Sun TV Network Ltd. BUY STOCK POINTER. Target Price `625 CMP `410 FY15 PE 15.1x

Transcription

1 STOCK POINTER Sun TV Network Ltd. BUY Target Price `625 CMP `41 FY15 PE 15.1x Index Details Sensex 19,242 Nifty 5,848 BSE 1 5,98 Industry Media Scrip Details Mkt Cap (` cr) 16,138 BVPS (`) 63.7 O/s Shares (Cr) 39.4 Av Vol (Lacs) Week H/L 431/177 Div Yield (%) 2.3 FVPS (`) 5. Shareholding Pattern Shareholders % Promoters 77. DIIs 2.1 FIIs 14.2 Public 6.7 Total 1. Sun TV vs. Sensex We initiate coverage on Sun TV Network Ltd (Sun TV) as a BUY with a price Objective of `625 representing a potential upside of ~52.4% over a period of 24 months. At a CMP of `41, the stock is trading at 22.2x and 18.1x its estimated earnings for FY13 and FY14 respectively. With ~2 mn households in Chennai ( mn cable subscribers and.5 mn DTH subscribers) and ~11 mn subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam), Sun TV is expected to be one of the biggest beneficiaries of impending digitisation in these geographies. Sun TV s revenues are expected to grow at a CAGR of 14.6% to `2,778. crore with cable subscription revenues growing at a CAGR of 3.2% while DTH is expected to grow at a CAGR of 21.6% by FY15. In line with revenues, PAT is expected to grow at a 15.6% CAGR from `692.9 crore in FY12 to `1,7.6 crore by FY15. Digitisation to provide fillip to Sun TV s subscription revenues Near term triggers from the implementation of digitisation in Phase I (Chennai) and Phase II cities should help boost Sun TV s subscription revenues. With ~2 mn households in Chennai (~ mn cable subscribers and ~.5 mn DTH subscribers) and ~11 mn subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam), Sun TV is well placed to benefit from the incremental subscriber additions. We expect Sun TV to be one of the biggest beneficiaries of digitisation and revenues are expected to grow at a 3 year CAGR of 14.6% to `2,778. crore (cable subscription revenues 3.2% CAGR to `36 crore; DTH 21.6% CAGR to `598 crore) by FY15. We believe that the cable subscription income is expected to outperform DTH revenue stream owing to increase in paying subscribers post digitisation (by 31 st Dec, 212) and increased contribution of ~`2.5 crore per month (with upside risk) from Arasu Cable network in Tamil Nadu. Given the potential for deeper penetration of DTH services in the company s key markets, the DTH revenue is likely to continue its momentum. The sharp jump in subscription revenues from 28.2% of total sales in FY12 to 35.8% in FY15 should bring more visibility and sustainability to the revenues besides providing diversification of revenue streams. Key Financials (` in Cr) Y/E Mar Net EPS Growth RONW ROCE P/E EV/EBITDA EBITDA PAT EPS Revenue (%) (%) (%) (x) (x) 212 1, , E 2,35.1 1, E 2,39.7 1, E 2, , , of 18 - Friday 21 st December, 212

