ZEEL Q2 FY24 revenue up 20.5%; growth led by subscribers

Zee Entertainment has announced its financial performance for the first half of the fiscal year 2024. Despite facing challenges in the advertising environment, the company exhibited substantial growth in other areas, primarily driven by its dedicated subscriber base.

Zee Entertainment reported a 3.5% year-on-year drop in advertising revenue during H1FY24, reflecting the volatility in the advertising market, even as ad spending showed signs of recovery. In the second half of FY24, the company anticipates a modest ad spend growth of 5-6% year-on-year, as a significant portion of ad budgets may be diverted to sports due to the upcoming Cricket World Cup (CWC).
The company experienced robust growth in its subscription revenue, attributed to the implementation of the New Tariff Order (NTO 3.0), which facilitated price hikes after a three-year interval. Zee Entertainment expects subscription revenue to continue growing in the range of 7-8% year-on-year during H2FY24.

Despite the challenges in the advertising segment, Zee Entertainment demonstrated impressive overall revenue growth, with a sharp 20.2% year-on-year increase. Notably, this growth was largely driven by the performance of Gadar 2. Excluding Gadar 2, the overall revenue growth was 5.4% year-on-year.

Zee Entertainment's OTT platform, Zee5, reported a remarkable revenue growth of 59% year-on-year, reaching INR 2,652 million. This growth was bolstered by a syndication deal. The company also gained viewership share in linear TV, with its share increasing by 90 basis points quarter-on-quarter, reaching 17.9%. This achievement was facilitated by an upswing in selective regional genres.

Zee Entertainment's future performance is closely tied to the potential merger with Sony. Recent developments, including an order from the Securities Appellate Tribunal (SAT), allow Punit Goenka to remain the CEO of the merged entity. However, the Securities and Exchange Board of India (SEBI) continues to investigate Goenka. The probability of the merger proceeding is considered high, with or without Goenka's involvement, unless he changes his stance on the merger's importance. Legal checks indicate a low likelihood of Sony wanting Goenka to remain as CEO until the investigation outcome is known, which could take 12-15 months. According to Karan Taurani of Elara Capital, this raises the risk for the Zee-Sony merger, potentially impacting valuations.