscriptions) attached.
