Unification of Star-Viacom18 doesn’t make us less capable of competition: Punit Goenka

New Delhi: On the eve of the NCLT final hearing on the merger of Reliance Industries-owned Viacom18 and Walt Disney-owned Star India, scheduled for August 1, 2024, Punit Goenka, MD and CEO of Zee Entertainment, stated that the unification of these two players does not make Zee any less capable of competing with the new joint entity.

During the Q1 FY2025 earnings call, he said, “We have always competed with the largest organisations in this media and entertainment market, and just because two players are coming together, while they will have a lot of synergistic benefits—which we also talked about when we were trying to do our merger—it does not restrict or make us less capable of competing with them as a joint entity.”

In March, ZEEL laid off 50% of its staff at its Bengaluru-based Technology and Innovation Centre. In April, Goenka announced the reduction of the workforce by 15%.

“A large part of the churn has happened in the tech center; a large part of it was due to redundancy. On the television side and other side, the talent, most of the talent is still with us. Therefore, we are confident in the delivery of the business,” he said. 

Shedding light on how the company is keeping employees morale high in times of uncertainty, Goenka said, “A lot has happened in the company in the last six to eight months, but we are working overtime to make sure that the morale of the organisation remains upbeat. Of course, whenever there is this magnitude of correction that happens on the HR side, there will be some level of disappointment and fear that sets in.” 

Zee Entertainment Enterprises has recently announced plans to issue Foreign Currency Convertible Bonds (FCCBs) amounting to $239 million.

“The idea of fundraising was to ensure a pool of capital at this stage so that we are ready not only for the shifting dynamics of the sector but also for the shifting dynamics in the competitive dynamics that are undergoing right now. We wanted to fortify our balance sheet and very soon we'll be ready with our deployment plans also, said Vikas Somany, head of strategy, M&A, and business development at ZEEL, during the call.

Throwing light on why the company decided to go FCCBs way for the fundraise, he said, “FCCBs are instruments that provide us with the flexibility to make multiple drawdowns according to our deployment plan over a longer period. That’s why we chose this over other instruments. While other instruments also offered flexibility, they came with limitations.”

Goenka attributed Zee's healthy growth momentum in margins to several strategic initiatives undertaken in Q4 FY2024, combined with a strong focus on frugality, optimisation, and quality content across the business.

Zee Entertainment bounced back to profitability in the June quarter of FY 2025, posting a net profit of Rs 118.1 crore, a significant turnaround from the net loss of Rs 53.4 crore in the same quarter last year.

“Over the past few months, we have put in concerted efforts to formulate a strategic and aggressive growth trajectory for the company. 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 our long-term plan of delivering higher performance,” he said. 

Commenting on ad revenue remaining subdued, Goenka said, “Despite seeing some green shoots in the last quarter of the previous fiscal, advertising revenue growth still remains subdued, with rural recovery yet to pick up entirely. In addition to the softness in demand, this quarter was also sports-heavy and included general elections, which further took the share away from general entertainment advertising spend. These factors have impacted advertising revenue during the quarter.”

Zee reported a 3% drop in advertising revenue for Q1, totalling Rs 911 crore compared to Rs 940.91 crore in the same period last year.

However, our prudent cost discipline across the business, helped offset the headwinds, added Goenka. 

Goenka also stated that the company’s conversations with large FMCG clients indicate a pickup in advertising spend in the second half of the fiscal year and with the onset of the festive season.

“That said, we remain cautiously optimistic about the macroeconomic environment improving and growth momentum picking up as we move forward in the fiscal,” added Goenka.

ZEEL’s subscription revenue saw an 8.7% increase, reaching Rs 987.19 crore, up from Rs 907.49 crore year-on-year. On the digital side, Zee5's revenue surged 15.3% to Rs 223.7 crore, up from Rs 193.9 crore in the previous year.

Commenting on the growth in subscription revenue, Goenka said, “On the subscription side, the outlook remains steady, and we 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 inflation in the coming few quarters as well.

This, coupled with the steady growth of ZEE5 subscriptions, is resulting in a balanced and healthy revenue profile from the linear and digital segments, he said.

During the quarter, TV entertainment viewership across the industry witnessed a marginal impact due to sports and elections. “The magnitude of the impact on our network share was much lower than some of our peers during the quarter,” emphasised Goenka.