2 Advertising revenues to witness traction going ahead Over FY8-FY11, Sun TV s ad revenues grew at a faster rate of 27.6% CAGR compared to the ~2% of the `3,15 crore South Indian ad market (Tamil, Telugu, Malayalam and Kannada). However, in FY12, in addition to the slowdown, uncertainty over Arasu Cable led to a total blackout of Sun TV s channels on the cable platform in the entire state of Tamil Nadu (except Chennai) which affected ad revenues adversely. Post Sun TV s deal with Arasu in August, 212, ad revenues are likely to return to a steady state growth rate. Going ahead, the regional TV ad market growth is likely to outpace the national TV ad market as the potential of growth in consumption of various products is greater in regional markets. In addition, Sun TV s competitive position in terms of premium pricing power (e.g. ad rate of ~`43,/1sec v/s `7,5-`1,/1 sec of immediate competitor in Tamil Nadu) reaffirms our confidence that the company will maintain its leadership position as well as achieve growth momentum. We expect Sun TV s ad revenue to grow at a CAGR of 11.3% to `1,34.5 crore from `945.4 crore over the period of FY13-FY15 on the back of improved ad spends and increased visibility in Tamil Nadu (TN being the biggest regional ad market). Valuation We initiate coverage on Sun TV Network Ltd (Sun TV) as a BUY with a Price Objective of `625 representing a potential upside of ~52.4% over a period of 24 months. At a CMP of `41, the stock is trading at 22.2x and 18.1x its estimated earnings for FY13 & FY14 respectively. Going ahead, pick up in advertising revenues and digitisation led boost to subscription revenues bode well for the company. Historically, the stock has traded at an average of ~23x one year forward earnings and we expect Sun TV to garner similar multiples going ahead. Moreover, we believe that the sharp underperformance by Sun TV v/s ZEEL (since May, 211) prices in the political and legal risks associated with the company. We expect the valuation gap to narrow and expect Sun TV to trade at its historical levels owing to its robust business model. - 2 of 18 - Friday 21 st December, 212

3 Company Background Sun TV Network is one of the largest television broadcasters in India with a strong network of 32 television channels and 45 FM radio stations across India. For more than a decade now, Sun TV due to its extremely popular offering has been dominating the broadcasting space in the four key South Indian states of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala (leader in 3 out of 4 markets). Recently, in 28, Sun TV forayed into the movie business through its division, Sun Pictures. In October, 212, Sun TV bought the Hyderabad IPL team for `425.5 crore which is to be paid over five years till FY17. Sun TV s Product Offerings Sun TV Product Offerings Radio Business Television Business 32 channels Movies & Distribution 59.2% 45 radio Stations (All over India) 97.8% South Asia FM (Rest of India) Kal Radio (Southern Market) Tamil Channels (~Rs 117)* Telugu Channels (~Rs 8)* Kannada Channels (~Rs 56)* Malayalam Channels (~Rs 575)* RED FM 93.5 Suryan Fm Radio Sun TV Sun TV HD Gemini TV Gemini TV HD Udaya TV Udaya Movies Surya TV Sun Pictures owns ~ 95 movies titles 49% beneficial Interest KTV Sun Music KTV HD Sun Music HD Gemini Movies Gemini News Gemini Music Gemini Comedy Udaya Music Udaya News Kiran TV Strategic Alliance with RED FM 3 Radio Stations in Mumbai, Delhi & Kolkata Sun News Chutti TV Sun Life Adithya Sun Action Sun TV RI Kushi TV Gemini Life Gemini Action Udaya Comedy Suriyan TV Chintu Kochu TV Surya Action * Ad Market size - 3 of 18 - Friday 21 st December, 212

4 Key Investment Highlights Digitisation to provide fillip to Sun TV s subscription revenues The non-existence of a proper addressable system had resulted in significant under reporting (~85% of `18, crore market size) of the subscribers base by LCO s (Local Cable Operator) in turn leading to lower revenue realizations for MSO s and broadcasters. This revenue leakage had not only impacted broadcasters and MSOs but also the GoI (Government of India) in form of lost taxation. The new system of DAS (Digital Addressable System), which has become a reality now (Phase I successfully implemented, except in Chennai), will drastically change the fortunes of the industry ensuring that all negatives regarding reporting of subscribers is done away with. Under DAS, the entire universe of subscribers will now be uniquely recognized leading to a multifold jump in the subscribers. This coupled with the growth of the TV households from ~153 mn to ~188 mn by 216 and paid C&S TV household penetration levels expected to increase to 89% from the current ~76% should improve the visibility on revenue growth and profitability of the sector as a whole. Broadcasters to benefit from growth TV households & increased penetration % % 86 76% P 216E 9% 85% 8% 75% 7% 65% Digital Cable DTH DD Direct IPTV Non C&S Analog cable Paid C&S Penetration Sun TV to be one of the biggest beneficiaries of digitisation We expect Sun TV to be one of the biggest beneficiaries of digitisation and revenues are expected to grow at a CAGR of 14.6% to `2,778. crore with cable subscription revenues growing at a CAGR of 3.2% to `36 crore while DTH is expected to grow at a CAGR of 21.6% to `598.3 crore by FY of 18 - Friday 21 st December, 212

