Rattibha

This is going to be a long thread and in this thread I will analyze TV18 on a standalone basis.
#tv18broadcast #tv18
Let's go🧵👇

The first thing to understand and remember is the ownership structure
- Independent media trust ( Sole beneficiary is Reliance ) owns 73.15% of Network18
- Network18 owns 51% of Tv18
- Tv18 owns 51% of viacom and 51% of AETN18

What does network 18 have under its umbrella?
- 39% in BookMyShow
- Forbes India, Overdrive, Better Photography, News18. com and Firstpost
- 51% of Tv18
- 92% of moneycontrol

What does Tv18 have under its umbrella?
Note : News18 Lokmat is a 50:50 JV between Tv18 and Lokmat group.

Tv18 also holds 51% in AETN18 Media Private Limited which operates History TV18. It has a viewership share of close to 25% in its segment but it doesn't offer much in terms of profits ( FY 18-19 Profit was 7.47cr, FY 19-20 profit was 2.24cr and FY 20-21 profit was 5.69cr )

- RoE of AETN18 has always been sub 12%.
- Tv18 also owns 24.5% of Eenadu Television Pvt. Ltd ( 5 regional entertainment channels )
For FY 20-21 ETPL had a PAT of Rs.62cr

Indiacast is 50:50 JV between Tv18 and Viacom18. It is in the business of content syndication and monetization with sole purpose to get business for Tv18 and Viacom18. Indiacast is also profitable on a standalone basis.
FY 20-21
Rev - 288cr
PAT - 3.30cr
RoE - 16.34%

Business news segment fetches the most revenue for Tv18 and it enjoys a pleasant position in that segment. In addition it also owns several regional news channels, the viewership data of which, has not been published by the company.

Let us look at how the television industry is doing in India
- 66% penetration
- Roughly 15cr households have either Cable/DTH connection
- New cable/DTH connections are coming from aspirational states ( Bihar, Jharkhand and North-eastern states )

- Connection growth rates in these aspirational states have been between 21-24%
- Over the past 3 FYs, aggregate television industry revenue hovered around 75,000cr ( Split equally between subscription and advertisement revenue )

- Contrary to the popular belief that digital platforms are eating away television's share, data show digital platforms are causing more harm to print media.
- General entertainment has dominating viewership share while news and sports are growing faster. See the following image

- TRAI's New Tariff Order enabled channels to earn more through subscriptions ( I noticed this change from FY 19-20 )
- For advertisers, highest RoI comes from sports and regional channels

- During FY 19-20, while many national channels reported drop in ad volumes, regional channels reported 13% increase in ad volumes ( sports channels too reported growth )

- Within sports, during FY 18-19, wrestling had 20% viewership share while cricket had 19%. Kabaddi had 17% and Volleyball got 5%. Dynamics within sports is changing.
- Average watch per household per day ( During FY 19-20 ) was 3hrs and 42 minutes

- With BARC resuming the publication of TRPs, CNN News 18 (English) improved its relative viewership share to 15% ( Before the blackout it was 13% )
- CNBC business channels ( English & Hindi ) continue their domination within their domain

Let's move onto the standalone financials of TV18

- Notice the dip in profits in 2019-20?
It was due to credit of excess tax provision during Fy 2018-19. Company credited approx 73cr of excess tax provision relating to earlier period. So, 18-19 PAT includes that 73cr write-back.

- FY 20-21 has been a fruitful year for the company in terms of profitability. EBITDA margins went up by more than 6%. I decided to probe further and found out that the improvement in margins was due to cut in production, marketing and distribution costs.

- Improvement in EBITDA margins during FY 21-22 was down to topline improvement. Marketing costs have also gone up meaning company has sold aggressively. FY 21-22 profits were mainly due to operating leverage.

- Moving onto the balance sheet, the company carries no long term debt
- One concern is that they keep lending to Network18 on short term basis. This outstanding keeps climbing every year. On 31st March 2022 it was over 800cr

- To extend these short term loans to Network18, company resorts to short term borrowing, mainly through commercial papers.
- Impact of these short term borrowings on net interest cost is not much.

- Cost of its investment in Viacom18 = 986cr
- Cost of its investment in AETN18 = 106cr
- Cost of its investment in Eenadu Television = 233cr

- One peculiar figure also caught my attention, it is an off-balance-sheet item i.e contingent liability. Amount involved is Rs 3114cr. I can't understand why this litigation exists between Network18 and Tv18. Probably the plaintiffs are minority shareholders of Network18.

This contingent liability might not crystallize but still it is important for everyone to understand its existence and the associated risks which is why I'm bringing it to your attention.
Note : e-eighteen is moneycontrol.

The reason I have excluded Viacom18 so far is because of the deal with James Murdoch and Uday Shankar. Nobody knows to what extent Tv18 will have to dilute its stake from the current 51%. So, analyzing Tv18 on a standalone basis made more sense.

Having said that let us now look at Viacom18 on a standalone basis. Here is their portfolio (Add Sports18 to it)

Here are Viacom18 Financials for the last 5 FYs. Notice how EBITDA margin has gone up by 10% in FY 19-20. I analyzed their financials and found that this was mainly due to their aggressive operational cost cutting coupled with operating leverage.

Here is Viacom18's shareholding

Now comes the tricky part and what everyone has been talking. THE DEAL. What is it all about?
Well, the actual deal structure is not out yet according to various news outlets, James Murdoch and Uday Shankar will buy out MTV's share in Tv18 (40%).

The amount involved is rumoured to be Rs.13,500cr. Also, Reliance will bring in 1645cr and transfer Jio Cinema OTT app to Viacom18.
Assuming this to be true, viacom18 would be valued at around Rs. 33,750cr.
Now the question is how much of this should Tv18 get?

--This confusion led to the drubbing of Tv18's stock. Some expect 10% while others expect 25% but no one knows how much it is going to be.
Also, higher the valuation of Jio Cinema App, the worse it is for Tv18 shareholders.

-Among all this confusion, the silver lining is the foray into sports by Viacom18.
-Acquired LaLiga, EFL cup, FIFA world cup (for Rs.450 cr) and NBA rights.
- e-auciton of IPL rights on June 12th is worth following closely.

- Going forward following rights might be of investors' interest -
1) English premier league ( Expiring after 2024-25 season )
2) Formula 1 ( Expiring after the current season )
3) UEFA champions league ( Expiring after 2023-24 season )

That's the end of this thread. Incase you find it useful, supplement this with you existing/ongoing research/
If you don't find this useful do abuse me in DMs 😋
A lot of effort went into this. I have been researching since October '21.

So if you find this thread useful do like and retweet. More engagement will encourage me to put more of my research notes out there.
If I missed anything, feel free to add your findings in comments.

@itsTarH

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