'Two players coming together does not make us less capable of competing with them'
During the Q1 FY25 earnings discussion, ZEEL MD and CEO, Punit Goenka shared that the maiden quarter of the new financial year commenced with an improving operating performance for the company. He said that the results of several strategic steps implemented in the previous quarter are being witnessed gradually and the company continues to maintain a sharp focus on frugality, optimization and quality content across business. “Timely and action-oriented interventions centered around these three key tempos have enabled us to achieve a healthy growth momentum on the margin profile. Compared to the previous quarter, our margins continue to display considerable improvement sequentially and we aim to drive this positive momentum higher as we move forward into this fiscal,” said Goenka.
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He also highlighted that over the past few months, the company has put in concerted efforts to formulate a strategic and aggressive growth trajectory and the fundraising exercise is a firm step in this direction. “We have taken the necessary steps to create a robust financial foundation in line with a long-term plan of delivering higher performance and enhancing the value-adaptive capabilities of the company in the interest of all our shareholders.”
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Coming back to the company's performance during the quarter, Goenka said that despite seeing some green shoots in the last quarter of the previous fiscal, the advertising revenue growth still remained subdued, with rural recovery yet to pick up entirely. He added, “In addition to the softness in demand, this quarter was also sports-heavy, coupled with general elections, which further took the share away from general entertainment advertising spends. These factors have impacted advertising revenue during the quarter, however, this challenging environment, our prudent cost discipline across the business, helped offset the headwinds.” He also noted that the conversations with large FMCG clients indicate the pickup in advertising spends in the second half of the fiscal and with the onset of the festive season. Goenka remained cautiously optimistic of the macroeconomic environment improving and growth momentum picking up as we move forward in the fiscal. “We are encouraged by the schemes and initiatives proposed by the Finance Minister in the Union Budget announced last week to help spur demand and boost the rural economy growth rate in mid- to long-term.” On the subscription side, the outlook remains steady for the company as they have continued to benefit from the implementation of the National Tariff Order 3.0, which is driving subscription revenue growth. “With a conducive policy framework in place, we are hopeful of registering a gradual growth in linear subscription revenue in line with the inflation in coming few quarters as well. This coupled with the steady growth of Zee5 subscription is resulting in a balanced and healthy revenue profile from the linear and digital segments,” said Goenka. According to him, during the quarter, the TV entertainment viewership across the industry witnessed a marginal impact due to sports and elections. The magnitude of the impact on network share was much lower than some of its peers during the quarter. Furthermore, in July, they have already regained the viewership share and are well placed in their key markets. He further added that the underlying fundamentals remain strong and the company continues to invest significant time and energy to enhance our delivery of quality content to further consolidate their viewership share gains. On the digital front, he had mentioned in the previous quarter that the company's near-term focus is to achieve a balanced cost structure to drive profitability for the long term. He shared that the teams have put in immense efforts during the quarter to optimise and arrive at a balanced financial profile for Zee5 and the company is already on the path to achieve a healthy cost structure for the business, which is evident in the significant reduction in the EBITDA lost this quarter. “As we progress in this phase towards our targeted cost objective, the digital business growth rate witnessed a marginal slowdown, but we expect it to rebound in the second half of the year. Zee5 remains well positioned in the digital landscape and has seen healthy quarter-on-quarter growth in usage and engagement metrics, underscoring its strong fundamentals. With the platform's strategic focus on good quality content, language markets, targeted investments and an exciting content line-up, we expect Zee5 growth momentum to sustain,” said Goenka. On the balance sheet, Goenka shared that their focused efforts have enabled them to further strengthen their liquidity and financial position. He said, “During the quarter, we have generated strong free cash flow, and our content inventory has also continued to decline, driven by optimized acquisition and movie releases. As the true potential of the media and entertainment sector gets unlocked with intensified competition and the advent of new revenue streams, we remain guided by our strategic priorities in order to appropriately capitalize on the emerging growth opportunities.” He also shared that the company is committed to achieve their targeted aspirations for the future, and their efforts in the subsequent three quarters will be focused towards enhancing their revenue profile with prudence and resilience at the forefront. “The action-oriented steps implemented earlier have resulted in the company maintaining a firm grip on its costs, and we aim to continue posting a healthy margin improvement rate. As we move forward, we remain optimistic of recovery in the overall macroeconomic environment on the back of good monsoons and an oncoming festive quarter.” Meanwhile, speaking on the consolidation between two large players, competitive landscape and cost cutting within the company, Goenka shared that a lot has happened in the company in the last six to eight months but the company is working overtime to make sure that the morale of the organization remains upbeat. “Of course, whenever there is this magnitude of correction that happens in the HR side, there will be some level of disappointment and fear that sets in. But as I stated that we are working overtime to ensure that remains upbeat and regular communication with the entire organization is taking place. I am personally, in fact, traveling to all the centers to make sure that I meet people on a regular basis to ensure that the organization is still behind them and we will emerge victorious in this timeline.” Secondly, on the competitive landscape, Goenka shared his views and said that the company has always competed with the largest of the organizations in the media and entertainment market. “By virtue of just two players coming together, while they will have a lot of synergistic benefits, which we also talked about when we were trying to do our merger, does not restrict or make us less capable of competing with them as a joint entity.” He further added, “My team and I are confident that we will continue to work on the entire portfolio and meet the expectations of our shareholders.” He also mentioned that a significant portion of the churn occurred in the tech center, largely because the platform had reached a certain stage of operations, making some roles redundant. However, on the television side and in other areas, the talent situation has been quite stable, and most of the key personnel remain with the company. “Therefore, we are confident in our ability to deliver on the business,” he concluded.