TV Today (TVTNET) 204

Result Update Rating matrix Rating : Buy Target : 240 Target Period : 12 months Potential Upside : 18% What s changed? Target Changed from 276 to 240 EPS FY15E Changed from 18.3 to 15.0 EPS FY16E Changed from 22.5 to 18.4 Rating Unchanged Quarterly performance Q4FY15 Q4FY14 YoY (%) Q3FY15 QoQ (%) Revenue 114.2 96.9 17.8 131.2-13.0 EBITDA 9.1 25.4 (64.1) 43.7-79.1 EBITDA (%) 8.0 26.2-1824 bps 33.3-2532 bps PAT 8.7 15.9 (45.2) 26.3-67.0 Key financials Crore FY14 FY15 FY16E FY17E Net Sales 389.4 474.7 536.0 607.7 EBITDA 109.3 131.7 148.6 179.3 Net Profit 61.3 81.0 89.4 109.7 EPS ( ) 10.3 13.6 15.0 18.4 Valuation summary FY14 FY15 FY16E FY17E P/E 19.8 15.0 13.6 11.1 Target P/E 23.3 17.7 16.0 13.0 EV / EBITDA 10.6 8.5 7.0 5.2 P/BV 3.2 2.7 2.3 2.0 RoNW 16.2 18.0 17.0 17.9 RoCE 22.4 22.6 22.6 24.0 Stock data Particulars Amount Market Capitalization 1213.6 Crore Total Debt (FY15) 0 Crore Cash and Investments (FY15) 94.5 Crore EV 1119 Crore 52 week H/L 254 / 120 Equity capital 29.7 Crore Face value 5 Research Analysts Karan Mittal karan.mittal@icicisecurities.com Sneha Agarwal sneha.agarwal@icicisecurities.com May 13, 2015 TV Today (TVTNET) 204 Margins take a hit; ad growth stays intact Revenues grew 17.8% YoY to 114.2 crore as the TV broadcasting segment continued to deliver superior advertising growth There was a huge decline in EBITDA margins. They declined to 8.0% vs. 26.2% in Q4FY14 and 25% as per our estimates. There were exceptional costs in the quarter pertaining to several events such as Delhi elections and the World Cup in Australia, which increased the operational costs for the company. In addition, it also incurred higher marketing expenses due to an increase in the competitive intensity. This resulted in a 46% increase in overall costs to 105.4 crore vs. 72.0 crore in Q4FY14. Hence, this dented the margins Owing to a miss at the operating level, the company reported a lower PAT of 8.7 crore vs. our expectation of 15.3 crore Aaj Tak maintains leadership position, Headlines Today gains traction Aaj Tak, has been able to maintain its dominant position in the fiercely competitive Hindi news segment for over a decade. BARC ratings, which were recently launched also, displayed their leadership position. However, the competition was seen to be heating up. The English news channel Headlines Today is also seeing traction after several renowned journalists such as Karan Thapar, Rajdeep Sardesai came on board. TV Today continued to deliver on ad revenues by clocking 18.0% YoY growth in its TV broadcasting revenues. We expect it to post 13.1% CAGR over FY15-17E to 590.0 crore in its TV broadcasting revenues. The company is currently planning to undertake litigation to complete the disposal of its radio business to ENIL. The outcome, if in the company s favour, will be EBITDA accretive. We have, however, factored in revenues from radio at 7.1% CAGR in FY15-17E to 17.8 crore till the time sale concludes. Phases III, IV digitisation to boost subscription TV Today would be able to better monetise its reach once the remaining phases of digitisation take shape as it enjoys a far stronger position in the smaller cities and towns, which are primarily Hindi speaking belts. However, remaining conservative on the pace of digitisation, we have built in nominal growth of 7.2% in this revenue stream. We expect subscription revenues to reach 41.0 crore by FY17E from 33.2 crore in FY14. Any pick-up in digitisation activity will be an upside risk. EBITDA margins to fall slightly owing to increase in marketing spends The company is undertaking heavy marketing spends owing to increasing competition from other news channels. The spends is likely to continue for the coming quarters. Though the increase will be partially offset by the reduction in carriage costs, we have slightly reduced our EBITDA and PAT estimates to a CAGR (FY15-17E) of 26.3% and 30.1% clocking 219.9 and 134.9 crore, respectively. Enjoys No. 1 position for decades; maintain BUY at 240 TV Today incurred higher expenses due to one-offs owing to Delhi elections & World Cup. As per the management, marketing expenses would follow a trajectory similar to the quarter as the company is spending more to cement its leadership position owing to increasing competition. Carriage costs, which form ~30-35% of revenue, are expected to decline ~10% annually in the next two years. We have reduced our EBITDA estimates and arrived at a revised target price of 240 valuing it at a 13x FY17E EPS of 18.4. We remain positive on the company s ability to deliver superior ad growth and maintain BUY. ICICI Securities Ltd Retail Equity Research