5 Key Highlights of TRAI Tariff Order & Interconnection Regulations for Digital Addressable Cable TV Systems Basic Tier Since, the consumer is required to pay for Free to Air (FTA) channels, concept of Basic Service Tier (BST) has been introduced. The BST is priced at `1 max (+ taxes) per month. However, it is not compulsory for the consumers to subscribe the BST and the consumer can select his own 1 FTA channels in the BST. Minimum Pay TV package A pay channel package will cost atleast `15 per month. Minimum 5 channels MSO s must carry a minimum of 5 channels from 1 st January, 213. Uniform Carriage Fees MSO s can declare their own carriage fees for any channel that the MSO has not asked the broadcaster for. Carriage fees cannot be increased for two years. No demanded placement Broadcasters cannot insist on placement of their channel in a particular slot. Compulsory a-la-carte by broadcasters Every broadcaster must offer all its channels to MSO s on a-la-carte basis. The broadcaster cannot compel any MSO to include its channels in any package or scheme offered by the MSO. Roadmap to Digitisation Phase Geographies Covered No of C&S Households Completion (%) Deadline I Delhi, Mumbai, Kolkata and Chennai ~12 mn 68% 31-Oct-12 II All cities with population > 1 lacs 3-4 mn - 31-Mar-13 III All urban areas (municipal areas) ~ 2 mn - 3-Sep-14 IV Rest of India ~ 2 mn - 31-Dec-14 With Mumbai, Delhi and Kolkata getting digitized along with Madras HC refusing to extend digitisation deadline in Chennai (Dec 31 st, 212), the doubts that had been raised over the implementation of DAS have been eliminated. Further, with the digitization being enacted into a law, we do not expect any serious delays in the roll out of the remaining stages. MSO & Broadcaster s share to grow multifold post digitisation Stake-holder revenue share Pre-digitization Post 216 Consumer ARPU 1% 1% LCO 65-7% 35-5% Distributor 5%.5% MSO 15-2% 25-3% Broadcaster 1-15% 3-35% - 5 of 18 - Friday 21 st December, 212

6 Rs.Crore Revenues to grow steadily at a 15% CAGR FY9 FY1 FY11 FY12 FY13E FY14E FY15E Cable subscription numbers to spur income growth diversifying revenue streams Historically, Sun TV has mostly relied on advertising revenues. However, in recent times, the DTH thrust had enabled the company to witness a robust growth in its subscription revenues. With digitisation being implemented on a war footing, the subscription revenues are expected to get a further thrust and contribute to a sharp jump in subscription revenues. Sun TV s Revenue Mix to change going forward 1% 9% 8% 7% 6% % 4% 5% 27% 21% 24% 4% 5% 4% 12% 26% 4% 4% 4% 4% 3% 28% 28% 33% 36% 5% 6% 5% 5% ~8 bps expansion in share since FY12 5% 4% 3% 54% 57% 57% 5% 54% 54% 51% 49% reduction by ~5 bps 2% 1% % 15% 13% 1% 8% 9% 9% 8% 7% FY8 FY9 FY1 FY11 FY12 FY13E FY14E FY15E Broadcast Fees Advertising Revenue Program licensing income Subscription income Others - 6 of 18 - Friday 21 st December, 212

7 Rs.Crore With ~2 mn households in Chennai (~ mn cable subscribers and ~.5 mn DTH subscribers) and ~11 mn subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam), Sun TV is expected to be one of the biggest beneficiaries. Domestic cable subscription revenue growth to outperform DTH stream Due to FTA (Free to Air) nature of Chennai subscription market and imbroglio in reaching a deal with Arasu Cable (in Tamil Nadu), cable subscription revenues dipped sharply and was unable to keep up pace with revenues from DTH stream. It grew at a 7.6% CAGR to `163 crore in FY12 from `131 crore in FY9 as compared to ~58.3% CAGR witnessed by the DTH revenue stream. However, we believe that the growth from cable subscription income is likely to outperform DTH stream owing to two factors: Successful implementation of digitisation in Chennai leading to increase in paying subscribers (by 31 st Dec, 212) and Impact of increased contribution of ~`2.5 crore per month (which can increase going ahead) from Arasu Cable network in Tamil Nadu. We expect this stream to grow at a CAGR of 3.2% to `36 crore during FY12-FY15E assuming an ARPU of `25 per month (lower side of management s guidance of `25+) during the forecasted period. Sun TV s cable subscription revenues poised to grow FY9 FY1 FY11 FY12 FY13E FY14E FY15E - 7 of 18 - Friday 21 st December, 212

