Recovery In FMCG Spending Ups Zee's Ad Revenues: Punit Goenka

Right after Zee Entertainment Enterprises reported the results for the fourth quarter and year ending March 31, 2024, on Friday, CEO and MD Punit Goenka said ad revenues of the company have improved on the back of the recovery in ad spends by the FMCG sector.

The broadcaster's advertising revenue stood at Rs 1,110.2 crore against Rs 1005.8 crore in Q4 FY23, reporting a 10 per cent growth YoY.

“The FMCG sector has been recovering with the rural sentiments witnessing an uptick, leading to a healthy increase in advertising revenue for the company, both on a quarter-on-quarter basis and on a year-on-year basis."

“While the FMCG pace of recovery is still massive and this quarter sports is taking some share of ad spending, we believe we are better positioned than in previous years to drive growth in ad revenues,” said Goenka during the investors' call.

Talking about subscription revenues, Goenka said he was hopeful that with a conducive pricing policy framework being in place, there will be an opportunity to drive gradual growth in subscription revenue.

In Q4 FY24, the company saw a 12 per cent Y-o-Y jump in subscription revenue at Rs 949 crore, up from 847 crore in the fourth quarter of fiscal year 2022-23.    

During the investors’ call, Goenka said he was confident of achieving the long-term aspiration of 18-20 per cent EBITDA by FY 2026.

Goenka also added that the results were on account of steps taken by the company in the late half of the last quarter and this will be reflected in the bottom line in FY 2025.

“Our visibility and confidence in our performance in FY25 and our ability to achieve the long-term aspiration of 18-20 per cent EBITDA by FY2026 has further bolstered. In the new fiscal year, all the interventions will fully play out over the next 3-4 months and there will be some one-time costs in the near term.

That said, a positive upswing should continue in the subsequent quarters and we remain well poised to capitalise on this opportunity,” he said.

The Merger Matrix

On the legal front, Goenka said the company has withdrawn its application from NCLT seeking merger implementation with Culver Max Entertainment (Sony Pictures), but it will aggressively pursue the arbitration proceedings in the Singapore International Arbitration Centre (SIAC).

“We have taken concerted efforts in every required direction to ensure that we remain frugal, optimise our resources and maintain a sharp focus on quality content across businesses."

“We have implemented a series of steps in the later half of the quarter, results of which will reflect in the bottom line in FY 2025,” he said.

He further said that “last few months have certainly been intense as we took several tough decisions for the company. Amidst this, we are grateful for the trust bestowed by our shareholders to implement these steps. Their approval on the appointment of three new independent directors on the Board is a testimony of their belief in us,” he said.

Goenka further said that the financial year 2024 remained subdued for the company due to the headwinds faced by the macroeconomic environment and other external factors.

“The final quarter of the fiscal year stood out by displaying positive levels of growth and we expect this momentum to continue in the new fiscal year as well,” he said.

A Balanced Approach

On the digital front, he said that ZEE5 continues to post a moderately healthy increase in metrics quarter-on-quarter.

“We have been over-indexing on growth and investment in the past, but the need of the hour is to pivot the business to achieve a balanced cost structure in order to sustain long-term growth. With that backdrop, we are looking at every element of the business with the lens of improving the overall performance,” he said.

Goenka also mentioned expecting some “short-term aberration in the digital business financial performance as the company plans to optimise costs for the long run."

“That said, the platform is making steady progress and we are seeing healthy trends in usage and engagement metrics, including the Net Promoter Score. We remain certain that with the launch of original shows such as The Broken News and others in the offing, ZEE5 will certainly be a comparative force in the Indian OTT landscape going forward,” he said.

Future Plans

Talking about the strategies going forward, he said that noting the intensifying competition across the sector, the company has taken strategic steps to secure its future and continue generating value for all stakeholders.

“We expect the near-term outlook of the industry to be growth-oriented on the back of rising content consumption and improving infrastructure, resulting in accessibility and affordability."

“We are noting the intensifying competition across the sector and have taken strategic steps to secure our future and continue generating value for all our stakeholders. I firmly believe that healthy competition will only propel the industry forward, which is beneficial for all of us,” he said.