Variance analysis Q4FY15 Q4FY15E Q4FY14 Q3FY15 YoY (%) QoQ (%) Comments Revenue 114.2 113.0 96.9 131.2 17.8-13.0 Other Income 11.0 3.0 5.0 4.2 118.9 158.7 Writing back of several year end provisions led to higher other income Employee Expenses 29.3 32.4 21.7 33.5 35.0-12.8 Advertising and Promotion expenses 32.7 24.0 18.1 25.2 80.3 29.7 The company has increased the marketing spends due to increasing competition Administrative Expenses 25.5 16.4 19.3 16.4 32.5 55.7 The increase in administrative expenses is particular to the quarter owing to high costs events such as World Cup based in Australia, Delhi elections and several other events Production Cost 17.9 12.4 12.9 12.9 39.0 39.2 The increase was due to high costs events in the quarter EBITDA 9.1 28.3 25.4 43.7-64.1-79.1 EBITDA Margin (%) 8.0 25.0 26.2 33.3-1824 bps -2532 bps Depreciation 7.3 7.6 5.3 7.5 36.8-2.7 The higher than expected costs led to the dent in margins Interest 0.2 0.5 0.9 0.3-77.0-33.7 Total Tax 3.9 7.9 8.4 13.8-53.4-71.6 Tax expenses include deferred tax expense/credit computed in accordance with AS-22 PAT 8.7 15.3 15.9 26.3-45.2-67.0 Key Metrics Broadcasting revenue growth (%) 18.3 16.4 14.5 19.3 Radio Ad revenue growth (%) -0.3 6.6 48.1-8.5-100.6-96.7 26.0-5.1 The traction in the English news channel Headlines Today contributed to better than expected ad growth Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Revenue 549.3 536.0-2.4 620.6 607.7-2.1 We have tweaked our ad revenue estimates due to delayed pick-up in corporate earnings EBITDA 180.7 148.6-17.7 218.2 179.3-17.8 Though the quarter contained one-off costs, we feel there is a structural change in the marketing spends. The management indiacted increrase in the marketing spends going ahead due to increasing competition in the news space EBITDA Margin (%) 32.9 27.7-516 bps 35.2 29.5-566 bps PAT 108.6 89.4-17.6 133.8 109.7-18.0 EPS ( ) 18.3 15.0-17.6 22.5 18.4-18.0 Assumptions Current Earlier FY14 FY15 FY16E FY17E FY16E FY17E TV ad revenue growth (%) 12.3 27.9 8.4 14.1 9.3 13.5 Radio ad revenue growth (%) 54.2 0.6 7.4 6.9 16.3 9.8 Subscription Revenue growth (%) 6.3 7.0 7.5 7.0 7.5 7.5 Comments Radio ad growth has been reduced due to the slowdown seen in the past two quarters ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis TV broadcasting revenues to grow at 18% FY15-17E CAGR TV Today with its flagship channel Aaj Tak has been able to maintain its dominant position in the fiercely competitive Hindi news segment for over a decade. The news segment, directly targeting decision makers in the family, enjoys a good portion of the advertisement share, which is expected to rise even further as literacy and income levels rise. The company continues to deliver on ad revenues and has clocked 18.0% ad YoY growth in its TV broadcasting revenues to 110.6 crore in the quarter. The company delivered exceptional YoY revenue growth in FY15 as the company benefited from the presence of elections. Going ahead, we expect the company to post 13.1% CAGR over FY15-17E to 590 crore in its TV broadcasting revenues, which is primarily dominated by the ad revenues. However, the 12 minute ad cap, if implemented, could come in as a downside risk. Exhibit 1: Revenue trends 700.0 30.0 ( Crore) 600.0 500.0 400.0 300.0 200.0 100.0-23.6 590.0 519.4 461.1 374.1 23.3 12.6 302.7 13.6 0.8 FY13 FY14 FY15 FY16E FY17E 25.0 20.0 15.0 10.0 5.0 - (%) Revenues Growth % The company is planning to undertake litigation to complete the disposal of its radio business to ENIL. The outcome, if in favour of TV Today, will be EBITDA accretive as radio is currently loss-making. We have, however, factored in revenues from the radio segment at 7.1% CAGR in FY15-17E to 17.8 crore till the time sale takes place. Subscription revenue growth The subscription revenue growth at 3.9% over FY12-14E has been lagging behind the growth in advertisement revenues over the same period as key markets for TV Today are yet to be fully digitised. However, going ahead, TV Today would be able to better monetise its reach once the remaining phases of digitisation takes shape as it enjoys a far stronger position in the smaller cities and towns, which are primarily Hindi speaking belts. However, remaining conservative on the pace of digitisation, we have built in nominal growth of 7.2% in this revenue stream. We expect subscription revenues to reach 41.0 crore by FY17E from 33.2 crore in FY14. Any pick-up in digitisation activity will be an upside risk. EBITDA margins to see softening owing to increase in marketing spends Operating costs in the quarter were exceptionally high in the quarter owing to the one-off expenses incurred with regards to the Delhi elections and World Cup. These expenses were specifically pertaining to the ICICI Securities Ltd Retail Equity Research Page 3