8 Arasu Cable Network unlikely to impact the top-line going ahead Arasu Cable TV Corp. Ltd was initially launched by the previous DMK government in 28 and eventually came into effect in September, 211 after AIDMK came to power. During this time, Arasu was declared as the only official cable distributor in Tamil Nadu (except Chennai) by the then Chief Minister J Jayalalithaa. On September 2, 211, services of Arasu went live and as Sun TV was yet to sign agreements with Arasu Cable, the company s channels were not available on Arasu s network across Tamil Nadu (except Chennai) which led to revenue loss of ~`77 crore in FY12 (`1 crore per month). Since its re-launch in September 211, Arasu has built a network that covers 31 districts in the state and reaches 4.9 million households. However, it is imperative to note that despite being dropped by Arasu Cable, Sun TV continued to maintain its leading position with marginal impact on it viewership ratings on the back of its continued visibility in Chennai, its availability on DTH platform across Tamil Nadu and presence of piracy, to a certain extent, in the state. Eventually, in August, 212, the company signed a deal with Arasu Cable to carry Sun TV s channels on its network for `2.5 crore per month. We believe that as Sun TV already enjoys a dominant market share in terms of viewership ratings, this arrangement will further strengthen its competitive positioning in the Tamil Nadu market which incidentally happens to be the biggest regional ad market. Also, with the DAS replacing the CAS system, the erstwhile rate of `7/month would no longer be applicable and the higher rates as prescribed under DAS would prevail. DTH subscription revenue stream to continue its momentum Sun TV has benefited tremendously from the rising subscriber base of DTH services in India, helping DTH revenues to grow at ~58.3% CAGR from `84 crore in FY9 to `333 crore in FY12. Starting from a DTH subscriber base of 1.11 mn in FY8, total subscribers of Sun TV channels now stands at 7.87 mn (as on H1FY13). With the digitisation becoming a reality now and given the potential for further penetration of DTH services in the company s key markets, the trend is likely to maintain the momentum going forward. As a result, we expect DTH revenues to grow at a CAGR of 21.6% to `598.3 crore during FY12-FY15E assuming an ARPU (average rate per user) of `36 per month during the forecasted period. - 8 of 18 - Friday 21 st December, 212

9 Rs.Crore Rs.Crore DTH subscribers growing steadily DTH revenues to get a boost % 1% 8% 6% 4% 2% % No. of subscribers (in mn) % QoQ FY9 FY1 FY11 FY12 FY13E FY14E FY15E We expect total domestic subscription revenues (DTH + Cable) to grow at a CAGR of 24.6% to `958.3 crore by FY15 from the current FY12 revenues of `495.6 crore with share of subscription revenue expected to increase by a whopping 76 bps to 36%. Our forecast is based on conservative estimates as we believe that in order to ensure smooth implementation of DAS, broadcasters will not rock the boat and will go in for negotiated basis pricing with MSOs in place of a complete revenue per subscriber model. Sun TV s domestic subscription revenues to grow at a 25% CAGR % % % % % 1% -6% FY9 FY1 FY11 FY12 FY13E FY14E FY15E 7% 6% 5% 4% 3% 2% 1% % -1% Subscription Revenue % YoY - 9 of 18 - Friday 21 st December, 212

