Zee embarks on new phase after Sony merger collapse

Zee Entertainment will look to turn over a new leaf following its failed merger with the Sony Group Corporation’s Indian unit, Zee MD & CEO Punit Goenka said in an earnings’ call on Tuesday.

Addressing investors, Goenka laid out three strategic pillars — frugality and fiscal prudence, resource optimisation and a sharp focus on quality content — as the way forward to drive growth as a standalone entity. The aim, he said, is 18-20% earnings before interest tax depreciation and amortisation (Ebitda) margins and 8-10% revenue growth by FY26.

The announcement came amid a mixed set of financial numbers reported by the company. Zee’s December-quarter (Q3FY24) consolidated profit more than doubled to Rs 59 crore as an increase in subscriptions offset weak advertising growth. It was still a miss when compared with the Bloomberg consensus estimate of Rs 91 crore for the period.

Zee’s consolidated revenue growth declined 3% year-on-year to Rs 2,046 crore, and Ebitda fell nearly 44% year-on-year to Rs 209 crore, even as the company cautioned that the overall consumer sentiment was yet to fully recover. These were in line with Bloomberg consensus estimates of Rs 2,087 crore and Rs 209 crore each for the period.

Zee’s share price closed 0.85% up at Rs 189.50 on Tuesday. The results were declared after trading hours.
“I have chalked out a firm and structured plan to bring back our margins to industry-beating levels and drive growth for the future. The three-pronged approach of frugality, resource optimisation and focus on quality as opposed to quantity will elevate and further streamline our existing capabilities in line with our growth plans,” Goenka said.

He said the firm would implement steps to optimise spends across verticals, including technology, content and marketing. It would also look at a recalibration of the OTT cost structure under Zee5 to improve return on investment. The company would also take steps to enhance the level of synergies and reduce overlaps between businesses, he said, implying that there could be some layoffs.

While Goenka offered no reasons for why the proposed merger with Sony didn’t go through, he did say that he wanted the merger to be implemented in the first place. “…Zee took several steps such as divestment or closure of profitable businesses in the domestic and international markets. I personally offered several proposals and solutions to Sony to address their demands. But unfortunately, they remained unaccepted.”

Zee and Sony have dragged each other to court over the failed merger, with the legal battle expected to be long-drawn. Last week, the Singapore International Arbitration Centre denied interim relief to Culver Max Entertainment and Bangla Entertainment, both entities of Sony, in its plea against Zee from approaching the National Company Law Tribunal to implement the merger scheme. Financial Express