current quarter and are not structural. However, the increase in the marketing expenses would continue in the near future as the company has propped up this line of expenses owing to increasing competition from other news channels. In addition, the company also incurred higher marketing expenses as the rating standards shifted from TAM to BARC. Though the reduction in carriage costs would partially offset the impact of additional costs, we have revised our EBITDA estimates downwards. EBITDA margins are expected to reach 27.6% and 29.4% in FY16E and FY17E respectively. The company is expected to be cash flow positive and, hence, would be able to fund its capex requirements internally. PAT margins, hence, are expected to reach 16.6% and 18.0% in FY16E and FY17E, respectively. Exhibit 2: EBITDA and PAT margin trends 35.0 (%) 30.0 25.0 20.0 15.0 10.0 5.0-28.1 27.6 27.6 29.4 15.7 17.0 16.6 18.0 11.1 3.9 FY13 FY14 FY15E FY16E FY17E EBITDA Margin% NPM % ICICI Securities Ltd Retail Equity Research Page 4

Valuation TV Today incurred higher expenses due to one-offs owing to Delhi elections & World Cup. As per the management, the marketing expenses would follow a trajectory similar to the quarter as the company is spending more to cement its leadership position as the competitive intensity has increased in the news broadcasting space. Carriage costs, which forms ~30-35% of revenue are expected to decline ~10% annually over the next two years. We have reduced our EBITDA estimates and arrived at a revised target price of 240 valuing it at a 13x FY17E EPS of 18.4. We remain positive on the company s ability to deliver superior ad growth and maintain BUY. Exhibit 3: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY14 389.4 26.3 10.3 482.8 19.8 10.6 16.2 22.4 FY15 474.7 21.9 13.6 31.8 15.0 8.5 18.0 22.6 FY16E 536.0 12.9 15.0 10.7 13.6 7.0 17.0 22.6 FY17E 607.7 13.4 18.4 22.7 11.1 5.2 17.9 24.0 ICICI Securities Ltd Retail Equity Research Page 5

Company snapshot 800 700 600 500 400 300 Target Price: 240 200 100 0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-10 Recommends dividend of 15% Mar-11 Joy Chakraborty appointed CEO of the company Mar-12 Puneet Jain appointed CFO of the company Dec-13 Trai mandates 12 minute ad cap on all broadcasters including news channels. The GECs curtail their inventory to adhere to the ad cap mandate but news channels Mar-14 This year turns out to be a blockbuster one with the company clocking 26.2% YoY ad revenue to 354.9 crore. The PAT grew to nearly 5x of FY13 PAT of 12.2 crore to 61.2 crore Oct-14 The government indicated at lifting 12 minute ad cap ban from free to air channels Top 10 Shareholders Sno. Name Latest Filing Date % O/S Position (m)n Change (m) 1 India Today Group 31-Dec-14 56.92 34.0 0.0 2 Derive Investments 24-Nov-14 6.40 3.8 3.8 3 Reliance ADA Group 18-Nov-14 3.45 2.1-0.7 4 Damani (Gopikishan S) 31-Dec-14 2.78 1.7 1.7 5 Damani Estates & Finance Pvt. Ltd. 31-Dec-14 1.50 0.9 0.0 6 Damani (Ramesh) 31-Dec-14 1.46 0.9 0.1 7 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Dec-14 1.38 0.8-0.1 8 Life Insurance Corporation of India 31-Dec-14 1.25 0.8-0.1 9 Damani (Radhakrishan) 31-Dec-14 1.20 0.7 0.0 10 Reliance Capital Asset Management Ltd. 31-Mar-15 0.61 0.4 0.0 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Promoter 57.47 57.52 57.49 57.44 57.42 FII 0.00 0.00 0.00 0.00 0.00 DII 2.49 3.36 4.02 3.91 3.56 Others 40.04 39.12 38.49 38.65 39.02 Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Derive Investments 13.47m 3.82m Reliance ADA Group -2.45m -0.71m Damani (Gopikishan S) 5.58m 1.66m Franklin Templeton Asset Management (India) Pvt. Ltd. -0.34m -0.10m Axis Asset Management Company Limited 0.17m 0.05m Life Insurance Corporation of India -0.22m -0.07m Damani (Ramesh) 0.17m 0.05m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 6