10 Rs.Crore Advertising revenues to witness traction going ahead Over FY8-FY11, Sun TV s ad revenue grew at a faster rate of 27.6% CAGR compared to the ~2% of the `3,15 crore South Indian ad market (Tamil, Telugu, Malayalam and Kannada). However, in FY12, in addition to the slowdown, uncertainty over Arasu Cable led to a total blackout of Sun TV s channels on the cable platform in the entire state of Tamil Nadu (except Chennai) which affected ad revenues adversely. Post Sun TV s deal with Arasu in August, 212, ad revenues are likely to return to a steady state growth rate. Going ahead, the regional TV ad market growth is likely to outpace the national TV ad market as the potential of growth in consumption of various products is greater in regional markets. In addition, Sun TV s competitive position in terms of premium pricing power (e.g. ad rate of ~`43,/1sec v/s `7,5-`1,/1 sec of immediate competitor in Tamil Nadu) reaffirms our confidence that the company will maintain its leadership position as well as achieve growth momentum. Market Sun TV continue to dominate ad market Tamil Rs 43 Approx. ad rates per 1 sec on GEC channels Telugu Rs 25 - Rs 3 Kannada Rs 2 - Rs 25 Malayalam Rs 1 - Rs 15 We expect Sun TV s ad revenue to grow at a CAGR of 11.3% to `1,34.5 crore from `945.4 crore over the period of FY13-FY15 on the back of improved ad spends and increased visibility in Tamil Nadu (TN being the biggest regional ad market). Advertising stream to gain momentum FY9 FY1 FY11 FY12 FY13E FY14E FY15E - 1 of 18 - Friday 21 st December, 212

11 Unique business model help Sun TV sustain highest margins in the industry Sun TV operates on a "Sponsored Revenue model" for its GEC channels, wherein it leases out its prime time slots (usually 7. pm to 9. pm) on 3 minutes basis to third party content producers for a fixed fee (termed as broadcast fee in P&L). In return, the content producers have the right to 4 minutes of advertising inventory per half an hour and Sun TV gets to keep 2 minutes (based on 6 min per half an hour model) of the slot. Since the content aired on Sun TV channels are not owned by the company, the cost of content and the risks of recouping the costs lie with the producer. The IP rights of the content lies with the producer and is not acquired by Sun TV as the content do not have shelf life and its repeat value is not that remunerative. Moreover, the company produces a large amount of content aired in the non-prime time slots in-house. Company's in-house production team sources ~75% of its daily content requirement in-house, out of which 4-45% is movie based, 8-1% is news and the rest is accounted by game, talk and variety shows which further lowers its production costs. Additionally, certain clauses incorporated by Sun TV to de-risk its model are: - Content providers have to maintain certain level of ratings for the content aired, failing which, Sun TV has right to change their slot timings or can also stop telecasting the content. - Exclusivity i.e. the producer will work exclusively for Sun TV during the period of agreement. - After the agreement is expired, the producer cannot telecast that serial on any other network for the next 2 years. International subscription revenue and Income from movie distribution to provide support to top-line Subscription revenues from international markets have been growing at a 16% CAGR over FY9-12, contributing ~4.8% to the top-line. This growth momentum is expected to be maintained albeit at a slower pace of 13.7% CAGR through FY15. Recently, the management has entered into ~2 agreements (v/s 8, years ago) which should support the growth. The international subscription revenues are expected to grow to `124 crore in FY15 from `84.3 crore reported in FY12. Sun TV has presence in the geographies of Malaysia, Singapore, Canada, Sri Lanka, the UK, South Africa, Australia, Europe and the US with ~.6 mn subscribers. The international subscribers pay on an average $8 per month of 18 - Friday 21 st December, 212

12 Rs.Crore Rs.Crore International subscription revenues to grow steadily FY9 FY1 FY11 FY12 FY13E FY14E FY15E Further, Sun TV entered the movie production and distribution business in September 28 through its division, Sun Pictures, and has so far distributed 21 films. Currently, Sun TV buys ~7-8% of movies in regional languages and has over 9,5 movie titles. Sun TV has the policy to buy movie titles as a single owner (as against multiple owners) with a strategy to keep the content exclusive. Moreover, we believe, this business adds significant value to the company s low cost model as the movie content is used in various forms such as comedy clips, music clips, action clips, etc on its multiple genre channel platform. Going ahead, we have modeled in an outlay of `8-9 crore per quarter for the movie acquisitions and we expect this stream to grow steadily at a 1% CAGR to `79.4 crore by FY15E from `59.7 crore in FY12. Revenue from movie distribution Extraordinary success of blockbuster movie - Enthiran FY9 FY1 FY11 FY12 FY13E FY14E FY15E - 12 of 18 - Friday 21 st December, 212