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Total operating Income 389.4 476.6 538.0 609.7 Growth (%) 24.6 22.4 22.4 12.9 Employee Expenses 93.0 116.8 136.2 153.4 Production Cost 40.8 54.5 57.4 58.5 Advertising and Promotion expenses 146.3 101.7 108.8 121.5 Administrative Expenses 0.0 71.9 87.0 97.0 Total Operating Expenditure 280.2 344.9 389.3 430.5 EBITDA 109.3 131.7 148.6 179.3 Growth (%) 216.0 20.5 12.9 20.6 Depreciation 24.2 30.0 30.2 31.8 Interest 3.6 1.5 2.0 2.0 Other Income 11.7 22.7 18.0 19.5 Exceptional Items 0.0 0.0 0.0 0.0 PBT 93.2 122.9 134.4 165.0 Minority Interest 0.0 0.0 0.0 0.0 PAT from Associates 0.0 0.0 0.0 0.0 Total Tax 31.9 41.8 45.0 55.3 PAT 61.3 81.0 89.4 109.7 Growth (%) 402.4 32.2 10.4 22.7 EPS ( ) 10.3 13.6 15.0 18.4 Cash flow statement Crore (Year-end March) FY14 FY15 FY16E FY17E Profit after Tax 61.3 81.0 89.4 109.7 Add: Depreciation 24.2 30.0 30.2 31.8 Add: Interest Paid 3.6 1.5 2.0 2.0 (Inc)/dec in Current Assets -8.0-24.3-23.5-22.4 Inc/(dec) in CL and Provisions -21.2 13.0 9.7 9.3 Others 0.0 0.0 0.0 0.0 CF from operating activities 59.9 101.2 107.8 130.4 (Inc)/dec in Investments 0.0 0.0 0.0 0.0 (Inc)/dec in Fixed Assets -9.9-51.3-10.0-10.0 Others 3.7-0.8-0.3 0.0 CF from investing activities -6.2-52.1-10.3-10.0 Issue/(Buy back) of Equity 0.0 0.1 0.0 0.0 Inc/(dec) in loan funds -17.3 0.0 0.0 0.0 Less:Interest Paid -3.6-1.5-2.0-2.0 Less: Dividend and dividend tax -7.0-10.4-13.9-20.9 Others 0.1 0.2-0.2 0.0 CF from financing activities -27.7-11.6-16.2-22.9 Net Cash flow 25.9 37.5 81.4 97.5 Opening Cash 31.1 57.0 94.5 175.9 Closing Cash 57.0 94.5 175.9 273.4 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Liabilities Equity Capital 29.7 29.8 29.8 29.8 Preference Share Capital 0.0 0.0 0.0 0.0 Reserve and Surplus 349.3 420.1 495.4 584.2 Total Shareholders funds 379.1 450.0 525.2 614.1 Total Debt 0.0 0.0 0.0 0.0 Others 1.8 1.8 2.3 2.8 Total Liabilities 380.9 451.7 527.5 616.8 Assets Gross Block 393.7 429.2 439.2 449.2 Less: Acc Depreciation 178.6 190.9 221.0 252.8 Net Block 215.1 238.3 218.1 196.3 Capital WIP 1.9 0.0 0.0 0.0 Total Fixed Assets 217.0 238.3 218.1 196.3 Investments 45.7 45.7 45.7 45.7 Inventory 0.0 0.0 0.0 0.0 Debtors 110.3 140.6 158.7 180.0 Loans and Advances 46.6 39.9 45.0 45.9 Other Current Assets 0.7 1.5 1.7 1.9 Cash 57.0 94.5 175.9 273.4 Total Current Assets 214.6 276.4 381.3 501.1 Creditors 51.7 67.6 74.1 81.5 Provisions 18.5 22.3 22.3 23.3 Other current liabilities 47.6 40.7 44.0 44.9 Total Current Liabilities 117.7 130.7 140.4 149.7 Net Current Assets 96.9 145.7 240.9 351.5 Other non current assets 21.3 22.0 22.8 23.4 Application of Funds 380.9 451.7 527.5 616.8. Key ratios (Year-end March) FY14 FY15 FY16E FY17E Per share data ( ) EPS 10.3 13.6 15.0 18.4 Cash EPS 14.4 18.6 20.1 23.8 BV 63.7 75.4 88.3 103.2 DPS 1.0 1.5 2.0 3.0 Cash Per Share 9.6 15.8 29.6 46.0 Operating Ratios (%) EBITDA Margin 28.1 27.6 27.6 29.4 PBT / Total Operating income 23.9 25.9 25.1 27.1 PAT Margin 15.7 17.0 16.6 18.0 Inventory days 0.0 0.0 0.0 0.0 Debtor days 103.4 108.1 108.1 108.1 Creditor days 48.4 52.0 50.4 48.9 Return Ratios (%) RoE 16.2 18.0 17.0 17.9 RoCE 22.4 22.6 22.6 24.0 RoIC 26.4 28.5 33.7 42.9 Valuation Ratios (x) P/E 19.8 15.0 13.6 11.1 EV / EBITDA 10.6 8.5 7.0 5.2 EV / Net Sales 3.0 2.4 1.9 1.5 Market Cap / Sales 3.1 2.6 2.3 2.0 Price to Book Value 3.2 2.7 2.3 2.0 Solvency Ratios Debt/EBITDA 0.0 0.0 0.0 0.0 Debt / Equity 0.0 0.0 0.0 0.0 Current Ratio 1.8 2.1 2.7 3.3 Quick Ratio 1.8 2.1 2.7 3.3 ICICI Securities Ltd Retail Equity Research Page 7

ICICIdirect.com coverage universe (Media) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E DB Corp (DBCORP) 363 465 Buy 6,657 17.7 22.0 27.9 20.51 16.471 13.015 11.3 9.1 7.0027 32.6 32.8 33.921 23.4 23.7 24.505 DISH TV (DISHTV) 78 90 Buy 8,334-0.2 0.9 NA NA NA NA 13.0 10.8 NA 7.8 18.8 NA 7.6 NM NA ENIL (ENTNET) 677 670 Buy 3,226 21.4 24.0 NA 31.56 28.218 NA 19.3 16.4 NA 16.2 16.2 NA 15.1 14.5 NA Eros (EROINT) 388 460 Buy 3,588 26.3 32.5 NA 14.8 11.9 NA 11.0 9.2 NA 18.0 19.8 NA 16.7 17.2 NA Hathway Cables (HATCAB) 53 64 Hold 4,289-1.4-1.0-0.7 NM NM NM 16.7 13.2 11.809 NM 1.4 2.1779 NM NM -4.928 HT Media (HTMED) 98 135 Hold 2,294 8.1 10.5 11.9 12.1 9.3 8.2289 4.7 2.8 1.3539 7.4 10.2 10.815 9.6 11.2 11.217 Inox Leisure (INOX) 146 240 Buy 1,404 0.4 4.0 9.9 393.9 36.201 14.761 14.6 10.9 7.4 4.2 7.4 12.8 0.6 5.9 12.7 PVR (PVRLIM) 640 670 Buy 2,542 3.8 12.8 22.3 169.7 50.1 28.7 14.5 11.8 9.7 8.9 11.7 14.3 3.7 11.4 16.9 Sun TV (SUNTV) 351 404 Hold 13,850 20.3 23.9 28.8 17.28 14.68 12.19 7.8 6.8 5.68 33.4 35.8 37.6 24.7 26.7 28.4 TV Today (TVTNET) 204 240 Buy 1,214 13.6 15.0 18.4 15.0 13.6 11.1 8.5 7.0 5.2 22.6 22.6 24.0 18.0 17.0 17.9 ZEE Ent. (ZEETEL) 305 380 Hold 29,303 9.9 11.2 13.6 30.69 27.156 22.512 22.3 19.0 15.0 21.7 21.7 21.9 17.5 17.1 17.1 *The FY15 numbers are actual for TV Today ICICI Securities Ltd Retail Equity Research Page 8

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 9

ANALYST CERTIFICATION We /I, Karan Mittal, MBA Sneha Agarwal, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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ICICI Securities Ltd Retail Equity Research Page 10