13 IPL franchisee buyout though not part of core business, but done at cheap valuations In October, 212, Sun TV Network won the bid for Hyderabad franchise for the Indian Premier League T2 Cricket championships. The company submitted a bid of `85.1 crore p.a. and the corresponding license has a validity of 5 years (total payout of `425.5 crore). While the price is more than twice the `42.8 crore p.a. that Deccan chronicle paid for Deccan Chargers (since 28), the two new franchises Pune Warriors and Kochi Tuskers fetched `1,72 crore and `1,533 crore for 8 years which translates into a payout of `213 crore and `192 crore p.a. respectively (in 21). Thus, the current price bid by Sun TV is at a significant discount to that paid for by the new franchises. Apart from the franchise fees, the company would also be bearing players salary and other overhead costs. Considering ~`55 crore as the overhead costs and Deccan Chargers s player salary, the total cost of running the franchise is likely to be ~`14.1 crore. The company has outlined that the IPL venture would be loss making in the first two years (till FY15) and then turn profitable from year 3 onwards (expected losses are seen at ~`3 crore in FY14). Given company s dominance in south market, we believe this venture would benefit in the long term owing to its ability to leverage the property on TV and radio. Currently, we have not included the financials of IPL franchise in our estimates. Management estimates for IPL venture Expected impact at EBITDA level FY13E Nil FY14E (Rs 3 crore) FY15E (Rs 4-6 crore) FY16E Rs 16 crore FY17E Rs 24 crore FY18E Rs 45 crore FY19E Rs 6 crore - 13 of 18 - Friday 21 st December, 212

14 Financial performance Sun TV reported 4% YoY decline in it top line during Q2FY13 owing to subdued advertisement environment (4% YoY), de-growth in analogue subscription revenues (- 28%; Arasu Cable impact) and no revenue from movie business. The management believes that sectors such as FMCG, Auto, mobile handsets and consumer durables have started showing positive signals in terms of ad spends as against BFSI which continues to remain a laggard. It has guided for double digit ad growth in the coming quarters and expects to end this fiscal with double digit growth. In November, 212, the management witnessed spurt in STB installations (owing to the digitisation deadline) which increased from an average ~3-4/day to 9-1,2/day. International subscription revenues grew by 44% YoY on the back of currency gain and increase in reach and deeper penetration. The operating margins declined by 51 bps due to rise in costs related to increased in-house and increase in satellite transmission costs. Moreover, company s erstwhile loss making radio business witnessed turnaround and posted a top-line of `5 crore with operating profit of `11 crore and PAT of `1 crore. Quarterly Financial Performance Particulars Q2FY13 Q2FY12 FY12 FY11 Net Sales Growth % Total Expenditure EBIDTA EBDITA Margin % Depreciation EBIT (EX OI) Other Income EBIT Margin % Interest Exceptional items.. PBT Margin % Provision for Tax PAT Margin % of 18 - Friday 21 st December, 212

15 Rs.Crore (%) Financial Outlook With its dominant position in Southern market, clinching a deal with Arasu Cable and superior content offering, we believe, Sun TV is well placed to benefit from the upcoming digitisation. We expect Sun TV s subscription revenues to grow at a CAGR of 24.6% to `958.3 crore in FY15. Further, EBITDA margins are expected to improve from 76.6% to 77.4% by FY15. Owing to the expected surge in subscription revenues along with expected traction on advertisement revenue front, we expect Sun TV s operational profits to improve drastically from `1,414.4 crore in FY12 to `2,149.1 crore in FY15. Revenue & Profitability Trend 3 1.% % 78.4% 76.6% 76.2% 77.% 77.4% 8.% % 38.2% 37.5% 35.7% 37.3% 38.5% 6.% 4.% 5 2.% FY1 FY11 FY12 FY13E FY14E FY15E.% Revenue EBITDA Margin (RHS) PAT Margin (RHS) Valuation We initiate coverage on Sun TV Network Ltd (Sun TV) as a BUY with a Price Objective of `625 representing a potential upside of ~52.4% over a period of 24 months. At a CMP of `41, the stock is trading at 22.2x and 18.1x its estimated earnings for FY13 & FY14 respectively. Going ahead, pick up in advertising revenues and digitisation led boost to subscription revenues bode well for the company. Historically, the stock has traded at an average of ~23x one year forward earnings and we expect Sun TV to garner similar multiples going ahead. Moreover, we believe that the sharp underperformance by Sun TV v/s ZEEL (since May, 211) prices in the political and legal risks associated with the company. We expect the valuation gap to narrow and expect Sun TV to trade at its historical levels owing to its robust business model of 18 - Friday 21 st December, 212

16 P/E(x) P/E(x) Price Comparison: Sun TV v/s ZEEL Average one year forward PE Apr-7 Apr-8 Apr-9 Apr-1 Apr-11 Apr Apr-7 Apr-8 Apr-9 Apr-1 Apr-11 Apr-12 Sun TV Zee Ent. Sun TV Avg P/E Source: Ventura Research Source: Ventura Research 1 Year forward PE: Sun TV v/s ZEEL 1 Year forward PE discount to ZEEL Apr-7 Apr-8 Apr-9 Apr-1 Apr-11 Apr-12 Sun TV Zee Ent. 9% 7% 5% 3% 1% -1% Apr-7 Apr-8 Apr-9 Apr-1 Apr-11 Apr-12-3% -5% Impact of delay in Arasu deal & political uncertainty relating to promoters Source: Ventura Research Source: Ventura Research - 16 of 18 - Friday 21 st December, 212

17 P/E Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 CMP 12.5X 17.75X 23X 28.25X 33.5X Source: Ventura Research P/B Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 CMP 3X 4.25X 5.5X 6.75X 8X Source: Ventura Research EV/EBITDA Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 EV 5.5X 8.7X 11.9X 15.1X 18.3X Source: Ventura Research - 17 of 18 - Friday 21 st December, 212

18 Financials and Projections Y/E March, Fig in Rs. Cr FY 212 FY 213e FY 214e FY 215e Y/E March, Fig in Rs. Cr FY 212 FY 213e FY 214e FY 215e Profit & Loss Statement Per Share Data (Rs) Net Sales EPS % Chg Cash EPS Total Expenditure DPS % Chg Book Value EBDITA Capital, Liquidity, Returns Ratio EBDITA Margin % Debt / Equity (x).... Other Income Current Ratio (x) PBDIT ROE (%) Depreciation ROCE (%) Interest Dividend Yield (%) Exceptional items.... Valuation Ratio (x) PBT P/E Tax Provisions P/BV Minority Interest EV/Sales Reported PAT EV/EBIDTA PAT Margin (%) Efficiency Ratio (x) Program cost / Sales (%) Inventory (days) Manpower cost / Sales (%) Debtors (days) Tax Rate (%) Creditors (days) Balance Sheet Cash Flow statement Share Capital Profit After Tax Reserves & Surplus Depreciation Minority Interest Working Capital Changes (176.) (12.3) Total Loans Others (46.5) (61.2) (66.2) (71.2) Deferred Tax Liability.... Operating Cash Flow Total Liabilities 2, ,93. 3,335. 3,947.2 Capital Expenditure (71.9) (558.7) (539.9) (557.5) Gross Block Change in Investment Less: Acc. Depreciation Cash Flow from Investing Net Block Interest exp Capital Work in Progress Increase/(Decrease) in Loans.... Investments Dividend and DDT Net Current Assets Cash Flow from Financing Deferred Tax Assets Net Change in Cash Misc Expenses.... Opening Cash Balance Total Assets Closing Cash Balance Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai 479 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation of 18 - Friday 21 st December, 212